Finding Your Procurement Mojo and Gettin’ Sigi Wit’ It – Part Deux

This spring, in Finding Your Procurement Mojo and Gettin’ Sigi Wit’ It (Part One), we began our review of Sigi Osagie’s Procurement Mojo, an important book for many procurement professionals and organizations. Unlike most books which attempt to teach you how to do the job (that you already have a decent grip of), Sigi’s book attempts to teach you how to explain to the organization what Procurement does, which is a critical issue that needs to be addressed since:

  1. Procurement is still the Rodney Dangerfield of the organization (and still don’t get no respect) and
  2. most Procurement Pros don’t know how to sell the organization on the unrealized potential that Procurement can bring.

In our first post we discussed how Sigi noted that a key to success was the Procurement brand, but in order to address the Procurement brand, one needed to:

  • build an effective organization,
  • deploy process enablers,
  • manage the supply base, and
  • apply performance frameworks.

Then we discussed some of the key points Sigi made with respect to each of these preliminary steps to building, and most importantly selling, the Procurement brand, but stopped short of discussing any of the game plan because some of his readers would get to hear the man himself and Get Sigi Wit’ It at Trade Extensions’ London event in October. However, now that the event is over, we’re going to discuss the final part of the book and complete the book review.

Sigi outlines three main areas that need to be addressed to build — and sell — your Procurement Mojo:

1. Procurement Positioning

Make sure Procurement is positioned in the organization in the manner and place that will allow it to be the most effective in both delivering its functional obligations and adding value. This involves addressing both reporting structure and enterprise involvement. Not all organizations require a CPO who reports to a CEO, some can do fine with a VP that reports to a COO (who is the CEO’s right hand). For example, if the organization is a manufacturer and most of the spend is direct materials, this can work fine, as long as Procurement is also involved in other key spend categories by the CMO (for agency management), CFO (for back office spend), CIO (for systems spend), and other executives that also have large spend categories. As long as Procurement understands key company purchases and is able to convey the importance of those key purchases to the right stakeholders in a way that elicits their involvement, the reporting structure is not as important as general Procurement involvement.

2. Stakeholder Communication

Every other key Supply Management activity requires stakeholder engagement and support to be successful, so why should brand management and promotion be any different? The key to building, and selling, the Procurement brand (and making your mojo work for you) is regular, effective, stakeholder communication that provides messages relevant to them. Make sure you understand what your stakeholders value most — and address that. Cost savings? Innovation? The relationship? If you can’t talk to their needs and report on value in their terms, it will be hard to break down the silos and sell the value, and brand, of Procurement. Sigi offers some great advice on how to effectively communicate with your stakeholders that most books don’t, and this is a great section of the last chapter, which includes a discussion of how to create a stakeholder map to keep your communications on track.

3. Procurement PR

Good companies make good products. Great companies create a great brand image that people want and instill desire for products even before the products are released or, in some cases, people even know what the products are. Look at Apple. The brand made people want the iPod and the iWatch even before Apple even announced them.

But good PR isn’t easy, especially for a function focussed on hard value and not soft messaging. However, once you know the right formula, it isn’t that hard either. As long as your messaging consistently addresses activities and issues that are:

  • Important,
  • Sustainable, and
  • Credible

and relevant to the audience being addressed, the PR will improve and the brand will grow. How do you do this? Sigi provides a number of examples of efforts that various organizations have used to achieve this goal. While not all will necessarily work for you, some will, and the book is a great aid here as well.

Again, we highly recommend that you check out Sigi Osagie’s Procurement Mojo and Get Sigi Wit’ It.

Authoritative Damnation 65: Solution Partners

Activist Investors and a troublesome Board of Directors are one kind of damnation, but solution partners are another. Generally speaking, an activist investor and a board of directors are only troublesome on a quarterly basis, but solution partners can be troublesome on a daily basis. How so?

You depend on solution partners to serve your customers.

Some customers want your products, but other customers want your products and support services that your organization does not offer. As a result, you will need the help of solution partners, which will likely own the customer relationship. As a result, you are totally dependent on these solution partners to not only serve your customers’ needs but make your customers happy. And if they own critical customer accounts and they say dance, you have two choices, dance or lose critical customer accounts. Not a great position to be in.

You depend on solution partners to run your organization.

You need them for your custom manufactured products, your enterprise software systems, your MRO, and sometimes even for your internal IT and change management projects. The bigger you are, and the more focussed you are, the more you need these solution partners. It’s not a bad thing if you have good relationships, but if the relationships go south, but you are still under contractual commitment for a year or more, it can be a daily damnation until the relationship ends and gets transitioned to a new supplier.

You depend on solution partners for innovation.

If your organization’s strength is marketing and consumer demand forecasting, and it depends on solution partners to come up with new custom product designs to meet those demands, and on solution partners to come up with new manufacturing techniques to implement those designs, then the organization is completely dependent upon solution partners for innovation. This means that it is not only unable to thrive, but also unable to survive, without a strong solution partner ecosystem. It doesn’t matter how big it is or how rich it is, but just on how good it is at managing those relationships. If the organization is not good at SRM (Supplier Relationship Management), it, like Procurement, is doomed, marooned, and about to be entombed.

In other words, while solution partners can be an organization’s saving grace, they can also be a source of eternal damnation, driving you down the highway to hell.

Even “Simple” Categories Hide Extreme Complexity!

Earlier this year, Mr. Smith asked “what defines complex sourcing and why does it matter” on Spend Matters because complexity usually means there is inherent risk and opportunity in that category or sourcing event. That’s why we have to understand what complexity is, where it is, how to identify it, and how to capitalize on it to reduce risk and generate savings.

As clarified by Mr. Smith, complexity has nothing to do with the size of the spend, the importance of the spend, the inherent risk (which is supplier independent), the urgency of the spend, or even the number of suppliers. It has to do with a number of internal, external, or commercial factors that hide complexity, often in plain sight. The nine factors are:

Diversity of stakeholders
… with conflicting requirements		 Number of suppliers
… and supplier variation		 Number of lots
and variants
Diversity of requirements Alternative market solutions Capacity constraints
Number of lots and variants Pricing models Conditional options

These are all summarized in Sourcing Innovation’s latest paper on Complex Sourcing: Are You Ready which also goes on to demonstrate how even a simple print tender hides all nine factors of complexity within it. That’s right! Your standard print category, that you believe is so simple it’s best to hand it off to a GPO because it’s too trivial to deal with, not only hides more complexity than you realize, but hides more complexity than your first generation sourcing platform can handle. You’re leaving money on the table with every Sourcing event. Lots of money. Enough to hire more talent to do more events in house and save even more money.

Intrigued? Then download Sourcing Innovation’s new paper on Complex Sourcing: Are You Ready today, sponsored by Trade Extensions, and find out how even the simple categories can hide lots of complexity that, when properly addressed, provide savings and added value in the form of risk management, supply base consolidation, and new supplier identification.

Moreover, this paper will also tell you why your first generation sourcing platform is not up to the task of handling this complexity and what to look for in a second generation sourcing platform that is up to the task of handling the complexity. Download Complex Sourcing: Are You Ready today and find out why optimization is the plan.

101 Procurement Damnations – We’re Almost There!

Our upcoming post chronicles our 80th Procurement Damnation that you, as a Procurement professional, have to deal with on a regular, if not daily, basis. That’s a very large number of damnations and we’re still not done! As per our halfway post, the damnations we’ve chronicled to date aren’t the only pervasive damnations that get in your way and pester you on a daily basis! We still have 21 damnations to go!

However, before we start the final stretch, we thought it would be a good idea to summarize the list to date so that you could go back and review any posts in the series that you might have missed during your hectic conference season as this is SI’s biggest and most aggressive series to date, much longer than both the 15-part “Future” of Procurement series and the 33-part “Future” Trends Expose series (that followed) combined and double the length of the maverick‘s 50 Shades of Pay series (assuming it gets completed) which, to date, only has 14 parts up and available for your reading pleasure.

There’s more that could be said, but as we’ve already said so much and still have so much more to say, without further ado, here are the links to the first 80 for your reviewing pleasure.

Introductory Posts

Economic Damnations

Infrastructure Damnations

Environmental Damnations

Geopolitical Damnations

Regulatory Damnations

Societal Damnations

Organizational Damnations

Authoritative Damnations

Provider Damnations

Consumer Damnations

Technological Damnations

Influential Damnations

Bonus Posts!

There’s No Return on Customization.

the doctor does not attend many events, but hen he does one thing he regularly hears is Company B saying that there is no platform that meets there needs so they are buying Solution S from Company X and customizing it through the vendor or a third party.

Before one more organization does this, the doctor needs to scream DON’T! In this day of age there is no return on enterprise software customization … no matter what the vendor or 3rd party may tell you.

Why?

1) Time to Delivery

If the functionality is truly valuable, by the time it is delivered, another vendor is sure to have equivalent functionality on the market ready and waiting for your implementation.

2) Up Front Cost

Custom development is a huge cost — which may never be realized given the average IT project failure rate and the average return.

3) Maintenance Cost

Out of the box functionality is covered under standard warranty and standard maintenance agreements — custom modifications usually require high hourly rates to contract scarce development talent for as long as is needed to fix any bugs or do any required upgrades.

4) Delayed Upgrades

While everyone else gets upgrades and new, free, features on the provider’s schedule, you get to wait and wait and wait until the talent has the time to address, and complete, the necessary upgrades to the custom modifications you made to allow the base system to be upgraded — this can be months (or years) and efficiency losses will add up on a daily basis!

When you put it all together, the costs will typically outweigh the benefits. So put the effort in to finding the right vendor with the right system and when it comes to customization, just do NOT do it! The only company that profits off of customizations is the vendor doing the customizations, because they are the company at the bottom of the money pit while their clients keep shovelling the money in.