Are You Revenue/Growth Enabled? Take This Hackett Group Survey and Find Out!

Today, the Hackett Group released their latest study — the Revenue Growth Enablement Study. The goals of this study are to determine in what ways a Procurement organization can enable revenue/growth scenarios for the organization as a whole, how far an average organization is down the revenue/growth enablement path, and what practices leading organizations are using to enable revenue/growth. Given the burning need for leading Procurement organizations to not only do more with less, but contribute to the top and bottom line in even more ways, this is an important study. For Procurement to earn, and keep, that seat in the C-Suite, it has to continue to deliver value year-over-year. And the best way to deliver that value, once it has trimmed costs, is to help the organization grow (with its expertise in operations management), globalize (with its expertise in foreign markets) and increase revenue (with its expertise in logistics, multi-stage and multi-channel inventory management, and new product introduction [NPI]).

Not only will this study give you ideas on how to identify growth priorities, tactics to support those priorities, metrics to measure success, NPI, and support sales and marketing, but it will qualify you for the full study results and final report when the study is complete. And in the meantime, you get one of the following five reports free upon survey completion:

  • 2012 Procurement Key Issues Study
  • Category Management – Beyond The “Strategic” in Strategic Sourcing
  • Supplier Relationship Management (Part I: Tapping the Power of Top Performance in SRM)
  • Defining & Expanding the Value Proposition of Purchase-to-Pay
  • A New Procurement for a New Normal

The 2012 Procurement Key Issues Study identifies the top 10 issues for Procurement organizations in the coming year, with the acceleration of revenue growth leading the way. (That’s why this study is so important.) It also discusses some key strategies for enabling profitable growth, including globalization — which will nearly triple within three years, as determined by the Hackett Group in their “Globalizing Procurement’s Service Delivery Model, Not Just the Supply Base”. (For some key stats, see SIs recent post on The Global Agenda — It’s Coming!.)

The study on Category Management, which attempted to go beyond the “strategic” in strategic sourcing, found that despite the additional savings opportunities that can come from category management (as chronicled by a number of Procurement leaders in Hackett’s conferences last year and by leading sourcing platform providers like BravoSolution), only 5% of companies have a category-focussed strategic sourcing process that is very well implemented or truly strategic. The majority of companies pursuing strategic sourcing (54%) are just average with a process that is fairly well implemented, but which does not push the boundaries. The report, which clearly defines the difference between a standard strategic sourcing approach and a category management approach, takes a deep dive into category management objectives and strategies, the supply management service line it enables, and provides a strategic category management framework that can jump-start an average organization looking to take it to the next level.

The study on Supplier Relationship Management, the first in a series, is extremely insightful on the importance of good SRM which is not just foundational for sourcing success, but transformational from a value viewpoint. It was found to increase cost savings / avoidance in top performers by almost 80% and growth-related benefits by 53%! SRM drives almost 45% of total Procurement value in top-performers! This is a level of improvement not achievable by any of the “Top 10 Technologies for Supply Management” on their own or even combined in a pair! Only collaborative sourcing, which embraces supplier relationships, can reach this level of value. The paper also identifies key differentiators of top performers and a model for SRM success that you can use to jump-start your organizational effort.

I haven’t reviewed the last two papers, but Sunday’s post pointed out how the UK Government expects to save £40 Million a year just by paying SME construction suppliers directly through P2P. P2P is full of opportunity, and I’m sure this paper will provide deep insights that can be used to jump-start an initiative. Finally, while There Is NO New Normal … Just the Old Normal Coming Back, there is a need for New Procurement Technology to cope with the return of an Old Normal that had passed before such technology hit the scene, and if any research organization is going to nail what that technology is going to be on the head, it’s the Hackett group.

To take the the Revenue Growth Enablement Study (enabled by their new, interactive, Qualtrics tool), and get your free research (and make your organization better for it), join the “World Class Procurement” LinkedIn Group.

Relentless Innovation, A Review: Part I: Setting the Stage

This is Part I of a review of Jeffrey Phillips‘, VP Marketing of OVO Innovation, recently published book on Relentless Innovation, his guide for transforming your organization from one that innovates occasionally, at best, to one that innovates constantly.

Before we get into the core of what relentless innovation is, or why your organization needs it, we’re going to set the stage by reviewing the astutely pointed out innovation myths, the biggest barriers to innovation in an average organization, and the problems with the average organization today — as detailed in the first four chapters of the book.

According to Jeffrey, some of the biggest myths in innovation that pervade an average organization, and prevent it from being relentlessly innovative, are the following:

  • Individual, innovative leadership accounts for the majority of a firm’s success.
    The truth is that sustained innovation goes beyond visionary leaders (who are often a one- or two- trick pony).
  • The level of industry competition dictates the amount of innovation (required).
    Industry competition might foster innovation, but it doesn’t guarantee innovation (leadership).
  • It is possible for firms to copy the product or service offerings of market leaders while retaining competitive advantage through low costs or higher service. There are a host of problems with this fast follower mindset. First, it’s not always possible to be fast enough in markets where products have life-spans of a year or less. Second, the more one follows, the less one leads, and the less likely one will be able to innovate. Third, the lack of (time for) market research prevents a following organization from differentiating what features make the market leader’s product or service attractive. Fourth, by the time the product gets out, a majority of market share could already be gone!
  • Due to changes in a globalizing world, no firm can sustain innovation leadership over the long term. The truth is that the primary drivers of sustained innovation are under an organization’s control.

But more importantly, the biggest barriers are the BAUMMs (pronounced Bombs) that are present in every organization — the Business As Usual mindset and the Middle Managers. Yes, those dreaded middle managers that everyone says you should right-size as soon as possible as they aren’t leading and they aren’t delivering products or services. (But, in fact, you shouldn’t really right-size them, just put them in the right mindset, but we’ll discuss this in a subsequent post.) These two barriers are the worst because they dictate what work is done, and how such work gets done. (Sustained) Innovation requires that the right work be tackled in the right way — so it’s natural that a BAU mindset that dissuades innovation in the hands of risk-averse middle managers is the best way to guarantee that innovation does not occur in an organization. Furthermore, any attempt to force-fit innovation into a BAU model that was not designed for innovation will fail.

The worst thing about a BAU that dissuades innovation is that any action that delays innovation starts and continues a viscous cycle that will delay innovation until the organization is on the verge of bankruptcy, obsolescence, or both.

So why are Middle Managers the biggest threat to innovation in a traditional organization? They have the most at stake when a threat emerges to the operating model that they are compensated against. If they miss their metrics, they will lose money in the best case and their job in the worst case. So they will look to squash any effort that is not 100% in line with the business-as-usual mindset that, generally, promotes efficiency, cost-reduction, and risk-minimization — three factors innovation projects in an early stage generally do not possess.

And innovation is desperately needed in an average organization. As Jeffrey reports, in 2010, a survey found that while CEOs consistently ranked innovation as one of their top three priorities, less than 25% of manufacturing organizations in the US innovated a new product in the last three years and less than 8% of service organizations innovated a new offering in the last three years! The fact that only 1 in 4 manufacturing organizations can innovate a product in 3 years and that only 1 in 12 service organizations can innovate a service offering in 3 years is telling!

Presumably more than 1 in 4 tried, but failed. Why? Probably for one of the following four reasons outlined by Mr. Phillips:

  • Poor strategy communication.
    This dooms just about any project to failure.
  • Lack of resources.
    Innovation does require enough resources to get the job done.
  • Demands for quarterly results.
    Not all projects finish within the quarter, or even the year. Sometimes a big up front investment is needed for a huge payout later.
  • Fear of uncertainty and risk.
    Aggressive innovation projects can present some of the biggest risks an organization faces internally.

And even those that succeeded probably couldn’t reliably replicate the effort because:

  • There was no plan.
    A plan that says what the organization will, and won’t do, is needed to keep things on track.
  • Not enough time was allocated to (the) subsequent project(s).
    Innovation not only requires enough people (who must be dedicated to it) and resources, but enough time to get the job done.
  • A Project Mindset was applied.
    As a result lessons learned that could be applied to other innovation efforts are not documented and lost.
  • A Control Focus was maintained.
    Middle managers try to “control” the project as they would a manufacturing project to “minimize” risk and, in fact, do the exact opposite!
  • The effort was too isolated from business as usual.
    While skunkworks sometimes works (when the team is dedicated 100% of the time and given all of the time and resources they need), it generally doesn’t. Support is typically required for success.
  • The innovation effort was outsourced.
    This is a crapshoot.

In other words, innovation is rare and relentless innovation, a trait Jeffrey claims is going to be necessary for organizations to survive in today’s ever-changing marketplace, is rarer still. So what can an organization do? That will be the subject of Part II.

GoTradeLive: A LinkedIn eBay on Steroids for Small Business Procurement to Groupon To.

GoTradeLive is launching its new, global, trading platform targeted at small and medium businesses in the US today. Its new free social commerce and commercial trading platform is poised to be as disruptive to the small business Procurement market as Coupa (Cabana) was when it was launched back in 2007 on Procurement Independence Day. This is not something the doctor says lightly.

So what is GoTradeLive? It is, simply put, a power-auction platform for small businesses on steroids. And what’s so great about that, you astutely ask because there are dozens, and dozens, of auction platforms out there ranging from free to seven figures in cost? It’s social. It’s networked. It’s mobile. It’s easy to use. It’s global (and multi-currency). It’s Free. It can be branded. And it’s proven — as it’s already been tested in Australia, New Zealand, China, and the UK, where they have offices.

Let’s take the benefits one-by-one.

  • It’s social
    You can create your own trading networks using a Facebook / Linked-In type interface and these can be public or private for public or private sales or trades.
  • It’s networked
    While the build-your-trading network ability of the Ariba or Ketera networks are not yet there, the building blocks are and you can see it’s coming. But the ability to define custom trading networks is unique.
  • It’s (a) mobile (platform)
    Like the consumer social networks and e-Commerce platforms, they have a mobile app that allows you to monitor your trades and bids from your mobile device.
  • It’s easy to use
    It’s as easy to use as Facebook, eBay, and other consumer sites.
  • It’s global.
    It has already been launched in Australasia and the UK and further global launches are already planned. It supports automatic currency translation for global buying and selling.
  • It’s Free.
    It’s using the Freemium model pioneered by sites like LinkedIn, DropBox, and BaseCamp. It literally costs nothing to use. No registration or account fees. No listing fees. No transaction fees. (However, if you don’t pay, you are subjected to ads and there is nothing to prevent an advertisement for a competitor’s product or auction appearing on your listing page.) Given that the cost of some platforms include transaction fees of up to 15%, this is a great deal.
  • It can be branded.
    For as little as $15 a month, which gives you one-user access, you can brand the site into your own trading platform (with your logo, colour scheme, etc.) and eliminate advertisements. Small Business Pricing is coming soon, and will start at less than $100 / month.

It’s a great social commerce platform for quickly moving slow, excess, or end-of life inventory and a great platform for many small businesses, especially those in retail, construction, and similar goods-based verticals, for spot-buying product needed at irregular intervals. And it has a lot of promise. This is one platform the doctor will be watching closely.

Trade Barrier Reductions

Late last year, as reported on World Trade 100 in “Reducing Barriers to Trade”, President Obama signed three new Free Trade Agreements with Colombia, Panama, and South Korea to eliminate tariffs and other barriers to U.S. exports, expand trade between the US and the respective country, and promote economic growth.

Columbia is the third largest economy in South and Central America and Panama is one of the fastest growing economies in the region, but it is the South Korea agreement that is of the most interest, especially considering the amount of electronics being imported by the US each year. And South Korea, which is the 15th largest economy in the world, does the most manufacturing in Information and Communication Technology (ICT) of all the OECD countries (Source: OECD ICT Outlook 2010) — almost 50%. And while 50% of global trade in manufactured ICT products takes place outside the OECD countries, dominated primarily by China, the fact that 50% takes place in OECD countries means that global buyers of ICT will soon have access to tariff-free trade on ICT products from the country producing almost 25% of the goods! (See the tariff schedules on the USTR page that reduces the tariffs on many products to 0.)

Under the FTA, nearly 95 percent of bilateral trade in consumer and industrial products will become duty-free within five years of the FTA’s entry into force, with most remaining tariffs eliminated within 10 years. And the almost unrestricted entry into the huge consumer market offered by South Korea will also benefit producers of ICT products, as demand there is almost as high as in Japan and parts of China. This is promising for globalizing ICT companies.

From the Land of D’OH: Timely Payments Make Effective Business

A recent SupplyManagement.com article on how “Direct Payments Will Save Government £40 Million a Year” caught my eye not because improving efficiency in an organization that spends Hundreds of Millions processing paper will, obviously, save Millions, but because of this paragraph:

The government estimates that ensuring SMEs get paid more promptly will enable them to run their businesses more cost-effectively and pass those savings back to the government. It will also improve the cash flow of small businesses and their ability to plan for future deals.

Supply Chain experts and leaders have been preaching this for years. Slow payments force suppliers to take loans, at terms that are significantly worse than what a large buying organization can get. Sometimes, to make payroll and secure cash-flow when buyers take 60, 90, and even 120 days to pay, small/new/perceived-risk supplier organizations have to borrow at 20%, 30%, and even 40% per annum. This substantially drives up their cost of doing business — a cost that will, inevitably, be passed to the buyer with the short-term mindset. If the buying organization pays on time, or, if it needs to, takes out a loan based on its credit terms, which could be only 6%, 5%, or 4%, to pay on time, the supplier can operate more cost effectively and pass on those savings to the buyer. It is that simple.

But this is a government organization. We should be happy they figured it out before Mayan Doomsday and not The Date Heard Around the World [www.isaac-newton.org]. (At least this way some of us will see the beginnings of a government organization coming to its senses during our lifetime.)

Of course, if the UK government really wants savings, it should mandate that the NHS follow this advice. As the world’s fifth largest employer [digg.com], it spends £110 Billion a year and processes Millions of payments. That’s a huge savings opportunity!