Are you Really Focussed On Value? (Key NPX Take Away 1)

Last week I attended The Mpower Group‘s Next Practices Xchange which is a gathering of some of the top supply management personnel from a select group of Fortune 500 companies who met to discuss how to get to the next level of supply management. Realizing that today’s best is not enough to sustain value in an increasingly competitive and economically challenging global marketplace, the best of the best are already trying to figure out how they are going to maintain their edge in tomorrow’s supply chain landsape. It’s a hard question that is not getting enough attention (as per my recent posts on Next Generation Sourcing and Supply Management), but there are answers to be found for those willing to look hard enough. This series will address some of the questions that a Supply Management organization needs to address to get to the next level, as well as providing some starting points for those looking for answers.

Whether you call it Next Level Supply Management, Next Generation Supply Management, or simply Next Practice, the key commonality to advancing the supply management function is moving from a cost focus (even if it is TCO) to value. However, before one can get to value, one has to understand what value is. Lamar Chesney, CPO of SunTrust, had a great presentation on value perspectives and how our view of value is rarely their view of value and how we fail to realize the value that is available in a Supply Management initiative because of this.

For example, while everyone may agree that price reduction is value, our view of value is generally not their view of value.

When we focus on What they really want is
cost avoidance speed to realization
TCO sense of comfort
specificity of deliverables practical certainties
contract certainties and flexibilities feeling of specialness
risk mitigation and governance contributions beyond sourcing & SRM

And, more over, this is how a Supply Management organization often responds to their view of value (even if the Supply Management organization does not realize it is doing it):

What they want What we believe
speed to realization speed kills
sense of comfort a good contract trumps the soft stuff
practical certainties a good contract, which can take months to negotiate, insures you get what you want
feeling of specialness everyone knows the supplier is providing a commodity and there’s nothing special about the product or service
contributions beyond sourcing & SRM sourcing strategies, contract management, category management, SRM, etc substitutes nicely for my help with your business strategy

See the problem? Not only does the (internal) customer rarely want what Supply Management wants to deliver, but the messages that Supply Management sends scares the internal customer away because the core message the internal customer hears is that what you value doesn’t matter. Not a good foundation for building the cross-functional team necessary for generating value.

Are You a Contract Hypocrite?

Tim Cummins penned a great article for the newly relaunched Negotiator Magazine site on how “Hypocrisy in Contracting Leads to Wasted Negotiation” since ridiculous demands just lead to repetitive, predictable negotiations that bring little or no value to either party. And this happens more often than not since most large companies would never sign their own contracts, which are diametrically different from those they demand when buying, which is just ridiculous.

Not only do we have to ask what happened to our ethics (that most professional associations insist upon), but we have to ask why we are risking failure for the sake of assigning blame should things go wrong instead of working together to insure that failure never happens. Especially when research is demonstrating that creativity and innovation are closely linked with greater mutuality in key terms which creates a joint responsibility to ensure success.

It’s not hard to harmonize buy-side and sell-side contracts, and it’s not hard to put together a contract you’d actually sign with fair, bi-lateral terms and conditions that share risks and rewards and protect both parties. (the doctor is just an engineer, his paper works that way, and he didn’t need an arrogant overpriced lawyer to create it — in fact, he didn’t need a lawyer at all!) So why can’t we move forward on this issue?

What Should You Do When Your Firm is About to Undergo an M&A?

M&A activity is heating up, and there’s a chance that your firm could be next. You could be the acquirer, the acquiree, or an equal partner in what is designed to be an equal merger. Either way, you have two choices: embrace the merger / acquisition or pretend it isn’t happening. In the first case, an enteprising Supply Management professional can often land herself a better position in the merged organization if she finds a way to shine. In the second, the disbelieving individual is likely to find himself out of a job in short order.

So what should the enterprising individual do if she wants to make the most of the situation? A recent article over on SupplyManagement.com (from the Official CIPS Magazine), about how such an individual gets “in the mix”, provided some useful insights. According to the article, the individual should:

  • seek out colleagues in the other organization
    and work with them on analysis, contract review, and benchmarking to identify quick wins that will raise her profile
  • understand the other business’ systems and processes
    as there may be scope for re-engineering that will increase efficiency, decrease cost, and improve results
  • look for complementary strengths
    that complement her organization’s weaknesses and use them to attack sourcing projects that would be put off otherwise
  • identify those who feel challenged or threatened
    and work to help them — as they’ll likely remember her when asked who should stay and who should go

and should not:

  • go into avoidance mode and hope it will go away

because, once Procurement is involved, it rarely does.

It’s good advice, and a good article.

Apprenticeship is the Answer

Back in March when I asked if we can fix supply chain education because academic programs, third-party programs, private programs, and vendor programs are, for the most part, not meeting our needs, I pointed out that the answer was to go back in time to when apprenticeshipos were common. When students studied on the job under the guidance of a master who prepared them for the job they had to do, not to advance an understanding of purely intellectual pursuits devoid of a real world application.

While I didn’t get much of a public reaction, I did get some very positive feedback from some old-school folks who have tried everything and realized that work-alongside training is the best answer. But a few old coots, as brilliant as they may be, do not deliver enough critical mass to get the idea out there. However, it seems that India is proving my point. As per this recent article over on Global Services that asks if “everything we know about offshoring innovation is wrong”, not only does an appropriately designed test prove to be a better indication of ability than a University degree, but intensive on-the-job training under a skilled expert tends to produce a better worker in months than is typically produced by years of higher education.

In other words, apprenticeships are the answer.

Goldilocks and the Three Bears: A Metaphor for Collaboration?

After reading a recent post over on the HBR blogs on “getting collaboration right”, I can’t help but think that the author was thinking of the children’s story about Goldliocks and the Three Bears when trying to define the proper way to approach collaboration. In the story, Goldilocks was walking in the forest when she came upon a house with no one home. She walks in and finds three bowls of porridge on the table. She was hungry, so she tasted the first bowl and found the porridge too hot. So she tasted from the second bowl, but found the porridge too cold. So she tasted from the third bowl, found the porridge just right, and ate it all up.

Then she was tired so she entered the living room and found three chairs. She sat in the first chair, but found it too big. So she sat in the second chair but found it too big as well. So she sat in the third chair and while it was just the right size, it broke into pieces when she sat down. Now very tired, she wanders up the stairs to find a bed for nap. She lay down in the first bed, but it was too hard. So she lay in the second bed, but it was too soft. Finally she lays in the third bed, and it is just right, so she falls asleep.

Then the owners, three bears, who went out for a walk to let their porridge cool, return. They find that someone has been eating their porridge and sitting in their chairs. So they look around and go to the bedroom, where they find that someone has been sleeping in their beds and still is. Just then, Goldilocks wakes up, sees three bears, screams “Help!” and runs from the room, down the stairs, through the door, and into the forest, never to return.

Which is how most collaboration efforts go. First the participants, wary of each other and the proclaimed benefits of collaboration, under-collaborate (because the porridge is cold). Then, when a C-Suite executive puts his or her weight behind it, and everyone gets on board, they over-collaborate (because the porridge is hot). Neither produces results, and eventually collaboration is accepted as something that needs to be done regularly, but not all the time, and the participants start to balance between too little and too much (and the porridge is just right).

However, since the participants are not very good at collaboration, they get weary, so they decide they need to find a framework to manage the process. Everyone pitches in and they start by selecting something that is so overarching and overdefined that they never get beyond the process itself (because the chair is too big) and get nowhere for a while. They eventually agree that the process (which fills binders) is too much and ‘streamline’ it to key steps and tasks, but the process still takes up most of their time and collaboration results are few and far between (because the chair is still too big). Eventually, the team decides to lean the process, and strip out everything but a few key steps, but since the process was built by stripping down an ill-conceived process, it turns out to be too brittle and breaks (because the chair is now too small to support the weight).

Even wearier, the team finally realizes that it’s not the process that is important, but the desired results, and start to define goals for the process and accountability. Thinking they finally have it right, they get ambitious with goals, but since the team is still new at results-driven collaboration, they get overwhelmed (because the bed is too hard) and don’t meet their goals. So they tone down their initial expectations, and deliver results, but don’t get the kudos they were expecting (because the bed is now too soft) and work their way towards a delicate balance between over-collaborating and under-collaborating and setting goals that are too ambitious and goals that are not. Finally, they realize the importance of accountability and insure that, in the case of no agreement (in a timely fashion), someone has the authority to make a decision, settle into a groove and get comfortable (because the bed is just right).

But then they get some unexpected negative feedback, because an executive complains about the lack of quick results or a key design element that would have doubled the potential market size was overlooked because everyone was new at the process, get spooked, and run away screaming (because they woke up and saw that they may still have to confront bears), never to return to collaboration again.

Which is a shame because, if they could get collaboration right and maintain it over time, they’d see significant results.