Monthly Archives: December 2015

Influential Damnation 97: Analysts

Conferences are bad, but manageable as they are only once or twice a year. Consortiums are worse, as they meet regularly to thrust their views upon you. Pundits / Futurists are a significant damnation, because their brand of influence seems to be annoyance perfected. But none of these compare to the damnation of analysts. Why?

Analysts are the Gatekeepers of the Gold Seal of Approval.

Let’s say you are a new and innovative startup, or even an older software provider that just went through a re-invention phase, and you have this great new product that contains at least half a dozen innovative features and functions not in any other product in the market that has the ability to deliver any organization that adopts the product tremendous efficiency and cost-control beyond anything else they can put in place. Your software should be winning awards and getting the gold-seal of approval that lets potential customers know that, for industry X with problem Y, this is one of the best solutions on the market. But it won’t even get a side mention in the back pages of the local business journal until it gets recognized by an analyst firm as an emerging solution, and forget front page coverage on something like Mashable until it has been vetted and approved by at least one major analyst firm. They are the keepers of the gold seal of approval, and if they don’t like you, you better keep one foot in the coffin.

If you’re not on their lists, you’re not on BigCo’s list.

The best way to get coverage is to get a big win. But a big win requires a big company adopting your software and getting a big result that they want to advertise to the world (so they can say how smart they were and how well they did). But the chances of a big company even inviting you to an RFX until the analyst firm, that they spend six or seven a years on to advise them, puts you on a contenders list is slim to none. Unless you can find a back door (through a consulting partner who will use your product to get a great result on a services engagement and then mention you in a press release and give you credibility with the firm), you’re out in the cold. After all BigCo payed six, if not seven, figures for the analyst firm’s shortlist, so it should be the best and they shouldn’t question it.

If you won’t pay to play, it will take a while to get on the analyst firm’s shortlist.

Analyst firms have two major client pools: BigCos (the Global 3000s and the emerging mid-market companies that want to be the Global 3000) and TechCos that want to supply the BigCos with tech products. BigCos pay for access to the research library and time with the top analysts to help them identify the right solutions. TechCos pay for access to the research library and competitive analysis and time with the analyst to help craft a product and/or services roadmap that will help them differentiate themselves in an often noisy marketplace. The big clients in each group will pay a significant amount of money, and will respect significant value in return. BigCos will expect one-one-one analyst time with the experts and specific consulting projects and the TechCos will expect prominent placement in all of the research.

As SI has explained, there’s a reason why every time a new Perilous Pyramid report is released on a subject by a big analyst firm, which will typically revisit major software markets every one to three years, the criteria for inclusion as well as the criteria for scoring changes. It’s not just because the technology changes, but because sometimes certain companies need to be excluded and certain capabilities scored higher for those six figure TechCo clients to look good. And if those six figure clients don’t look good, they won’t be giving the analyst firm six figures at renewal time.

And if you’re not a big client, good lucking winning the Perilous Pyramid.

As a result, if you’re a new company that can’t afford to become a big TechCo client of the analyst firm, or that doesn’t believe in the pay-to-play model and won’t pay for lip service, good luck winning the Perilous Pyramid, because, even if you happen to get the attention of the lead analyst on the report and that lead analyst really likes you, if your solution is too much of a threat to the big TechCo clients, it could be a couple of years of relationship building before you even get a mention as an emerging company (that didn’t make the Pyramid because revenues hadn’t exceeded the new minimum of m Million). the doctor, who is an expert in optimization and analytics and associated technologies as well as other advanced sourcing platforms can tell you that the best platforms in these areas have never reached the top level of the Perilous Pyramid and many never even got included in the reports when they were one of the best solutions (due to lack of revenue, lack of suite functionality, or some other arbitrary inclusion requirement). Fortunately most of these Pyramids did rank the established companies that were included fairly accurately (as there are big TechCos with good solutions that would serve the needs of most, but not all, client organizations), but the reports never gave a complete picture. Either equivalent options (from a technology perspective) were missing or not ranked as highly due to arbitrary ranking or scoring criteria.

As such, analyst firms are one of the biggest influential damnations out there. Like any market intelligence / consulting firm, they have to keep their clients happy to stay alive, but that often means ignoring solutions that should be covered. This means that new startups suffer as do big clients that have a very specific need that can’t always be met by the bigger TechCos. Now, a few analysts do their very best to uncover and promote new startups that aren’t paying clients (and some even do so without the expectation that those startups will become paying clients when they can afford to do so), but given that they have to spend the majority of their time flitting between, and dancing to, two different types of tunes (BigCo client and TechCo client), they don’t have much time left for anyone else. So while their advice will be good, it’s never complete and even though we might want to think that because we paid six figures for their advice that we could take it at face value, we can’t and, like everything else, have to take it with the grain of salt it comes with.

Infrastructure Damnation 12: Airlines

You knew it was coming. That’s why we saved the best infrastructure damnation for last. (And today’s post is the first of the last baker’s dozen of damnations that we have left to cover.) Postal Services failure is annoying, but there are private carriers. Road closures are more annoying, because even though there’s always another route, the other route is usually longer. Port closures are extremely frustrating, because if you don’t get notice in time to reroute the ship, or its already in port, you’re waiting until it reopens, which can be months if the closure is the result of a strike. But if the airline(s) aren’t flying, what do you do?

Ocean isn’t always an option

If the shipment is from an inland locale that is thousands of miles from the ocean, has no roads part (or all of the year), or is time critical (because the goods are perishable or needed now to prevent a production line shutdown that will cost millions a day), you can’t wait for slow ocean freight. You need air, and if air suddenly becomes unavailable …

Airlines are subject to a host of threats

  • Natural/Environmental
    Planes can’t fly in hurricanes or tornados, can’t fly if the air is filled with volcanic ash, and unless properly equipped, can’t land on water or ice (which means a sudden tsunami or ice storm can make a locale off limits). And, as we saw with the Eyjafjallajokull eruption, Air travel was shutdown for much of Europe for 10 days with minor disruptions occurring in different locales for another month.
  • Geopolitical
    Embargoes, dispute, and wars will close down a zone or prevent planes from one zone from entering another and terrorist threats can result in the grounding of entire fleets.
  • Labour
    Pilot, crew, or terminal worker strikes can down airlines for days, weeks, and even months.

While it may be statistically the safest mode of travel, as the number of people dying from airplane accidents is considerably less than those that die from car accidents, of all of the major modes of transport, it is the most easily interrupted.

AirFreight can skyrocket over night.

It’s not only ocean freight that can increase 20% or 30% (or more) year over year when demand is high, capacity is low, and fuel costs are going through the proverbial roof. If fuel prices spike, capacity drops (especially as a result of a strike at a major carrier), or certain routes become unavailable, prices can increase very quickly, and it won’t matter whether or not you have a contract. (As a Force Majeure or other out clause will quickly be enacted.)

You can’t soar without a plane, when it crashes, so does your Procurement operation.

Procurement Talent Management: How Do You Recruit, Train, and Retain Your Way to Procurement Success?

It’s a difficult question. Top Procurement talent is in short supply, budgets are tight, and between (brain-dead) budget cuts and time constraints, training is that magical activity that you only hear about in fairy and folk tales that begin with the words “Once Upon a Time”.

So just how do you find and bind top Procurement talent in today’s economic landscape? It’s a tough problem, but one that Charles Dominick, Founder of Next Level Purchasing, has addressed in his latest paper on Procurement Talent Management: Recruiting, Training & Retaining a Modern & Awesome Buying Team. (Because the world’s second [or is that third] oldest professions is awesome.)

In this paper, Charles notes that just like there’s more than one way to make a tamale*1, there’s more than one way to go about recruiting Procurement talent, namely, the traditional way and the radical way. Organizations that search for talent the traditional way look for people who

  • have experience in the industry,
  • have Procurement experience, and
  • have experience buying the same categories they will be expected to buy.

There are advantages to this approach in that these people are typically loyal to the industry and want to stay within it (as that is their comfort zone and they like their comfort zone), they can typically hit the ground running, and good matches are likely. However, there are disadvantages to. If you continually replace the Volkswagen Beetle with a newer model, you still just have a Volkswagen Beetle. You don’t have anything radically new, and, as such, are not likely to get the radically new ideas you need to get out of a rut.

But there is another way. Instead of looking for someone who’s good on the traditional paper, look for someone who:

  • has the personality that fits the corporate culture,
  • has influential charisma, and
  • has intellectual potential.

Such a person, as Charles notes, can bring support for increased involvement of Procurement in the enterprise (as they fit, and, more importantly, can schmooze their way into non-traditional, and maybe even scared-cow, categories) and have the bandwidth to learn more advanced skills (and use more advanced processes and platforms to get better results). Plus, as these individuals are out-of-the-box that your team is trapped in, they are likely to bring some new ideas with them. You could find your best and brightest talent this way, or, as Charles point out, you could flop as the hire might not like Procurement or, even worse, while seemingly bright with his high IQ, just can’t adapt to the Procurement way.

There’s no right way, and the doctor would like to suggest that the best approach is often a fusion of the two, where you look for someone who:

  • has a high EQ, as they have to fit in,
  • has an above average TQ, as they have to use modern tools,
  • has at an average+ IQ, as they have to be able to solve problems,
  • has an affinity for the corporate culture
    which doesn’t have to be perfect as their EQ will let them adapt,
  • has experience in a relevant industry
    which might not be the company’s industry; for example, if you need an IT buyer, why not hire someone who used to be an IT account manager, is comfortable with the technical terminology, and knows all the tricks and traps providers will throw at you (and how to avoid those expensive change orders), and
  • has some operational experience
    in Sales, Finance, Engineering or a related area that will allow them to pick up Procurement quickly.

This person, who might be used to a different box, is likely to come with some new ideas, adapt to the organizational culture, learn what they need to know, and have the potential to contribute. Now, there’s still a risk that if they come from Sales account management they won’t like the job, but considering the increased reward that will definitely come from expanding the search box (at a lower risk than the true radical approach), the doctor thinks it would be worth it.

As indicated, the paper also addresses the subjects of training and retention, which are important, but which we’re not going to cover. Even though the section on retention is quite good, as there’s nothing groundbreaking on this topic, we’d rather focus in on the discussion of the traditional vs. the radical approach, as a real understanding of this subject will help you tackle the biggest problem — finding talent in the first place. Training is easy — fight until the budget is re-instated and send your people on courses and/or bring experts in on a regular basis to help keep them current on best practices. (Given the ROI numbers, it should be a no-brainer.*2) And any company that truly wants to retain talent will do the little things that go a long way. But even the best employers don’t always know who to look for. That’s why Procurement Talent Management: Recruiting, Training & Retaining a Modern & Awesome Buying Team is a must-read for any CPO or VP who wants to build the best buying team she can.

*1 We don’t use the other phrase here on SI. (LOLCat does not approve.)
*2 But that’s the problem at many organizations these days, no brains in the higher ups. 😉

Technological Damnation 86: Template Mania

We’ll admit that compared to the rest of the technological damnations, and damnations like Cybersecurity / Cyberattack (76), The Cloud (80), and Dashboards (84) in particular, just to name a few, this particular damnation isn’t that bad [and it’s certainly no Big Data (79) or Spreadsheet (83)]. But it’s bad enough to make our list. Why? Let’s get to it.

But first, what is a template? Well, that depends. Wikipedia has over a dozen definitions for templates, including:

  • a pre-developed page layout in electronic or paper media used to make new pages with a similar design, pattern, or style;
  • a standardized non-executable file type used by computer software as a pre-formatted example on which to base other files, especially documents; and
  • a master page on which you can globally edit and format graphic elements and text common to each page of a document.

However none of these definitions really clarify what a template is. So let’s consider a few of the templates we use in Supply Management.

  • RFX templates to quick start sourcing projects for common or previously sourced categories
  • Strategic Souring Decision Optimization templates for pre-defining models
  • Data collection templates for analyzing surveys using BI tools
  • Scorecard templates for supplier performance monitoring
  • Workflow templates for setting up a sourcing project
  • Workflow templates for (automatically) approving invoices

And right now you’re probably even more confused. And that’s the point.

Extreme template proliferation makes it hard to even identify what a template is.

Is it a form? It is a form generator? Is it a workflow that powers a form generator to create a form custom for your sourcing project? Is it copyable, or just configurable? Is it specific to you, your project, your organization, and/or your platform? Can it be altered by you, by an administrator, or just a vendor rep? The questions are dizzying. And we still haven’t addressed the fact that …

Even if we can define what a template is, it’s hard to know when it could be used.

Take a quick-start sourcing template for mobile electronics. If it was designed for cell phones, can it be used as-is for smart phones or does it need minor edits. What about tablets. And what about those damn unclassifiable phablets. Aaarrrggghhh!

With so many options for each situation, it’s almost impossible to know which one is best.

If the templates can be copied and altered, there might be the vendor template, the modified template from the Center of Excellence, the modified modified template from the last Sourcing project created by the previous buyer, a modified vendor template from another region created by yet another buyer, a third party template in the customer network on the vendor’s site, and so on. Which one is best? Are any appropriate? At this point you just want to bang your head against the brick walls.

And how do we keep them all up to date?

This is the real damnation. Not only do we have to keep a never ending deluge of data up to date, but we have to now keep a never ending deluge of templates that may or may not be used to capture the never ending deluge of data up to date. Ack!


Data, data everywhere
and all the tables burst
Data, data everywhere
we thought it’d get no worse

State of Flux Has the Treatment for Your SRM Ailments: Part I The Need

But before we talk about the treatment, we’re going to talk about State of Flux‘s recent event in Chicago which was the US launch for their most recent Global SRM Research Report, The Business of Supplier Relationships, which is their 7th annual research report on the subject. We’ll talk about this report too, but first, let’s talk about the event, or more appropriately, the need for SRM as explained by the event.

Large organizations, including those desperate for savings, around the globe are leaving millions on the table on a regular basis. Some of this is due to a failure to capture negotiated savings (as per AMR’s classic series on Reaching Sourcing Excellence), and some of this is due to a failure to maximize the value of supplier relationships.

The heart of the matter is that the value delivered by your organization to its customers is ultimately dependent upon the value created and delivered by your suppliers that manufacture the product, pack the product for delivery, and provide warranty and repair services for the product. If the product is poor, delivered late (which results in stock outs and lost sales), packaged very poorly (which results in a large number of damaged units on delivery), or the warranty and repair services are slow and leave much to be desired, your customers won’t be happy with you, and there goes your perceived value and future revenue.

In other words, suppliers are critical to delivering the value that you promise your customers. But they are also critical to delivering the value required by your organization. Regardless of how good the products are, your organization needs higher quality products at a lower cost, new products to attract new marketshare, leaner production, lower cost delivery, and other renovations and innovations that add to the top line while shaving from the bottom line. This won’t happen without supplier involvement.

And suppliers won’t be involved unless the relationship is collaborative. Even though CAPS Research (Japan) has been telling us for almost a decade that collaborative supply management is the key to success, the concept hasn’t taken off much (yet) here in North America. While collaborative supply management has penetrated the Hackett Group top 8%, it’s not daily practice in the Sourcing and Procurement groups at many companies. But it should be.

The fact of the matter is there is considerable research, in addition to State of Flux’s Global SRM Research report (which has now been published 7 years in a row), that demonstrates the value of SRM. Consider the research undertaken by Planning Perspectives Inc. on the automotive sector over the last 14 years, which was presented at the Chicago event, which has not only found that the gross profit per vehicle increases as working relations improve (as per the Working Relations Index), but that 71% of the positive change is contributeable to changes in the supplier relationship. Let’s repeat that: 71% of profit increase in the automotive sector can be directly correlated to improvement in supplier relations. Not e-Procurement. Not spend analysis. Not strategic sourcing. Supplier relations. In addition, the more collaborative the working relation, the greater the price recessions offered up by suppliers in response to requested price reductions, even if the requested price reduction requested is lower than the average price reduction request. More specifically, companies with good supplier relations typically achieve 8% to 12% more price concessions than their peers.

Moreover, when there is a good working relationship:

  • suppliers are more willing to share new technology and innovations without the up-front assurance of a purchase order
  • suppliers are willing to invest in new technology in anticipation of new or additional business
  • suppliers are willing to communicate openly and honestly, which prevents surprises down the road that can lead to stock-outs or supply chain disruptions
  • suppliers are willing to support the organization above and beyond contractual obligations

And a good working relationship stems from supplier relationship management. In our next post we’ll delve deeper into some of the highlights of the State of Flux Chicago event before we reveal some of the most interesting findings from this year’s report.