Monthly Archives: September 2024

Advanced Procurement Today — No Gen-AI Needed!

Back in late 2018 and early 2019, before the GENizah Artificial Idiocy craze began, the doctor did a sequence of AI Series (totalling 22 articles) on Spend Matters on AI in X Today, Tomorrow, and The Day After Tomorrow for Procurement, Sourcing, Sourcing Optimization, Supplier Discovery, and Supplier Management. All of which was implemented, about to be implemented, capable of being implemented, and most definitely not doable with, Gen-AI.

To make it abundantly clear that you don’t need Gen-AI for any advanced enterprise back-office (fin)tech, and that, in fact, you should never even consider it for advanced tech in these categories (because it cannot reason, cannot guarantee consistency, and confidence on the quality of its outputs can’t even be measured), we’re going to talk about all the advanced features enabled by Assisted and Augmented Intelligence that were (about to be) in development five years ago and are now available in leading best of-breed systems. And we’re continuing with Procurement.

Unlike prior series, we’re identifying the sound, ML/AI technologies that are, or can, be used to implement the advanced capabilities that are currently found, or will soon be found, in Source to Pay technologies that are truly AI-enhanced. (Which, FYI, may not match one-to-one with what the doctor chronicled five years ago because, like time, tech marches on.)

Today we continue with AI-Enhanced Procurement that was in development “yesterday” when we wrote our first series five years ago but is now available in mature best of breed platforms for your Procurement success. (This article sort of corresponds with AI in Procurement Tomorrow Part I, AI in Procurement Tomorrow Part II, and AI in Procurement Tomorrow Part III that were published in November, 2018 on Spend Matters.)

TODAY

OVERSPEND PREVENTION

By integrating trend analysis on demand and price, the platform can easily predict the date the budget will be exhausted, and if that’s before the end of the year, it can proactively pause an order for budgetary review EVEN IF it would be automatically approved in a last-gen system because it was still within budget and from an approved supplier.

POLICY IDENTIFICATION and ENFORCEMENT

One reason fake-take (better known as intake) solutions are so popular, besides the fact they make tail spend procurement easy (which we’ll discuss in more detail in our next part), is that they make it easy to identify and follow organizational procurement policies, especially since they will even guide a user through the correct process once the product / service need is identified.

At the end of the day, this is just guided buying with integrated access rules (who can request / buy something), budget rules (what budgets do they have or have access to), approval rules (who needs to approve and when), as summarized in, and extracted from, policy handbooks (which can be done with traditional semantic processing and human verification).

AUTOMATIC INVISIBLE BUYING

In last-gen platforms you had to define items you wanted on auto-reorder, define specific rules for each, and manually maintain this list, and associated rules, on an ongoing basis. But, at the end of the day, for example, MRO is MRO is MRO and commodity stock is commodity stock is commodity stock and there’s no reason that you shouldn’t be able to turn over the entire category to the platform. After all, if you’re ordering the item regularly, as we described in Yesterday’s Smart Automatic Reordering, you have enough data to compute demand trends, price trends, delivery times, and EOQs (economic order quantities) and, as long as everything is within a threshold of predictability, the system should just re-order for you — and if something appears to be going off the rails, pause automatic re-order and alert a buyer to examine the situation and either do a manual re-order (which could include accepting the system suggestion), change the rules or thresholds for automatic reorders, or redefine the category / reassign the product or service.

AUTOMATIC OPPORTUNITY IDENTIFICATION

As noted in “AI In Procurement Tomorrow: Part II“, a high-performing organization tackles at most 1/3 of spend strategically on an annual basis, due to lack of manpower and time. The fact of the matter is that, unless you have a true best-of-breed spend analysis system and the experience to use it efficiently and effectively (as well as sufficiently cleansed and complete data to work on), it’s a significant effort just to do the spend analysis required to identify and fully qualify the market opportunity and shape it into an appropriate market event.

But there’s no reason that the platform couldn’t encode all of the standard analytic workflows used by best-practice consultants, identify the top product/services/categories with the most spend not under contract/management, look at the spend variability, look at current market prices and trends, look at average historical community savings data (from community, consultancy, and GPO intelligence), and evaluate and rank opportunities. And the best platforms do. (Are the rankings 100%? No — no platform has complete market data or complete knowledge of every variance to a market situation, but 90% is more than enough as that will free the buyers up to keep up with market dynamics and do real exploratory analysis that is not easily automated.)

SUMMARY

Now, we realize some of these descriptions, like yesterday’s, are also quite brief, but again, that’s because this is not entirely new tech, as the beginnings have been around for a few years, have been in developments and discussed as “the future of” Procurement tech before Gen-AI hit the scene, and all of these capabilities are pretty straight-forward to understand (especially with many of the fake-take and Gen-AI providers marketing these claims, even though they are not entirely realizable within their platforms). And, if you want to dive deeper, the baseline requirements for most of these capabilities were described in depth in the doctor‘s November 2018 articles on Spend Matters. The primary purpose of this article, as with the last, was to explain how more sophisticated versions of traditional ML methodologies could be implemented in unison with human intelligence to create smarter Procurement applications that buyers could rely on with confidence.

Billionaires are not Benevolent, but they aren’t all Bad Either (Bad Billionaires 2/3)

This is the promised follow up to The USA is a Third World Country.

As the great Robert Reich points out in How Much Wealth is Too Much?, there are now only five (5) ways to become a Billionaire, and none of them are good!

  1. Exploit a Monopoly
  2. Exploit Inside Information
  3. Buy off Politicians (20M in lobby funds gave Billionaires a 1B tax cut)
  4. Defraud Investors
  5. Inherit It (60% of all wealth is inherited, tax free)

There are no “Self Made” Billionaires. As the great Robert Reich again points out, the origins of today’s Billionaires are Multi-Millionaires with the money and connections to get them going. Wealth is begot from wealth.

And due to all the inheritance and capital gain loopholes, every time it’s passed on it just grows and grows so millionaire families from a century ago had 100 times that before the turn of the century and now have billions today. (Unless, of course, they exploited a monopoly, inside information, or investors, in which case they may have went from millions to billions without the intermediate step.)

Then there’s the fact that most of them greatly increase their wealth by:

  • manipulating stock prices for short term gains
  • paying their workers as little as possible to increase profits
  • using their success to get massive raises and bonues, and even bigger salaries and bonuses at their next job (CEO pay has skyrocketed 1,322% since 1978 [Economic Policy Institute], your pay has increased less than 18% … see the discrepancy (as their pay has increase 73X more than yours has)?
  • borrowing against their wealth to invest in other ventures …
  • including borrowing against their capital gains tax free (while paying less interest than they make on their new investments)
  • contributing to lobby groups / SuperPACS that create new loopholes for them to exploit
  • etc. etc. etc.

So they’re not benevolent.

Not to mention the fact that, in GDP terms, 6 Trillion is more than the GDP of every country on earth except for China and the USA. In fact, that’s more than the GDP of the bottom 128 countries combined (Worldometer). They have more buying power than 70% of the world. (And if you tell me it’s not right, I’d agree.)

But banning them is not the answer. If you try to take away their wealth, they’ll flee with it to another country. If you overtax them, they’ll invest all their money somewhere that doesn’t. If you limit their earnings, they’ll go elsewhere.

And while the departure of some of them would lead many of us to say goodbye and good riddance, the reality is that the country needs the (very) small number of “self-made” billionaires that start with millions and end up with billions and do it the old fashioned way they used to do it a century ago (after the US government busted up the railroad tycoons and brought in anti-monopoly laws) … i.e. there used to be a 6th way, and that way was build a business that increased value for everyone involved … the founder, the shareholder, and the workers. Like Ford did.

Ford wasn’t perfect (do your research), but he knew two things.

  1. if you want to grow your business, you need to make an affordable product
  2. if you really want to grow your business, make sure you pay your workers enough for them to afford it

Billionaires like that grew the economy because they lifted all boats (not just theirs). It’s billionaires like that who are needed to grow it again. Hopefully some well meaning ones will come along and start the cycle on their own, but like Reich, I’m a bit doubtful. The government may need to stand up for the people who elect them and push the billionaires in that direction.

How? That’s a damn good question. But we’ll tackle that in our next post.

The USA is a Third World Country (and by now, Canada is too!#) (Bad Billionaires 1/3)

Why do I say this? Because the “official” US poverty rate is over 11.5% and the official US (long term average) unemployment rate (U3) has been averaging 5.7%, and we both know the official rates (far) undercut the reality since:

  • in big cities and wealthy states, you couldn’t afford rent and food if all you made was $1 above the poverty line; and the US leads all nations with the highest overall child poverty rate of 20.9% (Source: Confronting Poverty)
  • the official unemployment rate (U3) excludes part time workers seeking full time, people who have not been able to secure a job in more than a year, went back to school (even part time) in an effort to level up, etc. and this (U6) rate is usually 50% to 60% higher (putting the long-term average U6 rate at 10.1%)

None of these statistics should exist in a first world country!

According the World Bank, of the 162 countries they track with a poverty line, 18 have a lower percentage of people living in poverty, including pre-war Ukraine, Belarus, Vietname, Kazakhstan, and Algeria. Something is VERY wrong here!

According to Trading Economics, 68 countries have less unemployment than the United States, with Uganda, Liberia, Vietnam, and Mexico included in the countries under 3%! Something is VERY wrong here!

According to UNICEF, there are 34 countries with a lower child poverty rate than the USA. THIRTY FOUR! Something is TOTALLY FUCKED UP here. You are (way) better off having a child in Slovenia, Czechia, Poland, or Croatia than the good Ol’ US of A.

Moreover, if you’re a blue collar worker or a low-tier white collar worker, you’re also screwed since you’ll never be able to pay off your student loans as almost everything you make will go on rent and food. And even if you’re true white collar middle class, good luck buying a house or sending your kids to college.

While all the economists and politicians want to tell you how great things are because the averages keep going up and up, this is all a facade to prevent you from finding out the truth that things have actually getting worse for you since the eighties (when “trickle on”*, which the Republicans like to call “trickle down”, economics were introduced) because the median is not getting better. (In good years, it’s barely holding steady.) The problem with averages is that they include everyone, which includes billionaires that are collectively worth more than 6 Trillion dollars. (If Bezos moved to a small town with under 1,000 people where the average income was 35,000, the average income per person would suddenly be over ONE Million dollars, while the median would stay the same. It’s all lies, damn lies, and statistics.)

The problem is that our buying power has decreased considerably since the 70s (which was the last time things were really good for the average American) as our median family income has not kept up with rising costs (which should not be a surprise as the federal minimum wage in the US has not increased in 15 years). The relative cost of a house has almost doubled, and the cost of sending our children to a community college or trade school has almost tripled.

Here’s a simple table to break it down for you.

Year Median Income Median House Price X times Median Income
1975 13720 39300 < 3X
2020 76600 391900 > 5X

And yet another simple table:

Year Median Income Average Tuition % Median Income Harvard Tuition % Median Income
1975 13720 542 4% 5350 39%
2020 76600 9488 13% 47730 62%

When you break it all down, relatively speaking, the cost of almost everything has increased significantly since the 1970s. The only budget item that has stayed relatively flat (in the 10% to 15% of median household income) is food for a family of 4, but that’s only looking at the numbers. Today, most Americans can only afford cheap (ultra) processed foods, and even Fox News is now warning us about those! (If you were to compare spending on healthy food baskets, the buying power does not remain constant.)

In other words a significant number of you are poor (and much worse off than the majority of OECD Countries [Confronting Poverty]), unemployed, or both, and the way things are, this number that has been rising for decades is going to keep rising unbounded unless something is done. And until that something is done and these numbers start decreasing and level off at acceptable levels (5% max for poverty and 3% max for U6 unemployment), as far as I’m concerned, the US (and Canada, which switched from following the UK’s lead to America’s lead a few decades ago), is a third world country!

So what can you do about it? Some would say ban billionaires (because no one needs that much money and it should be shared more equitably) while others would say fix government (and ban SuperPACS and lobby groups that have too much influence over governments and divert them from your welfare to theirs) and others still fix economics (and what it actually measures), but neither is a solution on its own. It’s not about fixing the wealth imbalance (it’s always been there, it always will be), or ending lobbying (although we probably should end SuperPACs and limit funding levels from any individual or corporation), or changing the definition of economics (because, thanks to lies, damn lies, and statistics, there will always be ways to corrupt the measures and mislead the public), but about increasing the prosperity of the average blue collar and white collar worker, getting them back to 1970 levels, and putting them back on the path to increase prosperity (compared to the majority of the world and making the USA a true first class country again).

How? That’s going to be hard, especially since you’re one of the last “democracies” (well, not really, you’re a republic) still on a two-party system (which is easily corrupted and has been for decades and that’s why you’re not a first world country anymore), but if a party would come along and focus on the right things, it wouldn’t be too hard to right the course … especially since productivity of the average worker has increased almost fourfold since the 1970s due to American ingenuity and grit.

But first, let’s babble about those Billionaires and why they simultaneously are and aren’t the problem. Stay tuned.

 

* Republicans have been telling us that “trickle-down” economics are good for us, when history has shown time and time again that they are not. In reality, those Billionaire tax cuts are “trickle on” economics, because that’s what the Republicans and their Billionaire buddies are doing to you, and if you don’t understand what that means, then type “golden shower” porn site into Google and it should bring up links to at least 30 sites that should have very graphic visual descriptions that demonstrate precisely what “trickle on” economics really is! (I asked Google how many golden shower porn sites and it said top 30, so I am assuming it will deliver at least 30 links to you.)

# Statistics Canada is always years behind compared to other countries, with no good data beyond 2021, but the projection for Canada this year was a 10.1% poverty rate!

You Admit You Might Be a Dumb Company. How do you avoid the fork in the road that leads to the Graveyard? Part 2

Good for you! As we noted in part 1, admitting you might be a dumb company is the most important thing to do on the yellow brick road to enlightenment.

So what do you do next? In short you continue to:

  1. admit to every mistake you are making and do something about it,
  2. look for opportunities to improve that are logical next steps, and
  3. never, ever forget the timeless basics.

Today, we’ll continue with describing what you do when you identify, and admit to, one of the last five mistakes we chronicled in our re-introduction to our “dumb company” series and want to do something better.

6) No More Training

Start picking out your corporate coffin and writing your corporate obituary, because the minute you stop learning and stop improving is the first minute on your corporate deathbed. So:

  • time your process throughput across corporate processes (and compare to industry averages)
  • examine your SaaS utilization (on the SaaS apps you keep after you Get SaaSy)
  • train where either can be noticeably improved

7) Tighten The Belt One Notch Per Month

You can trim the fat, but you have to stop trimming when the fat is gone.

If revenue is not increasing, it means that either your marketing or sales is not effective or your product is not appropriate. In both cases, you will have to invest further. In the first, to get some consulting from an expert low-cost guerrilla marketer as well as the educational assets you will need, and then some training on how to improve the effectiveness of your sales cycle. In the latter, expert advice on where to focus the development roadmap to make it more appropriate, and appealing, to your target market.

If there’s not enough cash, then you will have to wrangle more investment (even if the terms aren’t what you hoped) or, if you have revenue, take a loan (and keep your equity).

8) From 60 to 0 in Marketing

As already indicated, just because you wasted the entire $M marketing budget on overpriced events, email marketing, “analyst firms” and their maps, soundbite marketing, and a CMO who only cares about his jet-setting media-centric lifestyle, that doesn’t mean you can cut it to 0. If you do so, crawl in the corporate coffin as it’s almost time to nail the lid.

You need constant visibility as you have to be “the name they know” when your target customer finally gets budget and can invite you to an RFP or a contract negotiation. At any given time, half of your customers are going to be six months away from a potential budget. One fourth, nine months, and only one fourth will be close to a budget season, where they may not get budget, and then it’s fifteen months before they can talk to you.

Constant visibility doesn’t mean a booth at a 100K event every month and the media that comes from it, it means monthly educational content that not only keeps your name visible, but keeps you front and centre as they look for that content to consume, to learn from, and hopefully build their business case to buy your product.

9) Real Innovation is Too Risky

First of all, a lot of customer problems can be solved with evolutionary renovations to existing tech, and “innovation” is thus not as risky as you think.

Secondly, sometimes real innovation is needed to solve a problem, or at least do so affordably. While it’s risky (maybe you won’t solve it / get it right), if solving that problem is key to your corporate growth, and possibly your corporate survival, it’s definitely riskier not to pursue innovation. So do it, but carefully and in a controlled manner — don’t bet the bank on anything without a [very] high probability of success. Innovation should NOT be costly (beyond the innovator’s salary) in software-based tech. It’s just research, trial, and error. More than that, and you’re not doing it right.

X) Raise the DrawBridge!

You don’t know everything. And that’s okay. No one does.

But always remember: what you don’t know can kill you. Bring in an expert ASAP to do an analysis of your critical activities, identify weaknesses, and then, if necessary bring in an expert to address them. SI has been telling you for years consultants are cheap as the value a fair priced expert consultant will bring you is multiples of what that person will charge.

Next up: Avoiding the Graveyard if you are a Dead Company Walking! (Part 1 of 8)