Author Archives: thedoctor

So You Admit You Might Be a Dead-Company Walking. How Do You Avoid the Graveyard? Part 4

In short, as per Part 1, you

  1. keep admitting to every mistake you are making and do something about it, then
  2. continue by looking for cost-effective opportunities for improvement and pursue them and finally
  3. never, ever, ever forget the timeless basics.

Today, we’ll continue by describing what you do when you identify, and admit to, one of the next two mistakes (mistakes 5 & 6) we chronicled in our two part introduction to our “dead company walking” (Part 1 and Part 2) series (where we helped your potential customers identify problems that signify you are a SaaS supplier they should be walking away from). (You can find part 2 and part 3 here.)

5) An innovation burst is enough, especially if it is disruptive

A successful innovation burst is great as it can get you noticed, and as it’s very hard to get noticed in an overcrowded space (again, see the Mega Map), that’s a great start. But someone noticing you does not mean they’ll engage with you, and engagement does not mean they will buy from you.

Moreover, it’s never long before a one-trick pony loses the limelight as fast as he enters it. If you want to stay in the limelight, which wants to move on to the next story as soon as you’ve had your 15 seconds of fame, you need to keep innovating, or at least developing the core functionality necessary to flesh out the value message to the point the overall message is so compelling people want to hear it and repeat it.

The reality is that it is continued development, especially around core processes your technology is being designed to support, that will at least keep you on the periphery of the limelight, and that is where you need to be to not only attract enough potential customers, but convert them into customers who want, as we’ve been stating repeatedly, solid solutions to their problem and not shiny tech that looks cool but doesn’t do what they need it to do.

6) Too much investment, too soon, against an overly ambitious plan

This is one of the biggest threats to your success, especially since you will be pushed to scale up fast to support the rapid growth, that won’t come, or at least not early in your corporate development. Falling for this will burn the cash well before you are even close to break-even, and if you can’t raise additional funds fast when you run out, you’re dead.

The first thing to do when you raise too much money is to stop dead in your tracks, stop all external hiring and engagement, and step back and do the detailed market research described in our first mistake and figure out the MVP you’ll actually need to build a significant market share, and focus first on hiring the talent / or acquiring the third party tech, to get there as soon as possible.

Then you need to figure out what not only makes a good customer, but one that is easy to sell. It’s likely that the majority of these customers will need education to get them there. The next thing to do is hire the product people who can build these educational assets for marketing, sales, partners, and customers.

When you get close on the product and the marketing, then you start to ramp up marketing and high-performing sales (who can work without a lot of support and incomplete, but progressing monthly, assets) to start building the initial funnel when you are ready to go hard.

Then start building up your services teams with senior resources who can do multiple roles and initial implementations with little support.

And only once all the pieces start falling into place do you start scaling up.

And in the process, be sure to:

  • review the marketing plan: cut the funding to anything not focussed on education and thought leadership in the early days
  • review sales: cut the “leads” to those truly qualified with problems that match your solution; and definitely cut the spray and forget power washer lead blasting from 3rd parties, you want well qualified leads only
  • review the development plan: make sure it’s 90% steak and only 10% sizzle; sizzle doesn’t solve problems, or fill bellies, and that’s why customers want steak
  • review the budget: anything not going to educational/thought leadership marketing, qualified solution-based lead generation, or solid development is extraneous and needs to be cut ASAP to ensure the money lasts until the solution is broad and deep enough to serve the intended market, command the expected price tag, and get the interest you need for steady, continued, growth

Stay tuned for Part 5!

Cost Savings is NOT Cost Cutting …

… and we need more articles that hammer this point home!

A recent article over on the Supply Chain Management Review (SCMR) focussed on how strategic cost savings differ from cutting costs, highlighted a recent survey from Boston Consulting Group (BCG) that found that while 65% of executives are prioritizing supply chain and manufacturing costs as the biggest levels for organizations to pull for cost savings, 52% [are still focussed on] labour and non-labour overhead costs. OUCH!

Most Supply Chain / Procurement Departments are understaffed and/or under platformed due to lack of talent and lack of available budget. They’re also a very small part of the organizational headcount, which in many organizations is now a small part of total spend. As a result, labour is not the problem. External spend is.

And kudos to the SCMR and Laura Juliano from the Boston Consulting Group for pointing out that strategic cost control is the right approach.

If you’re spending 100M on a category, you should be doing a lot more than just a 3-bids-and-a-buy RFX, cutting a PO, and paying an invoice. A lot more. And looking at more than just the unit cost — at the very least the total cost of ownership from initial acquisition through warranty/repair and eventual disposal, if not full total value management which also looks at brand value, bundled services, etc. Even well managed direct categories usually have 3% or more savings opportunities, and those that were not well managed can have two to three times that (in the 6% to 9% range). In other words, giving one person the time to properly source one category, even if it takes 3 months of man effort, can save 3M. Even if the fully burdened resource costs your organization 240K a year, that’s an ROI of 50X on the proper use of that one resource’s time.

This one example surfaces the key point of strategic cost control. It requires strategy and strategy requires PEOPLE with real HUMAN INTELLIGENCE (HI!). (Not hallucinatory Gen-AI like “chat, j’ai pÊtÊ”). People who can analyze the situation, the available data, case studies from similar (historical) market situations, suppliers, products, and make the overall best decision(s) for the organization. And, preferably, people who can also consider the sustainability of their decision (and the implications with respect to any regulations in laws in countries they source from and sell to). (Senior Procurement leaders can’t ignore any sustainability requirements they are subject to [40% are], they definitely can’t be unaware of legislation that could affect them [37% are], and they definitely can’t be making awards to suppliers and/or for products that might just disappear in a year or three.)

In other words, you can’t reduce headcount. (You may need to replace people if you initially hired people who thought strategic procurement was catalog comparison or invoice verification, of which 95% to 99% can be fully automated, but never, ever reduce the number of people in Procurement.)

Advanced Sourcing 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 Sourcing.

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 Sourcing 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 Sourcing success. (This article sort of corresponds with AI in Sourcing Tomorrow Part I and AI in Sourcing Tomorrow Part II that were published in January, 2019 on Spend Matters.)

TODAY

Event-Based Category Alighnment

As per our Procurement series, a good AI based platform continuously analyzes (i.e. re-runs an analysis on a monthly basis) every product or service for inclusion against every organizational category and comes up with the most logical mix for the procurement organization based on likeness, current supply-base, spend-mix, and other existing parameters.

However, when it comes time for sourcing, the category should be appropriate for a sourcing event. This depends on volume, available supply base, and the category strategy (see the next item).

When it comes to sourcing, the AI will look at not only the product specifications, but also ensure there is a sufficiently large supply-base, with supply availability, spend-mix, and price trends. It will do this based on key material analysis (to identify additional suppliers in the market not yet supplying the organization), identification of market offers and volume disclosures from third party distributors vs. organizational need and overall percentages, analysis of spend vs. typical sourcing event sizes using simple (k-means) analysis, and price trends using basic curve fitting/projection. Nothing fancy.

Based upon the demand (volume), available supply base, supply availability, spend mix, price trends, and defacto templated sourcing strategy, the platform will recommend the event proceed using the standard strategy and template, proceed with modifications, or not proceed (alerting the buyer it’s not a good time, not a good event, or a new strategy is needed). It’s all traditional analytics, a smattering of machine learning, a sprinkling of pattern matching, tolerances, and confidence calculations. Nothing super fancy. The recommendation(s) will depend on a number of factors that revolve around the market conditions at the time. Current prices. Available supply base. Category dynamics in the consumer marketplace. Etc.

Category-Based Sourcing Strategy Identification

In our prior series, we indicated we’d have market-based sourcing strategy identification, and while that is in development, we’re not quite there yet. Market-based strategy identification requires a lot of data — market, supplier, marketplace, (anonymized) community intelligence, past event data, and past data from similar situations … the global marketplace has been so dynamic in recent years that we haven’t seen anything like it since pre-2000 … which was before the introduction of mass-market sourcing / procurement / modern supply chain software and we just don’t have the data.

That being said, for the majority of commodity categories, a number of leading firms have developed one or more standard sourcing strategies for the category and categorized the market conditions under which the strategies work. Modern sourcing platforms will run all the analytics against the specified demand ranges, supply vs. demand imbalance, historical price variances (since the last event), current market prices, check the thresholds, compute the match percentage and confidence, and then recommend go, go with changes/caution, don’t go — all using straight-forward trend analysis and mathematical calculations — no Gen-AI needed!

Real-Time Market vs. Response Monitoring and Automatic Pauses/Updates

As the responses come in, the application will not only track bids vs open market prices (and current prices), but compute the averages and if the bids coming in are worse than expected, alert the buyer. In a multi-round scenario, or RFQ-powered auction, the trends will be analyzed and if they are not as expected, the buyer will be alerted. In both cases, if something is off beyond a tolerance, which will adjust over time as buyer feedback on go-no go is collected, the event will automatically be paused if necessary. This just requires simple calculations against means and expectations. Good old math, a few business rules, and some workflow automation is all that is required.

Suggested Award Scenarios

Even if the platform doesn’t contain (true) strategic sourcing decision optimization [SSDO] (and see this recently updated article on Questions to Ask Your Optimization vendor for the requirements for a true SSDO solution), most modern platforms will recommend one or more award scenarios that take into account cost, business constraints, risk and carbon. It’s just a lot of combinatorial mathematical calculations and basic analytic verifications.

Carbon Impact Analysis

Using standard models for carbon production based on available data by industry, country, and when available, factory, modern platforms will use standard models and formulas to compute the carbon footprint by item, based on the supplier, the source location, and the location it is going to (and even take into account logistics based carbon production). It will do this for every item you’ve purchased, every item you’re considering, and show you the carbon impact of different award decisions vs. the status quo. No Gen-AI required! (Just a lot of formulae and data!)

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 development and discussed as “the future of” Sourcing 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, or similar, 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 January 2019 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 (HI!) to create smarter Sourcing applications that buyers could rely on with confidence.

Which Solution Provider Do You Want To Work With? NONE OF THE ABOVE!

In a recent LinkedIn Post, THE REVELATOR asked:

Under which category does your solution provider demo fall?

  1. đŸ¤Ģ Selectively Stealth With A Reason
  2. 🎩 Smoke And Mirrors
  3. 🌟 Courageous Dreamers

And, more importantly, which one would you, as a practitioner, prefer to work with?

the doctor, who has reviewed over 500 solutions in our space over the last two decades (and interacted with considerably more vendors than that) answered for you:

  • 𝐍𝐎𝐍𝐄 𝐎𝐅 𝐓𝐇𝐄 𝐀𝐁𝐎𝐕𝐄!

a) Selectively Stealth vendors are either

  1. considerably overrating their solution against the market (usually due to lack of homework) or
  2. hiding their solution because they know there is absolutely positively nothing unique about their offering (which is NOT a bad thing if it is easier to use, quicker to implement, better supported, and cheaper than competitors, but if that was the case, why would they be stealth?)

b) Smoke and Mirrors are

  1. greatly overselling a significantly underperforming solution (and usually trying to gouge you with a high price tag while they are at it)

c) Courageous Dreamers are

  1. selling you on a vision they may realize someday, but are usually doing so while trying to sell a woefully inadequate solution (or, a solution with one new great capability but none of the critical baseline functionality)

So what type of vendor do you want?

e. Open, Honest, and Informed

Even if they don’t have anything explicitly unique.

As SI has noted before, a good vendor is one who will be focussed on

  • a particular market size
  • one or more related industries
  • a subset of functionality where the founders / core team have strength

In addition, it will consult with organizations in that niche, analysts and consultants who serve that niche, and third party experts to get feedback during design, development, initial implementation, etc. and take all that into account in order to design a solution that will solve the problems of the aforementioned identified market niche in a manner that will be usable, and used by, the market they are going after.

It’s not about who has the most features, who has the best bells and whistles, who has the coolest sounding tech under the hood, …

IT IS ABOUT WHAT SOLUTION WILL WORK FOR YOU!

It’s the solution that will solve the 80% of your problems, that will contain all the functionality to do the tasks you do every day (not every quarter or every year), that will make those daily tasks more efficient and effective, that will be used in the majority (not the minority), that will be affordable for a business of your size, and generate an ROI.

And, sometimes the best solution is the NO-AI inside solution with nothing new, but the solution that was form fit for companies of your size in your industry, that streamlines your daily processes, that is easier to use than avoid, that solves the problems you wanted solved, and does so at a fraction of the price of the mega-suite that is just complete overkill with respect to what you are looking for.

Some of the vendors that received the best coverage here on SI are those that didn’t contain a single capability the doctor hadn’t seen ten (to one hundred) times before, but came from vendors who designed a solution for an underserved market niche, made it valuable for that market niche, and were completely honest about what they had and who they were selling to. That’s what the market needs.

AND THAT IS WHAT YOU NEED!