Category Archives: Corporate

The Change Management Myth: Why e-Procurement Initiatives Fail

One of at the presentations that I really wanted to see at the Fourth Annual International Symposium on Supply Chain Management was Jon THE REVELATOR Hansen’s presentation on The Change Management Myth: Why e-Procurement Initiatives Fail. Unfortunately, as happens from time to time, the author could not make it. However, Jon Hansen, formerly of e-Procure Solutions Corp. (and now of Procurement Insights), did send in the paper his presentation was to be based on, which had some really good points that I am going to discuss herein.

Before I get to what may be the fundamental reason, I’d like to reiterate a statement by Dr. John K. Potter who stated in his eight step process for change (in Leading Change) that transformation within a company can take between 5 and 10 years while, conversely, employees will abandon the initiative if the do not see compelling evidence that the change is working within 12 to 24 months. In other words, major organizational changes typically take 2.5 to 10 times longer than an employee will wait – so the pace of change, and your change management, needs to be relatively rapid if you want to succeed.

Secondly, I’d like to point out that despite their potential to revolutionize your organization, e-Procurement failures, especially partial ones, are much more common than you might think. Studies (IDC) and publications (Fortune Magazine) have reported that 75% to 85% of all e-Procurement initiatives fail to achieve the expected results. In other words, according to these studies, your chances of complete success are at most 1/4! Those aren’t good odds.

As an example, I’d like to point out the results of INCO’s eProcurement Transformation. At the conference INCO, one of the world’s largest nickel producers, presented the results of the initiative they started in 2001 (primarily through Quadrem (acquired by Ariba in 2011) an eProcurement marketplace) as a success. However, given their reported results, I would only classify it as a partial success.

As of last year, INCO calculated that their eRFQ initiative has saved them $3M on 907 events worth $300M – a mere 1%! If, like me, you’ve been tracking the industry studies by Aberdeen and AMR over the years, you will find this quite low. Now, an eRFQ initiative is not going to save you double digits like an eAuction or decision optimization can, but, considering the size of their organization and their spend, I would have expected efficiency savings at least 2 or 3 times that amount.

Furthermore, they have only run 26 events to date for a savings of 17M! Now, I don’t know all the baselines for this statistic, but I expect that their savings could have been a lot higher with more events. After all, industry statistics would suggest that they could have run considerably more events than they did (since at least 30 to 50% of events should be suitable for their eAuction tool and they have been running 180+ events a year through their eRFQ), and doubling or tripling the events should significantly increase savings. After all, their public financials indicate capital expenditures of almost 1.2B a year, and given average first time auction savings typically in double digits, if they had run even a third of their spend last year through an eAuction, I would conservatively expect that they should have been able to achieve a savings two times what they actually did. I could be dead wrong, but I’ve seen some considerable successes first hand when projects are appropriately implemented, managed, and, most importantly, supported. (And I’m sure the change management and the slow pace of a large corporation was the issue for the long implementation and what I consider to be weak results, and not the technology or their procurement team, who struck me as very on-the-ball.)

Back to the topic at hand. Most initiatives fail to achieve the expected results. (And sometimes drastically so! Consider the State of California who entered into a 6 year, $95M contract with Oracle on the basis of an unverified vendor savings estimate of $163M, which was not backed up by the $111M estimate by Logicon, Oracle’s consulting partner. When the deal was audited by the State’s auditor, the forecasts were found to be wildly inaccurate and the conclusion was that instead of saving money, the 6 year, $95M contract would actually cost taxpayers $41M.

The major reason, as hinted at by the above example, is typically lack of technology alignment. I’m a technology guru by training (PhD in Computer Science specializing in Multi-Dimensional and Spatial Data Structures and Computational Geometry), and I know (from experience) that great technology, including technology with a multi-million dollar price tag, can produce an ROI many times what you invest – but the truth is that it only produces results if it is aligned with your needs and solves the problem you need to solve. More importantly, even though the right solution can often save you millions and millions of dollars, the wrong solution can cost even more!

So why is the wrong technology often selected? There are a number of reasons for this. One reason, as I inferred in the software panel at the conference, is that the decision is not always made by the right person, but the primary reason is probably due to a lack of strategy. If your strategy is to simply “select an eProcurement / eSourcing tool” and reap rewards, you are bound to fail.

As Hansen says, any e-procurement strategy should be built upon a solid foundation of process understanding and refinement before technology is introduced into the equation. This way, when you make the decision to investigate the available applications, you are doing so with a clear understanding of how technology can work to accelerate the process, not define it. In other words, you need to know what you need before you select a solution, so that you can properly evaluate the solutions on the marketplace and select the one that is best matched to your needs.

The Best Place to Do International Business in Canada (is Halifax, Nova Scotia)

It’s Saturday (my day off from sourcing), and since I don’t have any Flaming Laptops or Weasels to report on, I’m going to tell you about the best place to do international business in Canada, and why. If you want the short answer, it is Halifax, Nova Scotia, but since I know some of you may not take it on faith that I’m right, you can keep reading.

The September 25 – October 8, 2006 issue of Canadian Business ran an article entitled The Best Places to Do Business in Canada where they ranked prime locations for business in terms of annual operating costs (/M$), cost of living index (with Toronto as a baseline), building permit growth, unemployment rate change, and crime rate per 100,000. Based on the weighted rating they used, Quebec City came first, St. John’s Nfld came fifth, Edmonton came seventh, Halifax came ninth, Ottawa came twelfth, Winnipeg came thirteenth, Vancouver came thirty-first, Calgary came thirty-fourth, Toronto came thirty-seventh, and Montreal came thirty-eighth.

A snapshot of the statistics of these cities is as follows:

Rank City Yearly Operating Cost ($M) Cost of Living Index Building Permit Growth Unemployment Rate Change Crime Rate(/100,000)
1 Quebec City, Que. 30.44 73.10 89.31 -32.76 5,069
5 St. John’s, Nfld 28.55 63.80 1.66 -11.76 6,898
7 Edmonton, AB 31.55 73.70 27.82 -19.15 12,207
9 Halifax, NS 29.34 74.90 17.31 -16.39 12,723
12 Ottawa, Ont. 32.18 83.30 -0.15 -35.71 6,385
13 Winnipeg, MB 29.48 74 6.52 -12.5 11,975
31 Vancouver, B.C. 35.04 98.30 6.23 -31.67 12,804
34 Calgary, AB 33.33 82.8 -1.86 -3.13 7,347
37 Toronto, Ont. 34.20 100.00 -7.59 -16.00 7,630
38 Montreal, Que. 32.46 86.8 -4.13 -1.19 10,213

However, there are more factors that you need to consider than just annual operating costs, cost of living, building permit growth, unemployment rate change, and crime rate – especially if you are an international business looking to set up or expand an operation in Canada. First of all, you need easy access to the rest of the world – and there are not that many large international airports in Canada with regular flights around the world. When you get right down to it, if you are doing a lot of international traveling, you probably want to be in Vancouver, Calgary, Edmonton, Winnipeg, Toronto, Montreal, or Halifax. Not only are these seven of the eight largest airports in Canada (by volume), but the only airports currently participating in the CANPASS program. However, we’ll include Quebec City since it did rank number one, St. John’s since it has the most eastern airport in Canada, and Ottawa since it is the nation’s capital.

Canada only has about 32M people, and with almost half its population clustered in and around the seven CANPASS cities (over 14.6M people in the greater metropolitan areas), it’s not surprising that it only has a handful of large airports with a large number of regular international destinations. Thus, with the exception of Ottawa, the nation’s capital, it makes sense that we should more or less restrict ourselves to these cities in our determination of the location that is truly optimal for an international company to open a (new) office in Canada.

Restricting our analysis to these cities, we see the following rankings:

City Yearly Operating Cost ($M) Cost of Living Index Building Permit Growth Unemployment Rate Change Crime Rate (/100,000) Airport (flts/day) Unweighted Sum
Quebec City, Que. 4 2 1 2 1 10 20
St. John’s, Nfld 1 1 6 8 3 9 28
Edmonton, AB 5 3 2 4 8 5 27
Halifax, NS 2 5 3 5 9 7 31
Ottawa, Ont. 6 7 7 1 2 6 29
Winnipeg, MB 3 4 4 7 7 8 33
Vancouver, BC 10 9 5 3 10 2 39
Calgary, AB 8 6 8 9 4 4 39
Toronto, Ont. 9 10 10 6 5 1 41
Montreal, Que. 7 8 9 10 6 3 43

At this point, it becomes abundantly clear that Vancouver, Toronto, Calgary, and Montreal are not your best choices (which is not unexpected since they scored so low on Canadian Business’ ranking). Furthermore, when you consider St. John’s lack of building permit growth and airport facilities (you need to house your organization), it’s probably not your best choice either.

This leaves Quebec City, Edmonton, Halifax, Ottawa, and Winnipeg. Considering that one of your primary decision drivers will (and should) always be cost of operations, that cost of living needs to be reasonable in order to maintain reasonable cost levels (since talented human resources are always a significant expense and will only stick around if they are afforded a comfortable lifestyle), and that commercial space is not increasing, this should strike Ottawa from your list as well.

So, Quebec City vs. Edmonton vs. Winnipeg vs. Halifax, which is truly the best location to set up a new location as part of your international business? Considering a primary driver is international accessibility, and that Quebec city is not one of Canada’s international airports (and that it only has only one fourth of the traffic of Halifax or Winnipeg), we should be tempted to drop Quebec City at this point. Furthermore, when you consider that communication is key, that English is the international language of business and that Quebec City, in the heart of Canada’s only province with French as the sole official provincial language, is not nearly as bilingual as Montreal, and despite it’s beauty and low cost of living, its time to chop it from our list.

So, we are down to Edmonton, Winnipeg, and Halifax. Let’s review our rankings:

City Yearly Operating Cost ($M) Cost of Living Index Building Permit Growth Unemployment Rate Change Crime Rate (/100,000) Airport (flts/day) Unweighted Sum
Edmonton, AB 5 3 2 4 8 5 27 (12)
Halifax, NS 2 5 3 5 9 7 31 (12)
Winnipeg, MB 3 4 4 7 7 8 33 (15)

With these rankings, it looks like Edmonton might be the best city, but when you limit it to your three most critical factors – international access, operating cost, and building permit growth (since you need space), Edmonton and Halifax tie and Winnipeg is still at the bottom. Thus, it should be clear that the race is really between Edmonton and Halifax. (We ignore crime rate and unemployment rate changes since they are all relatively close and since they are not really strong determining factors. Cost of Living does have an impact, as it indirectly impacts operating costs, but the costs of living are very similar.)

Halifax is 7% cheaper, Halifax International Airport (which is nearing the final stages of extensive renovations and improvements) processes 75% of the annual volume of Edmonton International Airport (with over 15 airlines serving it), and, unlike Edmonton (which is overshadowed in almost every way by Calgary), Halifax is the center of not only the province, but Canada’s Maritime Provinces. Furthermore, it’s the ideal location for a North American office that has to regularly work with locations across North America and Europe. Halifax is on Atlantic Standard Time, which means that it is four hours ahead of California (Pacific Standard Time) and four hours behind London (Greenwich Mean Time). So, you can work with Europe in the morning and California in the afternoon in a standard business day! Then there’s the issue of bandwidth – the majority of the big bit pipes to Europe run through the area (which also has the “Telecom Application Research Alliance”), so strong, fast connectivity is not a problem! (Furthermore, Nova Scotia’s two full-service telephone companies offer end-to-end redundant fiber networks.)

And, for those of you who need ocean transport, the Port of Halifax (the first inbound and last outbound port on the North American continent) is a full day closer to southeast Asia than any other North American port. Furthermore, Consolidated Fastfrate is currently building a new state-of-the-art transload, distribution, and warehouse facility at the Port.

Halifax may not be building as explosively as Edmonton, but it’s still an aggressive pace. Moreover, rapid fire expansions can often lead to rapid fire contractions, so Halifax might be the safer bet. Furthermore, when you get right down to it, once a city has made the cut, there are more than just hard numbers to think about.

The real strength of a company lies in its people – who need to be educated and cultured. Per Capita, Nova Scotia (and Halifax in particular) has one of the highest concentrations of universities and colleges in the country (which have exported their services to over 100 countries globally, enroll students from over 140 countries annually, and which graduate approximately 15,000 students yearly), and the highest concentration of graduates with a post-secondary education in Canada. Halifax is the largest city in the maritime provinces and a strong argument can be made that it is the cultural center. With annual events such as the Annual Atlantic Film Festival, Atlantic Jazz Festival, Atlantic Fringe Festival, Halifax International Busker Festival, and Shakespeare by the Sea that rival similar events in Canada’s largest cities, culture surrounds you.

Therefore, even though it only landed ninth on Canadian Business’ list of the best cities to do business in Canada, I would argue that Halifax is the number one location to do international business in Canada. After all, if you consider the following numbers from the article Get in Line from the same issue of Canadian Business, Halifax tops the list for the most cost effective city not only in Canada, but the U.S as well, to do business!

City Salaries ($mil) Benefits ($mil) Labour Costs ($mil) Rent ($thou) Power ($thou) Total ($mil)
Halifax 8.09 1.62 9.71 721 38 12.04
Edmonton 8.49 1.70 10.18 709 31 12.48
Montreal 8.74 1.75 10.48 743 36 12.83
Calgary 8.90 1.78 10.68 810 31 13.11
Ottawa 9.01 1.80 10.81 911 36 13.33
Toronto 9.41 1.88 11.29 893 40 13.84
Vancouver 9.52 1.90 11.42 1164 24 14.22
             
Salt Lake City 8.60 3.27 11.87 940 29 14.41
St. Louis 8.79 3.34 12.13 1152 30 14.89
Baltimore 9.05 3.44 12.49 1088 39 15.20
Phoenix 9.17 3.49 12.66 1164 50 15.46
Denver 9.63 3.66 13.29 1013 50 15.93
Boston 9.81 3.73 13.53 1266 60 16.49
San Francisco 9.96 3.79 13.75 1873 88 17.32

So, if you are looking to set up a new office in Canada, and you do not already have one in Halifax, set it up here. I’ve been convinced for the last few years that Halifax would eventually become not only one of the best places to do business in Canada, but the best place if you were, or wanted to be, an international company. And now it looks like I was right. So beat the rush – do it now. After all, it’s always the businesses that invest at the beginning of the curve that reap the greatest rewards – and, right now, the curve is just starting. Some really big companies are already starting to move into the region – you don’t want to be left behind, do you?

Furthermore, if you want to move into the region, there are people and organizations here to help you do it – at very, very low cost. Nova Scotia Business, Inc. (now Invest Nova Scotia) (which has assisted in the creation of roughly 17,000 jobs in the last five years) is rooted in Halifax and one of their primary missions is to help companies successfully set up shop here in Nova Scotia. They can also assist you in identifying loans, tax credits, and grants that you can use to significantly reduce the initial costs of setting up a new operation in the area. Furthermore, their payroll rebate program, which any company with the intention of creating at least fifty new full time jobs in the region can apply for, can help you reduce your initial costs for up to six years! They also have an Export Development team which can assist you in penetrating additional markets. For more information, check out the NSBI site or contact Paul Doucet, Director of Communications and Strategic Initiatives, he’d love to hear from you! You can tell him The Doctor sent you.

 

If you think it was unfair of me to skip companies 2, 3, 4, 6, 8 and 10 on the Canadian Business list in my analysis, here’s why I think otherwise.

For the longest time Charlottetown, #2, qualified as a city only because it was the capital of Prince Edward Island, a province of approximately 130,000 people surrounded by water, and it’s airport is about as small as you can get. If you really want to operate off of a tiny island, I’d go with Hawaii.

With respect to #3, #4, and #10, Saguenay, Que., Laval, Que., and Sherbrooke, Que. they are also rather small and, to be blunt, I doubt that most Canadians even know where they are! (If two of these cities were not near the shortest driving route between New Brunswick and Ontario on your way to Ottawa or Toronto, I probably would not know where they were!)

New Brunswick, a province of only 0.75M people, has three cities vying for supremacy – Moncton, the traditional business hub, Saint John (#6), an emerging competitor thanks to IT and Irving, and Fredericton, the capital with the primary University campus. In addition, they have two vying airports – the Moncton airport and the Fredericton/St John airport. As a result, I would argue that neither city is the best place to do business in the Maritimes and that Saint John does not belong on our list.

Markham, Ont., #8, like the other cities in Ontario on the list, are going to be shadowed by Toronto and Ottawa, especially since most of these cities are small (in comparison), with limited airports and employable populations.

The Talent Series V: Driving Competitive Advantage thru an Effective Talent Supply Chain

Another great presentation at the Fourth Annual International Symposium on Supply Chain Management was Head2Head Purchasing’s talk on Driving Competitive Advantage thru an Effective Talent Supply Chain.

The presentation by Wayne Burgess & Paul Dodd, Managing Partners, pointed out that the human element makes talent procurement distinct and volatile. According to them:

  • Attraction is Critical
  • The best talent is most at risk of flight
  • Talent is extremely volatile & unpredictable
  • Ownership is complex; you need to consider
    • Physical Asset Nature
    • Knowledge and Skills Retention
    • Intellectual Property
    • Work Product
  • Appreciation in Value over Time
  • Expensive Maintenance
  • Expensive Disposal Costs

Furthermore, some markets are even tougher than others. Right now, the countries that are worst off are Mexico (78%), Canada (66%), and Japan (58%). In Canada, Calgary and Vancouver are the hardest hit (over 80% in some industries). Furthermore, each market has its own unique skill pressures.

One of the high points of the talk was where they pointed out that most companies with client acquisition issues had one or more of the following issues:

  • Poor attention to employment and job brand
  • Poor understanding of the best supply channels
  • Supply strategies are stagnant
  • Supply and Demand are rarely linked
  • Reactive recruitment is typical
  • Little attention to supply surety
  • Workforce competition is often an afterthought

Why was this a high-point? Knowing the issues allows you to identify mitigating factors. In particular, these issues identify the following key success factors in the attraction of talent:

  • marketing of employment and job brand
  • supply channel knowledge
  • effective talent sourcing strategy
  • integration with demand generation
  • effective resource planning
  • relationships
  • market and internal data management

Furthermore, attraction, through marketing and PR campaigns, is often the differentiator. Good PR campaigns that create the buzz … continuously … across multiple supply channels.

Everyone knows that some channels work better than others, but one thing that surprised me was how much better some channels were than others. The presentation highlighted the following statistics that serve to indicate just how effective your marketing dollars can be expected to be:

Channel Avg Success Rate
Referrals 50.0%
Career Site 13.3%
Agencies 11.4%
HR Database 10%
Campus Recruitment / Events 9.8%
Advertisements 5.5%

In other words, your most effective channels are often your lowest cost channels. When you consider the cost of an agency, a job fair, or an advertisement, an employee referral program, even at 5K a head, is cheap in comparison. And when you consider the national, and sometimes international, visibility of a career site, their four figure fees pale in comparison to the number of applications you can receive if your ads are appropriately placed.

And the (technology) brain-drain is finally official …

Today Emptoris (acquired by IBM, sunset in 2017) finally announces what we’ve all known for a long time (see David’s post on e-Sourcing Forum back in February), that it has acquired MindFlow Technologies, a leader in inbound supply chain planning and sourcing optimization.  I’m going to refrain from commenting at this time*, but say that I’m pleased that a North American company acquired MindFlow, because in today’s economy, brain-drain is a global phenomenon and I personally think that the last thing you want is your country’s best and brightest packing up and moving halfway around the globe after a merger or acquisition!

The press release should be up on their site by the time you read this, so you can check it out at your leisure.  They are also announcing a new service offering, Overdrive, to help companies drive adoption and accelerate the business impact of Emptoris solutions.  The offering includes assessment tools, adoption workshops, analytical reporting, and access to a knowledge sharing user community with benchmarking metrics.  I’m sure my fellow blogger Jason Busch over at SpendMatters will have a few gems to offer on this last topic, as it’s part of his vision for next generation on-demand spend management solutions#, so I’d keep a close eye on his blog to see what he has to say.

Personally, I think Overdrive is a step in the right direction for Emptoris.  They’ve done a great job acquiring companies with leading solutions in various areas of sourcing, and recently produced an integrated solution through SAP NetWeaver, but technology is only part of the solution.  Knowing how to apply it for maximum benefit is the other half.  I’m interested to see what happens next.

* However I did comment on Jason Busch’s take, Old News Keeps Flowing#, which I recommend you check out.  (CombineNet, acquired by Jaggaer in 2013, has even chimed in!)

# Link no longer available.  All posts pre-2012 disappeared with the site revamp in June 2023.

The Wired 40 (Innovative Companies)

This month, Wired released it’s annual list of The Wired 40, a list of trendsetting companies that Wired believes is leading the way. This list included software companies in the Supply Chain / Customer Relationship Management space.

In particular,

  • (10) SAP, for rolling its own code and crafting slick modules for everything from analytics to HR and
  • (15) SalesForce.com for its upcoming web-based business platform that will offer 2,000 on-demand applications from purchasing to recruiting.

Of course, the big question is why? In the case of SalesForce.com, it is clear. As one of the first true Software-as-a-Service providers, they paved the way for competitors in their own customer relationship management space, such as Salesboom.com, as well as true Software-as-a-Service providers in the sourcing space, such as Iasta (acquired by Selectica, merged with b-Pack, renamed Determine, acquired by Corcentric) and Procuri (acquired by Ariba, acquired by SAP).

But in the case of SAP, I find it murkier. What have they done in the last year that not only warrants a place on the list, but a place so high on the list? Are they big? Yes. (After all, Gartner Dataquest just ranked them #1 in the ERP, CRM, and SCM markets!) Are they growing? Yes. Are they releasing new applications every year? Yes. Will they continue to improve? Yes.  (And if you asked me which stock to buy as a long term investment, I’d probably pick SAP.)

But are they trendsetting? I don’t think so. In the past year, SAP has essentially been doing what it has always done, build business software and acquire new technology to supplement its offerings. And, as always, it has been cautious and methodical about what it builds, when, and what technologies it uses. It made a calculated decision when it embraced web-services, and it took its time moving toward an on-demand model.  The reality is that trendsetters are risk-takers, and the reality is that risk-taking isn’t always good for business, especially if you’re a software company.  (Now Google might be doing great today taking risks, but Netscape was doing great a decade ago when it was taking risks.  But not all risks pay off, and SAP knows that.  Trendsetters try to change the market, and some succeed.  However, more often than not, the companies that ultimately succeed are those companies that embrace the market, something SAP understands very well.)

If the list was a list of top software companies, or influential software companies, or even wildly successful software companies, then it would definitely deserve a (very) high place.  But the Wired 40 is a special list, a list of trendsetting risk-taking companies destined to lead the way into the future.  Now, there’s absolutely no question that SAP will continue to be around for a long time, but since SAP’s strength is the production of systems for well defined business processes, and not the definition of new process or software solutions, I fail to see how it is trendsetting like Google or SalesForce.com.

Of course, if they continue on the path they hesitently started on with their recent acquisition of Praxis, then I might have to rethink my take on SAP as an SCM/CRM follower.  After all, as David Bush states over on e-Sourcing Forum, if they continue to acquire and integrate  best of breed on-demand solutions with traditional applications, they will be able to deliver a compelling client solution.  Of course, if they do the usual and simply use the Praxis’ acquisition to keep current SAP customers in the fold (of which Praxis has about 100), then they will be wasting a fine opportunity to earn that prestigious ranking that Wired bestowed upon them.

But that’s just me. Any differing opinions?