Category Archives: rants

Rant On Jason, Rant On (Procurement Solution Providers Are Doom and Gloom Too)

I tried to post this comment on Spend Matters, in response to Jason’s latest rant on “Getting Angry and Doing Something About It” about doom-and-gloom procurement practitioners, but his comment mechanism is “broken” due to an apparent mismatch between his CFML and Database (but I’m not a Cold Fusion expert, so I can’t say for sure). So I’m posting it here.

Jason, I hope your next rant is about how this is the time for the vendors and solution providers of the space to stand up and seize their opportunity to shine by helping buyers achieve never-before-achieved levels of productivity and savings that will help them shake the doom and gloom of this recession which, as you point out, provides Procurement and Supply Management with one of the greatest opportunities it’s ever had to shine.

Instead of putting their marketing engines into overdrive and making sure that all of the procurement and supply management departments, who desperately need solutions, are aware of their offerings and the problems their solutions can solve, I’ve seen many (of the smaller) vendors slash marketing budgets to 0 to “conserve cash” and reduce marketing and sales head count.

And instead of escalating New Product Development (NPD) to create leaner, meaner, easier-to-use solutions that can be brought on-line faster (and making use of streamlined out-of-the-box ready-to-start SaaS deployments), they’re putting NPD on hold and eliminating Product Managers, Quality Assurance, and Development Positions.

And most importantly, instead of taking their own advice and bringing in external experts who can help them get lean, mean, and thrive in a recessionary price-compression environment, they’ve cancelled all contracts and put a moratorium on external contractors until the recession is over.

As a result, the obvious has happened. Pipelines have dried up. Revenue has dived (as current customers have less to spend). And, in an effort to “survive”, they’ve slashed head-count by 10% to 50%, further impeding their ability to sell, build better solutions, service existing customers, and, most importantly, take on new customers. But, for some, even this won’t be enough as many of the smaller vendor’s aren’t sitting on years of operating expenditures in the bank. Their investors will likely have them on the block before year’s end. (You have to remember that many of the smaller vendors in this space are VC funded.)

There’s a reason I penned the “Dumb Company“, “Dead Company“, and “Your Marketing Really, Really Sucks” series (links below). I’m seeing the same mistakes being made again and again. Mistakes that were made by technology (based) solution providers in the last two recessions THAT ARE NO LONGER AROUND. Having worked for, and with, a number of start-ups and small companies (and collected piles of worthless stock in the process) earlier in my career, I see the writing on the wall. A number of companies that I thought were the more innovative companies in the space are acting like scared-stiff software providers instead of procurement enablers and blindly marching down the path to oblivion. If we lose them, the Big Co’s lose competition, and instead of thinking that solution X doesn’t need to be improved for 5 years, the Big Co’s will become the ERP providers of our space and we’ll be lucky if they update their solutions every 10 years!

So Rant On! Help me shake these dazed solution providers out of their slumber, because if we don’t, all of the buyers we so desperately want to help are going to suffer.

P.S.
If you’re a vendor reading this and you think this post doesn’t apply to you, think again. Based on my conversations and observations over the last three quarters, and my personal experiences working for, and with, a number of failed technology providers during the last two recessions, at least 9 out of 10 vendors in this space are making at least one potentially serious error at this point. And while one mistake won’t kill you, in a prolonged recession, it doesn’t take many. So I advise you … take a good hard look at yourself before shrugging this post off and going back to business as usual. I’ve already removed 3 service provider links from my Company List I hadn’t heard of over the past three weeks … and I’m really not looking forward to removing companies I have heard of, talked to, and rooted for.

Dumb Company

How Dumb is Your Company
Dumb Company
Dumb Company (The Lyrics)
Dumb Moments in Business not Aerospace, Automotive, or Bailout Related
Why Some Companies are Being Dumb

Dead Company

Dead Company
Dead Company II: If You’re Hoarding Cash … (You’re Not Going to Last)
Dead Company III: Fear is the Enemy
Dead Company IV: Avoiding the GraveYard
Dead Company V: More Ways to Avoid the GraveYard
Dead Company VI: New SI Offerings
Dead Company VII: Even More Ways to Avoid the GraveYard

Your Marketing Really, Really Sucks

Marketing is NOT Optional
How to Build a Bat House
The Brain Gives Pinky a Marketing Lesson
Web Marketer, Don’t Be Misled!

How to Build a Bat House

Once upon a time, there was a beautiful old wooden hotel in the North Country. The owner had coaxed an award-winning chef with a new family away from the hurry-scurry of the big city, so the food was fabulous. The staff were locals imbued with the history of the region and an encyclopedic knowledge of hiking trails, scenic vistas, off-the-beaten-track cross-country trails, and so on. The cleaning staff took pride in ensuring that floors and woodwork were polished, the rooms were well-equipped, and bathrooms were spotless. The fixtures and furniture were old but functional, and the atmosphere was charming, down to the homemade quilts on the beds, each one individually selected.

Eventually the owner, beset with health problems, sold the business to a bright young entrepreneur. Several years later, there was an economic downturn, and revenues fell off. The new owner seized the opportunity to cut costs. He replaced the chef with the sous-chef, at a much lower salary. He revised the menu to remove the most costly items. He instituted a retirement buy-out for the original staff, replacing them with rent-a-clerks and teenagers. He replaced the maids with a commercial cleaning service, and traded the difficult-to-clean quilts for store-bought linens and coverlets. He was able to decrease the room rates by 25%.

To the new owner’s dismay, revenues continued to fall. Former customers were turning up at the local Best Western and Holiday Inn franchises, whose newer buildings and minimalist rooms consistently undercut his prices, no matter how much he lowered them. He was forced to close one wing of the old hotel, then another, and more of the staff were let go. Finally, he had to shut the business entirely. After a while, windows blew out and bats moved in, hence the title of this story.

About six months later, the young man met the old owner for dinner. “I’m sorry about what happened to the old place,” he said. “The economy tanked, and no matter what I did to cut costs and lower prices, we just couldn’t recover.” The former owner stared into his wine glass for a while. Then he shrugged, looked up, and asked, “What reason did people have to stay in your hotel? The food was mediocre; the rooms had lost their charm; you fired everyone who cared about the guests, or who could help them enjoy their visit; and poorly-paid commercial cleaners will do the bare minimum, if that.” The young man asked, “What should I have done?” The old man shook his head. “Who knows,” he said. “But people always need vacations, and when times are tough they want an extra-special place to stay. I’d have made it more special, not less special; and I might even have increased my rates and my advertising. Heck, if someone is paying $200 a night for a room, $220 isn’t much of a sacrifice.”

The young man smiled tolerantly. “Yes, but this downturn is different. Everyone’s in trouble. Businesses are failing left and right.” The old man refilled his glass. “I’m sure you’re right,” he said. “Who can say whether my strategy would have worked?” The two men began applying themselves to their meals. Between forkfuls, the young man asked, “So, what are you doing with yourself these days?” “Oh, ” said the old man, “nothing special. The doctors eventually figured out what was wrong with me and fixed it, so I got restless and bought an old ski lodge about a year ago. We renovated the rooms, brought in a French chef, put in an outdoor 4-season pool, and recruited a bunch of savvy locals to run the place.”
   “How are you doing?”
   “We’re booked solid.”

I’d like to thank the Anonymous contributor who provided this story. It really makes the point that Marketing is NOT optional!

Dead Company VII: Even More Ways To Avoid the GraveYard

In Part IV we reviewed Brian Solis’ TechCrunch post on Fear Kills Businesses Dead where he proffered twelve generic suggestions that any company can use to grow in this economy. In Part V we reviewed ten “essential strategies for weathering the economic storm” from Christopher Lockhead’s guest post on Dan Farber’s Outside the Lines CNet blog. In today’s post, we’re going to cover 10 supply chain initiatives that you can use as a buyer to not only help your company survive in this downtown, but actually thrive, courtesy of Terry Harris of Chicago Consulting, as posted in a recent Industry Week article.

  1. Redesign your Distribution Network
    It’s been well establish by both analyst firms and leading vendors alike that decision optimization can save a fortune — 12% on average (according to two back-to-back studies on advanced sourcing strategies from Aberdeen) and up to 30% or 40% on some categories when deployed for the first time. Furthermore, in my experience there are two areas for unprecedented savings opportunities: services contracts and network re-design to optimize logistics spend, inventory holding cost, and import and export tariffs.
  2. Compete on Service
    If you’re providing a product that is essentially a commodity, in this market, you’ll be price-pressured to the brink of bankruptcy if you try to compete on price alone. So compete on service. Make your customer’s life easy and be a joy to work with. If they struggle with inventory, offer VMI. If they struggle with logistics, offer 3PL services. Etc.
  3. Re-bid Your Freight Spend
    Due to rapidly declining demands, ocean freight rates have dropped more than 50% from last year’s summer highs. Rail and Intermodal traffic has also been dropping at a rate of 6% to 10% a month for the past few months, and rates have been declining steadily as well. It’s a perfect opportunity to put your freight out to tender.
  4. Invest in Non-Transportation Resources that Offset Transportation Costs
    Inventory, smarter labor, and better technology can all reduce transportation costs. Reducing inventory, and storage space requirements, can halve overhead costs, which can be as high as 30% to 35% of product value in some companies. Better technology can streamline operations to minimize logistics and storage costs. And smarter people, properly trained in the latest best practices, can find innovative opportunities for reducing spend further through award reallocation, innovative ideas for packaging reduction, etc.
  5. Fill Orders Smartly and Flexibly
    Only ship from a single location, and make as few shipments as possible. If you’re fulfilling orders for multiple customers from overseas locations, ship them in one shipment to a local warehouse at the port and then divide the order into separate trucks.
  6. Optimize Safety Stocks and Order Quantities
    Make stock/no-stock decisions based on profit margins and SLAs, use pull deployment across the board, and optimize order quantities. Don’t stock low-demand low-margin non-critical items, reserve your costly storage space for high-demand, high-margin, and critical items necessary to fulfill SLA requirements. Implement up-to-date supply chain visibility applications that pull when a trigger point is hit.
  7. Accelerate your Forecasts
    Increase the frequency at which your forecasts are updated to better sense, and respond, to demand changes. Monthly forecast updates become weekly, and weekly forecast updates become daily. Review exceptions as soon as they arise.
  8. Re-engineer Packaging
    Packaging costs money. A lot of money. There’s the material cost. There’s the storage cost. And there’s the transportation cost. Find a way to use less packaging for all of your products.
  9. Use Cost-Effective Transportation Modes
    Don’t expedite. Don’t use air. Etc.
  10. Go Green
    You can go green and save money. Less waste, reduced disposal costs. Less fuel, smaller transportation costs. Savings opportunities abound.

Vince Kellen’s Technology Duds for 2009

Industry Week recently made my day when they published Vince Kellen’s (Senior Consultant of Cutter Consortium) five “anti-trends” for 2009 which stand out as a brilliant counterpoint to the rose-colored predictions of the laissez-faire wannabe analysts that tend to dominate the technology landscape. Probably because they echo my own sentiments and a few of the messages I’ve been trying to get across for quite some time now. So what were they?

  1. Social Networking will Unravel
    Kellen says “at the risk of offending Web 2.0 enthusiasts, most firms, especially those hardest hit in this recession, consider social networking speculative and in some cases frivolous“. Hear, Hear! There’s a reason why “facebooked” has become an urban slang slam, “myspaced” has become a synonym for a late-night booty call, and why the blogger elite (including the doctor and Loren Feldman of 1938 Media) slam Twitter on a regular basis (as the only thing you can do with it is say nothing in only 140 characters). There’s no real value in these technologies, and certainly no commercial value to a productive business.
  2. Mashups will get Peeled Back
    Speculative ROIs or projects not directly assisting with significant savings are going to be difficult for IT leaders to advance, and since the only “Web 2.0” technology that has less ROI and more speculation than a Mashup is social networking, these projects will be axed too. While mashups can be a useful component of B2B 3.0 platforms if they focus on enhancing content, community, and connectivity, on their own they are just useless eye-candy.
  3. Large-Scale VoIP and Unified Communication Implementations Will Be Muted.
    Although such projects promise long-term savings, unfortunately, at least in North America, they represent high up-front investment costs with a long-term payback period due to our still ridiculously high-costs for high-bandwidth access with service SLAs. As a result, these projects will be back-burnered until the economy hits another high-point and executives again don (or is that dawn) their rose-colored glasses.
  4. Analytics and Business Intelligence (BI) Will Lose Luster
    Although a sound data analytics package (you know the one) in the hands of a true expert (you know who they are) will find you limitless savings opportunities, the reality is that most of the offerings on the market are just static data warehouses with static reports in the hands of recent grads with little real-world experience and almost no training. As a result, the majority of solution providers have been over-promising and under-delivering for years, and the market, understandably, has become fed up. As a result, even though these are the times when a real data analysis solution is needed most, many projects will be scrapped and only the true innovators (which are a small minority of the market) will undertake projects to identify and acquire sound BI solutions.
  5. Aged Infrastructure Will Stay in Service Longer
    “More companies with way-past-their-prime architectures will attempt to coax them along for another year“. And this is unfortunate. While I applaud the inevitable push-back on social networking and useless Web 2.0 technologies, and understand the delay on VOIP and BI (as the value just isn’t there in some cases), I am saddened by the truth of this prediction. You see, technology infrastructure improvement offers companies a great opportunity to reduce cost and go green at the same time, thanks to new virtualization, thin-client, and innovative cooling technologies. Not only do green solutions generally offer payback starting in year two, but they last twice as long, effectively reducing your Total Cost of Ownership between 50% and 90% over a five to six year time-frame. And with cash-flush companies like IBM (who had a record profit year in 2008, and predict another one in 2009) able to offer low-cost financing if you can’t afford the up-front purchase and implementation costs, it just doesn’t make sense to delay this investment. (See my posts on greening your data centers, greening your desktops, and calculating your savings for more information.)

Dead Company VI: New SI Offerings

As my fellow blogger astutely pointed out last week in what is by far the best rant he’s ever penned title “Friday Rant Spending and Buying Polarization” on Spend Matters, supply and spend management companies are approaching the recession in one of two ways. The minority camp is taking the correct approach and aggressively ramping their marketing, human capital acquisition, and new product development efforts — seizing the unprecedented opportunity the recession provides to a company that can actually save its customers money and deliver rapid ROI. However, the majority camp is taking the exact-opposite dead-wrong approach and bunkering down until the downturn is over. They’re razing marketing to the ground, aggressively slashing headcount starting with the highest paid (and, often, the best performing) employees, and killing all new product development. As I explained in Part II why you’re not going to last if you’re hoarding cash, they’re digging their own graves.

When you cut marketing, you cut visibility. As a result, the pipeline starts to shrink and before you know it, your sales people are wasting 90% of their time doing cold-calls, desperately trying to find the smart minority who are salivating for the type of product you are offering. Even worse, by the time they’ve identified a customer, there’s a good chance the customer, anxious to see savings and ROI in this economy, has selected a competitor’s solution, because that was the only one they were aware of.

When you cut talent, you cut capability. In a technology-based offering, your biggest asset, and most valuable offering, is your people. Technology advances rapidly, and anything you build can usually be copied AND improved upon by a new start-up rather quickly. Customers look for providers who can help them. Customers look for providers who have done this before. Customers look for providers who understand where the market is going and who are actively working on solution enhancements that will meet their future needs. Those capabilities lie in your people, not your platform. Furthermore, when your competitors are shedding talent, this is the best opportunity to acquire talent, because it won’t cost you thousands of dollars in recruiter fees, signing bonuses, and raises to acquire them. Top performers want to perform. They want to work. All you have to do to attract them is to match their most recent salary and give them a challenge, and they’ll start tomorrow. (Alternatively, you can wait until the next upswing and then try to lure them from a competitor … but it will cost you a lot more to do so, even if you’re successful).

When you cut new product development, you give away your edge. Smart customers — precisely the customers who are buying in this market — know that it usually takes at least a year to bring a new kick-ass product to market, by the time you get through design, market need verification, initial development, alpha testing, tweaking, beta testing, and release. They know that any company not actively developing the next version or next solution now will not have what they need next year when the market moves forward. And smart competitors won’t want to be left behind. As a result, even a weaker competitor who is actively working on solution improvement will look much better to them than you. And you’ll lose more sales.

But if you’ve been paying attention, you know all this. And the reason you’re not spending is because, as my fellow blogger pointed out in his Friday Rant (Spending and Buying Polarization), and as I have come to understand, your venture capitalists have lumped you together with the rest of their underperforming portfolio because they don’t understand that downturns are precisely when sourcing and procurement firms shine. They see the rest of their Web 2.0 portfolio flailing (as it should, because, unlike B2B 3.0, Web 2.0 offers no value in the B2B marketplace) and therefore they assume that you will start flailing, too. They cannot differentiate value-add technology from valueless technology.

So, to help you convince your VCs otherwise, I’ve decided to offer three new services.

VC-ED Service #1: Why <Your Company Here> is The Future

I’ll spend one day reviewing your product and solution offerings, one day on a marketplace competitive analysis, and one to two days putting together a customized 1-2 hour presentation explaining why your VC firms need to invest in you now, backed up with a full report on your uniqueness and market opportunity, and I’ll deliver the report in person at your (North American or Western European) Headquarters.

VC-ED Service #2: The Time for Procurement/Sourcing/Supply Management is Now

I’ll join you in a one hour conference call as an independent market expert while you attempt to explain that your opportunity is now and that, if you miss it, you may not be around long enough to experience another. (And if you like, I’ll explain why I think anyone who doesn’t invest in the opportunity now is missing the boat. As you’ve probably figured out by now, I have no problem being passionate on this point.)

VC-ED Service #3: Pre-paid Corporate Obituaries

OK, so this is my little joke. Nevertheless, if marketing, consulting, and headcount has been slashed across the board, you probably don’t have enough cash left for VCED Service #1 (really just a light-weight version of my Total Solution Assessment, as described in What Does the doctor Do … For You). There’s also a good chance that your board is not interested in hearing any viewpoints that contradict their own views, so while you might be able to raise the $500 for option 2, you probably won’t get any commitment of their time. Thus, I am offering a pre-paid corporate obituary, because there’s a good chance that the VC’s “cash saving initiative” won’t allow you to hold out long enough for revenue to start flowing again*. However, you deserve to be remembered in style — hence, my pre-paid corporate obituary service. I will do an in-depth post on SI (and archive it on the resource site) covering your solution offerings, their value, and why you will be sorely missed if your doors close forever. You are free to use this material when you try to fire-sale your company, and maybe, just maybe, there’ll be one last lifeline from a smart VC firm who’ll see the value you have to offer.

*It will be at least a year from the time the VCs allow cash to flow again before sales pipelines, new product development, and new hires get on track. Since the recession will last at least a year, if not two; since it will be six months after that before the ultra-conservatives in the VC firms let cash flow again; and since most VC-backed companies in this space don’t have much more than a year or two of cash in the bank, there’s a strong chance that many companies just won’t make it.