Category Archives: rants

The 60 Minute Due Diligence Trend is Disturbing!

the doctor posted this on LinkedIn yesterday as a follow up to yesterday’s rant on how a 60 minute call is NOT due diligence, but is reposting it here because it’s something we should all be aware of and thinking about as progressive thought leaders (and while LinkedIn posts may get buried under the electronic sands of time, it will remain here).

Is anyone else disturbed and fed-up by the simultaneous trends of

  • “crowd-sourced due diligence” in 60 minute chunks from
  • the onslaught of new “global” consultancies that just connect you with “experts”
    … where these consultancies are staffed by recent graduates with literally no expertise in any of the areas they are finding the “experts” in and no capability to judge whether or not the “expert” they are connecting the client with has any real “expertise” in the area or not?

I’ve personally stopped responding to such firms altogether because

  • they’ve done nothing but waste my time in the past
    … (pestering me for days, and then when I finally relented, telling me the client, who apparently was insisting on me, was no longer interested — likely because I refused to drop my standard hourly rate for what was nothing but an interruption*)
  • they’ve done zero research as to what my expertise is
    … and when I’ve replied asking for more details beyond “supply chain” or “procurement”, I never received any relevant details beyond “these sample companies”, where I could often figure out that I was the last person they should be contacting if they wanted the true expert (I am a leading expert in Sourcing, Optimization, ML, and other advanced S2C tech [which coincides with my academic background], not in P2P [even though I know it very well, there are those, in this list, that know it better]; and in SC, it’s modelling, not the ins-and-outs of WIMS or Plant Management) …
    which forces one to conclude they are not doing any research on anyone else they recommend because they don’t have the skills to
  • given that they are essentially matching their clients with random people, there is zero reason to believe they are providing their clients with the quality insight that they’re promising
    … the doctor doesn’t care if they match a F500 with a dozen geniuses, if those geniuses have no relevant experience in the particular domain of interest to the client, how will the client learn anything. I know sometimes its “company x / product y” market research, but user experience is not deep insight into anything beyond *that* user’s experience — and if that user wasn’t trained, doesn’t have the right educational background to be using the tool, or was one stepped removed (the manager, and the team used it), it’s incomplete or second hand information.

It’s disturbing, and in some ways disgusting. What these firms should be doing is

  • finding and vetting a true market expert database against an appropriate taxonomy,
  • finding the right (leading) expert for the client (and, if no one expert can satisfy all of the client’s inquiries, identifying a team that will work with that leading expert)
  • having the leading expert put together an education session that covers the core information the client wants, possibly with the support of one or more other experts in related areas, and
  • ensuring the materials are delivered after the course is presented.

That’s worth a finder’s fee and a project management fee, and a rather large one at that given that an expert is worth more than gold, as obviously the client isn’t equipped to do this, and is thus reaching out to the “global” consultancy because of this.

But the model now is, to be blunt, sh!t as a client’s chances of getting what they need when they need deep insight are less than getting the toy of their dreams from a rigged arcade claw machine. It should not be accepted and true experts should disdain it!

* it’s hard to deliver real value in an hour, which is why the doctor typically contracts in a large multiple of days, and, yes, you will get a better rate if you contract for the amount of time needed to do the job right 🙂

A 60 Minute Call is NOT Due Diligence!

It used to be the doctor would only get a request once every month or so for a “call with a client looking for some insight into the space from an expert“, but now it’s the case he’s getting these every week, often multiple times a week, from yet another firm that “specializes in connecting clients looking for insight with experts” or some other such meaningless gobblydygook from a knock-off Dilbert Mission Statement Generator.

Maybe it wouldn’t be so bad in the grand scheme of events except,

  1. You can’t learn anything meaningful in 60 minutes. (We’re talking enterprise software solutions, not the results of an investigative whodunnit.)
  2. These requests are now coming from kids so young the doctor is wondering if they are still high school (despite the fancy LinkedIn titles their firms give them) … and not to be ageist, but there’s no way these kids have any deep understanding at all of any industry domain or what makes an expert (and how to judge if that expert has the right education and experience).
  3. It seems companies are using a handful of these calls as “due diligence” on a space or a company.

And a 60-minute call is NOT due diligence. the doctor does product and technical due diligence, and even a high-level due diligence on a company (which is just looking for potential red-flags and yellow-flags that will have to be watched) takes weeks of man power (as the team he worked with did market, strategy, product, and technology, and even though the doctor can do an entire product and technical diligence in S2P on his own — no team of 6 to 10 needed — it’s at least a week of effort on a single module to get enough certainty that there are no red flags and the important yellow flags have been identified). This is because a due diligence involves process reviews, document reviews, code reviews, focussed interviews, etc. etc. etc. and comparisons to standards, best practices, and market norms.

Given this, just what are you going to learn from a few call with external “experts” who don’t have any access to documents, processes and practices, and the internal stakeholders who make the decisions? Opinions. Maybe. But most likely, absolutely nothing!

In other words, if you need deep insight, find an analyst, diligence, or strategy firm that knows the space and, if you are interested in a company in particular, find an analyst, diligence, or strategy firm that that knows that company AND that company’s peers. And go with them. Don’t pay for the privilege of paying for the privilege to talk to someone who won’t end up being that useful to you. Especially if you need to be able to back up a(n investment [related]) decision that involves the company and prove you did your homework and the stars were aligned as well as they could have been when the decision was made (since no one can predict the future, just play the odds).

In other words, these firms, which the doctor will have nothing to do with, need to go away. A consultant who has the expertise to find the right analyst / diligence / consultancy for you and introduces you to the right individual in that firm deserves a finder’s fee, but doesn’t deserve a fee for the privilege of hooking you up with a random yahoo who can’t help you at all. (And even if that individual is an expert in their area, if it’s not the area you need, and they know next to nothing of relevance in the area and company relevant to you, they’re a yahoo from your perspective.)

And as you probably figured out by now, if you reach out to the doctor and he’s not the right expert for you, he’ll pass you on to someone he believes can (which could be one of the 40 experts he explicitly mentioned, and linked to, in yesterday’s post). It’s not about “sign the contract at all costs and hope to figure it out later“, it’s about helping your prospect because, even if they don’t become a client today, when their need is appropriate, they will become a client tomorrow.

How Can Indirect Spend *NOT* Be Well Managed in 2023?

the doctor gets a lot of press releases. Some of them contain a lot of BS (which is good, he writes best when he’s on an angry rant), others contain a lot of “findings” that, if true (and the findings usually are for the right for the right subset of the market), are simultaneously scary and ridiculous. In this particular case, as the doctor writes this, he received a press release that said the research finds that 82%+ of procurement leaders say their indirect spend is not well managed, leaving substantial cost savings on the table.

The question is, how is that number so high? We’ve had source-to-pay suites for a decade (which were originally designed to source indirect products and services, create catalogs of those sourced selections, support purchase orders only for items in the catalogs, and ensure invoices matched the item prices in the catalog. And for those willing to do custom integration, it was possible to integrate a best of breed sourcing solution and a best of breed catalog management solution and a best of breed e-invoicing solution and achieve this in the late 2000s.

Now, in a mixed solution, there was no guarantee that the sourcing event would choose the best mix (since early solutions generally didn’t support optimization or advanced analytics), that the catalog would force the lowest cost (or even preferred) selection when there were multiple options, or that the invoice management could detect when shipping costs were too high or handling fees shouldn’t be there, but there was still management and any overruns were not substantial (at least compared to pre-solution overages in indirect; an organization could easily cut out 80% of the fat, which could be as high as 30% in some categories; so if the overage went from 30% to 6%, that was well managed — and solutions have only become better over time).

What’s even worse is when the expected reality is put into hard numbers. According to the press release “two-thirds of suppliers (68%) report increased demand for their offerings compared to the past year and nearly half (43%) are planning to increase prices in 2023“. Thanks to global inflation, prices are going up as demand does (which is still pent-up post-pandemic), and we know it, but knowing costs will be uncontrollable to an extent is a tough one.

Of course the press release says that the key to cutting cost is to implement (autonomous) technology that saves on day one, which you should know by now, but the question is why have so many companies not yet implemented basic S2P functionality, either as a suite or as BoB integrations, as such technology would have ensured indirect was well under control, and reduced a likely organizational overspend by (85% of 15% of 35% =) 5% (est. realization * avg. savings * avg. indirect spend) of total spend, which would go straight to the bottom line! No autonomous tech needed!

For those interested, the press release came from a third party PR firm and was based on Globality’s 2023 Research Insights for CFOs.

Where’s the Procurement Management Platform?

Where’s the Procurement Management Platform?

When we started out in the very, very, very late nineties, it was all about Procurement and/or Strategic Sourcing, which, in the beginning was all about RFPs and on-line auctions. The focus was on taking many organizations from fax and spreadsheets to integrated bids and on-line analysis and reporting (even if utterly simplistic).

Then, in the early naughts, we had the introduction of spend analysis, CLM, S(R)M, and invoice management and by mid-decade vendors were building mini-suites for upstream (Source-to-Contract) and downstream (Procure-to-Pay, which included Catalog Management, etc.) Sourcing and Procurement. By the time the teens came upon us, the big suite vendors were taken steps to merge upstream and downstream and you had the mega S2P suites start appearing in the early to mid-teams, some through over a decade of development and others through acquisition (mania). They third generation of these products/suites were heralded as the one platform solution (which ERP vendors like SAP and Oracle were hailing themselves as back in the eighties), but …

1) Even though the mega-trend in the 2010s of the Source-to-Pay mega-suite was supposed to be the end of decades of advancement in S2P, we soon found out that even a suite that had the six-core applications of Sourcing, SRM, CLM, Spend Analytics, Procurement, and Invoice to Pay didn’t meet all of an organization’s needs as they needed supplier networks to engage with suppliers, data providers for discovery and diversity, CSR & GHG data providers for risk, custom sourcing tools for complex/niche categories, etc. etc. etc.

2) Most of these platforms had little to no project management, process management, or opportunity management

3) Most assumed that serving procurement meant serving buyers and that was it … but you have to serve reports and oversight up to management and pull purchasing needs in from across the organization. I.e. no (out-of-the-box) management / Finance reporting and projections or intake management (facilitating the need for further Excel usage, and not less)

4) Even those with great spend analysis didn’t always revolve around the spend, and when you think about how business measures its metrics, spend should be the foundation.

And, in summary, they didn’t, and still don’t, deliver an organization everything it needs to be successful (which is why the BoB vs Suite debate rages on today), because Procurement is not an island (even though it was once staffed like the Island of Misfit Toys), and instead is the front-end interface to the supply chain, which, for some companies can include 10,000 companies when you trace all of the product requirements down 3, 4, 5+ levels to the raw material source. (But that’s another topic for another day.)

Getting back to the topic at hand, if you had a proper Procurement Management Platform, which was designed to support data-centric end-point integrations for specific processes and organizational needs, then

1) it would be quite easy to augment and add in custom applications for niche processes or data collections for niche process and reporting management as needed

2) it would be built around sourcing and procurement centric project management and contain the extensible workflow capability required to add customized process and opportunity management as needed

3) it would allow for the creation or integration of intake applications and interfaces to gather needs and report on decisions and progress and to synthesize all relevant data for roll-up views and KPIs that finance and management needs on a regular basis

4) it could be built to use the organizational spend as the foundational data source …

and Procurement could build up, maintain, and evolve the solution it really needs to be successful over time — which is something it can’t do today because buyers can’t code low level APIs, app stores don’t ensure app connectivity, and today’s “networks” merely support data exchange and not overall process management.

So where do you get this when no single provider on the market has (historically) had this? Good question … and one that we’ll hopefully answer in the year ahead.

It’s Time for the Return of Purchasing Consortiums …

… but not the kind you think!

In the good ol’ days, before everyone had access to cheap and easy e-Auctions (when inflation was low, delivery guaranteed, and supply outstripped demand) or on-demand RFX sourcing platforms, the answer to better “purchasing” was consortiums that pooled demand and negotiated lower costs (hopefully lower landed costs, but you took what you could get). Except in a few industries (like healthcare, where product requirements are highly regulated, or utilities, where manufacturing requirements are exact), these have all but disappeared with the rapid rise in modern sourcing, procurement, and source-to-pay platforms over the past two decades.

While this may have appeared to be for the best, as you lost control over who you bought from, a third party controlled the relationship (and you couldn’t always go direct to get problems resolved), and you had to pay them a pretty golden penny for their problems, the pandemic has shown us that this is maybe not the case. Even though you want to control you purchasing as a buyer for your organization, you need reliable supply … and the pandemic has demonstrated (what many of us new, and blogged, about a decade ago; search the archives) that when you are outsourcing halfway around the world, reliability is a myth.

You need nearshore supply that you can easily get by truck and, preferably, train for large shipments (as modern trains can be more environmentally friendly from a GHG perspective), but every since  the Big (5/6/8/whatever) analyst companies that followed told you to go China, not only did you put most of your home-grown manufacturing plants out of business (which, I’m sad to say, wasn’t always as big of a loss as whiny politicians would have you think and definitely didn’t nail the coffin shut, but that’s another post), but you also put many near-shore manufacturing plants in Mexico (and other Central, Latin, and South American locations) out of business (which did!).

They needed to be resurrected the day pandemic restrictions started relaxing, and every day the need for their reactivation (and modernization) / replacement gets worse!

But unless you are a Fortune 100, you don’t have the spend on your own to convince anyone to even think about restarting a factory somewhere closer, more reliable, and safer. (And even then, the risk equation is not any better than continuing to outsource to China and hoping for the best!)

That’s why we need a return of the Purchasing Consortium, but with a new mandate to not only pool and guarantee enough demand to keep a new(ly) (revived/modernized) manufacturing operation sustainable and profitable but, in the absence of anyone in the target location willing to take the startup risk, manage a multi-shareholder investment on behalf of the Global 3000 parties that need such an operation and can afford to invest in one!

It’s a win-win regardless of whether or not anyone is willing to buy the operation once started. Either someone steps in and takes it off of the consortiums hands, giving the initial investors a return on their investment in addition to guaranteed supply, or the investors, who maintain control, can keep purchasing costs down (and the potential for profits up).

The question is, besides companies like Apple and Microsoft that can afford to build their own chip plants near shore (because what else are they going to do with the Billions they have in the bank?), who else is going to step up and bring it back to where it should be.

 

(Now, before you go bashing the grumpy old analyst for China bashing, this post is not about China bashing [although that’s a great rant topic], it’s about the insanity of going halfway around the world for something you can get [close to] home. If you’re selling in Asia, you should damn well be manufacturing in Asia, as it would be insane to manufacture something in Mexico and ship it to China if it’s easy to manufacture in China!)