There’s No Nearshoring Revolution on the Horizon!

the doctor recently saw a headline that the nearshoring revolution is just beginning, and while he wishes this were true (as he’s been preaching the need for a nearshoring revolution since Sourcing Innovation started, which, for those keeping track, was 17 years ago), it’s not.

A few progressive thought-leading innovators are doing it, but a few is not a revolution. It’s just a few people and organizations who are both willing to do the right thing and wealthy enough to
a) pay for all the upfront costs (where the return may not be recouped for years) involved in shifting a supply chain, bringing new factories online or upgrading those that have been offline for years (or decades) and
b) not be beholden to investors, shareholders, or Wall Street demanding profits now.

The reality is that reorganizing supply chains has a large upfront cost and when most corporations are beholden to shareholders who want profit now, Private Equity firms who want profit now, and Venture Capitalists who want profit now, the last thing they want is upfront cost. They want margin, and the best margins are finding the lowest cost of supply out there and using that, even if it means continuing to source from halfway around the world with all the risks involved (and the losses that would accompany any of those risks), especially if you can buy supply chain insurance at a reasonable cost.

As long as the backward-thinking financial models and economics continue to focus on profit over value or true wealth creation, nearshoring is going to face the same obstacles that Corporate Social Responsibility and Sustainability has faced for the last two decades where everyone says they want it, but unless legally mandated, no one is willing to pay for it. the doctor is aware of multiple surveys that have been conducted in this area over the last couple of decades and while a majority of respondents will say it’s top priority, the majority will not even pay 3% more for a more sustainable product or service as the success criteria they are eventually measured on in Procurement is total “savings” (regardless of the long term cost to society).

The reality is that most corporations bought into the Big outsourcing push of the 1980s and 1990s because their managers and primary shareholders were greedy and wanted profits sooner rather than later, and while that mentality persists, they’re not going to be willing to absorb the upfront costs of shifting back. To truly fix the supply chains, which is as simple as “F*CK China” in the Americas and “F*Ck the Americas” in China as the doctor pointed out in his recent post on how you reconfigure the global supply chain, you need a no upfront cost solution for organizations to switch back, or a value proposition beyond assurance of supply.

In the United States of America, for this to happen the MAGA crowd, instead of wasting all their efforts trying to take away basic human rights away from their citizens (while they are simultaneously trying to put an angry grandpa back in office and hide the huge “gifts” they are getting from certain parties that benefit greatly from laws they pass or block), needs to focus on solutions to actually bring the jobs they are claiming to fight for back to the Americas, which could include:

  • interest free loans for building supply chain infrastructure such as factories, distribution hubs, ports, etc.
  • free, or heavily subsidized, training for Americans to do these jobs
  • higher tariffs on any
    imported products that are produced at sufficient volumes in America to satisfy the American market
  • higher taxes on any
    exported products that should be sold at home

Unless the value is created, or China Sourcing is banned wherever products could be sourced from the USA, Canada, Mexico, or friendly Central/South American states, the nearshoring revolution will not happen. There’s no incentive for it to happen, and no Tribore Menendez taking up the charge!

Ten Best Practices for (Software) Vendors, Part 5 (Yet Another Bonus Tip)

In this series we went over the ten best practices that you as a startup or small vendor should be aware of and address appropriately if you want any hope of growing and scaling a successful vision beyond blind luck. We did this because the majority of analysts and experts don’t give you this insight in the clear cut fashion to help you understand what you need, why you need it, and who you need it from (in the form of an expert) to get you where you need to be.

While buyers need a lot of help, and the primary purpose of Sourcing Innovation is to give them the insight into the market, the vendors, the best practices, and the knowledge they need to be successful, Sourcing Innovation realizes it also needs to help vendors because buyers need better solutions as well as better education, and they won’t get those better solutions without successful vendors to deliver them.

And while the challenges might be too numerous to ever fully cover on any publication, as the list of best practices would get very long indeed, many are very niche and would only help a few vendors and can be overlooked with the goal of addressing, and solving, all the common issues first and if the niche ones are significant, then a vendor can engage an expert for a short period of time to address them.

To date, we have covered the following 11 best practices in this series:

  1. Identify the Market Sector You Are Competing In
    … and the Niche Your Solution is Targeting
  2. Do Your Market Research
  3. Define Your Target Industries
  4. Identify the Core Pain Points Your Solution Will Address in the First Release
  5. Understand the Data Needs and Design the Full Data Model
  6. Understand the Current Customer Processes and Typical Restrictions
  7. Don’t Overlook the UX (User Experience)
  8. Get the Messaging Right
  9. Price It Right
  10. Get Advice AND Listen to It
  11. Get The Help You Need! (And Get It Sooner Than Later!)

They are all important, but they don’t cover everything. And while we shouldn’t have to cover this 12th bonus practice, because it should be covered by Best Practice #8 and #10, given the state of the the technology space today, we have to bring it into the limelight.

#12 Don’t Mention AI. Not Even Once. Not Even If You Are Using Proper AI!

Customers are looking for vendors who are offering solutions, not buzzwords. Who are offering solutions that provide repeatable, explainable, provable answers, not random, black-box, suspect answers that could be based in fact or fiction, especially if trained off of random internet data with no fact checking or supervised learning.

Maybe AI gets you analyst attention (and it might be required to get ranked high in some analyst reports, but as we’ve already explained, that’s complete bullshit and we would not expect those analyst firms to stick around very long, or stick to this if they want to stick around and be taken seriously), but as more and more buyers experience the false promises of “AI” first hand (and push back against analyst firms that only push AI vendors on them), we expect customers to start blacklisting vendors that only sell “AI” and not actual solutions or services (and analyst firms that only push “AI” vendors on them).

Maybe AI gets some potential customer attention because you must be a technology advanced vendor to be using AI, if your claims are true, but all it’s going to do at a smart company (and you don’t want dumb customers in tech, they always cost more than they pay you) is get you in the door, and if you can’t deliver a good demo, and convince the C-Suite (who, seeing all these failures, are, or soon will be, becoming suspicious of AI for AI’s sake) you have a valuable solution that is guaranteed to deliver a significant ROI, you’re not going to get the sale.

Furthermore, as we’ve said over and over again, there is no true AI (at least Level 4) and anyone with a working brain who uses that brain knows this to be true. Your target customers are beginning to realize that most solutions are Augmented Intelligence (Level 2) at best, and often only Assisted Intelligence (Level 1), and then only for specific functions or insights, which are often a very small subset of everything they are expecting the solution to do.

Plus, any advanced capability that is reliable is not based on some random, black box, untrained mystic technology, it’s based on specific algorithms, trained on known data sets, and tweaked with a well defined set of parameters in a well defined range that have known, predictable, responses to specific data sets and situations. More specifically, we’re talking parametric curve fitting, (MILP) optimization, clustering, pattern matching, neural networks, deep learning networks, etc.

Thus, instead of just claiming “AI”, you should name the technologies, describe how you’ve applied the technology to solve the problem, be prepared to overview the validations you applied, and summarize the results you achieved and how much better they consistently are compared to more traditional algorithms and solutions the buyer is likely using at the present time, if they are using any solutions at all. This will get the buyer’s attention and prove that you know what you’re doing and your technology is an actual solution, not buzzword vapourware.

At the end of the day, customers want success, and AI, on its own, does not guarantee success. (In fact, unhindered AI guarantees failure if utilized long enough. That’s the beauty of probability and statistics. Eventually anything built purely on black box statistics WILL FAIL!) Plus, many buyers are old school, barely trust tech as it is, and are very worried that AI will take their jobs (and even if it can’t, they believe that management is looking for every opportunity to use AI and replace them, even if the technology is inferior, so the last thing they want to do is bring in technology that management could try to use against them). So not only can focussing on AI undermine the power of your solution, but AI can turn off potential customers who want to feel safe in their jobs.

We’re not saying to lie about using AI, or to avoid the discussion when you get in front of the customer, we’re just saying don’t follow the crowd and the hype and don’t focus your marketing on AI. Focus on the solution. “AI” is just another tool in the technology development tool belt. It’s not a solution on its own. And customers need solutions, not Automated Idiocy. Finally, here’s another bonus best practice.

#12B … And Don’t Use AI to Write Your User Manuals, Thought Leadership, Blog Articles, or Sales Materials Either!

Ten Best Practices for (Software) Vendors, Part 4 (Bonus Tip)

In Part 1 we noted that, just like buyers, you need help. And then, in Part 2, we made it clear that in order for you to understand you need help, you need to understand where you might need that help and that’s why we are doing this series for your benefit and going deep. In Part 3, we completed coverage of our ten best practices, to be as fair to you as we were to buyers when we gave them our Five Best Practices for Buyers, which built off of our articles on five easy mistakes source to pay tech buyers can avoid and even a critical sixth mistake most tech buyers make in source to pay (who need to realize that No Tech Should Be Forever).

The ten best practices are:

  1. Identify the Market Sector You Are Competing In
    … and the Niche Your Solution is Targeting
  2. Do Your Market Research
  3. Define Your Target Industries
  4. Identify the Core Pain Points Your Solution Will Address in the First Release
  5. Understand the Data Needs and Design the Full Data Model
  6. Understand the Current Customer Processes and Typical Restrictions
  7. Don’t Overlook the UX (User Experience)
  8. Get the Messaging Right
  9. Price It Right
  10. Get Advice AND Listen to It

But as we noted, even though this covers the majority of mistakes we see over and over and over again in startups and small companies, this is not everything. And while we can’t cover everything (and wouldn’t even if we could as some mistakes are for markets or solution areas so niche, it would only help one or two companies whereas this advice applies to all the companies in our space), there is one more piece of advice that cannot be understated!

#11 Get The Help You Need! (And Get It Sooner Than Later!)

As a startup/small company, or even a mid-size company, you don’t know everything. You can’t. You have fixed resources to work with, and most of your cash has to go into developers to build the product, implementation consultants to install or configure it, sales to sell it, operations to keep the business running, and finance to keep the lights on. Even if you can find them, when you are small you often can’t afford the best marketers, product visionaries, algorithm experts, researchers, etc. on top of all the people and SaaS platforms you need to keep your business going. Then, as we pointed out above, there is all the expertise you are missing. While you will have many strengths to get to the point where you have a saleable product, you’ll also have many weaknesses.

Get help where you need, or can make, improvement(s), from an industry expert, consulting analyst or consultant. While their quotes might give you sticker shock at first, because you think to yourself that you can hire a FT resource for what a consulting analyst charges for 25% of their time, you have to realize that you would do so with the caveat that it will take that FT resource years of research to get to the same level of expertise that the consulting analyst brings to you in the first minute of engagement.

Your hire will have to do weeks or months of research to understand the market or the problem, while an expert can start working with you on a solution right away as they have already spent years, or decades, researching the market and problem. Your hire will be working at an industry average pace and level of capability at best, while an expert will be working at an expert level of capability and an above average pace as they have honed their processes and techniques to maximum efficiency. Remember that you’re not just paying for time, you’re paying for expertise you can’t hope to acquire in the near term (and expertise you need to be successful and grow your company to the point where someday you can hire someone of their caliber full time), to get the solution you need now (be it an algorithmic or process solution to a difficult problem, a better roadmap, customer intelligence, good pre-sales or marketing materials, engagement strategy, etc.) and not a year down the road (where you could be financially unstable if you haven’t solved the problem or grown your customer base). Furthermore, once that solution is delivered, you don’t have the ongoing overhead of a high-paid full-time resource where their skills may only be needed part of the time.

If you don’t think you need help anywhere (considering all the skill sets it takes to not only take a startup to financial stability, which often happens in the 1M to 5M, but break through this barrier where most startups get stuck until they eventually become founder lifestyle companies serving the same small customer pool in an optimized model or simply fade out of business as renewals end), then you don’t know where your weaknesses are and should get an expert to do a full/high-level end-to-end assessment to help you understand the true strengths and weaknesses of your product, marketing and business model with respect to the market.

the doctor has yet to encounter a startup or small company in our space that doesn’t need help somewhere with the above best practice requirements to success. Never. (This doesn’t mean that he hasn’t encountered a startup/small company he couldn’t help, as the needs of some of the companies he’s talked to, and many others he’s aware of, were not in his core strengths, but simply means that he’s never encountered a startup/small company that didn’t need help from the right industry expert. This should be easy to understand because if those companies had recognized they needed help and sought it out, it is extremely likely they would be larger companies and/or market leaders given the relative lack of modern procurement solutions in an average mid-size or larger company compared to other back-office solutions. In every niche there is room to grow, and if a company with a suitable solution isn’t growing, it’s because they aren’t doing something right and, thus, need help to get it right.)

It’s important to remember that admitting you need help is not a sign of weakness, dumbness, incompetence, or any other negative condition a loser might want to associate with asking for help, but a sign of true courage, strength, and intelligence and what a winner does. If you’d ready any good books on startups or growing a startup to a successful company, including Garry Mansell’s Simplify to Succeed, you’d know you need at least five very different, and sometimes conflicting, skillsets to create a successful company. It’s ridiculous to think anyone could become an expert in all these areas, and remain an expert in all these areas at the same time while simultaneously having the breadth of market knowledge required. If it takes 10,000 hours or five years to become an expert, that means it would take 25 years to become an expert in all the areas, and by the time you reached expert level in the 5th area, your expertise in the first area would be two decades out of date. A good leader knows their strengths and their weaknesses, a great leader also knows the strengths and weaknesses of their core team, and the greatest leader isn’t afraid to augment that with the missing expertise on an as-needed basis to bring to bear a total solution that no one can beat. Only a true loser sticks to their arrogance that they always know best, especially when empirical evidence points to the contrary.

Ten Best Practices for (Software) Vendors, Part 3

In Part 1 we noted that, just like buyers, you need help. Then, in Part 2, we made it clear that in order for you to understand you need help, you need to understand where you might need that help, and that’s why we are doing this series for your benefit and going deep.

So, just like we wrote on the Five Best Practices for Buyers, which built off of our articles on five easy mistakes source to pay tech buyers can avoid and even a critical sixth mistake most tech buyers make in source to pay (who need to realize that No Tech Should Be Forever), we are giving you the ten best practices that address the ten most common challenges we see that you should be aware of, and some advice on how to address them.

In our first two articles we gave you the first seven:

  1. Identify the Market Sector You Are Competing In
    … and the Niche Your Solution is Targeting
  2. Do Your Market Research
  3. Define Your Target Industries
  4. Identify the Core Pain Points Your Solution Will Address in the First Release
  5. Understand the Data Needs and Design the Full Data Model
  6. Understand the Current Customer Processes and Typical Restrictions
  7. Don’t Overlook the UX (User Experience)

which revolved around market research and technology. Today we give you the next three, which revolve around the marketing (and sales) of the product.

#8 Get the Messaging Right

Not cool messaging, not current hotness messaging, not buzzword messaging, but meaningful messaging that gets the right points across. What it does, how it addresses the customer problems, how it improves the customer situation, and how it will deliver a return on investment in the short and long term.

This is easier said than done, because the messaging still has to be attractive, easy to consume, comprehensible by your target audience, and to the point. It’s a tough balance, made harder by the fact that if you don’t understand the industry, the terminology, the current technology, the competition, or what the audience is looking for, you’ll never get it right.

#9 Price It Right

This is very hard. Price on ROI? That’s different by company. Price by competition? If it’s truly different, it’s not comparable one-to-one. Price by current market size average SaaS spending? That could price you out of the market or price you out of business. It’s the optimal balance between value, customer budget, and all-in costs to the company (development, implementation, support, etc.), and that’s not easy, but it has to be understood to ensure the majority of the intended market can afford it and do so by the next budget cycle, that the pricing doesn’t sell the solution short, and most importantly, that the sale price doesn’t put the company in financial jeopardy.

#10 Get Advice AND Listen to It

Analysts and Industry Experts are your friends, at least if you listen to them and ask good questions and listen when they are able to give you advice (and listen even closer when they say they are not the expert in that area and redirect you to the those who can, as the best analysts and experts not only know their areas of strength, but their areas of weakness and will send you to the right analyst or expert when you have a challenge outside of their core areas).

There are a number of things you need to understand, especially if you are a new founder or CEO:

i) They are much more informed than you on the market, assuming you are talking to a senior analyst or long-time industry expert. Maybe you’ve seen a few solutions and heard customer opinions on a few more, and hearsay customer opinions on a few more than that, but most analysts have seen dozens of solutions in any particular area and have deep understanding of what those solutions do, what the target markets are looking for, and the average technical proficiency of those markets. You don’t have that. (And if you think you have a great solution because Ariba and Coupa doesn’t do something, you are drastically underprepared to tackle the market on your own.)

ii) They have seen the majority of the messaging and sales approaches and have seen what works and what doesn’t. Your CMO might have been the Marketing Guru in their last job, but if that last job was in a different area of tech, or even a different area of Source-to-Pay/Supply Chain, their knowledge and experience doesn’t necessarily translate. Going back to our point about market maturity, and risk-aversion, an experienced industry analyst has a lot more insight into what’s worked and what hasn’t and is the person your CMO needs to learn this new industry/market and how to use their skills to be the next Guru in your market.

iii) They are aware of the market research and expertise that exists that you can take advantage of. You don’t need to guess, and you definitely don’t need to double down on your start-up assumptions and proclaim them as inescapable truths, which, as experts know, likely only holds true in a vacuum (and could be completely false for the majority of your target market).

Plus, as we indicated above, the best analysts know their areas of strengths and their areas of (relative) weaknesses and when they can advise you well and when to pass you off to a colleague, even if at another firm. (If the doctor doesn’t know, or isn’t in the best position to advise you, he’ll happily pass you off to one of the dozens of active analysts and industry experts he trusts to advise you appropriately, which includes the analysts he publicly listed in his analyst recommendation post.)

Is this everything you need to do? Or even know? No, but it’s a great start and when you get these practices down, you will be in far better shape than your competition and not make the same mistakes us long time analysts and consultants see over, and over, and over again. We see far too many companies take two steps back for every step forward during their formative years, and it just doesn’t need to be that way. Especially if they are bringing a better solution to (a subset of) the market.

Ten Best Practices for (Software) Vendors, Part 2

In Part 1 we noted that, just like buyers, you need help. And what we left unsaid is that most analysts, bloggers, and self proclaimed experts aren’t giving you the help you need. Which, to be fair, they shouldn’t, because it’s worth money and they need to make a living too. However, they should at least be giving you the insight you need to understand where you need help and how they could help you, because they shouldn’t expect you to hire them on their word alone that they are good. You should have something to judge that as well as whether or not their expertise is in the area you need it.

So, just like we outlined Five Best Practices for Buyers, which built off of our articles on five easy mistakes source to pay tech buyers can avoid and even a critical sixth mistake most tech buyers make in source to pay (who need to realize that No Tech Should Be Forever), we are giving you the best practices you, as a Source-to-Pay/Supply Chain Front End vendor, need to understand to be successful.

Yesterday we gave you the first three:

  1. Identify the Market Sector You Are Competing In
    … and the Niche Your Solution is Targeting
  2. Do Your Market Research
  3. Define Your Target Industries

which revolved around market research. Today we give you the next four, which revolve around the technology solution.

#4 Identify the Core Pain Points Your Solution Will Address in the First Release

Once you understand the market sector and niche you are competing in, and the problems potential customers are having, you need to identify the subset of pain points you are going to address. (And stick to them until you have a solution that minimally addresses them. Flip-flopping will not only waste time and money, but distract you away from a core you will still need to build.) This may mean tweaking your definition of the “problem” slightly to moderately and changing the product design and roadmap you drafted when you started, but it costs a lot less to do it before you start development than when you are halfway through a development cycle and realize the focus was wrong. Moreover, targeting the core pain points you identified ensures you have a solution that not only solves a real problem but also gives you access to a market that is not already over-crowded with existing solutions that would directly compete against yours.

Make sure to validate that the pain points are common to multiple customers, and not just the companies the founders came from or your alpha partners and beta customers. Remember that your alpha partners and beta customers are either the leaders and innovators in the top 10% of the market (and way ahead of their peers in operations, supply chain, processes, and/or technology utilization and readiness) or the up-and-comers willing to take risks on innovative new tech to catch up to the market leaders. They are ahead of their peers in functional capability and/or willingness to take a risk, and it could be years before the rest of the market catches up. You want to be building something that a majority of the market is ready for once you prove the solution and your resiliency as a company, not something that will limit you to a very small group of industry leaders and/or risk takers.

#5 Understand the Data Needs and Design the Full Data Model

Before you code a single line, go back to your market research and look at all of the data your competitors are collecting, the data the customers are looking to keep track of, and the data that is available in the systems you will (likely) integrate with. What you have to remember is that, when it comes to software, just like the architecture you start with determines what you can build feature and function wise, once you start with a data model and your developers start coding to that model, extending it can be exceedingly difficult later. So start with the right data model. (Then do the architectural core, which should support not only all of the initial functions but those functions identified as potential future improvements based upon secondary pain points or common competitive functionality. Just like a foundation for a two story house will only ever support a two story house, you need to build the foundation for a high-rise if that’s what you want to build, even if you are only building one floor at a time.)

#6 Understand the Current Customer Processes and Typical Restrictions

If you don’t understand what you are trying to automate, what processes your target customers are comfortable with, what restrictions they have to work within, and don’t design your technology to work within the processes and restrictions, it won’t matter how great your tech is because it won’t be adopted. Unadopted technology is even worse than unsold technology — unsold technology can be spun as “just coming out of development“, unadopted technology means you don’t have happy customers using it, which gets interpreted as “it doesn’t do what it was intended to do“, and that will really hold you back.

#7 Don’t Overlook the UX (User Experience)

You could have the best tech ever, but if it’s

  1. not an attractive technology that looks easy to use,
  2. not a technology that is actually easy to use, and
  3. not one that fits within their process mindset, then it won’t get adopted and used by the intended customers. And we’ve already indicated that non-adoption is worse than a lack of sales.

Come back tomorrow for Part 3 where we will conclude our deep dive into ten best practices.