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Saturday
Oct012011

"If it ain't broke, FIX IT!"

Peter Smith, Spend Matters UK/ Europe
www.spendmatters.co.uk


There’s a big temptation when things are going well to just keep going, to accept the status quo. It can seem like nothing can possibly go wrong. All through history we’ve seen examples of people, companies, even whole civilisations who have thought “everything’s fine as we are, we don’t need to change”. But if you’re not changing or growing, you’re declining – or dying.

In my business career I’ve seen governments worrying about the power of IBM, then Microsoft.  That seems crazy now as those firms, although still doing fine, have lost the dominance they once had. Now it’s Google or Apple who are “getting too strong” for the public good.  In some industries, there’s more longevity; interestingly, consumer goods seems to have a lifespan greater than anything in the business to business world.  Mars, Unilever or Nestle look like they’ll be good into their second centuries. But when I was growing up, some of the iconic names of British business - or on the high street - were ICI, Woolworths, Midland Bank, Dewhursts and British Leyland. Remember them....?

It’s much easier to change and develop from a position of strength rather than waiting for the crisis to hit!

So everything changes. What does this all mean for procurement people though? Just that complacency and arrogance are the absolute enemies of excellence, and if you’re not improving, developing, you’re probably dying.  If you believe that your organisation or your function doesn’t need to change and adapt: if you believe that everything is just fine: then that’s probably a good indicator that problems are just round the corner. The same applies to us as individuals too. And remember – it’s much easier to change and develop from a position of strength rather than waiting for the crisis to hit!

The best people I’ve worked for, with, or managed, have always had this element of dis-satisfaction. They were capable of acknowledging and celebrating success, but they always wanted to do things even better, they wanted to try new ideas.  That doesn’t mean you have to be foolishly risk taking – one of the reasons I’ve always been glad I chose procurement rather than marketing is that procurement folk (unlike many marketeers...) tend to have a healthy scepticism and therefore a sensible attitude to risk.

But we can’t let that spill over into that “everything’s fine just as it is” mentality.

So how does the profession look at the moment in terms of this issue? It’s a mixed picture, as you might expect, but I see a lot of organisations who aren’t pushing the boundaries as hard as they might.  And given the economic outlook, it seems more important than ever to be doing just that.

However, if you’re reading this, you are probably not in that category anyway – you’ve embraced, or at least have an interest in some of the most advanced procurement and supply chain technology in the world. But I still meet CPOs from major organisations that have never run an electronic auction or an end to end e-Sourcing process – let alone considered optimisation processes.  If you are in that category – give it a go.

And my perception is that the profession generally has not quite woken up to the significance of how “optimisation” platforms signal a fundamental change to some of the well-established paradigms of procurement, particularly category management.  We started exploring this in our White Paper for Trade Extensions – available here. (If you haven’t read it, please consider spending 20 minutes doing so).

We can ask the market how it would like to structure the supply we need.

Our hypothesis is that this technology enables us to approach the market in a very different manner to how we traditionally do so through category management processes. Instead of carrying out large amounts of analysis to (in effect) second guess the market, and the fundamental economics that lie behind it, we can ask the market how it would like to structure the supply we need. Given that it is the suppliers who understand those economics, that will lead to a more economically advantageous solution than we’ll ever get by simply sitting in our proverbial darkened room developing complex “category strategies”.

But that is just one example of how procurement needs to be challenging our own status quo and traditional thinking. I see some of the same issues in automation of purchase to pay processes; in attitudes to risk management (where most organisations and procurement functions are working at a level that can most kindly be described as “basic”), in attitudes to training and development, and in how procurement interacts with internal stakeholders. This isn’t true everywhere of course, but it is pretty common.

Be open minded, challenge yourself and current practice.

There is no magic answer to this, but the most important message for senior procurement people is this. Be open minded. Challenge yourself and current practice. Develop your awareness of external information and events; some great ideas come from inside your organisation, but many don’t. And above all, NEVER get complacent.

Garry Mansell of Trade Extensions and I were discussing this topic recently, and his phrase was, “if it ain’t broke...FIX IT”!

So even if things look pretty good, even if you’re hitting your targets and delivering your goals – think about that. What more can we do? What can we do differently and better? How do we embrace change to make sure we stay at the front of the pack? They’re the key questions to ask.

Peter Smith can be contacted at psmith@spendmatters.co.uk