A neighbor and close friend of mine works for a well-known design company, and he and I have spent some time discussing what makes the company successful and innovative. He is a highly creative individual, but he emphasized to me that there are some “structural” aspects to the success of his firm. The topic of innovation is very popular in more advanced procurement organizations, so I thought I would take seven of the value statements made at this design company and apply them to the procurement setting based on what I’ve seen at other organizations.
Procurement organizations should explicitly state and continually demonstrate the values and behaviors (backed up by measurement and support) that are tied to the company’s broader values. In a sense, such value statements are design principles themselves to how the workforce should behave with each other and with external partners. Let’s review the seven primary values:
- Be optimistic. Believing that something is possible will somehow make it so.
Okay, I sense your eyes rolling here. But, optimism does not equate to naïveté. It equates to leadership. One of the biggest differences I find between older “old school” procurement managers and “new school” procurement leaders is that the latter have a “can do” attitude that helps them set stretch goals, motivate each other (and suppliers), and constantly push the boundary of procurement’s value proposition rather than just staying “inside the box” of legacy procurement services. This will indeed make you better if you’ve stayed inside of it too long, especially since you will run out of runway in terms of justifying your existence through traditional savings generation. They also approach supplier negotiations fully aware of the gaps that they will likely face with suppliers, knowing where to start in terms of common areas of agreement.
Also, the optimism itself signals your willingness to be a partner and not just a paycheck— someone for whom the supplier will actually wants to go to bat when they go to senior management with your economically aggressive proposals! Optimism is infectious, and it creates a culture where people inspire each other and can inspire suppliers to reach deep and deliver more innovation and more value to you. When you combine strong strategic supply management aptitude with a strong strategic supply management attitude, you are invariably going to be very successful.
- Collaborate. The most powerful asset we have in our arsenal is the word “we.”
Collaboration is an overused word and should be used sparingly and sincerely. You don’t really need deep collaboration to do basic transactional and self-service e-procurement. But you certainly need it in critical, complex, and/or strategic categories and suppliers – both internally and externally. This is a huge topic that we won’t dive into in great detail here, but suffice to say that in addition to having the right attitude and aptitude of both parties, alignment is the one thing to focus on here. You can have alignment without collaboration, but you can’t have collaboration without alignment. Certainly, mutual dependency helps with alignment, but when there are inherent goal mismatches, then you need to pay special attention to creating alignment mechanisms across the internal silos and external silos.
The biggest thing here is to create 360° alignment between spend owners (and functional partners that are also spend owners), suppliers, senior management, and procurement staff to work on a “balanced scorecard of supply.” If procurement is only the advocate of purchase price reduction, rather than the arbiter of defining and realizing holistic supply performance, you’ll have a rough time becoming a customer of choice that wins the hearts, minds, and budgets of innovative suppliers. You need to get aligned or else it’s going to be a rough ride when your potential supply innovation collaborators view you as a purchase price reduction conspirator.
- Make others successful. Going out of your way to help others succeed is the secret sauce.
Although you could argue that this value is part and parcel of the previous value statement, it does warrant calling out on its own. There is no single method easier for creating alignment than simply helping your stakeholders achieve their goals. For internal stakeholders, it really just means using a “customer management” approach to understand what they are trying to do as a function or a business unit, and then aligning your metrics and resources as best you can to them. Even if you are merely helping to enable their success (and saving some money in the process), they will be willing to go to bat for you in defending the value that you provide them.
Conversely, if you are merely using them to enable your success, then your ability to hit savings goals and get your bonus while they are not necessarily successful in meeting their goals will not exactly be appreciated. Nor will it set a foundation for future collaboration (especially if they view you as a budget reducer and gatekeeper). The same obviously goes for suppliers. The more that you can go Jerry Maguire with them (i.e., “help them help you”), the more they will remember it and help you when the pendulum swings the other way. Service organizations are really measured by how successful they make those they serve. If you do view procurement as a service-oriented organization, you have to define your stakeholders’ success before you can define your own.
- Embrace ambiguity. Get comfortable with discomfort.
This can be a difficult value, but if we want our supply chains to be more resilient, we also have to challenge ourselves to become more resilient. There is perhaps no function that needs this quality more so than procurement! In doing so, procurement organizations need to work hard to avoid applying the same “hammer” (n-step sourcing methodology, narrow PPV centric measurement systems, etc.) to a diverse set of problems. Rather, they need to “mass customize” their procurement services to the needs of their stakeholders and tune the vocabulary, the framework (e.g., use a DMAIC approach rather than a rote n-step process), the RACI models, and the palette of KPI’s used to define supply performance.
It is by embracing such uncertainty and ambiguity that procurement organizations can grow their toolbox to solve a much larger set of problems. In fact, one of procurement’s core competencies is its ability to solve complex problems and help frame these problems through a series of objective functions, cost models, trade-offs, simulations, benchmarking, and direct supply market participation. If you run from complexity and ambiguity, instead of helping stakeholders embrace it and tackle it, you are missing a key opportunity to lead.
- Ask for forgiveness – not permission. Learn from failure.
At the end of the day, you need to deliver results, and that means leading and removing roadblocks. Results will go a long way in helping others forgive you for any transgressions that you may have made. The biggest lesson here is not to allow yourself to fail collectively and then blame the problem on the management system. Rather, you need to find a way to minimize the constraints (e.g., by working within a limited scope) and then show that those constraints shouldn’t exist in the first place. In other words, you can put a cost to the constraint by showing the value of ignoring the constraint. Obviously, you don’t want to get yourself fired by going around the rules. A perfect example of this is assuming a constraint that you must use your ERP system as your only technology platform for supporting your procurement processes.
You won’t be in a happy place if you say that you couldn’t meet your savings goals because it’s IT’s fault. Rather, you have to be creative in, say, selectively using cloud-based best-of-breed applications to accomplish your objectives, while trying your best of course to be a good corporate citizen and work nicely with IT. Most importantly though, you must do your best to not create a culture of fear within procurement and to encourage and celebrate risk-taking. You cannot innovate without breaking some rules and changing some paradigms. So, you need to create formal processes that encourage such innovation with suppliers (supplier innovation centers, “requests for innovation,” and other techniques). If you want innovation, you will need a lot of persipiration and a support system to encourage the “at bats.” If you manage your business or your procurement organization as “one strike and your out,” you will never have a team, and you clearly won’t win a game.
- Take ownership. Individual ownership supports collective responsibility.
In the 360-degree alignment referenced above, one of those key alignment points is the link to procurement staff. Any supply performance improvement goals such as cost savings need to be linked to staff members individually (good) or to those members collectively through a cross-functional category team (better). Note that this can just be savings, but other goals, and can also be a capability-related goal such as a supply risk score improvement for the relevant spend category or supplier. Of course, things need to be in place to go beyond just decomposing savings targets to individual sourcing/category managers and buyers. For example, if you have a cross functional team working to reduce total costs, then you have to “double count” the savings to translate between P&L impact and the individual performance measurement. You can also divide up the savings ‘credits’, but the important thing is to measure in a way that fosters collaboration rather than internal competition.
- Talk less and do more. Nothing is a bigger buzzkill than over-intellectualizing. Design is about rolling up your sleeves and making things.
Although this value might seem to apply much more to a design innovation firm, it is also relevant to procurement. I can’t tell you how many times I would do procurement benchmarking project readouts for a firm who demanded to see the analysis dissected in different ways (e.g., changing the peer group composition), only to have the same basic story emerge over and over. Data is messy, especially spend data and market data, so it’s tempting to always want more data in order to create a more sophisticated solution. But, the solution is only as good as your collective ability to implement. An MIT study showed that almost half of complex logistics bids ended up being non-compliant in execution.
Another more common example is when procurement does an internal stakeholder survey or a supplier stakeholder survey to identify opportunities for improvement, and then gets so overwhelmed with the responses that they don’t end up doing anything other than analyzing them. This is always comical when one of the internal stakeholder responses is that procurement spends too much time analyzing and not enough time doing. Ultimately, your efforts need to be visible to stakeholders, showing that you’re working with them “side-by-side,” even if you can’t always be physically co-located.