The article below is written by Torbjörn Thorsén on November 20, 2012
Every year, research firms and consultancy practices flex their survey and research muscles to produce the research to end all research documents in all lines of business. Of course procurement is always prominent, with Aberdeen offering its CPO Agenda series (Dynamic Procurement being their latest tagline), Forrester covering the technology space with its E-Purchasing Vendor series as well as IBM, Accenture and Capgemini trying to outdo one another on the consultancy practice stage.
Ironically enough, almost every single piece of research starts off with a question regarding procurement priorities; and over the years the answer has been singular: cost reduction. Well, one can’t be too surprised as that’s what most organizations expect procurement to be doing – keeping spend under management and ensuring that one pays the lowest possible price for the quality of goods and services required.
Intriguingly, stakeholder management has slowly been creeping up on the agenda, with Pierre Mitchell from the Hackett Group finally pointing a finger at the issue at hand and saying: “[stakeholder] alignment around complex indirect spend categories is a particularly high priority to close remaining spend influence gaps”. If only the research could give pointers to how this is done, then procurement might elevate itself slightly off its often perceived shop-floor status.
Fortunately, seasoned practitioners have been able to close these gaps without relying on too much theory. It’s quite simple actually, in order to gain acceptance (and thus buy-in and alignment) from key stakeholders, procurement must:
- Talk the talk
- Prove its contribution
- Keep up with the speed of business
Now this may be easier said than done, but there are indicators that show that in some case procurement understands the challenge and are driving their progress to address these issues.
FIGURE 1: Research by (1) SAP and PROCUREMENT LEADERS Key Drivers for Modern Procurement 2011 and (2) ARDENT PARTNERS 1nnovative 1deas for the Decade Ahead July 2011
To deal with the stakeholders who are highly influential in these complex and hard to manage categories (often services heavy categories such as marketing, legal and in some cases IT) modern procurement organizations are gearing up with (and looking for) competencies previously outside of the skill sets. Business focused skills that are more closely related to management consulting than anything else.
What this does is that it enables procurement to act as more than just gatekeepers who negotiate and guard contracts, it allows procurement to act as business developers who are able to break down spend numbers into business critical reasoning (dropping the real figures in a business case format on the desk on non-compliant business managers usually gains their attention as well as their co-operation). Add communication skills worthy of upper management and you’ve got procurement that not only packs a punch, but is able to deliver on (management) stage as well.
Where procurement functions used to rely on negotiation skills alone to drive business value – a more mature function has come to understand that traditional procurement skills need to be offset by:
- Technology support that enables procurement to stay on top of operational spending (spend analysis, contract lifecycle management, supplier performance and risk management as well as e-procurement)
- Business competence in a broad sense that’s inclusive of the specific business needs of the stakeholder, as well as
- Communication skills that enable procurement to sell the spend under management storyline
Then, and only then, can procurement successfully address the complex categories it needs to focus on in order to continue to generate real procurement value.
Product Strategy and Innovation, Capgemini IBX Platform