Client Partnership - Urrgghh!
In Proxima’s new ‘2023 CPO Report – What’s next for procurement?’, Russ Stewart comes closest to saying what is needed, but even he talks about stepping up as a business partner, as the apex of Procurement ambition.
No, Mr Stewart, you’ve got to kick down the door!
Proxima, in the opinion of many, is the most bold and innovative Procurement & Supply consultancy, so its report should have been exciting. That it fails is because it is too full of buzzwords and banalities when courage and action are demanded.
Three themes are headlined at the start: embracing a broader definition of value; enabling a connected and extended enterprise; and investing in expanding the procurement skillset. Not exactly attention-grabbing. And then, in the words of Greta Thunberg, these themes are mostly followed by “Blah, Blah, Blah”:
Phrases you could read anywhere.
Back to Russ Stewart, the SVP Procurement of Tyson Foods. He starts to say interesting things like, “Don’t stay in your lane”; “Be transformational”; and “Those who remain…focused on spend will…be…left behind.”
That’s more like it. He is, at least, pushing at the door.
Simon Geale, Proxima Exec VP, nearly gets it too. Phrases like “higher value placed on resilience and purpose than on the price”; and “Procurement…architecting these new forms of value” nudge the door open by a few millimetres. But Mr Geale still sees the pinnacle as being a collaborative ‘ecosystem partner’. Why do people go on about collaboration and partnership?
The boardroom door slams shut.
Any consultant could tell you that, once you are defined, pigeon-holed and categorised in transactional or operational roles, there is no way up. You must start at the top, with a compelling vision, and work with executives to develop a plan and agree your role. If you cannot do that, keep your dreams to yourself and don’t bore the rest of us with your needy pleas for respect and recognition.
A different approach is essential.
Procurement has unique and desperately required capabilities. Nobody has better appreciation of how an organisation looks from outside; neither has anyone wider experience of the political, social, commercial, and technical relationships which form supply chains, shape trade and drive competition.
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Procurement can see, long before anyone else, when the economic moat (to use Warren Buffet’s term) that keeps competitors from the walls of your castle is drying out.
Only Procurement has the networks to detect when suppliers are moving downstream, or customers upstream. They steadily shrink your business and, when they meet, you no longer exist.
Who, other than Procurement, will call out internal systems and processes that have become obsolete and inefficient and could be done better by a third party?
Why would an internal function that launches a new system bother to check if the costs it removed from its own budget reappeared on others’. (HR self-service springs to mind!). Procurement is expert at total-cost budgeting.
How could anyone other than Procurement communicate externalities (activities which harm others but have no direct cost to the business) sensibly in a business case? Think Carbon emissions.
Organisations normally migrate downstream where margins are greater, and Ford had been doing so for over a century. It used to own iron foundries and rubber plantations. Now it is crunching into reverse gear to copy Tesla. You don’t need to be a genius to see who within Ford should have initiated and led this.
If any of this seems far-fetched that is only because we have sold Procurement for decades as a savings machine in the buying space. We cannot blame others for our own propaganda on purpose and scope!
A new concept tosses these self-limiting perceptions aside.
In biological science, there is a term for organisms that shape their environment or themselves, to become fitter to survive. They are called ecosystem engineers. The examples commonly cited are:
In reality, most species do both; and organisations do too, by evolving. The way supply chain transactions shape an organisation was described by Ronald Coase in 1937 in The Nature of the Firm. He was awarded a Nobel Prize for it, as well as for his work on externalities, the basis of today's thinking on environmental costs. We have been sitting on these insights since then, quietly content to dream of no more than stepping up as a business partner; and failing even to do that.
What if a CEO had a courageous and talented team to challenge the way an organisation works, to question its role at the intersection of a network of supply chains, and to actively lead improvement? The executive board cannot always be relied upon for new thinking and challenge. They are too often beset by linear, short-term groupthink, personal interests and career caution. Many see their boardroom role only as a functional general manager, without a mandate to speak up on wider issues.
Is this the compelling vision for which we have all been searching? Who will take up the challenge and kick down the door?
Procurement Rainmaker | CPO | MCIPS | ex-Bain
1yEcosystem yes, engineer no. Procurement needs to add value in the business (social science) realm, even if we‘re increasingly adopting all kind of technology. In any event, I am a big advocate of the ambitions to step up from the spend rut.