I sn’t this so true of how people often approach business problems? Most of us have no shortage of good examples where well-intentioned efforts to solve a problem in a hurry before fully understanding the root problem just made things worse (or at least delayed the desired outcome). Often this is a symptom of panic in the light of inexperience, combined with the strong instincts most business leaders have to "fix the problem."
“FIRE, READY, AIM!”
The spend management equivalent to this phenomenon is “strategy, control, visibility.” Having been on the procurement side of an unsegmented, out-of-control spend category, I appreciate that there is a tendency to want to be strategically minded right out of the gate. Only one problem: like firing blindly into the air, setting strategies too soon has little chance of hitting the target. I myself (early in my career, mind you) have made the mistake of putting strategy before visibility and control and paid the price: wasted time and effort, frustrated business managers and suppliers, and anemic compliance and adaption. I can still feel the bruises!
IN POKER THEY CALL IT A “TELL”
I like to think I am a little wiser now than when I entered the sourcing and procurement space 15+ years ago. So today, when I am asked for guidance on how to quickly or easily identify spend management opportunities or how to assess an organization’s readiness for program expansion (i.e. from temporary labor into SOW-based services) my first response is “what questions do you have?” And I mean that literally.
The type of spend or vendor-related questions being asked in an organization is the tell (a behavior, manner of speaking or words used that gives clues to the underlying condition). To demonstrate this point, look at these two different sets of questions:
|Group 1 Questions||Group 2 Questions|
|How many suppliers do we use?||Do we really need 163 staffing firms?|
|How much is our consulting spend?||Why are we paying multiple rates for the same contractor?|
|Are we getting what we paid for?||Why are we only 11% compliant with our competitive bid policy?|
|How do I get my supplier badged?||How many engineering firms do we need to support $25M annually across two plants?|
|That supplier failed again?||If that supplier has that much spend here, shouldn’t we be getting volume pricing?|
The questions being asked in Group 1 indicate a level of helplessness that suggests immature or even non-existent procurement capabilities (i.e. visibility). Group 2 questions, on the other hand, demonstrate at least a root grasp of issues and opportunities as evidenced by the questioner’s use of specific data references. Group 2 does not have all the information they need, but they are clearly ahead of Group 1.
KEY VISIBILITY TAKEAWAYS
- Visibility into spend and vendor data drives better spend and vendor management questions;
- Asking the right questions leads to better, more accurate and effective corrective actions (i.e., operational controls and spend management strategies).
WHAT ABOUT CONTROL?
The bridge between visibility and strategy is control. Control in this context is the ability to influence preferred actions. In practical spend management terms, control is:
- Organizational awareness of procurement preferences – such as a preferred vendor, a negotiated rate card, a pre-approved SOW template, competitive sourcing criteria, etc; AND
- The ability of the organization (managers, end users, etc) to engage those preferences.
In one sense strategy is the most important thing. Strategic objectives are achieved by development of the right strategy and effective execution against that strategy. But how does one know if they are working on the right strategy if there is no data to support it or controlled processes to execute against it? If an organization’s starting position is little to no visibility and control, then I would suggest that lack of strategy is not the real issue. Rather, lack of visibility and control is the problem to be solved first.
Solve the visibility and control issues and the right strategies will become self-evident.
|Business Problem||Practical Impacts||Capability/Solution||Relevance|
|Organizational Blindness||You don’t know what you don’t know||Visibility||Ask better questions|
|Chaos||No control over policy, processes, behaviors, outcomes||Control||Awareness of procurement preferences + unconstrained access to engage the preferences|
|Ineffectual Efforts||You can’t strategically manage what you can’t see and control||Strategy||Fact-based and operationally actionable strategies work best|
The above review of the most basic procurement capabilities is straight forward and covers concepts most of us have all been exposed to or experienced first hand before. The challenging aspect of developing these procurement capabilities is the concept of scale. How does an organization achieve portfolio-level visibility and control so that portfolio strategies can be implemented? By using the right vendor management system (like IQNavigator!).