Simon Geale

24 April 2019
Topics in this article
  • Cost Optimization
  • Supplier Engagement

In the first part of this paper we looked at Supplier Collaboration: what it is, why do it, and who does it/needs to do it? In this second part, we look deeper into some of the character traits shown by those who are starting out on, or are running collaboration programs, or variations thereof.

The base examples and anecdotes are real, taken from surveys, conversations with CPOs, and written works on the subject. The format, the five traits of organizations that do collaboration well, are my learnings, making sense of what I have read and what I have been told. I structured this around the box model introduced in part one:

In the article below, we take a whistle stop tour of the five characteristics on the left: Strategy, Ethos, Capability/Skills, Technology, and Change propensity, ultimately looking to answer: what makes collaboration a success?

1. Vision and Strategy are key

While the statement sounds obvious, perhaps it’s not, as programs fail due to their failure to develop vision and strategy upfront. And it’s a four way street linking Procurement with suppliers, stakeholders and leadership. It’s imperative that each party shares a common end vision, ultimately pointing at the customer’s needs, desires, and experience.

Put simply, organizations are asking customers to trust them, and to win that trust means continuously focusing on what our customer “looks” like and what they value.

A collaboration model, or ecosystem, is a hyper-connected approach to delivering on the customer-focused value proposition; leading to doing things faster and achieving better outcomes than going it along.

Where this approach differs from more conventional supplier management, is that the end goal is the same for all parties, and they understand their role as enablers to that end. ­­This is a principle of customer economics; that cooperation/collaboration can create or increase a market, thus increasing the overall opportunity for collaborating organizations.

It’s a bold approach as often the organizations that excel are competing with each other or operating adjacent, but are collaborating to speed up R&D and bring the opportunity to realization faster. Think driverless cars or ridesharing organizations.

Institutionally, most ‘legacy’ businesses are not programmed to collaborate, and it takes executive leadership to promote the right thinking and behaviors. It also takes an organization that needs to rely on collaboration in order to succeed. More recently, while a lot of talk is about innovation, an emerging practice from large corporates has been to stifle innovation until such point where creative destruction becomes a necessity.

2. Change the concept of reward

In Procurement and Supply Chain, we often talk about incentivization, and I suspect most of us fall short on where we’d like to be. Not because we don’t want to, but because of an ‘organizational self’ that prefers to ‘transact and win’ over ‘win as a team.’ In fact, the average scorecard is three times more likely to value OPEX savings over innovation.

This is not in itself a problem if the primary driver of the collaboration is OPEX savings. Those who collaborate well, however, are able to consider the various financial and non-financial rewards of participants, then activate strategies to share risks and rewards.

An often-neglected dynamic that adds complexity is that in a true collaboration model, the relative value of inputs and outputs differ as time/development/production progresses. Think about the risk and reward profile for the organization that puts the majority of their efforts into R&D vs the organization that handles production. Both are committed parties, but the time at which they are carrying the greatest risk or can evidence their success are not the same.

This means that the Collaboration Lead has to think deeply about financial merits. But, there are other behaviors which leaders display as organizations like Philips or Vodafone (for example) have shifted from purely managing in the supply chain to a much more innovation-centric culture by doing things like providing infrastructure, sharing risk, and mentoring start-ups (and much more).

These types of behaviors support the ‘win as a team’ mentality on which collaboration depends.

3. Different capability and different skills are needed

The modern commercial function needs to be very good at a number of things, and this means holding a variety of skills. Our recent article “Procurement will be Networked” focused on the journey from ‘Sourcing Generalist’ through to this collaborative world of the ‘Network Partner’. This staircase outlined the differing focus and types of skill sets required as Procurement moves through its evolutionary journey.

Technology, of course, adds another dimension to this; enabling us to do more, faster, and with greater accuracy. But it’s important to focus on the human aspect too. If the history of procurement has taught us anything, it’s that advances in technology have taken away some roles and replaced them with others.

In the collaboration sense we can look to the IT function as inspiration, and a lot of the work being done around ‘orchestration’ which is now relatively common. Orchestration is a good word for it, because it prompts a simple and convenient analogy; as the conductor of an orchestra, it is less important to know how to play the instrument and more important to know what, how, and when to bring them in to produce the product: in this sense, a piece of music played beautifully.

A common mistake organizations make is to think that high performers can simply do the next thing. This is not necessarily true, as a great ‘Category Manager’ may not have the soft skills to be a ‘Business Partner’, and a ‘Business Partner’ may not have the entrepreneurial self to manage a collaborative relationship.

Leaders understand what skills they need at each level of their organization and recruit accordingly, linking skills to strategy and product.

4. Technology is your friend, but buyer beware

Over the last decade, procurement technology has, in my opinion, largely flattered to deceive. Until recently I would’ve characterized it in three ways: 1) a market which is increasingly noisy about how disruptive it is, 2) a core set of platforms which don’t appear to align with that message, and 3) at a business level we have struggled with adoption. All in all the myth is far more impressive than the reality. But is all this about to change?

The big shift over the last five years has been the acceleration of niche products which can do exactly what the user needs them to do, but at a fraction of the cost or without feature set of an enterprise platform.

This is very important for the small to mid-sizes organizations that have historically been frozen out by the enterprise tech firms…unless they had bottomless pockets.

Ironically, it seems to be the mid-sized technology vendors who suffer the most, as the enterprise players adopt a more App Store-style approach, and connectivity reigns where protectionism once ruled.

5. Embrace change, it’s fundamental

As the last on the list, embracing change feels obvious, but perhaps that’s right. One can’t just go forth and innovate; it has to be in the mindset. With a growth mindset, change enables us to improve, and improving enables us to succeed. We innovate, test, and measure continuously, using change as a lever to spur us on, as opposed to a prompter of procrastination or paralysis.

We all know a change aficionado; Proxima – Web Graphics – Supplier Collaboration 7
often they are lambasted for their lack of practicality and action. There is a little truth in this. That mindset is fundamental to innovation in thinking, and harnessing it is fundamental to innovation in action.

Taking a challenger approach to business problems is going to automaticavke the function out of its comfort zone and into a more disruptive space, asking “what if” and “why” rather than accepting the status quo.

The fact is, we existing in a gummed up economy, currently despite a feeling that we are living in highly innovative times, the giants of the global economy are stifling innovation. Yet it is here where we most often look when we seek to innovate ourselves. In doing this, we become ‘innovation led’ rather than innovators ourselves.

A number of organizations have embraced change by running specific innovation programs, encouraging creative ideas or solutions to problems from established and new suppliers. These usually start with questions. Questions which may not have binary answers.

Not everyone is comfortable in this zone. The collaborator is.

Final thought….

The above are some nice examples, but so what?

Relating back again to our Insight/Network partner roles from ‘Procurement must be Networked’ we start to see some of the characteristics, values, and behaviors that we need to adopt to move us from doing supplier collaboration on paper, to supplier collaboration in reality. But there is also a really important reality check….

We don’t want to or need to collaborate with every supplier. Suppliers have a role in in making us more productive, enabling operations, or powering growth. Understanding that in the first instance is critical for understanding the wider shape of the organization and types of skills that we need, striking that balance between solving today’s problems and seeking tomorrow’s opportunities – don’t lose touch with what made you famous.

To get the full presentation – get in touch. In the meantime, go forth and collaborate.

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