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Collaborative Commerce

April 12, 2011

This week I am at the AribaLive event in Nashville. It has brought together more than 1,600 delegates and an overriding theme is Ariba‘s new mantra of ‘collaborative commerce’.

For many on the sell-side, this may seem a rich irony as they look at the role Ariba has played over the last 15 years in driving more confrontational procurement behaviors. Its advocacy of spend management and e-auctions are prime examples of the drivers behind commoditization and the destruction of traditional relationships.

Yet I think Ariba is sincere in its understanding that the next phase of commerce demands moving on from this platform and allowing reengineered trading relationships to flourish. The old basis for trading relationships had to change and there was inevitable resistance and breakage. Now it is time to move on.

Certainly that has been a key part of the Executive Forum debate in which I have participated and provided many insights from IACCM, which is of course the main forum for ‘collaborative commerce’ in practice..

The theme of that Forum has been the role of Procurement in 2020 and it is drawing from work undertaken by Roy Anderson, a former CPO at several major US corporations. The interviews he undertook for his study show a high degree of alignment in CPO forecasts about the future. I will report more on these in future blogs. Some of the key points are a widespread agreement that Procurement must become far more focused on value, not price; on outcomes, rather than measuring activities; and it must focus efforts on strategic initiatives and outsource the rest.

Within this, I led a session on the future of contracting and negotiation. We discussed why a global economy has made these activities more important; and also why the nature of contracts and negotiations must change. Many started the session by seeing contracts as irrelevant. By the end, it was widely accepted that it si the current form of contracts and negotiations that is the problem. The agenda must change; the purpose must change; and if Procurement is to be considered ‘valuable’, it must show some leadership in driving that change. In particular, a ‘strategic function’ does not simply act to implement the policies and procedures of others. It does not simply perform a role of imposing standards or monitoring compliance. It assesses business and economic impacts. It has a clear view of where it is headed next – for example, towards collaborative commerce.

As one CPO commented to me last night, “If you want a smooth landing, you must keep your eyes on the horizon. If you watch the runway, you’ll land with a massive bump. In my experience, Procurement leaders almost all have their eyes on the runway”. I welcome the Ariba agenda because I think it truly can assist a refocus.

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