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Dead-end strategies #1: Strategic Sourcing

August 24, 2017

25 years ago, I worked with a large Business Administration function on a project to redefine their value. Senior management had issued a challenge to all support functions, requiring them to justify their existence.

The leaders of Business Administration took a bold step. They believed that they could not only prove internal merit, but they could go a step further and start to generate revenue by selling their services externally.

My role was in part to facilitate their planning and in part to test the commercial viability of their ideas.

Sadly, it quickly became evident that this was a group in denial, hoping that they could somehow resist the advances of technology. Their proposed external offerings were not sustainable and, within 2 years, the function had all but vanished. Its remnants were busy defining and managing the automated systems that had eliminated several thousand jobs.

This story is not uncommon and throughout history has been a consequence of technological advances. The only remarkable fact is the consistent lack of readiness by those whose jobs are affected.

Might this group have protected themselves by moving into new, adjacent areas of activity? In this particular case, it was hard to see how such a move could have been achieved. Right now, it’s the question facing Procurement – as Richard Sterling points out in an excellent article “Procurement’s Make-over“.

There is no doubt that the core functions of the procurement process will automate. This leaves practitioners exposed, having been led down the wrong path by their traditional professional associations. As Richard’s article points out, most Procurement groups remain driven by the short-term practices introduced with strategic sourcing. The adoption of narrow measurements of savings and compliance, together with the alienation of suppliers, led to the marginalisation of key skills such as relationship management and commercial judgment. It is now a real struggle to escape the trap of today’s activities and build the skills and credibility needed to assume a new role.

IACCM’s approach to this problem has been to develop learning and development programs that encourage individuals to challenge old assumptions and to embrace innovation and change. It seems to be working. One seasoned and senior Procurement executive recently told me: ‘I found the IACCM training quite upsetting. It made me consider our role in a completely different way and question many of my assumptions. I realized how much more value we could be offering the business. I was upset because I hadn’t thought of it before.’

Maybe it’s time to upset your team!

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