Why Procurement can and should be the epicentre of innovation for business

Sue-Barrett-at-Procurement-and-Supply-Australia-Conference-2019

Procurement, whether they are aware of it or not, are the epicentre of innovation and leadership of complex systems management within organisations and across the supply chain, or at least they should be.

Their exposure to all elements of the supply chain can and should inform them and in turn other key stakeholders within and outside their organisations of the latest, the easiest, most sustainable, faster, ethical, better ways of doing business.

While they cannot expect to be experts in every area of business, they can and should be experts in systems, managing complexity and managing relationships which is what a supply chain is. Procurement professionals need to be more systems oriented in their approach and understand and facilitate the interconnected web of business, human relationships, sustainability, innovation and ethical sourcing.

Is this being taught or trained in Procurement School?

Is this being encouraged from within businesses from the C-suite down?

I am not sure.

So why is this important?

Because, the biggest killer of innovation in any business is often the procurement process itself. When a RFP (request for proposal) is reduced to a tight specification brief for a short list of 3 suppliers and no room for alternative ideas or offers, or is poorly written with no understanding of the real impact on the business, then innovation, ideas, smart people and better ways of doing business are cut out of the equation.  It’s like living in a walled city with no idea about what is happening in the outside world.

And why is this important to Australia, in particular?

Well for one thing, according to Harvard and a recent Australian Financial Review article, ‘Australia is Rich, Dumb and Getting Dumber’.  Here’s an excerpt

Bangladesh, Cuba, Iran, Mali and Turkmenistan share an unexpected connection to Australia, and it isn’t membership of a tourist destination hot list.

All are among the economies that are so lacking in complexity, and have such limited natural opportunities to develop new products, that Harvard University recommends they adopt industrial policy straight out of the post-colonial developing world: the “strategic bets” approach.

The advice comes from the Harvard Kennedy School’s Center for International Development, which two weeks ago launched an online database of 133 economies that combines remarkably rich data with beautiful presentation.

Designed to map, literally, the economic progress and opportunities of the industrial and non-industrial world, the Atlas of Economic Complexity exposes an under-appreciated truth about Australia.

The enormous wealth generated by iron ore, coal, oil and gas masks, and probably contributes to, an economy that has failed to develop the industries needed to sustain its position among the top ranks of the developed world.

Put simply, Australia is rich and dumb, and getting dumber.

Australia now ranks 93 out of 133 nations in terms of the Economic Complexity Index with a score of -0.60 compared to Japan at +2.28 and just 0.02 points above Pakistan and 0.04 points behind Senegal.  

This is appalling on every level. I warned of something like this back in 2014, and wrote about it in my article ‘If I was Prime Minister for a day’.

So what are we doing about it? Who is responsible? Where can we start?

Well first of all innovation and managing complexity should be a top priority on the agenda of every Australian Board and C-Suite in Australia. If it’s not, then they are not doing their jobs properly.

But why wait for them?

Given Procurement can often be a bottle neck for innovation, why not start there? From the pragmatic place of the day to day operations of business.

This is where Procurement can and should step in and take the lead.

However, if Procurement professionals decide to stick to their compliant, cost managed, automated procurement process of operating that keep suppliers and ideas at bay and remain the budget adhering lackeys of Finance, they are at risk of becoming obsolete and doing everyone else a great disservice thus leaving organisations, people and communities vulnerable and in danger of obsolescence.

No pressure Procurement Professionals, but I believe you can and should be the epicentre of innovation, the open gateway to ideas and opportunities and leaders of complex systems management within organisations and across the supply chain.

On 9 October I ran a workshop for procurement professionals at the 2019 PASA conference. It was titled: Avoiding a ‘Kodak moment’ in Procurement.

The interactive workshop was designed to explore the current state of procurement – the pluses and minuses – and what the future may hold. It examined how current and emerging trends are affecting the supply chain, consumer sentiment, technology, brands, reputations, business viability and relationships, and where the opportunities are for procurement to remain and/or be a viable and reliable business partner from inside their own organisations.

We looked at:

  1. What opportunities look like for the procurement profession moving forward
  2. How procurement professionals need to adapt and position themselves as valuable business partners
  3. What human skills and qualities are vital to navigate this hybrid-digital-human world
  4. ‘Brand Procurement’ – why should businesses choose to work with Procurement?

Here are some of the findings from the session:

Changes over the last 2 years

  • Big data is creating interesting insights and opportunities
  • There are higher expectations but people looking do to more with less
  • The low hanging fruit is gone so what’s next
  • Compliance has increased, especially around labour laws, modern slavery
  • There are less resources; however, agile procurement delivery is emerging
  • Increased awareness of procurement
  • Suppliers are frustrated and fatigued by cost of compliance

The Good News Stories about procurement

  • The rise of indigenous suppliers
  • Ethical sourcing
  • Working with local suppliers – creates more jobs, etc.
  • Improving user experience
  • Creating opportunities and being proactive instead of waiting and reacting

How are internal and external stakeholder dealing with the current market conditions?

  • Currently, many are reactive and in a state of flux, which means that procurement need to be proactive, on the front foot, informed and asking questions
  • They are wanting consistency – how to adapt and make positive changes
  • They are feeling disconnected so procurement need to share information and insights, ask questions to understand what they are trying to achieve

Where are the opportunities for procurement as it relates to innovation, collaboration, growth and mutual prosperity with our internal and external stakeholders?

  • Knowledge as a gateway, a filter and activation point
  • Stakeholder engagement (internal and external) – collaboration, creating forums for innovation, tools and resources
  • Ideation session including Blue Ocean Strategy thinking
  • Working WITH suppliers not against them; be more inclusive
  • Be seen as agents of change
  • Have SMART conversations, be totally business oriented not just procurement focused

Where are the opportunities for procurement to be valuable business partners and innovators?

  • Better data insights that allow procurement to spot opportunities
  • Working with suppliers to better understand purchase and supply chain
  • Need to redefine what Value means – beyond price
  • Procurement need to align their priorities with the business’ values and strategy
  • Procurement need to provide transparency in how they work
  • Be strategically focused, not transactional
  • Build trusted relationships across all stakeholders; share data and market intelligence, share risks, share achievements, listen more and collaborate
  • Ethics and values oriented, not just profit maximisation oriented

What makes procurement optimistic about their future?

  • People are not looking away now i.e. labour laws, etc.
  • Availability of technology
  • Can show quick wins and shared value
  • Procurement can be seen as having the answers and insights into better ways of doing business
  • Being outcomes oriented demonstrates value, trust and inclusion
  • Building better relationships results in more innovation and better ways of doing business
  • Knowing procurement can make difference
  • Being commercially sound can coincide with being mutually beneficial for all stakeholders
  • The future of technology creates opportunities

So where to next?

Procurement need to reset their brand and value proposition and learn, ironically, how to sell themselves better and excel at consultative solution selling practices.

Ben Shute, who we work with arm in arm bridging the divide between sales and procurement, has written an article Holy Trinity of Procurement Skills – take a look. It’s a great read.

Procurement, please step up and take the lead; we desperately need you.

Remember everybody lives by selling something.

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