The theme of Pierre's and Chris' Ariba LIVE presentation was "accelerating the tipping point" -- in other words, how can companies best accelerate the transformation of the Spend Management function from average performance to world-class. In a post earlier this week, I highlighted some of the findings from Hackett's latest research that supported why world class organizations are not only more efficient, but also more effective in their activities (incidentally, Hackett defines world-class by looking at both of these "e" metrics). In this post, I'll share some of their more qualitative recommendations from the discussion.
Chris and Pierre believe that to accelerate the typing point within procurement, that organizations must not only change their actions, but change their philosophies as well. For example, they must begin to recognize themselves as a different type of provider. To be more specific, rather than just behaving as an independent function, procurement should look at itself -- and act and behave accordingly -- as a professional services provider to the business. And they must not only collect and gain access to knowledge and insight -- they must manage it over time so that the sum of the procurement "service" is more than its parts. Along similar lines, organizations should look to develop a "clear operating model with right sized metrics and proper resource levels (which are leveraged fully)" to achieve sustainable returns.
In addition to thinking about the role of procurement differently, Pierre and Chris also note that a company's "Spend Management services [must] change over time to help organizations get the most bang for the buck." This might require that companies look at spend in new ways in hopes of "getting more bang for the buck my maximizing the utility of spend to the business." In this case, I might suggest supplier partnering strategies where suppliers assume elements of risk or inventory. But the ability to change is not just limited to considering supplier utility. Achieving lower prices and other "TCO elements" as the environment evolves is just as essential. And companies should look to spend fewer "bucks", as they put it, via changing activities and consumption drivers.
Many of these recommendations are elementary -- as they should be. Indeed, getting past the tipping point does not have to involve rocket science (or even optimization, for that matter ;-). Rather, it involves changing the way an organization thinks and acts, not just at the top, but at all levels. For that reason, it's a good thing that not only the muckety mucks in the "Power Conference" at ISM got to see Malcolm Gladwell speak (unlike some of the other speakers who only addressed the executive attendees). After all, the only chance an organization has to get past the Spend Management tipping point is to institutionalize effective management and thinking throughout -- not just in the upper management echelons.