Forget Social Networking — Focus on Supply Knowledge Networking

Spend Matters welcomes a guest post from Pierre Mitchell, Director, Hackett Advisory Group.

Procurement's top capability is arguably supply market intelligence. Building that intelligence requires gaining knowledge on supplier firms -- and that includes the people who run and operate them (i.e., this means having intelligence on some of those key people, but also using suppliers' staffs as extensions of your supply market 'intelligence operations'). But, it is not typically feasible to interact with all of them personally, even when you segment out the non-critical suppliers. So, understandably, many people have quickly jumped on the idea of using social networking tools to support procurement and supply chain processes. Yet, for all the hype, the current examples are fairly simplistic (e.g., use LinkedIn for recruiting new staff or tracking specific staff at competitors or suppliers). Furthermore, given that many large corporations have strict social media policies, there is often not as large of a digital footprint as some might hope. The bigger issue though is that rather than jumping straight into how to use social networking sites and tools, we should first start with defining the knowledge that we are looking to attain -- and what we want it for.

If you look at how progressive competitive intelligence groups are run, they start with identifying the key pieces of knowledge/intelligence believed to be leading indicators of future 'events of interest' (not just suppliers going out of business), and only then do they work backwards to the sources of that intelligence, and then finally to the processes, methods, and tools that can (and will) be used to gather it. As a side note, there is a good LinkedIn group called Strategic and Competitive Intelligence Professionals that I find interesting to see what methods and tools that CI professionals use in their day-to-day lives to glean external intelligence.

Social networking tools are just one vehicle for building such intelligence -- and often crude ones, at that. I was talking to the CEO of a supply market intelligence firm, and he figures that the customer facing area of competitive intelligence is probably about 50-100X greater than the supplier facing side. SRM has always been the neglected sibling of CRM, even if it is more strategic (but I may be biased!). While I'm not sure about the 100X figure, it is pretty clear that, bid optimization aside, there is much more pioneering technology adoption on the sell side then the buy side. The tools used for data mining, predictive analytics, multivariate market segmentation, self-service, knowledge management, interaction monitoring, profitability analysis, and many other areas are pretty impressive when compared to procurement doing forensic AP extracts to figure out how much money is getting spent by whom on what.

Next-generation intelligence tools will likely be a 'mash-up' of extended supply chain network models, social networking data, corporate data tracking of all employee interactions (e-mail, Smartphone, etc.), third-party knowledge sources, and most importantly, the intelligence applications and associated 'metadata' that sit on top of these data pools. For example, let's just take an example of a CRM tool called Reachable (previously called PeopleMaps), which lets a sales rep or an entire selling organization upload all their social networking credentials and e-mail contacts. It will build a graphical relationship network from you to a person that you are trying to sell to (e.g., a CPO, anyone BUT the CPO, Kevin Bacon, whoever). That makes it pretty quick and easy for seller to find multiple pathways to budget-owning stakeholders. Scary stuff. Now, let's turn that around. Perhaps there is a critical, but secretive, supplier, or perhaps a supplier that you want to watch more closely for whatever reason. In theory, if your organization loaded every employee who has called or e-mailed that supplier into such a tool, you might find that you have employees who have close personal connections with that supplier -- that you could potentially tap.

There are myriad of ways to capture supplier "touches" (similar to CRM system "touches") that could be used to assess how a supplier is actually managing you in reality versus how you think they are being managed by you. I can't confirm nor deny that some companies may in fact monitor such interactions, but it is food for thought about the "art of the possible" in terms of collecting intelligence once you know what type of intelligence you would like to collect. Also, this whole area is not just about setting up elaborate electronic monitoring to predict future events. In many cases, 'the best defense is a good offense', and if you are worried about a key supplier getting acquired by your competitor, perhaps a better path is to find ways to innovate with them and build tighter process connections and personal connections rather than putting them under electronic surveillance.

One final point, the people aspect of gathering intelligence is not mutually exclusive to other types of supply market intelligence, and in fact should be used in concert with those techniques. In other words, social networking is not about being social, but rather, is about better identifying and gathering human-based intelligence from a human-based network to identify people who influence a physical value network, and use their behaviors and/or knowledge to give you differentiated insight and intelligence on what will change the value network to your favor or your detriment. Done right, it will let you proactively change it for the better -- and make life harder for your reactive competitors.

I don't know, what do you think? How do you think this area will evolve? I'd love to hear your thoughts.

-- Pierre Mitchell, Director, Hackett Advisory Group

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