Incrementalism, Deming, Sony & You
Spend Matters welcomes a guest post from Mark Schaffner, VP of Marketing at Verian.
Have you ever wondered why something as straightforward as paying invoices for fair-priced goods and services is so complex?
Incrementalism, or "firefighting", is a planning process normally found where a large strategic plan has failed to develop. Incremental decisions are made based upon the information at hand when a crisis occurs. It often results in rigid work systems which are unable to deal with the actual problems faced at the grassroots level. Sound familiar?
The decision to have the person who ordered the product receive the invoice makes sense. It makes sense to order office supplies from one vendor and MRO supplies from another. It also makes sense for marketing to pick the printing vendor. Each decision is very sound and logical.
Unfortunately, the cumulative effects of these decisions often don't make sense. Why is AP just receiving an invoice that is six months past due? Why are we asking vendors for detailed purchasing information? Why did we order more brochures when there are 10,000 in the closet?
At some point, an organization reaches a size and complexity where a strategic plan for indirect purchasing and invoice processing pays impressive dividends. The challenge for P2P professionals is that most CFOs don't see indirect purchasing and accounts payable as strategic, but -- they do interpret strategic as a synonym for "painful and expensive change."
What is a purchasing or accounts payable professional to do?
Edward Deming provides you an answer. Every CFO who knows Deming's work in Japan will be comfortable with its logic. Deming suggests the incrementalist approach of shoot, shoot, shooting until a target is hit should be replaced by the aim, shoot and measure process of continuous improvement. It's "less work for better results" payoff made Deming famous.
Your continuous improvement approach to P2P is to lay out a long term vision of attaining higher levels of spend visibility (aim), identify how to take the first step towards the vision (shoot) and report back to management the project's results (measure).
The first step may be centralized invoice receipt, scanning with approval workflow, a simple purchasing system with better approval control, an inventory system for supplies or an automated approach to processing travel expenses reimbursement. Each company's first step is different.
But what is common is the need to find an affordable solution to a pressing P2P problem that will be the first step toward realizing a grand strategy. Using the momentum of your initial success, you can gain support for your next project and repeat until that grand vision is a reality.
Deming has taught a 42-year-old Akio Morita these principles when Akio was struggling to get the 20-employee company he co-founded to realize his vision. Over the next 30 years, a continuously improving Sony changed the world. Could the same happen for you?
- Mark Schaffner, VP of Marketing at Verian