Spend Matters welcomes a guest post by Santosh Nair of GEP.
One might wonder what Steve Jobs has in common with procurement. He is the quintessential entrepreneurial genius with a focus on top-line growth whereas procurement continues to be a bottom-line focused function. But if organizations truly want to undertake “procurement transformation,” then who better to learn from than the individual who transformed multiple industries and business models during his lifetime? Between co-founding Apple in 1976 and converting it into the world’s most valuable company, Jobs helped transform several industries, such as personal and tablet computing, music and digital publishing. So, what can procurement learn from him? Here are the top three lessons:
1. Focus, focus, focus
As Jobs once said, “Deciding what not to do is as important as deciding what to do.” When Jobs returned to Apple in 1997, the company was producing a wide range of devices, including multiple different versions of the Macintosh. After a few product review sessions, he decided to stop the chaos. He got his senior team together and drew a two-by-two matrix. He labeled the two columns “Consumer” and “Pro” and the two rows “Desktop” and “Portable.” He directed his team to think of great products for each quadrant and cancel all other products. The team was initially stunned but channeled their creative energies in creating some of the best consumer products that the world has ever seen. Jobs would take his leadership team to a retreat every year and ask “What are the 10 things we should be doing next?” After much discussion and debate, the group would come up with a list of 10 ideas. Then Jobs would slash the bottom seven and announce, “We can only do three!”
Compare this to the procurement function, where CPOs try to extract value from multiple sources: organizational restructuring, new technologies, strategic sourcing, tail spend management, payment terms, improved supplier performance, risk management, et al. While all these efforts are important, the diluted focus leads to sub-optimal results. A better approach would be for CPOs to conduct a degree of organizational introspection (exhaustive benchmarking) and prioritize specific areas. Not all value drivers are created equal, and companies should concentrate efforts in the areas that’ll create maximum results.
2. Innovate constantly
Apple went from the edge of bankruptcy to becoming the world’s most valuable company in a matter of a few years. The secret sauce was the phenomenal leadership of Steve Jobs and his ability to innovate. Launching a sleek iPod, disrupting the music industry with iTunes and designing physical stores to sell these products were all innovations that no other provider had considered. Apple’s key insight was that true transformation goes well beyond efficiencies and requires real innovation. This is the biggest lesson for procurement from Steve Jobs. Many procurement functions follow the Dell model of cost efficiencies and ultimately reach a point where more cost cutting will result in bleeding (performance dips, increased supplier risk). True innovation, on the other hand, can transform internal processes and external partner relations to create ongoing value. This encourages loyalty among the user base, something that procurement should aspire to do with its internal customers.
The term “innovation” is often mistaken to mean “invention,” but business innovators usually turn existing ideas into new ways of doing business. Before Jobs launched Apple’s products, the market already knew of MP3 players, smartphones and tablet computers. But Jobs innovated in terms of new applications for these technologies. Similarly, procurement has to innovate to come up with applications for big data, mobile computing, cloud computing, changing supplier industry structures and other factors.
3. Be clever about marketing
Steve Jobs was probably as good a marketer as he was an innovator. He was aware that his showmanship led to inspired employees, users and products. It was about the steak as well as the sizzle, so to speak.
Procurement has been relegated to a back-office shared services role for a long time. For any CPO to make a true impact on the function, it has to be shaken out of its stodgy image and inspired towards a new vision. This applies to internal employees, the senior leadership team and other functional stakeholders as well. Once such a vision is articulated and the entire ecosystem buys into it, the execution becomes smoother and procurement will truly have its day in the sun.
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