Procurement Transformation – With and Without the Burning Platform

I’ve been doing some preparation for a workshop that will cover a number of topics including procurement transformation, so thought we would revisit some of the issues around the subject today.

Let's focus on stakeholder buy-in, which is key to any transformation programme, and the different situations in which procurement leadership can find itself in terms of kicking off the work. At one extreme, a friend of mine was brought in to an organisation a couple of years ago as CPO, by a CEO who had worked with him before, with a very clear brief to “transform” a fairly old-fashioned procurement function (and indeed transform the manner in which the wider organisation worked with its suppliers).

Having that brief is every different from an existing CPO who personally decides that transformation is necessary and then has to sell it to senior colleagues. However, in the first case, it is still important to establish just how broad and deep the support for the programme is – in the first case, my friend had to carefully establish whether it was just the CEO who was committed to this, or whether the whole senior team really was behind it.

Anyway, in the case where persuasion is needed, life is easier if there is a “burning platform” to reference - a pressing reason why we need to make the transformation urgently. That can be financial, as in “revenues and profits are declining and our share price is in freefall.”  Or it could be competitive – “we’re in the bottom quartile in our industry for procurement performance on this benchmark”, or maybe our competitors are selling products at prices we can’t match. Are they buying better than us?

The burning platform could also be risk-related - “we cannot guarantee supply to the factory”, or perhaps a severe reputational risk issue has arisen through issues in the supply chain. But in any case, this gives procurement leadership the opportunity to base a business case strongly (but probably not exclusively) on these factors.

If there really isn’t a burning platform, then three other approaches can work. There is the “Promised Land” scenario, usually with a financial basis. “I can give you an additional £50 million a year in savings if we run this programme.” Clearly, this is the favourite approach when consulting firms are promoting the idea of procurement transformation, usually to the CFO!

Then there is the “hard logic” approach – here are the detailed survey results that show we’re just not very good, plus the evidence from leading analysts that procurement excellence leads to higher profit … and so on. Lots of data and external verification helps here.

And finally, we have the “pride and emotion” strategy  - “this great firm should be the best in our industry at procurement (and we’re currently not), we owe it to ourselves, our staff and our shareholders ...”

So if you are kicking off a transformation programme, think carefully about which of these propositions is likely to work best in your organisation. (It could be a combination of course.) But remember that the whole stakeholder persuasion and engagement aspect doesn’t stop when the programme starts. Here’s a chart I used in previous workshops to show how that continues at each phase of the transformation.

And if you have any further thoughts on transformation, or if you feel like sharing your experiences in a guest article or interview, do let us know – it is a topic that is always current and worthwhile.

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