Procurement's New March to Complex Categories (Part 1) — From Joan Rivers to Mike Myers

My standard coverage of the Emptoris/Rivermine deal is beginning to feel like mid-winter in Chicago. So rather than continue down a beaten and cindered path on which I just examine the facts and proffer an opinion or two on what this and related vendor market happenings mean, I want to take a more scenic detour. Here's the first post of a multi-part series that is bound to offend some, make others laugh and hopefully inspire the rest of you to change a portion of the procurement landscape. Enjoy.

It would be easy to write off Emptoris' latest acquisition as a financially astute move by their owner, Marlin Equity Partners, to mash together two similar companies that generally sell to related sets of executives inside companies wanting to save money. Crunch the numbers, add a dash of marketing to the dough, cast a product vision and voila: you're one step closer to an IPO. One that could deliver a ridiculous IRR to the fund investors, who just a few years back watched as the firm's principals were able to pick up Emptoris for a valuation less than 1X revenue -- owing, at the time, to uncertainty over patent litigation settlement issues. Nice recipe to make a few bucks and hopefully deliver significant value to customers in the process? Yes it is.

But there's a lot more to it than that. We've already started down a path where procurement organizations are destined to either get out of dodge and go back to being transactional backwaters, or take on increasingly greater responsibility and respect by tackling more complicated -- and potentially higher savings value -- categories like telecom. And they'll need specialized tools like Emptoris/Rivermine in telecom and Rearden in travel to do it, lest they fly VFR into some commerce cloud and inadvertently head into a tailspin without realizing it.

How did we get to this point of no return (and no safe harbor for procurement organizations sitting on their reverse auction or generic P2P laurels)? Quite simply, the better performing procurement executives have begun to shift away from elementary tactics, categories and tools to mine for value in harder-to-reach but often more lucrative areas. Like deep-water drilling and mile-deep mining, the stakes and risks are higher than looking for gold (or liquid gold) near the surface -- but so are the rewards. Complex categories can often yield not only more substantial initial savings, but also greater cost avoidance overtime.

I believe this shift brings with it the prospect of redefining what we generalize procurement and supply management today. Let's face it: even on a good day, procurement is still the Joan Rivers of the organization at best, still needing to work overtime in the golden years to justify its importance and self worth. In contrast, procurement needs to become the Mike Myers of comedy.

To wit, instead of crafting a new joke (or savings ploy) each day to satiate the organization and shareholders, create a few lasting and monstrous successes and personas that you're remembered by (e.g., Austin Powers, Fat Bastard, Dr. Evil, Wayne Campbell, Shrek). And then you'll be able to call it a day by collecting fat royalty checks -- yes, the analogy holds in complex categories -- rather than waiting for an agent or sponsor to book that requisite gig (or sourcing event) to justify your relevance in between periodic face lifts, not to mention nip and tuck sessions.

Just as Mike Myers has an easier life than the amazing Ms. Rivers -- who persists like the energizer bunny -- pursuing and succeeding at tackling complex categories like telecom presents an opening for procurement organizations to create a massive fan (and customer) base inside the company that continually drives savings and value. Yet beyond donning a different mask to succeed, procurement must also become the lead actor (and even the director, in certain cases), to create a lasting production and impact that no other function (or third party) can replicate for management and shareholders.

So ask yourself: do you want to do stand-up in retirement communities and stage worn establishments when you're nearly 80, or do you want to be a superstar before your mid/late life crisis sets in?

To be continued ...

- Jason Busch

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