Should Procurement Organizations do a “Magic Quadrant”…on Themselves?

When I changed careers in the late 90s to get off the road as a management consultant mercenary (basically to prevent divorce with the arrival of my first-born son), and landed at AMR Research as an ‘industry analyst’, I learned about the Gartner Magic Quadrant (MQ) and eventually thought, “I wonder why we don’t do this with our user clients.” So I asked Jim Shepherd, the wisest of all the old ERP analysts (and the curmudgeonly counterweight to Bruce Richardson) and he squinted his eyes, shook his head, and said “We do not do that to our user clients.” I walked off mumbling to myself that it was a lost opportunity and didn’t think much of it until a few years later when “industry exchanges” were de rigeur.

At that time, we wrote a research piece about how user companies participating in consortium based exchanges and/or those looking to set up private exchanges would need to start thinking like vendors in terms of becoming services-oriented, etc. Of course, now, most procurement organizations do think of themselves as internal service providers with formal ‘center-led’ service delivery approaches - whether or not they operate independently or as part of a shared services organization (often called Global Business Services nowadays).

Anyway, in 2004, I headed off to The Hackett Group to help my friend Chris Sawchuk start up Hackett’s Procurement Executive Advisory Program, a program most similar to CEB’s Procurement Strategy Council, and was excited to have the Hackett benchmark database at my fingertips (even though at the time it was heavily biased towards efficiency rather than effectiveness) – especially since Hackett developed an MQ-like “value grid” where the Magic quadrant firms (users in this case – not vendors) are called “World Class.”

Both frameworks, if nothing else, are wonderful for marketing, and although they are arduous (and often expensive) for the process participants, they do add value on the whole. CPOs are a competitive bunch, and they (and their bosses) do like to see where they stack up as much as software CEOs, especially when they fare well. And it’s funny to see how the perceived value of the exercise for both camps amazingly seems to correlate to their performance in the study!

I will write a lot more on procurement benchmarking in more detail in future pieces (in a way that doesn’t violate ethics or my current in-force NDA from Hackett, of course!). But the one aspect of the MQ that I like, that practitioners can adopt, is measuring the ‘completeness of the [procurement] vision’. Of course, this is not based on a third-party ‘expert’, but rather on comparing performance (and capabilities) compared to both the ‘art of the possible’ and the ‘reality of the promised’. Of course, you can certainly use third parties to help with this process. IBM used to use this model in its procurement transformation diagnostics.

There is a strong correlation between the value promised (and the ‘permission’ granted by the enterprise to procurement to pursue that value creation) and the value delivered. Overpromising to get to the table and then under delivering when at the table isn’t a good way to stay at the table. But, it’s still important to measure both the services you are offering (i.e., what is the value of the procurement service levels you can offer) and not just the service levels (i.e., the performance targets/SLAs of the chosen services you are measured on – which might be much narrower than what you can do or want to do!)

I wrote about this in previous blog post here, and there’s a benchmarking report that I wrote for the Australasia chapter of CIPS here for those who want to explore this topic of aligning your capabilities to value and performance. It’s an art and a science to keep them aligned so that you can keep evolving your procurement services and the continually growing value you help create with external partners.

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