The Procurement Consulting Industry is Desperately in Need of a 21st Century Peter Kraljic

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I’m somewhat amazed by the lack of sizable new entrants in the procurement and supply chain consulting market in recent years given the overall growth of the sector. I’ve been privately asked to look at market growth and market size for clients in the investment space and the growth picture, for larger firms, appears incredibly healthy, seeing double-digit compound annual growth rate practice growth, which would suggest, under many circumstances, new entrants as well. Yet that’s not happened, at least not at scale.

The Big 5, especially, with KPMG and Deloitte out in front, appear largely limited by the number of skilled advisors they can put on projects more than anything else. (That is, if you don’t count Accenture in this group anymore, a firm that has gravitated more to business process outsourcing and managed services.) Ernst & Young and PricewaterhouseCoopers are also growing at high clips, albeit from what our estimates suggest is a smaller base.

Strategy firms aren’t sitting still either, with BCG and Bain — the former perhaps more than the latter — making material investments in procurement and operations, yet with tiny practice areas compared with perhaps the best sector brand: McKinsey. McKinsey continues to build from a surprisingly large procurement base as well. Back in 2014, McKinsey had roughly 8,000 consultants overall — a third who focused on operations consulting, and a third who focused on procurement, according to our own discussions.

As interesting are those on the periphery of consulting also doing consulting (and some seeing quite significant growth/uptake). Software developer and BPO provider GEP is also a sizable advisor on the consulting front. Deep procurement experts such as Proxima are worthy of mention here, too, even if their core business tends to trend more to managed services. And of course boutiques like Source One, Insight Sourcing Group, Denali, Protiviti, Profit Recovery Partners and others are carving out clever not-so-small practices and niches in the broader market and realizing similar or even greater practice growth than larger firms. Sector specialists like Censeo Consulting (public sector) and Huron Consulting (higher education) of course are worthy of mention as well.

Finally, no discussion of procurement consultants would be complete without mentioning A.T. Kearney as well, but personally, I see its business as more protecting their traditional cash cow — good business if you can get it, of course. To ATK’s credit, though, it has at least ventured into developing technology-based offerings and productized services and frameworks — even if we don’t always agree with them. Examples include the ROSMA benchmark, “chess boards,” and their homage to Eli Goldratt’s book “The Goal” with their own book titled “The CPO.” (Some of the Amazon book reviews are pretty humorous, actually).

Of course, there are dozens of boutique providers worthy of mention as well, on which perhaps we’ll do a more formal sector roundup after we issue a formal RFI to providers in the coming months — the market will see what Kennedy Information comes back with first given its recent research foray into the topic in the meantime.

So, Where is the 2015 Version of Peter Kraljic?

But what concerns me today is not market or provider analysis, but more an observation — namely that procurement consultants are almost all sounding the same these days with little in the way of thought leadership to do anything but generate slightly more thoughtful collateral and ideas to bring to customers that marketing teams can. Consulting firm partners have become skilled salespeople, presenters and, in the best of cases, mentors to younger practice leaders. But where’s the 2015 version of Peter Kraljic, an individual in a firm that stood for truly rethinking the profession and did something about it?

I thought about not saying this, but I won’t hold back any punches here: McKinsey’s recent book on procurement wasn’t a terribly worthy followup to the Kraljic legacy. It says little that’s new or has already been mentioned in other firm white papers. It’s a shame, as the McKinsey is at the cutting edge in numerous areas of sourcing and supply chain in terms of client studies — and even technologies their firm is quietly using in working with clients. And their Operations Extranet is also great (sign up immediately if you can).

I have no doubt Procurement 20/20 is not the best they can do to bring all their ideas together to take procurement to the next level beyond Kraljic. McKinsey’s issue is the same as that of other firms — everyone sounds the same these days because investment in practice thought leadership has played second fiddle to investing in practice growth given the strong demand for everything from procurement transformation to sourcing and supply chain design to technology and architecture strategy and implementation.

Partners these days are too busy to have enough time to publish and spend time with their own ideas — something that can’t be outsourced or handed off to junior partners, senior managers, ghost writers or marketing departments — or a back office in India that can whip up some mean frameworks and slides overnight. I’d also argue — and this is a sad reflection on what management consulting has become — that typical leaders are not as pragmatically academic or articulate, in writing, as they once were. It’s simply not valued these days. Writing and telling a story outside of decks is a lost art. PowerPoint charts have become the Twitter of big ideas for the best and brightest in the advisory world. Sad.

I know what the solution is. And it will happen. A small firm, perhaps started by an academic, will emerge with a great idea that stands apart — a philosophy of better procurement that is new, different and game-changing. This kernel will then grow.

And it won’t be soon enough.

Please follow Jason Busch on Twitter @jasondbusch

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Voices (8)

  1. Dan:

    The procurement world is bigger now than it was in Kraljic’s day, and much more difficult for a single idea to change it – since his article we’ve had category management, strategic sourcing, SRM, optimisation, and the increasing professionalization of the industry. Kraljic was able to be groundbreaking because (at the risk of mangling metaphors) he was faced with the lowest of low-hanging fruit.

    Having said that, if you take a look at the over-simplified versions of his matrix that are doing the rounds, you could be forgiven for thinking that we haven’t moved on from Kraljic because many of us still haven’t fully understood his ideas.

    1. RJ:

      Couldn’t agree more with the central point you make here, Dan, but on rereading your list of the “advancements” in Procurement I’m struck by the degree to which each of these is essentially building on Deming and/or Kraljic’s work.

      Procurement expertise and advice seems to me to be focused nowadays on three key areas, in ascending order of complexity and descending order of tangible benefit:

      (i) straightforward negotiation / benchmarking / competition to drive down cost (or at its worst, price);

      (ii) pursuing operational efficiency / effectiveness through good process management, supply chain analysis, demand management etc. (i.e. in a very simplified view the areas that Deming’s work focused on);

      (iii) managing relationships (stakeholder and supplier), supply strategies, innovation, markets (i.e. the issues that are informed by Kraljic and similar analyses).

      The challenge faced by Procurement consultants (and indeed by strategy-minded internal teams) is that the benefit of (i) is generally easy to understand and measure; that of (ii) is sort of recognised and accepted by business leadership but is not the exclusive domain of Procurement as a function; while the value of (iii) is currently seen as nigh on impossible to quantify, or even articulate in hard business terms.

      Procurement consultancy firms (including the one I work for) have generally benefited since the crash from businesses desperate to save money via levers (i) and (ii) and to my mind have become rather lazy in their attitude to lever (iii) which is both the most interesting challenge to rise to and potentially the greatest long-term driver of business value.

      I’d therefore suggest that the “next big thing” will stem from, or be, the ability to quantify procurement benefits / value that go beyond cost savings. Whilst ROSMA makes a stab at this, it’s neither elegant nor simple enough to win over stakeholders like a 4-box model can. If someone can genuinely answer this one on a postcard then I think they’ll be onto a winner.

  2. Bitter and twisted:

    Maybe there is no next big idea.

    After a certain competence level is reached, anything more advanced is a trade-off.

    1. Dan:

      That assumes that a ‘certain level of competence’ has been reached, and I’d argue that there are quite a lot of organisations and people that just aren’t there yet

  3. Bill Kohnen:

    Interesting thoughts and generally agree one the sameness of most consultants. I suggest the next big idea(s) will emerge from people that don’t even understand that’s what they are doing and are perhaps not even traditional purchasing people. For instance Facebooks concept of Open Compute.

    I would also suggest that while today much of what you hear from purchasing professionals in Asia is a good but not very innovative take on best practices that in time purchasing thought leadership may shift to Asia. Perhaps to an organization like Singapore National University that also has partnerships with Universities in the US

  4. Richard Scott:

    Interesting to note that Procurement (and Sales, incidentally) are largely absent from the Curriculum (even as Electives, let alone the Core Content) of almost all MBA Programs. I just checked LBS, Insead and Harvard. Supply Chain (Logistics) are covered, but not Procurement.

    One wonders whether the professional bodies leading the Procurement profession should try harder to get their discipline onto the Business School timetable … no wonder that Consulting firms struggle to recruit trained resources when no-one is training them at Graduate level.

  5. Charles Dominick, SPSM, SPSM2, SPSM3:

    There is a different business culture between Kraljic’s days and today.

    Today, we live in a business ecosystem of nasty competition, powerful clique-esque partnerships, and I-dare-you-to-sue-us copycatting.

    “If” someone comes up with new, revolutionary models, the existing heavyweights will do one of two things:

    1. Rather than embrace the new models and tout the advancement of the profession by someone other than their own, they will seek to bury it. To try to prevent their audiences from seeing the innovation that is happening outside their “old boy network.” They will try to perpetuate the myth that they are the only innovators in the space.

    2. Copy it and try to claim it as their own idea. The bigger the incumbent, the deeper the pockets for lawyering up. Having revolutionary ideas without a fortune to defend them makes it hardly worth having revolutionary ideas.

    In this environment, it is difficult for anyone to be a “legend in his/her own time” the way that Kraljic was. Except in rare cases, only upon death will someone’s contributions to business be truly be recognized (if they are “lucky”).

    Because no one can compete from the grave.

    And that’s the only time our business world – and the procurement world – can feel comfortable with a maverick among those who stand to have their thunder (and a penny or two of market share) stolen.

  6. Tim Giehll:

    I respectfully disagree. What we really need is another Edwards Deming, who after rebuilding Japanese manufacturing/procurement after WWII, returned to the States to revolutionize American procurement/manufacturing in the 60s, 70s & 80s. We need big ideas like his in order to continue world class manufacturing, total quality management, Kanban systems, and just in time inventory, to name a few.

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