Value as a Service and Design-Centered Procurement

Coupa Inspire 2016

I typically leave technology conference write-ups to my esteemed colleague Jason Busch, but I thought I’d chime in on some of my takeaways from the 2016 Coupa Inspire conference.

Rob Bernshteyn gave a great intro story about his overly-engineered breakfast at a hotel recently. He simply wanted oatmeal and coffee delivered on time to his room before a big meeting. But, it ended up being a massive tray full of “waste” (eight slices of toast, lemon slice, and no spoon) and was late.  

It’s a good metaphor to extend to enterprise software, which gets functionally bloated and doesn’t support the customer’s desired outcomes. As a side note, I had the same experience this morning at the Westin, where not only did I find coffee pods designed for a different machine than what was in my room, but I also found that the coffee sweetener in the mass-produced packet was saccharin. I expect these packets at the Red Roof Inn, not the Westin.  

So, somewhere a Starwood corporate purchasing agent got a favorable PPV on coffee sweeteners, but hundreds, or even thousands, of consumers like me who don’t like to be poisoned by their hotel suppliers now have had their perception of this usually fine hotel brand lessened (albeit minimally) by this decision. In other words, customer value and enterprise value died at the altar of purchase price savings.

Value, Not Savings!

Since we used the term “value” here, Coupa has wisely pivoted from its old slogan of “savings as a service” to a broader “value as a service” model. If Coupa is really going to align itself to procurement and help procurement alignment to the business, then it does indeed need to focus on creating value beyond cost savings (you can’t save yourself to zero). The procurement pivot from savings to broader value is not new — and still a work in progress. But, how to define procurement value, or even value more broadly?

In a paper I wrote about six years ago, I basically argued that you have to first focus on the business value that is extracted external spend/suppliers by a broad set of stakeholders.  

Spend is what you pay, but value is what the stakeholders get.

Since stakeholders (which includes a diverse community of requisitioners, senior executives, functional partners, suppliers and procurement staff) all have different stakes in the process, they are all customers of that process. Therefore, building a balanced scorecard of supply/spend outcomes for them and then working backwards to give them supply/spend management services (i.e., procurement services) that enable them to achieve those outcomes is a tricky proposition, especially if you’re trying to scale these interactions across a big enterprise. But, it’s from this process that procurement derives its own value. Balancing these multiple (and often conflicting) objectives is a classic design problem. But, if you can reduce design trade-offs through superior design of a reimagined procurement System (with a big “S”), you are maximizing procurement value by maximizing stakeholder value. And if you want to do this efficiently, you have to design a mass customized procurement model.

Idealized Buying

This “design process” of a better anything (product, service, procurement organization, procurement software, etc.) is a formal best practices-based process that procurement organizations (who are services/solutions suppliers!) should be doing on for the design of their procurement services (see our series on this here and introductory post on this here), and if they are truly trying to embrace supply market power for innovation, then procurement groups should be aggressively surrounding themselves with solutions providers that are similarly using design-centered approaches — and then bring that innovation inside to the organization. In other words, procurement should be gate openers — not gatekeepers.  

This brings me back to Coupa.

What’s nice to see Coupa doing — and other providers too (e.g., GEP comes to mind) — is aggressively implementing this approach in its complete solution stack. It includes the design process of rapid and iterative 1) value discovery, 2) value realization and 3) ongoing optimization. This is not a software process. Self-funded improvement projects are a key attribute of most procurement evolutions — so shouldn’t the providers do the same?  

This is increasingly the role that providers will play — bringing platform-based models to scale this design process across firms so that any subsequent firms can find innovation (i.e., how others solved a problem in a re-imagined way) to adopt at their firms. In other words, practitioners are increasingly become “prosumers” (producers and consumers) of new procurement capabilities in a provider’s ecosystem that are increasingly digital. And if providers can rapidly scale this capability development within a customer firm in a way that it solves a broader problem that can now be deployed quickly to the rest of the providers’ customer base, then the role of that provider (and its partners — e.g., KPMG, Deloitte and IBM with Coupa) is fundamentally shifting from a software feature/function arms race to a game of agile development of new capabilities that are industrialized and quickly rolled back out to customers.  

I’m encouraged by Coupa’s improvements in its real-time benchmarking (now with 49 KPIs) and, more broadly, its transcendence of “empty apps” to focus on platforms (e.g., its emerging Coupalink program taking a page out of the Tradeshift platform playbook) and on idealized design (e.g., Coupa’s “No UI” approach that says that users shouldn’t even be involved unless absolutely necessary).  

Idealized Procurement

Perhaps no function could use idealized design more than procurement. Moving outside the box of “doing deals and paying bills” to a role of enabling and democratizing how firms buy XaaS and tap supply market power for enterprise value creation is a massive leap. Acknowledging this broader design problem, though, is the first step to filling the chair called “externalization” at the executive table. Whether procurement has a shot to fill it though is very unclear, so it needs all the help it can get. And firms like Coupa helping them is a great service to the profession.

Anyway, I’ll cut it here, and report back on some more of my learnings from the Coupa conference soon. Stay tuned!

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