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Connect Procurement’s “S-Curve” to that of the Business

01/04/2018 By

Image by tpap8228 sourced from Adobe Stock

Spend Matters welcomes this guest post from Conrad Smith, senior director of global procurement at Adobe. 

Every procurement department needs to “right-size” itself. Although it’s natural to set our vision on a “world-class” procurement department, it’s far more important to clearly understand the stage and needs of the business we support. From startup through growth and into stabilization, the business needs us to deliver value and support directly aligned with its key business goals.

Most businesses follow a well-known development pattern that we call the “S curve.” In the startup phase, the team works day and night to turn flat growth into rapid upward expansion. Procurement helps where you can, stays out of the way and cleans up the mess. Once the business begins to take off, order volume grows exponentially, launching the business up a steep ramp – which eventually levels out as it hits market saturation. From the top of that curve, every business has two options: innovate or die. If a company fails to create something new and launch a fresh period of upward growth, it’ll stagnate and fall away from market leadership.

Throughout those later phases, procurement’s role needs to evolve and grow as the business matures.

But, the sad reality is that a disconnected, self-centered procurement department often stifles and slows the very innovation needed to lift the entire company into a new generation of growth and success. Advanced procurement professionals serving business at the top of the S curve must be chameleons, and adapt their approach dynamically between meetings and business units at wildly different stages.

While every procurement department should push to reach maximum involvement at the highest levels of the organization, it all comes down to understanding where your business currently stands on the S curve.

The Growth of Needs

Startup leaders rarely see much value in bringing on a dedicated procurement person during the launch phase – and they’re usually right about that. What a startup typically needs from procurement is simply someone who can work in a chaotic environment, adapt constantly between tasks (some procurement and some not), quickly solve problems, sometimes stay out of the way, clean up the mess and get bills paid.  Generally, those and other tasks are owned by an office manager.  A company at this level derives no value from a procurement expert who keeps talking about category management. That level of procurement doesn’t even apply to a startup, and a busy founder has no time – or reason – to be thinking about it.

Most businesses take a few years before hiring experienced procurement professionals. When I was hired to head up the procurement department at one technology company, the business was beginning to cross into the enterprise level – they’d gone public and were valued around $1 billion. It was only at that size that they began to take procurement seriously as a distinct department.  They had a few hundred million in supplier spend and could have benefited from procurement expertise a bit sooner.

Somewhere along this growth curve, inefficiencies always begin to add up – especially as every department makes its own independent purchases on an ad-hoc basis. This creates a clear opportunity for a small procurement department to manage supplier negotiations and make more cost-effective purchases. In cases like these, higher-level procurement management should deliver savings and better operational efficiency.

A great way to know how procurement can best serve the business is to learn, internalize and support the key business goals.

Aligning Accurately

For an experienced procurement professional, it can be all too easy to assume that the most sophisticated, high-level management techniques, tools, and data are helpful for businesses of all shapes and sizes. But that’s not the case. Often, it’s like a high-powered enterprise consultant coming in and telling a small mom-and-pop business how to “rethink their management culture.” Sophisticated techniques are simply not always relevant.

Instead, we procurement experts need to align our services to what the company really needs at its current stage — not the stage where we think we want to be.

If you’re working for a startup, it’s often best to minimize the size and complexity of procurement, roll up your sleeves, be willing to take on tasks not typically performed by procurement – and most of all, be willing to clean up the mess, and save the category management discussions for a later stage of growth. Hopefully, soon enough, toward the middle of the S curve, as order volume ramps up and a public stock offering looms, it’ll be time to start talking about more controlled and disciplined processes, systems, design for cost, and supply chain management – because at this stage, the company genuinely needs procurement to help enable the growth.

This ascension up the value pyramid continues as the company reaches higher stages of expansion, where procurement can help prevent problems with regulatory compliance and design workflows. By the time your company has matured, you’ll have helped build a sophisticated procurement department – one that’s grown organically, integrated with the company’s needs at every stage of growth.

While you want to avoid creating more structure and process than what’s “healthy” for the business, you also don’t want to be late in recognizing and delivering needed services and value. Always strive to be one step ahead – so that next month or quarter, you are prepared to deliver to the business exactly what they need. In a rapidly growing and changing business, yesterday’s approach is not going to align with tomorrow’s needs.