Why Community Intelligence is the Leading Coupa Value Proposition
The Spend Matters team is on the ground at Coupa Inspire 2018 EMEA, in London, where Coupa CEO Rob Bernshteyn kicked off the event by reiterating the company’s vision through a letter-by-letter explanation of Coupa’s name. We’ve covered this approach to defining Coupa before, and while the attributes of openness, usability, prescriptive and acceleration are all of course applicable, we respectfully disagree with the choice for “C.” While Coupa is indeed “comprehensive” — readers will see this in the our deep dive Vendor Snapshot (Part 1, Part 2, Part 3) of the provider and its performance across numerous categories in the Q3 2018 Spend Matters SolutionMaps — there is a better choice: community.
The real power of the Coupa platform, and the real ability for the company to deliver on its promise of not only rapid deployment and rapid spend under management but also rapid savings realization, is the community intelligence it is building.
Now, anyone who has been reading my rantings for any length of time knows that I’m not a big fan of the “wisdom of crowds,” because when you ask a crowd, it’s not “none of us is as smart as all of us” but “none of us is as dumb as all of us,” and the weakest link pulls you down. But the great thing about community intelligence with Coupa is it’s not really community intelligence but data-driven insights based on actual spend behaviors. It’s not someone’s subjective view of pricing, performance or risk but objective insights on what organizations did, achieved and continued. This is key.
When you put out a survey, you tend to get only three types of respondents: those who are tremendously happy and need to share their joy, those who are not happy and want the world to know, and those who have a hidden motive for completing it (they want the gift card, the supplier promised them a discount if the supplier got enough favorable reviews, etc.). Yet these respondents generally represent only a small percentage of all possible respondents.
If only 10% of those in a relationship respond, where do the other 90% lie? In the camp that is quite satisfied (but not joyful enough to shout from the rooftops) or generally unsatisfied (but not to the point they are going to add yet another re-sourcing event to their plate). You don’t know. But the data across a significantly large (and statistically relevant) community does.
If orders increase over time, supplier performance metrics increase over time, or risk scores decrease over time, you know the majority of buyers are in the satisfied camp. But if the opposite is true, then you know the majority of buyers probably aren’t that satisfied. With this information, you can make a relatively good and informed decision about a new supplier, or an old supplier that does not seem to be working out, and do so without having to go through a lengthy qualification exercise.
So is knowing what the average price being paid for a product or service is for the volume you are buying or for an organization of your size. It is a fact that you will never get the best price in every category, if any category, as only the biggest buyers of a category get that deal. But it’s also a fact that you generally don’t know the best price you can get. If a dozen of your peers, however, get within 1% of a certain price after going through a strategic sourcing event in the last month and the raw material costs are pretty stable, you know what your target price is (and how it relates to average supplier industry margin). That can prevent weeks or months of unnecessary negotiating effort as you will know when a supplier is as low as it can go and when the overall deal is not getting any sweeter.
But the value of community intelligence doesn’t stop at supplier risk and supplier pricing. When you have tens of millions of normalized transactions and about a billion dollars of normalized spend, all tied to sourcing events, contract terms and specific markets, you get deep insights into what overall performance metrics should be not just from a cost perspective but an organizational performance perspective. How long should an event take? How long should it take to get a contract signed and new terms and conditions in force? How long should it take to get from PO to invoice to goods receipt?
This is the true value of Coupa to an organization just beginning a true (business) spend management journey.
Simply put, if you don’t have a sophisticated spend management platform in place, your data quality is likely terrible. Even if you recognize it’s bad, the truth is it’s a lot worse than you think and full of holes. Key description fields will be empty. Classifications will be wrong. Price breakdowns won’t exist for most of your core transactional data.
When you go beyond the data records that have to exist for financial auditing purposes (as an organization has to account for every dollar flowing in and out) things get much worse. Supplier records are outdated and full of gaping holes. Product records may or may not exist. Most of the competitive data you solicited in a sourcing event didn’t get captured and centralized in a market intelligence system. You know who you contracted with, and at what rate, and that’s it. Not whether the price was what it should have been. Not how the market compared. Not what the market is now.
And even if you acquire a vendor that can work magic at data cleansing, classification and enrichment, all you’re going to have at the end of the day is good historical data, which is great for understanding what you did spend.
Value, though, comes from understanding what you should spend, and without community intelligence, the only way you are going to figure that out is with in-depth, time-intensive sourcing events that collect lots of data, build lots of models, do lots of analysis and analyze value that your organization did not (previously) know existed. And that takes time — typically months per category.
Chances are, if you’re considering Coupa, you don’t have that time. You’ve been mandated a cost reduction target over the next two to three years that will be impossible to achieve just by getting spend under management and paying the same, on-contract price across the board for the few dozen categorizes your team has the time to strategically source. You need to hit market average across the categories you aren’t sourcing and get your tail spend under control, but you don’t have time to do this and strategically source.
But if you buy into the community, follow the data-driven insights, avoid the risk and use the pre-negotiated Coupa Advantage suppliers, you can get 80% of the way there on many of the categories you don’t have time to analyze and start seeing value on day one.
But you have to buy in — and buy in 100%. Because you can’t just take. You have to give.
You have to rate suppliers, provide feedback and share your data so that the data lake becomes a data ocean, your best practices influence others who improve and share back with you, and everyone gets better, actionable insights. Because without participation by all, the data is incomplete and the full picture is not known.
If you buy into the community, like many young British children who watch Sooty on a daily basis, you will be impressed by the seemingly (mathe)magic results the platform brings, as it allows you to skip years of learning and development and hit the average peer level overnight. But if you don’t buy in, you might just feel that Sooty is instead pranking you, making others laugh at your expense.
For customers, the magic words to getting the most value from community intelligence are “izzy wizzy, let’s get busy — together.” Because the magic of Coupa only works if everyone buys in, completely.
EPRO P2P SOURCING ANALYTICS02/15/2018
EPRO P2P SOURCING ANALYTICS02/15/2018