Dr Ian George on Procurement Transformation – Strategy Development

(We’re delighted to feature another post in the series on Procurement Transformation from Dr Ian George. Ian is a senior partner and practising consultant at Agile Partners, has an engineering background, and has worked in procurement for the past 20 years. His doctorate looked in detail at procurement transformation programmes).

The belief is often held that only once the strategy has been formulated does it need to be sold to the organisation. Good strategy development, however, begins at the formulation stage, involving those closest to the issues and who will feel the most impact from the changes proposed.

By starting their involvement early, not only do they feel like they have been listened to, they also have time to develop their thoughts and come to terms with the realities of what needs to be achieved. They will have a sense of engagement. Slogging through good quality arguments before proposals are made is always preferable to the emotional arguments that often follow proposals that have been thrust upon an unsuspecting audience.

Procurement strategy needs to be formed as a sub-set of the business strategy, aligning closely with the stated objectives of the organisation. There is a fine line between being part-of and being subservient to the business. Procurement is an equal partner amongst other functions, playing its part in delivering the business imperatives. It shouldn’t find itself being positioned as a service provider to others. This requires Procurement skilfully to market its capabilities and ensure those around it have a good awareness of what it can contribute, rather than simply its role in achieving their objectives.

Once the strategy has been formed and signed off, implementation becomes the primary concern as we move from the “what” to the “how” - and this needs a strategy too. It is quite common for the senior management team to have spent a great deal of time on the business strategy, but the implementation is often left to lower levels of management – who are not granted the same luxury of time. This means it often doesn’t get the care, resources or attention it requires. When things inevitably start to go wrong, or progress markedly slows, the reaction from the senior management team can be frustration and even public anger. This can quickly end up in a stand-off or skewing of the original purpose -- strategy being replaced by opportunism and fire-fighting as the forces of reactive self-preservation overtake the proactive intent.

As changes start to take place, the context upon which the business and implementation strategies were formed will shift. This means a process of iterative strategic evolution needs to take place that is carefully synchronised with the development of the organisation and its objectives. It also means that the strategy needs to be seen as a guide rather than an absolute. For many, this is difficult because during times of high stress individuals tend to crave structure and the visibility of what to do next. The overwhelming majority of people (more than 95%) struggle with moving forward into territory that has not yet been fully formed.

The essence of a good procurement strategy is its responsiveness to changing situations on both the customer and supplier sides. If Procurement can demonstrate its ability to read situations and respond appropriately, then the rest of the organisation is more likely to rely on its decision making abilities with regard to critical situations, even those that have no obvious solution or route forward. Given Procurement’s access to the supply market and the intelligence held by suppliers, there seems little reason why the function cannot become the eyes and ears of the organisation, giving early warning to emerging shifts or trends and therefore directly influencing the development of the enterprise.

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First Voice

  1. Ed Luttrell:

    So, here’s another sound article that re-states the (hopefully by now) obvious points about procurement’s engagement with its internal stakeholders. Whilst there’s nothing particularly new here, it’s good to see these key messages being revisited.

    In particular, the article encourages a focus on how the environment in which procurement is now operating is increasingly complex. As a result, the ability of procurement people to be flexible in their response to complexity is going to be key to the success of their roles and the function in general. The fact that the “territory” is often “not fully formed” allows for both chaos and creativity. Surely this is yet another articulation of the need to have procurement people improve their capabilities in leadership, influence, visioning, etc etc.

    I especially like Ian’s turn of phrase: “The essence of a good procurement strategy is its responsiveness to changing situations…” I absolutely agree. The questions, as ever, have to be: how flexible (in their behaviours) are your procurement teams and their leaders? And if there’s not a lot of evidence that they are, how are you going to change that? Readers familiar with my work will already know my own answers to these questions…..

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