Why Procurement Should (Often) Embrace the New

Do you want to be the first customer of a start-up firm?

Do you want to be the first organisation to try a brand new product or service from an existing supplier?

Do you want to be a “beta test” site for some exciting new software?

These are interesting questions that many procurement people and their organisations face fairly regularly. In some cases, the answer might be obvious. If the start-up firm is called Del-Boy Motors Ltd then they may be best avoided. Equally, if a long-term supplier announces an innovation that will revolutionise your industry and gives you the chance to have unique access to it for two years, then you would be stupid to turn it down. Although we suspect some firms and buyers would do so if it was 2% more expensive than the current product ...

But in most cases, the decision is less clear-cut. In such tricky cases, where pros and cons have to be balanced, procurement people in our experience have tended to err on the side of caution. Let somebody else try this out and make sure it works, is probably the dominant way of thinking. And being bold can come with a cost – in the change itself and implementation of a new supplier or product.

In the public sector, this caution is even more widespread. Although there have been positive moves in the UK in recent years  (and let’s give ex Minister Francis Maude some credit for trying the change the culture here), often new firms or new products just did not get a chance in the public sector because of risk-aversion and a process which discriminated against the new.

But if procurement is to contribute what it can and should to our organisation, we really should be much more attuned to looking for competitive advantage, which by definition rarely comes from buying the same stuff from the same suppliers. And there are other good reasons for thinking that trying “the new” might actually be less risky than we think. That’s because a new supplier or a firm with a new product has a very strong motivation itself to make sure it works well for the client.

The reason for writing about this was a n interesting conversation we had recently with a software firm that got us thinking. The firm is launching what is in effect a “new product” that they hope many of their existing client base will buy and use. They told me that some clients were understandably cautious, no doubt worried about how the new product will work and implementation costs as we discussed above. But others were actually keen to be the first.

We know how important this is for you, so we know that if we are one of the first clients to use it will get the best possible support and service. You can’t afford for us to have a bad experience” was the comment from one obviously very smart procurement executive.

There is even more to be gained by the supplier if the user will go as far as to provide quotable references or be a “reference site”, so the supplier motivation is both to avoid negative experience and to encourage highly positive and referenceable experience and comment. So maybe, the risk is not as great as we might think. Indeed, the greater risk may come when the supplier has many customers, and resources are getting stretched.

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First Voice

  1. Alun Rafique:

    Great article especially as myself and Nick are sometimes cast as Dell and Rodney…I hope it is just a height thing!

    We have found that times are changing rapidly. We aren’t the largest company but we can now count 6 FTSE 100 companies as our customers. Mainly related to how the larger companies now want to achieve real success more quickly, especially starting with Pay as you Go. We have seen they are much more readily open to look at innovative solutions.

    The public sector still seems very reluctant to look at change though. We have been told before by a local council buyer that we have more chance of changing our system then the process, even if the process was questionable. Negotiation within frameworks is still massively underused. Perhaps Brexit will shake things

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