A good friend, colleague and my intellectual provocateur Tim Cummins (IACCM) and I have been talking about this issue for quite a long time and finally decided to collaborate and do something about it. We have co-hosted about 15-20 different sessions in our relationship but this feels different. This time I think we are on the warpath – in a very productive way. Given the unique confluence of both the Buy and Sell side that Tim represents, I am quite enthused (and it takes a lot to get me enthused these days 🙂 ).
You have heard us talk about the issue before, many, many times – (e.g. Strategic Sourcing is Dead, Relationship Management, Sourcing Emperor Has No Clothes ). The processes we use to establish contracts is fundamentally flawed and destroys value and they barely touch the relationship, which is where actual exchange of contracted value and creation of incremental value actually occurs. The good news is that after years of being challenged and ridiculed by many others in our professional community, the tide is turning. That’s why you will now see the word VALUE just about anywhere you turn, any conference you attend and any brand spanking new process you read about (Value Based Sourcing, Vested Sourcing, etc.). Value Creation has been the highest level in our Maturity Model since 2000 from which we declared that Strategic Sourcing (we only mean the process 🙂 ) should be dead.
Unfortunately, almost ALL of the current thinking is exclusively focused on dealing with the Content of the problem. Organizations are buying these supposedly brand new processes, investing in technology and people and waiting for the results. The alumni of our Academy will quickly recognize the folly of that because these organizations are not changing the Context, and Context ALWAYS trumps Content. A cold glass of water has totally different value when you move it from your comfortable air conditioned dining room table and place it outside on a hot summer day while you are mowing the lawn – it’s the same glass of water in a different context. While the analogy is perhaps over simplified, the message is powerful (just google the term Context trumps Content).
The context must change from adversarial, zero sum game processes to collaborative processes that not only seek to deliver promised value but create significant incremental value. And that applies whether you are on the buy or sell side of the community. The context must also change in terms of the role that you play in your organization from an efficient transaction processor to a strategic business partner focused on incremental value creation and risk.
This is not to suggest that the content must not change but rather that you need to do both and Context, while a bit more invisible and perhaps obscure is far more powerful. Processes, technology and people all need to also reflect the new reality of collaborative trading relationships. A systems approach to our relationships must be adopted where we are facilitating the conversation across the entire system to create more value for the entire system. The ordering pattern from our customers seriously impacts our supplier’s ability to be the most efficient supplier for us and impacts the efficiency and cost of the entire system.
For a more detailed discussion, please see my article: “Contracting’s collaborative vision: this transformation blueprint can make it happen“ and Tim’s blog post: “Contracting: A Necessary Evil or a Competitive Weapon?“ but most importantly put these dates on your calendar – Tim and I will be conducting a 2 part virtual workshop: The Why – Contracting Must Change and What Will Happen if We Don’t? and The How – What Does Contracting Need to Change and How?. Webinars will be on February 24th and March 23rd , respectively.
Let this be the year where you actually achieve your New Year’s resolution of finally transforming your function into a competitive weapon.
Latest posts by Dalip Raheja (see all)
- Category Management: Our 20th Anniversary AND What’s In Store For 2020 - January 9, 2020
- Category Management: Managing Risk Is Vital - December 12, 2019
- What Are Your 2020 Category Management Plans? - December 5, 2019