Do You Know the Difference Between Strategic Sourcing & Category Management? Rule #1 – Focus on Your “Customer”

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Cost Savings, cost savings, cost savings – if we focus on cost savings at the expense (no pun intended 😊) of what is most important to our “customer” then we Fail. Period.  Herein, lies the single biggest difference between Strategic Souring and Category Management – focusing on your “customer’s” Value Drivers.  It’s really not that hard to do, we just NEED to do it.  We often ask our client (the CPO) how they measure success of their Procurement organization and “making their Customer (internal Business Units) happy” is almost NEVER on the list. 

I read an interesting article in HBR which has absolutely nothing to do with Strategic Sourcing or Category Management but there are many lessons to be learned about how to get your “customers” to adopt your “product”.    “Disruption Starts with Unhappy Customers, Not Technology”.  The article points out a number of new companies that were launched by taking activities away from incumbent companies – those activities that customers were NOT satisfied with.   Here is a sample:

“In each example, changing customer needs led to the evolution of an industry”.

Industry Incumbent Disruptor
Video game Electronic Arts Twitch
Hospitality Four Seasons Airbnb
Mass retail Walmart Alibaba
Electronics retail Best Buy Amazon
Cosmetics retail Sephora Birchbox
News Axel Springer Facebook
Video on demand Comcast Netflix
Personal grooming Gillette Dollar Shave Club
Radio iHeartMedia Pandora
Financial software Intuit Mint
Auto transportation Fiat Chrysler Uber
Financial services Bank of America TransferWise
Luxury handbags LVMH Rebag
Pharmacy CVS PillPack
B2B software Microsoft RocketVisor
Telecom Telefónica Skype

 

So now you ask, what does this have to do with Strategic Sourcing vs. Category Management?  Making the Transformation from one to the other is HUGE and can be a game changer or disruptor for your “customers”.  BUT, it is going to be VERY difficult to get your “customers” to accept that change UNLESS that change produces something they WANT and see Value in.  When you are thinking about THIS transformation, you need to put your “customer” at the center and cost savings may not be at the top of their list or on their list at all.  The incumbent companies above left a void in their markets that someone else was able to fill AND if we leave our internal customers with a void they too will find someone else to fill it.   So many of our clients are putting in (or moving to a new solution) P2P or S2S systems that are supposed to be the big “disruptor” in Purchasing but most of what those systems do add little Value to your “customer’s” business. That begs the question, why are we doing it?   Have we asked our customer what we can do to improve their business?  Have we asked them what we can do to facilitate strong third-party relationships to grow their business?  Are we working with suppliers to help increase revenue for our internal customers?  These are just a few suggestions to start thinking more about what drives your customers satisfaction as opposed to what drives Procurement? 

The Mpower Group is facilitating a virtual workshop in August (on behalf of PERT – Procurement / Supply Executive Round Table) entitled “Category Management – Have we Made ANY Progress or is it Still a Vague Concept?”  In this workshop we will discuss the implications to the Procurement organization of NOT moving fast enough toward Category Management. Much of the Value that Procurement can add (but is NOT) through Category Management is creating a void that someone (internally OR externally) WILL fill.  What are you doing to shift your focus to your “customer” to fill that void?  You need to have a plan to make that transformation to Category Management or someone else will do it for you!

Let us know what you think and join in the conversation. . . .

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Anne Kohler
Anne has been leading consulting and financial management organizations for over 25 years. She has extensive expertise in Strategic Sourcing, change management, contracting & contract management (both the buy side and sell side) organizational design and supply chain management. Anne has a passion for collaborating and educating her clients while helping them to uncover hidden value in their organizations. In addition, Anne has been named by Supply & Demand Chain Executive as a “Top 100 Provider Pro to Know” every year since 2007 and a 2013 Top Female Supply Chain executive.
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