Do you Know the Difference Between Strategic Sourcing and Category Management – Technology, People, Process or All of the Above?



Happy 2019!  As we dive into a new year, my partner and I like to touch base with all our clients to see what the “big thing” is on their agenda. While we have not talked to all of them yet, the one common theme that is emerging is technology. Our clients are becoming increasingly concerned that unless they jump on the cutting-edge technology bandwagon they will be left behind.  That belief, by the way is being fueled primarily by the consulting community.   It appears that the BIG consulting firms are minting money because they are everywhere touting robotic process automation (RPA), artificial intelligence (AI), blockchain, etc. regardless of whether the client is ready for such technologies or not.  After all, isn’t technology what drove companies like Uber, Pinterest and Blue Apron to success?  You would think so, but you would be wrong! 

According to an article in HBR, “Digital Growth Depends More on Business Models than Technology”, it was those company’s business model NOT technology that was the key to their success.  “Yes, those companies had great technologies, platforms, and demographics, but the secret of their success turns out to be much more prosaic. Each was able to satisfy real customers who needed real jobs done — and by jobs, I mean a fundamental problem in a given situation that needed a solution. In other words, they had great business models.”  The overall premise of the article is that technology is an enabler which supports a strong business model and should be viewed as such.  The author highlights “four interlocking elements that, taken together, deliver value to both the company and its customers”:

  • Customer Value Proposition
  • Profit Formula
  • Key Resources
  • Key Processes

What does this have to do with Strategic Sourcing or Category Management?  As we continue to move the needle from tactical to strategic and from Strategic Sourcing to Category Management we need to be focusing on the above, in addition to dipping our toes into cutting edge technology.  Let’s explore each element in the context of our discipline.

Customer Value Proposition –  those Sourcing / Category Management organizations that are the most successful are the ones that understand what is important (Value Drivers) to their customers (internal stakeholders / business units) and provide solutions to satisfy those Value Drivers.  THIS IS CRITICAL!!!  If we can do this, no one will be looking at what technology we deploy.

Profit Formula   – this is one area we have mastered.  We know how to cut cost and save money and should continue to do so AS LONG AS we are satisfying the Value Drivers of our key stakeholders first.

Key Resources –  our discipline will continue to be about people.  We are internal consultants after all and need to have the skills, competencies and other resources to be able to play that role.  I’m assuming the BIG consultancies are not planning to replace THEIR strategic resources with technology so why should we?

Key Processes – having standard, repeatable processes that are well documented and scalable are critical for us to play the role of the internal consultant.  Automating poor processes is of little use but enabling strategic processes through technology can yield benefits.

Where is your organization in ensuring the four elements above are working together to create value for your stakeholders and the company as a whole?  Before you start chasing after the FUD (fear, uncertainty and doubt) being spread about how far behind you are in technology, make sure you have a strong business model in place FIRST.  While we all need to be moving toward digital technology – it is 2019 after all, make sure that technology is automating a successful business model. 

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


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