The biggest challenge with bundled deals is that they often contain many line items for different products or services and also different units of measure for the same products and services.
Edmund Zagorin: That’s terrific because I was going to ask about what you recommend for writing procurement job descriptions next. You actually anticipated the next two questions that I had teed up here. But to zero in a bit, I think what jumped out at me from your description is the term “cross-functional”. There are certainly times where one gets the sense that in procurement, along with local government and even corporate enterprise positions as well, the sense that people have their lane, have their channel, have their silo, and they’re very much encouraged not to look beyond their purview to build value and create opportunities for the organization. And the reason for that is that, if people have a clear understanding of what is and is not their responsibility, then there won't be conflicts over authority, or ambiguity over responsibility and accountability, which can cause frustration. Silos don't exist in a vacuum, after all -- they evolved to meet a need -- they help people have good interpersonal communication. But now, particularly as you look towards the adoption of technology platforms, a lot of times the value that is most delivered is beyond a single role or function, e.g. it is "cross-functional." I saw this in some of my work at Responsible Purchasing Network looking at sustainable procurement initiatives for local government. There the value is really to the organization, in some cases to leadership who have set aggressive targets, for example, for carbon reduction or waste reduction, etc. But in some cases, when such an initiative it is one small part of too many people's jobs, then it fails to gain traction among people who are very focused on what is or is not their core area of responsibility. This might be a long way to a ham sandwich, but my question is how do you see procurement leadership working against these silos, working towards this "cross-functional" idea where everyone is part of a team that has strategic enterprise value and customer service as its North Star, and how do you hire for that kind of a team?
Brent Maas: I tend to think in terms of outcomes. Let’s talk about the hiring process itself, for example. Having conversations where they talk about outcomes- how did what you did impact your staff, your teammate, your superiors, other departments, etc? I think engaging in the conversation is really about hearing whether or not folks are relatively fluent or articulate in talking about their understanding of impacts and because of the job that they do, they are contributing in some manner to the organization. If their experience is restricted to a particular category of product or service and they don't seem to indicate much awareness of any other attribute of organizational function, in fairness, you can ask some questions, probably reviewing to probe a little bit to find out whether they hadn't been given an opportunity to form much awareness and are therefore ignorant (I don’t mean that in the negative connotation), especially in an entry level type job.
But the more they could reflect the capacity to understand- “I recognize there’s multiple stakeholders across the organization and I can’t figure out why we can’t, to use your earlier example, seem to move the needle on carbon emissions related programs? Why aren’t we doing that?" Well, there are a lot of reasons - not just within single organizations, but across communities we see problems like this, where getting groups of people to be motivated enough to take difficult actions and make tough choices is what leadership is all about. And I can come up with a bunch of reasons but I think part of it is having a conversation with folks to help facilitate their thinking to go beyond what their immediate task is or what their immediate charge may be. There are some folks that can’t go beyond the hypothetical or get into a creative mode where they are conceptualizing beyond the black and white, and that’s OK, you need people like that, too. But in terms of looking for those you might develop into roles that could conceivably be formal leadership roles, you are looking for those who naturally drift into talking about problems and challenges from multiple perspectives, seeing a problem like an organization. And then cultivating that person and giving them opportunities to get more insight and understanding into the functionality and the processes and culture, the strategic goals throughout the organization. Then hopefully they express “Hey, I have an interest in pursuing this further or any opportunity for me to contribute, but I haven't been invited to participate.” And then you start getting into, what I think, are issues for organizational leaders to ensure that they are developing the culture that allows for that kind of development opportunities for his or her people. That may or may not exist, but asking: how can we create opportunities for people to own the outcomes of their own work? It’s not always the procurement piece at all, it’s really very much about management issues - how does the organization manage power? How do organizational leaders influence the environment in which the work is being conducted? Are you helping your people perform in a highly effective manner? Do your people have the desire to go above and beyond?
Edmund Zagorin: That’s a pretty profound set of questions. And we're starting to see a shift in a lot of organizations, where it's about of a culture of opportunity discovery. If people can find problems, brainstorm creative ways to solve them and then get the backing of leadership to execute, that's the sign of a great culture. Because sometimes the best ideas in an organization come from people who are closest to the work. A true leader's realizing that suggestions from workers are not a challenge to their authority, and that these suggestions can actually be a source of tremendous value. Now, of course not all of those ideas are going to be that great, but some of them will. And having the patience to hear people throughout the organization on things that they want to try and even create, in some organizations we're beginning to see the emergence of something like a Chief Innovation Officer or someone who is simply tasked with allowing the organization to execute on opportunities for value. What is that role if not: get some projects, define roles and responsibilities, brainstorm what success looks like, define metrics, define outcome scenarios and then once you've gotten decently close to clarity, then begin executing. I think that that is partly due to the rapid advances in certain sectors of technology, but I think it's also due to just a general recognition that people genuinely prefer to work for an organization that is willing to at least hear them out on an idea and potentially, that could be an area where they can see themselves in the organization as part of having launched an initiative. Everyone ends up benefiting from that approach..
Brent Maas: Certainly the opportunity to meaningfully contribute to something new or to elevate an existing program is a very rewarding kind of experience.
Edmund Zagorin: Absolutely. I just looked at the time and realize that I want to try and stop close to the top of the hour here. To close out, I had two quick questions which are more take-aways from this larger picture that we're painting. So the first question is what is one thing, it could be a device, machine, institution, process, really anything that exists in public procurement today that you think won't exist in 10 years?
Brent Mass: This is making my brain spin because, particularly in the public sector, the less well off agencies will hang on longer to legacy everything than would a bolder and well-funded and well-managed agency. We know demographically there is a higher percentage of college grads than was 30 years ago anyway, look forward 10 years, the number of college grads in management roles will probably be a bit greater than it is today. There are a number of things I wish would go away, in some manner. What should go away is making decisions in a vacuum - I think there’s no reason that any acquisition decision should be made without having ready access to comparative price data, at a minimum. There is just so much latent data and should be sufficient to provide an expansive resource to make comparisons. The challenge is to bring together that data from the myriad of disconnected sources and being able to make that data available to whomever might be interested. I think acquisition decision-making will be gone - people will set parameters but computation will do much of the rest. Anyone who continues to do that will be because they have stuck their head in the sand and refuse to pull it out.
Edmund Zagorin: To me, it seems almost counterintuitive to me that everyone doesn't already have access to at least some form of benchmark for that, but I hear you on that. Procurement that doesn't beat the market, at a minimum, I think will start to receive more scrutiny, especially in the context where it seems like there's an unfulfilled mandate for free and fair competition.
Brent Mass: I’m speaking about making purchasing decisions with comparative data, whether you are "in procurement" or not. Anybody might engage in the activity, specifically authorized or not. Overall I think people want to make more informed buying decisions, and I think that will involve a lot of changes.
Edmund Zagorin: Last question here - If you were to make a two or three point checklist for any procurement leader of things to make sure that you're either doing over the next couple of years or are doing regularly, what's on that checklist for you? It could be anything from a type of meeting or a type of administrative procedure to looking at a particular category. In other words, where are some low hanging fruit that you think potentially are no-brainers across some of the portfolio of change management initiatives?
Brent Mass: It really comes down to data. What am I doing to aggregate the data to be most helpful for me to be able to assess performance. Outcome, as it relates to performance outcomes, as well as procurement specific, what is that data and how can I go about getting it? And in particular, what I have in mind contextually, is that, at minimum, you should work regionally, whether that’s through local government or if you have to do direct outreach, work with multiple agencies share the data and extract from that data what would be most informative to you in helping your agency. It’s about data analytics. Number two - How are you aligning your activities with the goals of the organization? Are you talking with your people about that regularly? Do they understand how what they do aligns with what you are trying to do? Number three - What are the ideal activities or things that “if only we could do” this would help us be closer to meeting those goals?
Edmund Zagorin: That last point was particularly helpful - asking: what if. Taking initiatives to look outside your department, lift your head up and see the bigger picture. Incitements to do that are, in 2018, much needed and as we look towards the future, there's going to be more opportunities for folks who get good at doing that regularly and build a culture that honors and rewards seeing that bigger picture. So I want to just say a big thank you from the team at Bid Ops for your time today. It's been a pleasure as always, getting to chat.
Edmund Zagorin: First, just a quick introduction, Brent Maas has really been the director of partnerships for NIGP for well over 13 years and has been involved with the organization, far and beyond that developing best practices, and building out the community for public procurement officers across North America and then also helping develop and support the development of local, state and regional chapters of the organization across North America. Brent, is there anything that you'd like to add to that introduction just in terms of what you've been up to for the past 20 years in the world of public procurement?
Brent Maas: You covered a substantial chunk of it. I’m not sure I can add all that much, being involved in processes and working with procurement folks in understanding their challenges and try to apply thought and experience how to help overcome those challenges whether it through practice or tools.
Edmund Zagorin: Absolutely! I think that intentionality and thought is huge, especially for a community of practitioners. My first question in that spirit, what is the single biggest change as affecting public procurement over the next 10 years across the board?
Brent Maas: I think as much as anything, a capacity to recognize the value of the technologies that are being developed to support procurement and a capacity to adopt those technologies- the challenge there being many in terms of overcoming internal barriers, be they budget or staff because they either do not understand the value or otherwise are so focused on what would otherwise be process and transaction that they do not realize that the outcomes that reflect the actual effectiveness of what procurement can provide- it just misses them. That is probably the biggest challenge or change coming in the next decade or two.
Edmund Zagorin: Absolutely. I think that change management is definitely a theme that we see a lot whether it be getting younger folks involved in the profession or to your point, adopting some of this technology and actually putting it to work in the procurement shop. Aligned with that, my next question is - how do you think leadership in some of these organizations is going to evolve and change to focus priorities around some of these big changes? How do you see leaders today setting the agenda around that?
Brent Maas: I think, first, to try to break down what we are talking about by leaders. I think it is not necessarily just that individuals who carry Chief Procurement Officer or a similar title, although hopefully you would find what I would otherwise call “true leaders” in those roles. Having said that, the challenge of leadership is that real leaders looking forward are not necessarily looking backward to compare themselves to what others are doing and then try to emulate that. Sometimes these things truly are new and innovative that they might, absolutely, look side to side, but yet look backwards as a point of reference that can suggest things whether they be functions, activities, the quality even, that will inform what they are trying to create. All of that said, I think leaders of procurement, it's not about just how efficient and effective can we conduct the processes, but how can we influence outcomes for our organization to reflect the value that procurement brings.
Edmund Zagorin: For sure, I think that qualification of leadership is important because there are people that take leadership at different parts of the organization; someone setting the budget, for example, may set some some floors and ceilings in terms of the space that people can play in, in terms of trying out new things or being able to experiment with new technologies. One thing that we've seen in some departments is where folks have tried a technology solution once and for one reason or another maybe not had a great experience. And that can have the effect of creating a mentality where they say, “Oh, well, you know, we tried technology and now that didn't work, so we're now going where if it isn't broke we don't need to fix it.” This is the same mentality that views any technology project as part of IT, rather than seeing opportunities to leverage efficiency across tons of processes. If you see the gains that even a small change in process can make in the number of hours folks have to spend doing the type of work that nobody enjoys, the transformative benefits of these projects become obvious, whether you're at the level of the buyer/user or the C-level executive.
It's funny (this is just a very tiny digression) but I knew a couple folks who were doing local government consulting in the UK, right after Google Docs came out and they did a pretty good business that was just showing governments how to use Google Docs as a document management service, which at the time was entirely free. Google offered the service at no cost to anyone. It was just so people could play around with the idea of having their documents on the Internet and in the case of Google Docs on, on someone else's server, which at the time was a very new idea. And if you think about it, “implementing Google Docs” it’s a free service, so all these folks were doing was showing government officials how to use this free service, and making pretty decent money along the way. So you might think, “well, that's a little bit strange, since Google Docs is free” but the thing is that they were providing a very real value: change management for government administration. And at scale, for many of these governments, even using something like Google Docs for one or two projects to manage documents and collaborate on edits/revisions virtually was a total gamechanger in terms of productivity and reducing the number of meetings; it really streamlined their process.
Brent Maas: That's true, I do think there's a huge value from getting a partner that gets your organization excited about exploring new processes. It’s funny, the description of Google Docs, reminded me of early word processing, way before the dominance of Microsoft Word. I don’t know if you’ve ever had the joy of working in that environment but that’s how it was- there were server based apps and everybody was accessing the same things from dummy terminals. The principle re-surged thirty years later; cloud computing. We can talk about leadership and the challenges of even developing younger folks in an environment that does not give those types of things in the status quo. It’s one of the things demographically which has already been recognized- the demographic shift that we're seeing in terms of the number of low level procurement positions that are being eliminated, yet, the incremental gain in the number of positions at the management or senior management level and what is all of that pointing to? In my mind, it’s a reflection of the processes that can be handled by technology and a demand for the professional knowledge worker who is building their experience in the procurement environment and everything that means. The everything being not just the steps taken to go about awarding a contract or even a contract management but it’s about testing what were the outcomes associated with the process and then the actual “what did we get” and how effectively did that meet the needs that we said that we had. And did we get any derivative benefit or on the other hand, did we pay more, in the end because there were unexpected issues along the way? Like “We needed to hire staff and pay them. We didn’t think about that.” Even more, on the front end, before processes start, based on what might come to pass. We have to ask: "Is what we’re trying to achieve substantially better than what we achieved before by virtue of doing this, and if we see the benefit then do we need to create a new position in our organization in order to be more successful?” At least more successful than it could otherwise have been. And that is so much of what procurement is about and yet procurement has been defined, certainly, in terms of transactions. You ask:“Where are we going and how do we go about getting there?”
The other day I came across this job posting for- they did not call it a Chief Procurement Officer, but they called it a Strategic Procurement Officer. I thought that was very interesting. This was a major contract for government. They were looking for a Strategic Procurement Officer and the language they use in there, at its core, is what an ideal procurement professional looks like. So much of it is aligned with what does a strong manager, organizational leader, look like? In terms of some of the things that they were looking for and it is outstanding strategic capability. “Yes, we need somebody with the procurement background but also someone who is analytical and is outcomes-focused. They need the capacity to be collaborative and influential. It's a total soft skill but it’s called out, it's called out specifically in this job posting. And why would that be? Because you're working across business lines- we need somebody who knows how to assess efficiency and expect to maintain to keep costs down while at the same time, maximizing efficiency and effectiveness and both the financial outcomes and the organizational outcome. It's not so much about that you know how to put together a solicitation and can you manage a team of people who also will do that for you, no, it's not just those skills. It's really is about creating a role for folks who are extremely analytical, but also have that capacity to be very people oriented as well, at least be good with people and all the while knowing where you are going. What is it you are trying to achieve?. And it starts to blur the line between the traditional view of procurement is versus what it means to be an organizational leader.
Edmund Zagorin: All right folks, today, on the interview, we have Rich Eggers who is a leader in the Chamber of Commerce here in Cincinnati, also a mentor at Ocean Accelerator, and has spent some time as a business leader in the procurement world in his role in raw materials procurement for Mars at the senior Director level. So we are lucky enough to be able to grab a few of his minutes today and ask some questions that we've been asking folks who really know their way around the industry. So Rich, a first question for you is just- what do you see changing over the next five and 10 years in procurement generally? Where do you think the biggest shockwaves are going to come?
Rich Eggers: First of all, thanks for having me and giving me an opportunity to share a little bit about my story. So, I think Purchasing is moving more towards a business integration and really playing a key role with the leadership team and in driving value for their customers. I see Purchasing’s unique external focus on the supply chain really starting to leverage a couple of different things. One is mega data sets -- and where they're looking to find a unique insights from those data sets. I think this is going to be a continuing theme into the future -- how can you look at the broader collection of data, both within the company and also external to the company to find unique capabilities and connections that you can leverage. I also think that efficiency is going to continue to be an important driver. Coming up with tools and approaches and work processes that make the process more efficient is going to be super important as we try to do more with less every year.
Edmund: Fantastic. Yeah. I think we definitely see the theme of doing more with less across the board, especially given how many companies are trying to hire more folks in the procurement department as workloads increase in what is, of course, a very tight job market. So I want to just ask kind of on that topic - where do you see leadership priorities in procurement moving today? What do you see today, or even the new leaders who will be rising through management ranks over the next 10 years? Where do you see their priorities really focusing?
Rich: Yeah, I think the thing that's unique for Purchasing as a skill set, it's really about linking those business needs that are ever changing more directly with the marketplace in which you're trying to procure your goods and services. And so I think the one thing that is a challenge in that is not knowing exactly where the business is going to go, but still having an important priority to come up with the right strategies to deliver against that. I think in order to do that, what's going to end up happening is they're going to have to do a better job of looking at overall spend. Some of the big dollar amounts will have more strategic focus and more time put into where the long tail of other things that need to be bought are going to have to be automated. So I think the leaders are going to be looking to drive that clarity around what is in the tail that needs to be automated and then what is kind of in the core that needs to go through a tool-enabled approach for strategic sourcing. I think that kind of ties through the two main pieces - really continuing to stay focused on strategic thinking, tied to the business needs that are ever changing and as well, putting a strong focus on those top priorities and systematizing of the tail.
Edmund: I think that comment about tail spend is really profound, especially as you see a certain types of spot buys and smaller purchases increasingly managed through a more delegated and decentralized framework, particularly in very large organizations. There are some tools that a procurement department to use today that won’t be used ten or twenty years from now in their current form, kind of like the kind of manual calculator once was prevalent and now that same calculator exists as a virtual machine or a set of abstract commands in Microsoft Excel. Are there tools that are used in procurement departments today - I mean one perhaps could say something like a fax machine or something, but, maybe even heuristics or cognitive tools - that we’ll see phased out over the next ten years of changes?
Rich: Yeah, I think the marketplace is evolving more rapidly every day. So tools that require a lot of time in order to implement are going to fall out of favor, if you will. Tools that are restricting the boundaries of the marketplace are also going to be less important as you look to leverage the relationships that you have. It's about being able to share those unique needs as efficiently and with the level of clarity that's needed, so that you can collaborate and partner with external capability or drive even competition in a way that makes it really clear what the deliverable is that you're looking for. So I think a couple of things are gonna change. One thing is if you're working in processes right now that are kind of email focused, I think that's going to have to change in the future. You're not going to be able to deliver the full scale of requirements with a standard email type of solution. So I think that's going to be a thing of the past. It's going to be more of a relationship management tool that you’re going to have to use. If you're doing a lot of your work on paper, that's also gonna be a tool of the past. We just don't have the time or the ability to touch that many pieces of paper on a regular basis. Not to mention the environmental impact as well. I think finally a piece that's going to be important for the future is recognizing that the change happens daily and, and with those changes, a lot of volatility in the market places, a lot of volatility in relationships and you're going to have to be much more responsive to that. And so I think tools that also don't take into consideration those market movements and what your requirements are, are going to also fall out of favor. So it will be important in the future that's your ERP systems are integrated with real time market information so that you can make the best decisions over the short run and the long run.
Edmund: Wow. I love that last point you made. I think enterprises talk a lot about creating very large repositories of data. You hear the term “data lake” thrown around. I think it's always interesting to ask the question - is that data actually a) accurate and b) actionable? How recent is it? How relevant is it to the decisions that are being made every day? And I think as those questions get asked more and more, it will put increasing pressure to, as you said, to make sure that data is relevant, make sure that it's coming from the market, and that people can use it to be more adaptive and responsive. So this is the final question, and I'll admit that there's perhaps a certain bias on my part in asking it, but I think it's those real $64,000 questions in the procurement world today: where do you see artificial intelligence and machine learning playing a role in a procurement’s future?
Rich: So I think it's going to be really an important part of the future for several companies that are really focused on fast paced industry change. If I think about procurement, some of the pressure for the strategic procurement organizations, is to be more tactically efficient with large data sets. Artificial intelligence is going to help move to a more efficient execution. So for them it's going to be incredibly important. I think for teams that are more tactically efficient, and that's where they spend a lot of their effort. I think they need to be pushing more towards a strategic mindset. And those businesses, what's going to be really important is to be able to get rich feedback out of the data sets, which they don't have today. And so I believe where your company is today and where your strengths are, it's going to change how you need mega data or artificial intelligence. It'll be interesting to see as we go forward where the innovation occurs. Is it that they both occur at the same pace in both sides, or is one gonna lead the other? And depending on the advancements of mega data understanding, in or out of artificial intelligence, it'll drive a competitive advantage you want versus the other. So I think this will be something that'll be important for the purchasing organizations to consider in their business interactions in the future, to the point where if artificial intelligence ends up dominating the path in the future, it may have an implication on what your organizational design and what you're buying approach in the marketplace. And I think as well, if a mega data analysis and that kind of strategic insight gathering comes out to be in the forefront, pushing beyond the artificial intelligence capability from a speed and delivery standpoint, then if you don't have that insight into the business then you're going to have to really probably modify the way which you're purchasing organization comes forward and does its work. So I think it will be a profound impact in the organizations. And so it'll just be interesting to see which ones respond to those external capabilities as they get to create in the marketplace.
Edmund: Rich, terrific insights here. Alright, folks. Well that's it for the interview. Thanks for checking in to learn about the future of procurement with Rich Eggers and the Bid Ops team.
Edmund Zagorin: Today we’re speaking with Damian Beil, a practitioner and professor specializing in strategic sourcing and operations at the University of Michigan’s Ross School of Business. Damian’s research focuses on multi-phase procurement auctions and the discovery of uncommon value in common requests for goods and services up and down the supply chain. Damian, is there anything you'd like to add to that, that introduction?
Damian Beil: Mostly right. Uncommon value sounds grandiose, but we do try to teach business students at the University of Michigan how to identify and create value in supply chain relationships. Happy to chat with you today.
Edmund: Excellent. Well, Damian, I'm only going to ask you a few questions because I know your time is very valuable. I'll just dive right in. What do you see as happening in the next five and 10 years in supply chain, particularly in the Source to Contract phase as a technology becomes more sophisticated both in the gathering of data and of course in use of digital commerce networks?
Damian: Good question. I think data is going to be increasingly important in a lot of different areas. One major way is that data will to allow us to make better predictions about things. If you put that into the context of procurement, you could, for example, better predict which supplier is going to perform well, under what circumstances. At scale, you could predict what a certain market is going to look like in the next six months, maybe even what the outcome of a certain auction would be. Of course, we developed a lot of models on outcomes in markets like auctions, but I think with more and more data available, it will become easier and easier to do that well. The data may be slow in coming, but I expect it will come – eventually, emerging technologies like blockchain will probably help here. So I really think the big change is mostly is going to be around making better predictions and it's going to be a question what are the ingenious ways people think of to use that in in sourcing settings.
Edmund: Absolutely. Very insightful. I’d tend to agree with that and would be interested actually in at another time digging more in on the types of models that you’re using today for these procurement auction forecasts. Shifting gears for a second, I’d like to also ask what you see as the biggest priority for a procurement or a supply chain leader today? I know historically it's saving money and, and delivering bottom line revenue. Are there other leadership priorities that you see emerging?
Damian: I think one big area that is really hot right now is risk management around global supply chains. With all the movement on tariffs that is a big issue on people's radars. And it has huge implications for sourcing and procurement. It's unclear how long lasting this will be but that's definitely something important right at this moment. Taking a 30,000 foot view, talent development will continue to be important. There's still a lot of firms out there that have talent needs in the supply chain area, sourcing in particular. So it will continue to be a priority to grow talent and invest in people who can add value to the firm.
Edmund: Absolutely. And out of curiosity and I know you train, teach and coach folks that are going into the field in the Ross MBA program, so I wonder if you could share one question that you could ask someone to determine their kind of aptitude or in a job screening process for procurement?
Damian: That one is pretty easy. I think it would be a question devised to assess, for whatever industry I’m recruiting for, whether or not the candidate is able to identify the business case - the value add - between a buyer and supplier relationship.
Edmund: Absolutely, yeah. Holistic analysis.
Damian: I think that is what separates the wheat from the chaff. It's all about “why” a buyer and supplier are doing business together - understanding really clearly what the case is. The details are less important, but if you have clarity on the case, the details will work themselves out. I think that's where a lot of people struggle --- to identify or think at that kind of strategic level from the get-go.
Edmund: Right, to kind of see the value both short and long term in a decision.
Damian: Yes. It’s the ability to identify the value/business case/opportunity and to be able to understand it and articulate it. And then the rest of it is execution. The identification of the opportunity in the business case is where the creativity and seeing the big picture come into play. That's what justifies the high salaries that the people who are really talented in supply chain deserve.
Edmund: Completely agree. Shifting gears for a second, I wanted to get your view on the future of procurement with a different phrasing of an earlier question: are there any tools that you see used by procurement or supply chain practitioners today that you think will not be used, say 10 or 20 years from now?
Damian: Airplanes. By which I mean that I think eventually we'll get to the point where virtual meetings do a sufficiently good job replicating face to face relationships that people won’t need to travel so many days a year in these positions. For other market mechanism tools, I think the tools are going to get more sophisticated. Simple tools still have a place in your toolbox, like your price only auction, but you may become more sophisticated and use it for fewer applications than you would today as you becomes more sophisticated and can incorporate more aspects like full cost and value and all that stuff. That’s going to continue to become more widespread. I think it will probably supplant some of the simpler manifestations.
Edmund: Haha, I think many folks in the industry would be just fine with fewer travel days, not to mention our families. And my last question, well, I can't not ask you about this. Where do you see any leading indicators of the role that artificial intelligence and machine learning is going to play in supply chain and procurement today, or in the near future?
Damian: I think it gets back to how you identify creative applications of better prediction abilities. You can think of a self-driving car. Why does that work? Because we’ve had computers looking over the shoulders drivers for millions of miles and eventually they became able to predict what a good driver would do in any given situation. Right? So if you can have a computer look over the shoulders of procurement agents for millions and millions of transactions then maybe you could do something similar, in other words, you can predict when suppliers are going to have a problem and take proactive steps to counter that or predict what the market is going to be, when an event's going to be successful, when it's not. These aren't necessarily the best applications. But I think the really interesting things will happen when people get creative about what cool things you can get data on, and therefore when you can make good predictions. That's where there's going to be a lot of applications and new value created. Have to call out blockchain again (sighs) it might help with the data needs.
Edmund: Damian, that’s a fantastic note to end it on. It’s wild to think about what the procurement landscape and the economy as a whole will look like when more of the business commerce is transacted automatically, even autonomously. Thanks for talking with us today!
Not to strangle to proverbial albatross from Coleridge’s Rime of the Ancient Mariner, but if you believe in the myth that “everything must integrate” with your legacy procurement software, you are probably already suffocating your procurement org’s savings potential.
Here’s a real story. Years ago, I was doing some consulting at a medical company’s procurement shop and needed to pull a few purchase orders from Accounting to see if they matched what I was seeing in the ERP data. By consulting the company directory, I got a phone number in Accounting. That directed me to an analyst who happened to be on vacation, then I ended up losing an hour playing phone tag with the vendor trying to pull the invoice (rather than the purchase order). Instead of sending more emails to nowhere, I decided to just walk down a couple floors to Accounting to see if another analyst might be able to help me out.
This Accounting department was neither terribly modern nor terribly antiquated. The company was publicly traded, and the office layout was a cube farm with centralized Break Room and Copy Room. Each cube had a huge number of file cabinets, all bulging with pieces of paper and I figured I might be in luck as far as locating my troublesome purchase order. Asking around, I discovered the Cube of an analyst who could answer my question, and inquired as to the location of either physical or digital purchase orders.
“No,” she said. “That’s not on-site, anymore. We’re going paperless.”
Noticing that she seemed to be drowning in an off-white ocean of papyrus, I asked if hers were merely the last vestiges of a bygone era, or… what?
My question must have confused her.
“Oh no,” said this analyst. “These aren’t purchase orders. All these papers are e-mails.”
“E-mails?” I asked, incredulous. “Why do you have file cabinets full of e-mails?”
“Because,” she stated flatly. “We’re going paperless. But there’s also a rule that says you can’t keep an email in your inbox for more than 30 days. So every month everyone prints out their e-mail inbox and files it away. Officially, we aren’t really supposed to, but everyone does because there’s information in those emails that we need to get to. If we can’t save them in our inbox then we still need some way to access them.”
In other words, the office’s E-Mail Deletion & Paperless Policy had resulted in two outcomes: all of the former paper (including the purchase orders) had been removed from the building and placed in storage elsewhere. The resulting empty file cabinets had been promptly filled with printouts of the emails themselves.
These emails were bulging from every filing cabinet in every cube around the office. The whole experience left me thinking: if you give a group of people a bunch of arbitrary and contradictory constraints, their workaround will often undo the very purpose of the initial solution. People will figure out how to do their job well enough to not get fired, and will figure out how to maintain access to the information that they need to do it. They'll use email, they'll use paper, they'll use Post-It notes and telephone calls. You will not know everything that they are doing with your org's money, time or other resources.
For every employee, actually taking an action is almost always more important than tracking/reporting it, and that is why every effort at data centralization ends up being an exercise in creating newer, less visible channels of communication outside of the central platform. If you use an ERP system and think that's truly an accurate representation of the sum total of your "master data", I have some really terrific swampland down in Florida with your name all over it.
What does any of this have to do with either Coleridge’s albatross or legacy procurement software?
The albatross in Coleridge’s poem is a giant bird who starts to lead a boat full of lost sailors out of treacherous and freezing Antarctic waters . Perhaps for reasons of hunger, one of the sailors shoots and kills the albatross. This decision means that the whole boat of sailors is basically screwed as far as getting home. Instead of a feathery navigation win, all they have left is a very massive and very dead bird. Due to poetic justice, the other sailors make the guy who shot the albatross wear the dead bird around his neck.
The whole albatross scenario is exactly how legacy procurement software uses the short-term transactional benefits (e.g. eating an albatross) to keep an entire organization shackled to an outdated business methods (e.g. a directionless ship). By “requiring integration”, the legacy procurement software prevents the organization from spending less than six figures on any new piece of software (certainly any software created in the past 3-5 years), and by restricting the pace of its own evolution (relative to, say, any consumer application), the software inevitably becomes a bottleneck.
Much like the burden of a carrying a rotting albatross carcass, or the necessity of printing your entire e-mail every month, people figure out a way to make it make sense. And the way it makes sense is the following sentence: “We need everything to integrate so that all our applications talk to each other.” By prioritizing this constraint, buyers fail to recognize that the reason that they wanted software in the first place is to save time and money, to make their lives easier. If “integration” is always the priority, eventually everything else falls away until the new software doesn’t make much of a dent in the procurement productivity stack: practically the only thing it does is integrate.
The day that legacy procurement software falls behind on enabling best business processes for the enterprise is the day that it becomes a bottleneck to effective collaboration. In effect, the legacy software platform becomes an albatross; from a beacon of hope for survival to a rotting bird. In a world where adaptation is synonymous with survival, any enemies of adaptation (including legacy integration requirements) can be lethal for the business customer. The albatross learned this lesson the hard way, and frankly, so did the sailors.
To sum up, Coleridge is neat and procurement software can be cool but only when it’s making your business better. The day that you want an integration more than you want a solution is the day you've decided that killing the albatross is more important than surviving the lethal ocean of competition.
Stop me if you’ve heard this one before. It’s a myth called the “the end-to-end solution.”
This myth states the following (inaccurate) premise: one *single* software platform can enable greater productivity for every set of tasks that a person does while they are at their work.
Let me take a second to quickly disprove this myth:
Your Microsoft Excel is software.
Your email client is software.
Your web browser is software.
Your smartphone is software.
Your office calendar is software.
These are all *different* pieces of software.
These different pieces of software talk to each other to varying degrees.
If your team uses SAP in addition to *any* these, your relevant data is already living in multiple distinct pieces of software, none of which are mutually integrated.
And yet, there is a cadre of VPs that nevertheless believe deep down that they must centralize all role-based workflow in a single software application (nominally for the purpose of master data management and eliminating data silos).
This has been a drumbeat of digital transformation for the past few years. But I’ll let you in on a little secret: it’s wrong, and in many cases, this myth can do great harm to a procurement team’s digital transformation roadmap, setting everyone involved up for horrific failure.
How does “end-to-end” hurt procurement’s digital transformation? To understand the pain this myth causes, we need to know why it was created in the first place. Widely acknowledged within Silicon Valley, the myth of “end-to-end software” was created by a group of very clever enterprise salespeople to justify funneling all possible upsells towards a single solution provider (e.g. themselves). “Platform doesn’t do something? We'll be happy to tell you that the platform could potentially do *anything* in the future! Don’t go out to evaluate the market, instead come back to us, your "end-to-end solution" and we’ll add it to our roadmap and if we ever end up building it then we'll just charge you a ton for it!"
Customer gets more features and salespeople get more money. Sounds like a win-win, right?
Wrong. The result of this misalignment of incentives is that enterprise software becomes tremendously vulnerable to feature creep, and eventually bloated with a ton of poorly architected and hastily assembled features that make the applications nearly impossible to use.
These features are frequently one-offs and tend to obscure the core functionality that made the software application a winner in the first place. Over time, these features create a hurdles to basic workflow, especially for new hires or cross-functional roles, and build in a huge drag on productivity.
At Bid Ops, we know that this is no way to make a winning product — that’s why our automated negotiation solution only does one thing, and it does it dramatically better than any other solution on the market (hint: it negotiates the vendor contracts that your negotiating team doesn’t have time for). But there’s a bigger lesson here than just product design, and this is where “layers of productivity” comes in.
This idea will sound familiar to anyone from the consulting world who knows the magic of “low-hanging fruit,” or people familiar with Kotler’s 6 D’s of exponential technology. The core idea of “layers of productivity” is that added productivity only becomes possible after you have already gotten the wheels turning (e.g. you can only go faster once you’re already moving in the right directions. This is certainly true for our process of qualifying customers. For example, if all of your procurement workflow currently lives in paper, I am sorry to say that you cannot use our product. We simply would not sell it to you. At this point in our growth curve we are only looking for leadership case studies that will allow our customers to leapfrog ahead of the pack for their digital transformation. We want to point to dramatic, astonishing changes in specific, measurable results. Which is why we know that you need to have “layers of productivity”, one on top of the other, working towards profound inflection points where our customers begin asking questions like:
· What if I could run all my bids for the rest of the year starting today, using asynchronous automated communication?
· What if I could use artificial intelligence to benchmark success against my organization’s size and spend, rather than getting someone else’s comps?
· What if I could take the three parts of my job that I like the least and make them go away, not just for me but for my entire team?
That’s why “layers of productivity” is so important — because it gets away from the “end-to-end” idea of change management. In the old world, people would buy enterprise software that would fundamentally change people’s entire workflow, and it would be tremendously disruptive and time-consuming and headache-inducing and would have a negative effect on team morale and productivity.
Those of you who have labored under the yolk of an ERP integration know exactly what I am talking about. Those of you who have had to manually migrate data from one legacy system to a new soon-to-be-legacy system know exactly what I’m talking about. And I’m here to tell you that it doesn’t have to be this way. The old way of buying enterprise software is coming to an end, and a new era is dawning, one that uses cloud-based apps, bots, blockchain, deep learning and artificial intelligence to implement best practices in procurement. Imagine your team’s most productive week. What if that could be every week, and with only a fraction of the cognitive and administrative overhead? That’s our vision.
True solutions don’t displace existing workflows or require painful integrations, rather they layer on top of one another, enriching enterprise supply chain data and weaponizing negotiating teams to gain market share and competitive advantage. This is why literally all of our customers already use SAP Ariba, Oracle, Coupa, Lawson, even ScoutRFP (a company that many people assume is our direct competitor) — because like many frontier technology solutions, we provide an added layer of efficiency that is only compelling because it pays for its own annual cost in the first day of implementation, and then drives savings on savings on savings.
Our philosophy is that if we can’t deliver 10x+ improvement in measurable, quantitative results, then we aren’t the right fit, period. The reason is simple: the market has to move 10x ahead of whatever your existing workflow is otherwise it’s not worth the headache of change. And the reality is that there is simply no “end-to-end” software application that can move super fast on everything at once. Never has, never will. It’s a different approach to buying software, but it’s one that has tremendous spoils for the victors. Because in the era of exponential acceleration, “layers of productivity” can enable strategic sourcing teams to realize exponential efficiencies in places where bigger companies simply haven’t yet thought to look.