sourcing

Bid Ops Interviews Brent Maas for #TheFutureofProcurement #NIGP (Part 1)

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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.

Bid Ops Interviews Damian Beil on #TheFutureofProcurement

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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.

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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!

2 Techniques Procurement Leaders Can Learn From Design Thinking

Design thinking is a set of approaches to problem-solving. Long used by creatives, architects, brand strategists, writers, over the past ten years it has become popular among business executives and software developers. Why?

Design thinking offers a more satisfying explanations for problems and helps leaders organize data to plan how to fix it. Rather than playing a blame game, design thinking encourages leaders to tinker with incentives, requirements and functional processes to achieve the outcomes that best serve the organization’s needs. This has amazing potential for accelerating beneficial outcomes in procurement organizations.

At a high level, design thinking is characterized by the following:

  • Iterative Process. Rather than trying to shoot for a perfect final outcome through deliberation (read: long meetings, analysis paralysis), iteration allows a group to put together something that works well enough to test, get feedback from users/customers/stakeholders and then change it throughout the course of a structured feedback process. Iteration means that leaders can admit when a guess is just a guess, groups resist becoming psychologically invested in dead ends and no one has to die on their sword by building consensus to commit to a course of action with insufficient data.
  • User-Centric Thinking. Design thinkers often put a big emphasis on the role of empathy in understanding why people behave a certain way under certain circumstances. This makes sense: if you can “put yourself in the user’s shoes” then you can understand why the user acts, or at least have a better idea. Like many aspects of design thinking, user-centric thinking may seem obvious, but anyone who has heard a product team gripe about the persistence of “user error” knows how easy it can be to blame the user for not understanding an interface, rather than taking responsibility for making the interface simpler/more accessible.
  • Fail Fast & Cheaply. Testing something doesn’t mean building it and watching it fail. Ideating, prototyping, experimenting and gathering feedback using precise, structured processes can happen in a variety of ways, using a variety of representations that are cheap, easy, and de-risk the possibility of failure.

What can procurement leaders learn from design thinking?

Before delving into suggestions for procurement professionals generally, I want to talk briefly about how our team at Bid Ops uses design thinking for our own platform development. Prior to adding a new feature to our product roadmap, we conduct detailed interviews with experts and realworld users to make sure that there’s a true pain point that our functionality will be able to resolve. Basically, if the feature eliminates a text field or adds relevant data to an evaluation matrix, we are usually eager to prototype it and then deploy it in a test bid environment where we actually go through a complete, live, timed rehearsal.

1. “Agile” Procurement.

The concept of “Agile” is an application of design thinking to the software development process. “Agile” is distinguished from “Waterfall.” In Agile, you create a Minimum Viable Product (MVP) as soon as possible, test it, gather data, iterate and then begin building the actual system. In Waterfall, you spend a lot of time deliberating, make a long timeline and the build a product without ever knowing if it’ll work until it’s been launched! To many Agile thinkers, that’s adding a tremendous amount of risk to the product, and increasing the likelihood that users will find bugs in the product later on.

Here’s a useful illustration (Waterfall is the top, Agile is the bottom):

 

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(Source: Henrik Kniberg ,  Agile Coach, https://twitter.com/henrikkniberg/status/691932339354599425)

Agile is distinguished from Waterfall.

Now think about this in terms of procurement. The traditional RFP process is essentially a Waterfall process: you develop the specs, perform the Current State Analysis, solicit a pool of vendors to qualify, gather pricing, evaluate award scenarios and all without knowing if the vendors will be able to deliver the goods/services or how well they will perform! This is the definition of Waterfall and it’s why you hear these horror stories of vendors low-bidding an RFP and then get stuck being unable to deliver at the promised performance.

Solution: Proof of Concept (PoC) procurement. The notion of paid pilots for a new technology solution has been prevalent in the start-up world for some time, but fundamentally the same principles ought to apply for a new vendor. If there are ways to see how a vendor will perform, either through a trial period or an “onboarding audit”, then you will potentially be able to draw out the award process for large, important purchases to gain additional insight into vendor performance and to explore the possibility of multi-award or collaborative scenarios, all of which reduce the risk involved with putting all of one’s eggs into a single vendor’s basket.

2. Progressive Onboarding.

Apps can be difficult to learn right out of the box, and there’s often just a lot of information! Visually, a screen with a lot of text can be overwhelming. Where to begin???? Well, designers came up with the idea of progressive onboarding, which means that you teach the user how to use the app bit by bit (rather than all at once) and the more they use the app, the more they unlock greater/advanced functionality. Here’s an example of how the popular collaboration app Slack does this, by only showing users how #channels work after they’ve logged in and begun poking around:

 

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(Slack, image taken from Appcues, 2017)

Overwhelmed with too much information? Sounds like a couple RFQs I’ve read :) Much like old-school software, procurement documents tend to overwhelm the vendor with a huge number of requirements, asks for detailed information and chores in order to even submit for qualification. From a functional evaluation perspective, most of this information is simply not useful, and requiring vendors to enter in additional data means that fewer vendors will bid. That’s part of the reason that many procurement systems suffer from the problem of adverse selection: they foist byzantine administrative requirements on a group of users who are results-oriented sales people with limited time to devote to an abundance of opportunities. Progressive onboarding can and should be a way that procurement professionals increase the number of vendors competing for their business, by only asking for information on a need-to-know basis (e.g. at the point the evaluation process where such information could be win-qualifying).

Intro: What is Combinatorial Bidding?

Hello, and welcome to Bid Ops Insights, a blog about business strategy for procurement, and the relationship between strategy and combinatorial bidding.

The name sounds scary, but combinatorial bidding is simply the idea that when buyers awards a contract to a vendor, they typically use a process that involves multiple phases to evaluate multiple vendors on multiple criteria.

Technical specifications, price, value, geographical location, quantity and vendor presentations usually play a role in the award decision, but there are often oddball considerations based on the category, and some criteria will apply to certain classes of vendors and not others (for example, localization or vendor diversity preferences).

Today, in many organizations, buyers struggle to analyze those different criteria in order to reach an award decision.

This schema — relating selection criteria to produce a sourcing outcome — is what drives the process of ‘*combinatorial bidding.’

At Bid Ops, we would argue that all bidding is combinatorial bidding. Even the simplest RFP places inherent non-price limitations on the pool of responsive vendors. Paperwork itself (e.g. the RFP itself) is an intrinsic limitation -- if a vendor doesn't have time to read a long document, they simply will not respond. This demonstrates that even the simplest RFP is a qualifying process that selects for a smaller segment of the market than would otherwise be available.  

By using software to reduce inherent limitations, masters of combinatorial bidding processes can create a "supply funnel", in much the same way that salespeople use a funnel-based approach to drive growth. That's what this blog is about, effective techniques to get the most out of your bids using design thinking, automation and artificial intelligence.

By learning to think explicitly about how a procurement process produces inherent limitations and selection criteria for the winner, we are opening a conversation about how procurement can lead from within the enterprise: on improving margins, innovation and inclusion.

These posts are not intended for a technical audience, and we welcome contributions from a diverse range of readers in the procurement, sourcing, technology and organizational & business process design community.

Our goal is to channel suggestions to transform bid processes into a race to the best, and transform procurement processes from a bottleneck into an engine for enterprise value.