Pierre Mitchell's Chicago Fly By (Part 2)
At the Conference Board Procurement Technology's event in March, Pierre Mitchell walked through some great slides discussing his "top ten" list for new procurement and sourcing technologies. In this post, I'll dive deep on a few of ideas. But first, I thought it might be useful to list out what Pierre sees as the building blocks of these advancements. What's important to note here is that technologies themselves are merely enablers -- it's what companies do with them that makes the difference between competitive advantage and sunk software cost.
Pierre's building blocks for his top ten technologies list are: AI (which he explains as auto-classification systems, pattern matching, neural networks, fuzzy logic, etc.), optimization (mathematical solvers and domain specific modeling), statistical analysis and simulation, search (spidering, smart agents, etc.), knowledge management (taxonomies, attributes, meta data, attributes, cross referencing and capture), the Internet, Web 2.0 (e.g., self-authored content, social networking hubs), physical ID systems (bar coding, RFID, biometrics), and "of course" enterprise applications which house appropriate master data and transactional data because you still need a system of record and a "place to store your stuff".
I could add to this list, but for the sake of brevity -- and to get someone else's ideas tossed around on this blog -- I'll jump straight to some of his "top ten" list concepts. Pierre's first new technology item is "CRM for procurement" as he puts it. What is CRM for procurement you ask? It's certainly not Siebel spun the other way (we spent millions trying to get this to work at FreeMarkets and eventually it did, but not within any reasonable budget). No, CRM for procurement requires tools that better integrate such areas as savings tracking and workflow, demand management, S&OP, project planning, etc. CRM for procurement also involves internal marketing programs, analytics, Six Sigma tools and client surveys to capture the voice of the customer. In short, it's using CRM approaches and functionality to help procurement organizations improve their levels of service to the organization -- by actively tracking, measuring and managing performance delivery with the intent to continuously improve service levels.
Another of Pierre's top ten predictions is enhancements in the area of "design for supply". Here, some of his thoughts are a bit old hat (e.g., better re-use of existing designs and early supplier design involvement). But I like what he has to say about the prospects for manufacturers to identify price variations for same or similar items as well as to better design for supplier manufacturability, cost, sustainability and other variables. Further down the line, Pierre posits that we'll see deep cost modeling and linkages to supply chain scenario planning processes. All very cool things indeed.
The last area I'll touch on today that Pierre predicts will be a hot technology focus is "content enabled analytics". By this, Pierre is talking about analytical applications that in his words "use both company data and supplier/market content to highlight new opportunities". These might take the form of supplier or market risk analyses or price/cost forecasting. Or perhaps they might even look at trading network derived intelligence or involve compliance-focused analytics. Content enabled analytics might even provide for the "automation of sourcing 'opportunity identification'" as Pierre puts it.
My commentary on this on this prediction is not to ignore the business model challenges vendors have always had -- and will most likely continue to have -- in pulling off such offerings. Services and software companies are bad at monetizing their content (e.g., look at Ariba, which has great supply markets content, but does not sell it today at all). And content-based firms notoriously fall on their arses when they try to get into the software world (think credit here -- I won’t say anything else ;-). So in other words, if you're looking to existing vendors for content focused analytics, you might be waiting a very long time (unless you decide to roll your own solution).
- Jason Busch
Pierre's building blocks for his top ten technologies list are: AI (which he explains as auto-classification systems, pattern matching, neural networks, fuzzy logic, etc.), optimization (mathematical solvers and domain specific modeling), statistical analysis and simulation, search (spidering, smart agents, etc.), knowledge management (taxonomies, attributes, meta data, attributes, cross referencing and capture), the Internet, Web 2.0 (e.g., self-authored content, social networking hubs), physical ID systems (bar coding, RFID, biometrics), and "of course" enterprise applications which house appropriate master data and transactional data because you still need a system of record and a "place to store your stuff".
I could add to this list, but for the sake of brevity -- and to get someone else's ideas tossed around on this blog -- I'll jump straight to some of his "top ten" list concepts. Pierre's first new technology item is "CRM for procurement" as he puts it. What is CRM for procurement you ask? It's certainly not Siebel spun the other way (we spent millions trying to get this to work at FreeMarkets and eventually it did, but not within any reasonable budget). No, CRM for procurement requires tools that better integrate such areas as savings tracking and workflow, demand management, S&OP, project planning, etc. CRM for procurement also involves internal marketing programs, analytics, Six Sigma tools and client surveys to capture the voice of the customer. In short, it's using CRM approaches and functionality to help procurement organizations improve their levels of service to the organization -- by actively tracking, measuring and managing performance delivery with the intent to continuously improve service levels.
Another of Pierre's top ten predictions is enhancements in the area of "design for supply". Here, some of his thoughts are a bit old hat (e.g., better re-use of existing designs and early supplier design involvement). But I like what he has to say about the prospects for manufacturers to identify price variations for same or similar items as well as to better design for supplier manufacturability, cost, sustainability and other variables. Further down the line, Pierre posits that we'll see deep cost modeling and linkages to supply chain scenario planning processes. All very cool things indeed.
The last area I'll touch on today that Pierre predicts will be a hot technology focus is "content enabled analytics". By this, Pierre is talking about analytical applications that in his words "use both company data and supplier/market content to highlight new opportunities". These might take the form of supplier or market risk analyses or price/cost forecasting. Or perhaps they might even look at trading network derived intelligence or involve compliance-focused analytics. Content enabled analytics might even provide for the "automation of sourcing 'opportunity identification'" as Pierre puts it.
My commentary on this on this prediction is not to ignore the business model challenges vendors have always had -- and will most likely continue to have -- in pulling off such offerings. Services and software companies are bad at monetizing their content (e.g., look at Ariba, which has great supply markets content, but does not sell it today at all). And content-based firms notoriously fall on their arses when they try to get into the software world (think credit here -- I won’t say anything else ;-). So in other words, if you're looking to existing vendors for content focused analytics, you might be waiting a very long time (unless you decide to roll your own solution).
- Jason Busch
But anyway... here goes. I'm a bit of a reductionist -- instead of saying, "use both company data and supplier/market content to highlight new opportunities," can we just say "benchmarking?"
I've seen recent benchmarking work that has uncovered 10% or more overcharges on "best price + x%" contracts -- and that's a refund check, not some "future savings if you change your behavior in various complex and difficult ways."
There's no better way to empower Procurement and to convince management to undertake more sweeping initiatives than to emerge from the trenches waving a fat, unexpected check. Practical and perhaps overly reductionist thinking? OK, I plead guilty.