A Thriving Procurement Function for the Next Five Years -- Part 2: Getting People on Your Side

Posted At : February 24, 2010 12:57 PM
Related Categories: Procurement, Jason Magidson

What will a thriving procurement function look like over the next five years or so? In this installment of the series, I join with Gregg Brandyberry, my partner at Wildfire Commerce, to explore a critical skill we believe is necessary to procurement professionals: the ability to get your business partners on your side.

Our original goal was to determine what procurement professionals should do in order to persuade decision makers to approve and fund their initiatives. However, when we engaged 15 procurement professionals and a CFO in a dialogue on this topic, we were intrigued by a broader theme that emerged: the importance of getting the people you're trying to influence onto your side.

It may seem obvious that such influencing skills are important, but it's not obvious what one should do. Here are six of the key ideas that came out of the session:

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A Thriving Procurement Function for the Next Five Years -- Part 1: Do You Speak Finance?

Posted At : January 5, 2010 6:48 AM
Related Categories: Procurement, Jason Magidson

What will a thriving procurement function look like over the next five or so years? I'd like to begin a dialogue here on this blog, hoping that a number of people can share their perspectives on what a thriving procurement function helps to make happen. We can then synthesize these perspectives into material on which procurement professionals can act. Ideally, we'll get groups of people building on each others' ideas in live online sessions, but to start things off, I figured I'd reflect here on the work of a couple of procurement professionals who know how to get the attention and support of the CEO and other C-level officers.

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What Is Procurement's Value?

Posted At : September 17, 2009 1:02 PM
Related Categories: Jason Magidson

One of the first moves made by a newly appointed Chief Procurement Officer at a Fortune 100 company was to find out from his internal stakeholders what they wanted from Procurement -- in other words, "What is procurement's value in the eyes of the customer?" His goal was to build better relationships with his internal business stakeholders in order to enable Procurement to bring more value to the company and become more of a strategic partner.

The CPO didn't want to just send out a superficial survey that wouldn’t tell him much. He wanted to get deep insights into what his partners are trying to accomplish, how they feel about Procurement, how Procurement could drive more value, and what Procurement could do better. So, he charged a team with conducting in-depth, open-ended customer interviews. The interviews identified not only their perspectives on Procurement -- what works, what’s missing, what constitutes value, and what they would ideally like -- but also the context in which Procurement's value can be viewed. This included each customer's business context and how it's changing, what impact they're trying to make, and the pleasures and frustrations of their work. Understanding this context is important because it reveals opportunities to enhance Procurement’s value in the context of the larger system it serves.

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Introducing “Idealized Design" -- You Can Have Your Savings Cake and Eat it Too

Posted At : August 5, 2009 9:36 AM
Related Categories: Jason Magidson

In 2007, the president of a global consumer healthcare products business tasked a team with reducing costs by $250 million. In response to this daunting challenge, the team initiated a number of savings projects. For example, one project cut costs by $3 million by creating multi-language packaging for a dental product. After realizing similar savings on a variety of other projects, team members concluded that they were reaching a savings plateau and would need creative approaches in order to access the next level.

That's when the team's leader turned to a process called idealized design, which had been applied successfully elsewhere in the company. The key feature of idealized design is that participants pretend that the product, process, system, etc. that they are designing was destroyed last night and they are starting from scratch and designing what they ideally want today if they could have whatever they wanted. Doing this frees people up to "think out of the box," unleashing creativity and generating ideas that save money, improve revenues, enhance customer satisfaction, and so on.

The team engaged a facilitator who was experienced with idealized design. He first helped them brainstorm the ideal process for saving money and then helped them cull the best ideas and turn them into implementable designs. For example, they realized that the richest savings opportunities were at the roots of the new product lifecycle rather than in the leaves -- so they designed a program to engage the new product development groups from the very beginning to ensure they bake in an end-to-end lifecycle cost management program and culture. Some of the things they focused on include: global standards (e.g., packaging, active ingredients, flavors, and components); getting product teams to utilize default materials and specifications; and, product formulation harmonization.

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Spending Effectively Matters

Posted At : July 9, 2009 9:56 AM
Related Categories: Jason Magidson

I recently read two articles -- one disturbing and the other fascinating -- in The New York Times about the search for effective cancer treatments.

The disturbing article asserts that the National Cancer Institute has spent $105 billion since Nixon declared war on cancer in 1971, with only small changes in death rates across all cancers. The article discusses how the agencies that spend money on research projects choose conservative research approaches that create incremental learnings at best and are unlikely to produce breakthrough therapies. Meanwhile, researchers with novel approaches who don't receive funding because their approaches are "uncertain" risk damaging their careers.

The fascinating article mentions how researchers in Australia are testing an approach with a one-two punch. The first mechanism introduces toxin-containing bacteria cells that are coated with antibodies such that they attach to receptors on the surface of the cancer cells. The cancer cells' response of attacking the bacteria by engulfing them draws the toxins in. The second mechanism suppresses genes in the cancer cells that would normally help build resistance to the toxin over time. It's amazing how these researchers conceived of a way to trick cancer cells to let in "Trojan horse" toxins that, once inside, slow or stop the cancer cells' defenses. Now, imagine if scientists were to develop an approach with 10 mechanisms of action that would beat cancer cells into remission.

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Leaning Lean

Posted At : June 18, 2009 9:51 AM
Related Categories: Jason Magidson

"My [pharmaceuticals packaging] team used idealized design, together with lean sigma methods, to generate one extra day of sales under patent without increasing cost. We shortened by 65% (from 17 hours to six) the time required to print prescribing information leaflets at launch. This improvement translates to an additional $4 million in sales for each product that has $1 billion in sales at the end of patent life."
- Larry Edzenga, Principal Packaging Scientist -- Major Pharmaceutical Company

Many supply chain organizations engage in lean improvement efforts, but where are the breakthroughs that take them to a new level of performance? In my experience, the way many lean tools are applied almost guarantees merely reproducing or tweaking the status quo. Often teams spend a lot of time analyzing the current state, identifying root causes of problems, and then developing solutions to current problems. But if you fix problems in the current system, don't you only get back to where you were? The problem is that little or no time is spent focusing on what is ultimately wanted -- without regard for what's in place today. That's a major reason there aren't many breakthroughs. Larry Edzenga, a packaging engineer, approached lean differently. First, some background: When the US Food and Drug Administration (FDA) approves a medicine, they require changes to the prescribing information leaflet that accompanies the medicine in the box. This necessitates making the changes to the leaflet, approving the changes, getting printing film set up, transporting materials, printing the inserts, and getting them into the packaging.

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Friday Rant: Payment Matters

Posted At : May 29, 2009 10:03 AM
Related Categories: Jason Magidson

I know of some large corporations that are pushing out their payment terms from 30 days to 60 days. They're trying to squeeze out working capital in order to get a little more profit. If their cost of capital is 8% and they wait another 30 days to pay a supplier a million dollars, they're theoretically saving 8% x $1MM x 1/12 = $6,667 in capital costs. However, this is penny wise and pound foolish. They could very well be increasing their supply risk, not to mention hurting goodwill, because many suppliers are facing liquidity issues in this economic downturn. Furthermore, suppliers I talk with say they figure out ways to increase their charges on future projects to compensate for any borrowing costs they may incur.

Yogi Berra has taught us that it's tough to make predictions, especially about the future... but I'm going to paint a scenario of how the economy could rebound in the next couple of years, and relate it to another reason it's important to pay quickly.

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"Procurement Innovation" -- An Oxymoron?

Posted At : May 12, 2009 9:01 AM
Related Categories: Jason Magidson

Mark Twain observed, "Everybody talks about the weather, but nobody ever does anything about it". Well, doesn't it also feel like this is the case for procurement innovation? One often hears declarations such as "Innovation is our first priority"! Usually, however, procurement professionals politely agree and then continue what they were doing before. Why is this? I think there are several reasons. For one, many procurement professionals are measured primarily on savings (correctly so), and they may be concerned that if they focus too much on innovation it might erode their negotiating position. Another reason innovation is uncommon is that procurement professionals' approaches for gathering business requirements produce few new ideas: sending out e-mail requests that generate meager responses; brainstorming sessions that degenerate into complaints about today's offerings; surveys that are either too long to get responses or too short to get meaningful input; ad hoc conversations.

But what if there were ways to simultaneously achieve innovation and savings? Here's an approach that pharmaceuticals giant GlaxoSmithKline has used very successfully with numerous categories of spend. Begin by spending a half day with an initial group of about 12 people who actually use the sourced product or service and get them to start from scratch and design what they would ideally like. Freeing people to focus on the ideal opens up all kinds of new possibilities. It's as if they have been released from the small box in which they operate and a whole new world of possibilities begin to emerge. To make the process work, a facilitator must insist that the group be positive and build on each other's ideas and must not allow the people to talk about what they don't like or about what is in place today. Follow-on sessions should be held to help build support for implementation.

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Welcoming Gregg Brandyberry and Jason Magidson to Spend Matters

Posted At : May 5, 2009 3:43 AM
Related Categories: Spend Management, Gregg Brandyberry, Jason Magidson, Jason Busch

I'm pleased to announce that in the next couple of weeks, you're going to see a handful of new voices joining me on Spend Matters. I plan to keep writing just as much if not more, so look for a general uptick in both the quantity -- and hopefully quality and usefulness -- of content. The two newest contributors joining me for the first time today are Gregg Brandyberry and Jason Magidson. Gregg and Jason are two of the most insightful (and entertaining) thinkers and doers in the space. Both just left GlaxoSmithKline where they developed and successfully deployed the company's Global Procurement Technology Platform over the past 10 years. Gregg was VP Procurement, Global Systems and Operations and Jason was Director, Procurement Systems and later Director, Procurement Innovation (Jason is the author of Idealized Design -- Dissolving Tomorrow's Crisis...Today).

Gregg and Jason have formed a small consultancy called Wildfire Commerce, Inc. They are focused on helping companies achieve real breakthroughs that reduce costs and grow revenues. The two believe all companies have significant hidden opportunities that they can help unlock through real empowerment of the existing workforce, the better utilization of capital assets and shifting the focus from "talking" to "doing" by executing employee-owned accelerated improvement plans.

These guys are practitioners who have been at the forefront of Procurement technology since the late 1990's. For those who know GSK, you'll understand exactly what I'm talking about. They were very early adopters of new technologies and adopted a philosophy that was based on making sure that their Procurement clients were in the driver's seat and always had "best of breed" functionality available -- whether they built functionality internally or purchased 3rd party solutions. They were willing to take certain risks with early technology suppliers and deployed these solutions on a global basis.

I'm sure GSK will miss these guys, but I'm pleased to report that they will begin making regular contributions to Spend Matters. Thanks, Gregg and Jason, for joining me on these virtual pages. Gregg is back from Europe after dodging swine flu (he hopes) during the past week, and will share his thoughts on the matter later today, as both a world business traveler and procurement pharma guy.

- Jason Busch

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