Procurement Success – How Procurement Contributes to Building Business to last for Centuries
Procurement success plays an important role in the success or failure of business. However, very often we measure “procurement success” with a very short stick to alleviate some immediate, reactive and/or survival pains. We aim to measure longer term success over a 3 – 5 year period, maybe.
But seldom do you find business measuring success over centuries rather than years or even decades.
Earlier in the year, I had the privilege to facilitate a strategic business planning session with one of my clients. My client decided to use the TED talk by Martin Reeves on “How to Build a Business that Lasts 100 Years” to set the framework and mindset for the strategic business planning session.
Human Immune System as Amazing Health Product
Martin Reeves kicks off his TED talk by explaining the features of the human immune system. The human immune system is an example of a personal health product with amazing features:
- it cleverly uses redundancy by having millions of key components such as white blood cells, before it is needed to act as a buffer against the unexpected;
- the diversity of different approaches can cope with just about anything that confronts the immune system;
- the design is completely modular – if one system fails, another takes over;
- the product is adaptive – it can create targeted antibodies that it’s never encountered before;
- it is prudent – it can react to tiny threats and can remember every previous threat in case it rears its head again;
- the product is totally embedded and works in complete harmony with the body;
to create an unprecedented level of biological protection.
Martin explains that his interest in the connection between business and biology came about when the CEO of a global technology company asked him:
“What do we have to do to make sure our company lasts 100 years?”
Biology and Business
In order to answer the tricky CEO question, Martin (a lapsed biologist himself) turned to his friend, a practising biologist. And to nature.
Nature after all has been in the business of life and death for centuries.
What they found, was that the same six principles forming the foundation of the human immune system, appear in biological enduring systems but also in long-lived social systems such as the Catholic Church, the Roman Empire and Kongō Gumi. This was the oldest continuously operating company in the world – 1480 years.
The pair also looked at what happens when the business immune system fails and what caused companies such as Kongō Gumi and Kodak to fail.
They also examine why businesses such as Fuji Film and Toyota manage to succeed notwithstanding challenges facing their business immune system.
Procurement’s contribution to building business that lasts for centuries
“What do we have to do to make sure our company lasts 100 years?”
This question left me wondering what we had to do to achieve procurement success in terms of centuries rather than years or decades.
Procurement often controls more than 40% of business expenditure through its sourcing and procurement activities. It plays a significant role in business success and/or failure.
Business can learn many lessons from the human immune system and the long-lived social systems such as the Catholic Church, the Roman Empire and Kongō Gumi. Take lessons from the failures such as Kodak and ultimately the Roman Empire and Kongō Gumi too.
How can procurement contribute to building a healthy business immune system and ultimately, procurement success?
For starters, we can all take the time to watch Martin Reeves’ TED talk.
Then we should take the time out to contemplate:
- what we do,
- how we do it,
- why we do what we do, and
- most of all, how we can change the way we approach procurement
in order to contribute to the success and tenure of business.
Procurement can use the components of the human immune system as a guide for procurement success:
The human immune system uses redundancy having millions of key components available, before it is needed to act as a buffer against the unexpected.
Business is made up of many parts and often we work with many lean management theories and practices.
Procurement can, as part of their role in business, ensure that we understand the bottlenecks and risks to the business across the whole supply chain. Ensure that the components are in place or can be activated in a very short time frame to act as a buffer against the unexpected.
Diversity in approaches will ensure that procurement can approach business solutions from different perspectives. In order to diversify, I believe that it is critical that procurement gains hands-on knowledge of all areas of business and bring this knowledge back to the procurement function. Be leaders from within the organisation rather than work in silo’s.
Ask why with a view to learn, not a view to criticise.
If one system fails, another can take over.
Any modular design is designed to be:
“constructed with standardized units or dimensions for flexibility and variety in use.”
If we manage procurement in the same old way as we have always done, we will get the same outcomes.
When we set up procurement, it is important to understand how we can set up our teams and efforts in order to provide flexibility and variety in case one system fails.
When working with suppliers with a view to procure on a modular basis, it is important to build solid relationships with suppliers – in good times and bad times.
The human immune system adapts to target antibodies to threats not encountered before.
In procurement we need to really learn more about blockchain, innovation, technology. Rethink the role and purpose of procurement. Really rethink the value of procurement.
Adapt to add value where we can make a difference.
How do we pick up the tiny threats and make sure that we learn from the past?
Prudent procurement teams will do this. Often tiny threats are hidden risks and end up creating significant business issues.
Taking time out to plan, learn, receive mentoring and coaching will allow procurement to step outstide the day-to-day transactional world and see both opportunity and threats.
I really love the concept of embeddedness, working together as a whole and not as separate functions or teams.
Communication forms the cornerstone of embeddedness.
I think through gaining hands-on experience in business, procurement will learn to communicate better, become better listeners and therefore gain a much deeper understanding of business and how, together as one, we can break down silo’s and cabbage patches.
Shigemitsu Kongo formed his construction company Kongo Gumi in 578 AD, and it lasted 1,428 years.
During 2006 Kongo Gumi went into liquidation.
They survived countless political crises, wars, natural disasters and even two atomic bombs.
What Kongo Gumi couldn’t survive was debt. It did not have enough redundancy as it used to have. Kongo Gumi no longer were that prudent.
It takes 100 years to build a company that lasts 100 years. Constant work and constant effort.
But, most important is to make sure the foundations for business are strong.
Procurement can contribute and should contribute to strong foundations.
What is your procurement team’s contribution to business success?
Please contact us for more information on how you can improve your procurement leaders and procurement teams’ performance.
Have a great day!
Celia Jordaan has 21 years international and corporate experience and worked in the areas of procurement, tenders, supply chain, contract management, law and risk. She works with business, procurement leaders and teams to develop and implement strategies to boost business performance, make tendering easy and improve bottom line performance.
To learn more about Celia Jordaan, please click here.