7 Ways to Nurture a Procurement Disruption Culture
As a procurement leader, I have first hand experience of the pain points of an ever evolving, dynamic and demanding business environment. It is sad to see so many stressed and almost frantic procurement leaders and teams try their best to make a difference but not succeeding. To be able to succeed in procurement, we cannot simply continue to do what we always have done. Well performing procurement teams are the teams that are well integrated in business and are able to operate from a perspective of procurement intelligence and a culture of procurement disruption.
What is disruption?
I like Caroline Howard’s description:
“Disruption takes a left turn by literally uprooting and changing how we think, behave, do business, learn and go about our day-to-day.”
Harvard Business School professor and disruption guru Clayton Christensen says that:
“a disruption displaces an existing market, industry, or technology and produces something new and more efficient and worthwhile. It is at once destructive and creative.”
In the overall supply chain there are two sets of customers:
- external customers that buy our products and services and
- internal customers that produce the actual product or service.
Both are customers for procurement.
Procurement disruption can happen externally or internally.
- External disruption is what your competitor does to disrupt your market and your customer base.
- Internal disruption is done from within an organisation.
Uber is a good example of an external disruptor. External disruption is affected by how well your competitors understand and services your customers’ needs. It works well when it is a new organisation such as Uber. Uber could do what they do not because they did not provide the same service. However, because Uber defied the general rules and traditions on how the taxi industry had been managed for decades, it could disrupt its own supply chain.
It provides the same service but in a different business model. Therefore delivering a better outcome.
The people who started Uber, were probably users of the existing taxi service, hated it because they were not feeling as if their needs as customers were understood and met.
Why does it work?
Because Uber represents you and me not feeling the love, not getting the service. Therefore the revolution of Uber is working because we feel our needs are understood and met.
Internal disruption in an existing business is harder because you have to change so much before you can disrupt, especially when you have invested lots of capital in your business.
It requires courage and commitment to commence and see through the process of internal disruption.
Procurement has a key role to play in internal disruption. It needs to lead the way and continue to do so on an ongoing basis.
Excellence is a continued effort and therefore procurement disruption should be the same continued focus on achieving procurement excellence.
Procurement and procurement disruption
Procurement can drive improvement towards what is expected from their external supply chain.
More importantly, procurement should be enablers for external disruption and not road blocks.
However, procurement has a significant impact on the supply chain and the ultimate value delivered to customers.
Procurement can therefore have a material impact on internal disruption and delivering procurement excellence.
Internal procurement disruption requires a culture that nurtures:
- destructing the same old procurement ways and practices we have always used and
- creating something that is new, efficient and effective.
Procurement has a major role to play in:
- sensing market changes and
- therefore creating value and procurement excellence.
To make it work, procurement needs a deep knowledge and understanding of its customers – both the internal and the external customers.
It is often hard work in a business just to work on building good working relationships with your internal customers.
With the constant focus on output (rather than outcome), there is little time to get to understand what the external customers needs are. It will complete the picture and will make it easier for procurement managers to focus on outcome rather than output if they can close the pieces of the puzzle.
How can one bring about a culture of procurement disruption?
It starts with leading with the right culture.
A culture of questioning and creating a culture of disruption.
Internal disruption starts with the people not with the systems and processes.
A culture of procurement disruption requires:
#1. The freedom to ask “why” and “why not”
One cannot change culture unless we have the freedom to ask questions.
Also, when we ask questions, know those questions will be heard, considered and answered.
If you allow the answer ever to be “this is how it has always been done”, then please consider very carefully how your business can do better, improve and exceed.
Furthermore, take the time to imagination a world where your organisation no longer survives, because your competitor and customers found better ways to achieve their outcomes.
Allow many questions to be asked and do not stop at the first answer.
A great mentor taught me the very valuable lessons around theory of constraint. Find the bottlenecks, remove the bottlenecks and move on to the next one.
Also, that what we think is the bottleneck, may not be the real issue or problem.
Be inquisitive, curious and creative.
Those are important factors in successful procurement disruption and excellence.
#2. Fostering a culture of being part of an organisation and providing a service to the organisation
Well performing procurement teams understand that they are part of a larger supply chain and organisation.
Procurement should stop waiting for the organisation to come to them; they must determine their customers’ needs and how it can be met in a due diligent manner.
It does mean rules still apply and have to be followed but those rules to be fit for purpose within a due diligent process. It is a team effort and requires an understanding of the needs of procurement‘s customers and what it means to deliver a service.
Procurement managers should make sure that they have the right team.
We encourage procurement managers to go out of their way to find procurement people with the right aptitude AND attitude.
The same old attitudes won’t prevail and will bring no disruption about. It will not assist to create a culture of disruption either. Team members with the attitude and aptitude for procurement disruption will make the process easier.
#3. Procurement Intelligence
I think procurement managers will do well to work with their teams on fostering procurement intelligence. Procurement people with mature emotional intelligence:
- can focus,
- can defuse conflict,
- speak up when others won’t or can’t,
- notice what is broken and find solutions,
- will be accountable and
- will deliver procurement disruption and excellence.
Procurement intelligent people are talented and need to be recognised and developed as talent.
As a procurement manager it is important to be a leader so your team can follow you. Find a mentor outside your normal industry group, someone you can learn from and that you know will challenge you.
Grow your own emotional intelligence and your team will grow with you.
With the right mindset and focus the procurement manager and his/her team will work to find solutions not obstacles and will be able to bring about internal disruption.
#4. Delivering Value for Money
In the ever-changing economic climate, it is more important than ever for procurement teams to make sure that they can show value for money through the services they provide.
Value for money takes into consideration both financial and non-financial criteria. It is too easy to focus on the financial component only. However, to ensure sustainable outcomes, it is critical that we give due consideration to the non-financial criteria.
In times where there are lower profit margins, increased focus on cost savings, procurement managers must stand strong and consider more than just the lowest cost.
Procurement managers have to be scrupulous in removing some of the old “this is how we have always done it” practices.
This improves productivity and focus on the right areas in order to disrupt.
#5. Collaboration is key
It is really important to find the right partners who will join you on the journey of disruption. Collaboration requires working together with the total supply chain; it is procurement’s duty to find those right partners in the area of procurement.
It requires review of your existing providers and suppliers to see who have been with you through thick and thin. Find those who have been proactive and got to understand your pain points as if it was their pain points.
Collaboration is never a one sided approach, it does require commitment from both sides.
The days are gone where the swords are being held above the head of suppliers. It does not foster any trust or loyalty and will get you nowhere.
#6. Focus on result-based outcomes, moving away from transactional outputs
We cannot use the same old metrics we used previously.
Traditional, transactional output will not disrupt.
We have to focus on result-based outcomes.
Result-based outcomes focus on:
- deep understanding of our customers and supply chain;
- defining the right measures for success for our internal and external customers – how do we know if they are really better off?
- how do we know when we have disrupted our supply chain- what metrics are in place to measure this?
- How do we determine what the most important priorities and measures are?
- Who are our key stakeholders, collaborators and partners on the journey of procurement disruption?
- What are the steps in the journey of disruption?
- How do we pivot when things do not work as we thought it would?
It is such simple concepts, yet it will take lots of work and disruption to succeed.
The concepts apply to all in procurement to determine:
- who their customers are,
- what they want and
- how they will get from talk to value add action
- that lead to procurement disruption and excellence..
It is useful for procurement managers to use results based outcomes as part of their planning process and ensure they create the right culture.
#7. Understand and practise risk – properly
I don’t think many procurement professionals truly understand what risk is and how to manage risk effectively.
Since disruption equals change, we manage change.
Management of change equals managing risk.
Effective risk management requires solutions and not a tick box in an approval form. Procurement managers should coach and mentor their teams in the art of risk assessment and really ask the deep questions. Look beyond what is here and now and examine the risks clearly.
Why bring about a culture of procurement disruption?
“Disruption” as a concept is not new.
It is change.
Change is constant and therefore disruption should be managed as ongoing part of the day-to-day way of working.
Procurement is an area that is slow to disrupt.
I prefer to lead rather than be lead.
In my opinion there are more followers than disruptors in procurement. There is a bigger focus on the traditional, on transactions and output rather than results or outcomes.
Procurement disruption should focus on outcomes and direct results that will add value for both internal and external customers. It will deliver procurement excellence.
Unless we change the way we procure and contract, existing business will be slow to combat change.
Ultimately, business become victims and losers to external disruptors.
Business becomes followers and price takers.
Unfortunately when this happens, procurement must be the ones to wonder what their contribution was to failure.
Procurement disruption culture: disrupt rather than be disrupted
Business needs more procurement managers having the courage to step up, speak out and disrupt.
You don’t need to be a perfect procurement manager but you can no longer sit in a comfortable office directing approvals and paperwork.
You have to be a disruptive leader, striving for procurement excellence and leading your team to success.
Don’t underestimate the power of sharing and finding like-minded procurement people. I encourage you to find others that are willing to be disrupters rather than wait for the disruption.
It is great to work with procurement managers to proactively disrupt rather than be disrupted, to destruct and create.
We work on the basis of procurement disruption – this is done by empowering more procurement managers to disrupt their world from within and therefore, unlock value for their organisation and their customers. Our procurement leadership packages focus on improving procurement leadership and building capability in procurement.
We look forward to creating a culture of procurement disruption and producing something new, effective and more efficient and worthwhile.