Influence, commercial sense and commercial excellence
Jun 3, 2015 10:42:00 AM
In the increasingly virtual corporation, it's the support functions that knit everything together. Well - the strategic elements of them anyway. The process-driven parts have either been outsourced, or are so securely locked away in their silos that they have other, bigger problems to solve.
Actually, when you think about it, many of the most successful companies also outsource the strategy part too. Why would an organisation try to set a strategy around something like shareholder value maximisation when there are armies of bankers, investor relations experts and management consultants who can draw on the widest possible experiences, analyse the market in fine detail and craft a super-smart approach?
What does that leave? If a business is effectively IP - brands and engineering - and a supply chain network, what exactly are its core competencies? What are the bits you can't outsource? Well, that's obvious: it's a state of mind.
Obvious - but hard to pin down. Former New Labour spin doctor Alastair Campbell likes to talk now about communication strategy. And one of his favoured models is OST. "T" stands for tactics - the ways in which you carry out your strategy the "S". But sitting above that is "O" - the organisation's objectives. How those objectives are set, what those objectives say, how the objectives are communicated and how they flow into the strategy and tactics - that is what increasingly defines organisations.
Which brings us back to the support functions. Our main interest is obviously procurement. Procurement (like finance, HR and IT) touches every part of the business. So the leadership teams in those functions are critical to delivering "OST". How they describe the central objective, the reason for the organisation's existence, will define how well the whole enterprise can deliver on it. It will set the strategic framework and it will set the tone for the tactics.
Let's say the corporate objective is the constant renewal of the customer experience. Procurement might then frame its strategy as supply chain flexibility and promoting innovation from third parties. Tactically, that might involve deploying teams that can develop more in-depth relationships with suppliers and negotiate deals that are less geared toward minimising supplier margin, but rather incentivising them to become more integrated with R&D and new product development.
When you take that kind of approach, it all needs to work together and be properly co-ordinated, of course - or it can descend into complexity and disguised risks.
Many organisations today find themselves in this kind of position. They rely so much on third parties that it's only the support functions which will ensure all efforts are properly aligned around the commercial objective. So they have to make sure they're taking a proactive, creative and strategic approach to their part of it.
That means we need to address one other critical factor: ability to influence. We've talked before about the need to spread the right procurement culture; and how that means promoting the right behaviours. This central role for functions like procurement can only work if it's capable of getting the right message out. Influencing behaviour across an organisation is tough - but it boils down to clear messages and above all role-modelling.
Procurement leaders need to live the “O”, the “S” and the “T” for their function and their enterprise. The good news? If it's more important than ever in this distributed, outsourced, virtual enterprise to win friends and influence people. Procurement are at least professionally trained in the art. Skills like project scoping, negotiation and relationship-building are becoming exponentially more valuable as the supplier network becomes richer and wider.
Is your procurement function able to set, and align with, the wider corporate objectives?
As always, if you have any thoughts or comments, please add them below.