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Looking for commercial excellence in all the wrong places

Guy Strafford
May 28, 2015 9:08:00 AM

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What drives excellence? Is it the relentless drive for customer delight? Is it the fanaticism of engineering to “get it right”? Is it the single-minded pursuit of maximum profitability?

One person to turn to for answers is Tom Peters, the veteran management guru whose seminal 1982 book In Search of Excellence was a global hit and sparked a rebirth in motivational management thinking.

Glancing down the list of attributes Peters and his co-author Robert Waterman found in the companies they deemed “excellent”, it’s not one thing that drives commercial excellence. If you want to be an excellent business, you need to cover a lot of bases. The 8 attributes they identified are:

  1. A bias for quick, active decision-making and problem solving, avoiding bureaucracy
  2. Be close to the customer
  3. Autonomy and entrepreneurship, fostering innovation
  4. Productivity through people; valuing employees as a source of quality
  5. Hands-on, value-driven management
  6. Stay with the business that you know
  7. Lean – especially at HQ level
  8. Loose-tight: autonomy at the shop-floor, but with centralised values

But take a closer look. There also seems to be a thread running through them: communication. In each case, companies can only deliver on one of Peters’s eight themes if they’re communicating well inside and outside their business.

The issue, then, is what kind of communication? And by whom? That’s a question we’ve been asking, and our conclusion – unsurprisingly – is that procurement has a critical role to play here for two reasons.

First, procurement is what connects an organisation to a sizeable chunk of the market. In the era of corporate virtualization a business is only as good as its supply chain. On average, more than two-thirds of revenue is spent with third-party suppliers, and increasingly, companies rely on their suppliers for innovation and competitive edge. Driving excellence from these relationships is a key component of growth and change.

Second, discovering why people inside the organisation spend the way they do can reveal a huge amount about how they operate, not just whether they’re buying cheap or even smart. This relies on asking the right questions, of course, and gaining both insight and trust from people in every function. Being embedded and building relationships are no longer optional.

Look again at those excellence themes. In each case, a procurement function with the right approach – promoting behaviours that both join up the organisation and reveal the complexities and risks that can scupper it – is a vital component. Hands-on management? They know where they buy and why it gives them an advantage. Lean HQ? Efficient procurement minimises management overhead while maximising the benefits of a co-ordinated set of supplier relationships.

No wonder Peters said last year: “there is no more sexier profession than that of supply chain management”. OK, so he was addressing a supply chain conference – but there’s a good reason he says that “supply chains are the focal point of all operations and should be more responsible for sales and marketing goal fulfilment as opposed to reducing costs”.

This drive for commercial excellence – a culture of sharp, clear thinking around commercial relationships – is never more important than during a growth phase, too. Businesses that try to layer in these critical relationships, to build improved communications, after they start to expand into new markets or build out revenue streams will find it much harder to shift ingrained attitudes.

Above all, it’s a reminder that the modern enterprise has to be joined up. Business gurus have been talking about “breaking down silos” since at least the 1980s. (Take a look at these fascinating articles on functional silos and a case study from 1988 and 1989 – what’s changed?) The fact that we’re still worrying away at that particular challenge shows us functions crossing the business – like procurement, finance, IT and HR – need to be fully in play to deliver excellent outcomes.

As always, if you have any thoughts or comments, please add them below. 

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