Procurement has matured during an era of business efficiency. However the increasing speed of innovation and the shortening of product life-cycles, has meant organisations are being forced to step away from focusing on efficiency. Instead they focus on driving competitive advantage through business agility. In this series of articles to be released in the coming months I will explore the ways procurement leaders can help their business to rapidly adapt to market and environmental changes in a productive and cost effective way.
So, we have all heard of the term ‘business agility’ before, but do you really understand the true meaning, or its importance for the procurement function? It was about 6 months ago that I was Listening to David Gildeh from Alfresco and the penny really dropped. I finally got what business agility truly means to enterprise.
David referred me to a book written by Peter Evan-Greenwood, which I quickly downloaded and read, called The New Instability. Peter’s work is a great piece of writing which really helped me to understand that businesses need to shift from ‘efficiency’ to ‘business agility’.
Companies have begun to realise that the next plateau of performance cannot be reached by extracting more efficiency from our existing supply chains, we have reached the point of diminishing returns. They’re taking a different approach, focusing on agility rather than velocity.
Peter Evan-Greenword – The New Instability
Everyone needs to read this book! If you do, let me know what you think in the comments below.
BUSINESS AGILITY & PROCUREMENT
Procurement’s role in building agility looks just as clear cut as its role in the historic efficiency age. During the efficiency drive, procurement focused on managing the supplier base and its cost to help drive profit and revenues. In the age of business agility, procurement’s focus should be to help drive the business to become more adaptable and accelerate innovation, time to market and time into new markets. This does not mean that price and cost will not be important, but the focus on agility is going to need to increase in order to establish or maintain competitive advantage.
ef·fi·cien·cy [ih-fish-uhn-see] noun, plural ef·fi·cien·cies.
- The state or quality of being efficient; competency in performance.
- Accomplishment of or ability to accomplish a job with a minimum expenditure of time and effort: The assembly line increased industry’s efficiency.
- The ratio of the work done or energy developed by a machine, engine, etc., to the energy supplied to it, usually expressed as a percentage.
Big businesses have been left rigid after decades of efficiency, so an aligned innovative and adaptive supplier base is going to help companies quickly become more agile, as they look to innovate new products and business models.
As Peter Greenword says:
Your next competitor will be someone who realises that the rules have changed, or that the rules can be changed. This competitor will be someone from outside your industry, someone whose position away from the playing field provides them with a broader view that enables them to understand which assumptions no longer hold.
So now we have slimmed down, is it time to become agile?
I will leave you with one final quote from Peter’s book;
Many companies are focused on – even obsessed by – agility. Agility, however is an overused and often misunderstood term. Many companies confuse agility, the ability to change direction quickly, with flexibility, the ability to bend easily without breaking.
Some other piece the are well worth a quick read:
Want to bounce ideas around about how best to put the building blocks in place to drive business agility Click Here and get in touch we won’t bight!