Return On Relationships
Procurement’s New Dawn
February 8, 2017
Alex Short
2 minutes

Procurement-led innovation is the future.

Advances in technology are disrupting the status quo at every corner. I’ve been living the tech hub of San Francisco for six months now and this ‘disruption’ is not only a widely accepted concept it’s the key thread that makes up the very fibre of so many businesses in the city.

This is a city that is forcing industries to converge and developing competitors to every business in the world at lightning speed. In this “age of disruption” the pressure on businesses especially the traditional ones has never been greater.

CEO’s are now putting technology innovation at the top of their list, planning to partner more extensively with key suppliers to protect their boundaries and beat off the growing competition.

And why not? it makes complete sense, concentrate on what you are good at and develop long-term relationships with those that can enhance your business/products/services this collaborative way of working will ensure you have that competitive advantage.

Work alone at your peril.

So where does procurement fall into this new vision of the future? The best CPO’s out there are interested in value creation, innovation and competitive advantage. And guess what, procurement is perfectly positioned as the conduit to both the inside and outside world. Simply put, procurement touches every part of the business and could if positioned right not only re-connect our internal silos that so often hinder us, but also nurture and develop the supplier relationships to bring innovation and a wealth of knowledge into the business through seamless collaboration.

The possibilities are endless but it needs procurement to stand up and stop fighting petty political battles and start driving revenue growth. The life of delivering mindless savings is over lets steal the show, we are after all a uniquely positioned function.

I can promise you now the only businesses that will do so will be those with balls of which there aren’t many that belong outside the enigma that is tech city.

You only have to look at the increase in your levels of outsourcing over the last 10 years to realise the level you rely on your suppliers as market experts and innovators. Is it not true that in many cases your suppliers know and understand market requirements far better than you do?

So if procurement can develop a collaborative working environment where it processes and integrates suppliers ideas to create new products and service technologies then it will finally arrive at the nirvana of value creation and the next chapter in our functions life story.

Those leaders and individuals that embrace this new way of working will not only become highly successful but will also set the tone for the next 10 years of business success.

It’s time for procurement to command innovation, extract it from suppliers and bring it into the business. How through business partnering and open collaboration with your strategic suppliers.

You must not however think there is a silver bullet to kick this off. It takes well laid out processes, the right mindset and then modern technology to underpin the whole approach and make it scalable. With these in place you can then begin to drive alignment, build trust, drive real two way collaboration which will then in time get you to consistent Value Creation! We call it the ROR (Return On Relationships) model.

Oh and modern technology does not in any way mean Ariba, SAP, Oracle or some makeshift platform developed by a consultant so they can bill more hours.

Check out our ideas and frameworks, this whitepaper around governance gives you an idea about what is needed up front.

Alex Short is Founder of Old St Labs he is passionate about building the next generation of business software. He is recognised as one of procurements thought leaders.
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