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Sourcing for Growth
Introduction to a sourcing model for client / partner collaboration
“Conformity is the jailer of freedom and the enemy of growth”, John F Kennedy
A recent Accenture study, “increasing Agility to Fuel Growth and Competitiveness” found
that only 21 per cent of respondents were confident they had the right initiatives in place to
achieve cost reduction targets. However, in an age when digital disruption is turning
industries upside down and inside out, the picture may be even more alarming. Astute
sourcing activity offers vast opportunity and may be the only sensible way of tapping into
global capabilities be it for cost advantage or to access unique expertise. The exam question
is how to make this happen.
Staring into the Abyss
As John Kotter has pointed out, industry is changing at an accelerating rate. It is a volatile,
uncertain, ambiguous and complex world and organisations are having to re-examine the
fundamentals of their operations.
What changes are required to meet the needs of our customers and expectations of
Can we deliver cost reductions and service improvements? Historically what have we
achieved and why?
What’s our technology delivery track record? What happened? What changes do we
need to introduce to leverage new technology opportunities?
Where does risk lie? Why is this? What does the Regulator think?
How do we invest for growth? How is it linked with cost reduction? What is the role
of sourcing partners?
Are our operating models able to flex to accommodate customer demand, structural
change and growth opportunities?
Are we making the most of the global economy? Do we have the skills for it?
Are we getting the most out of our partners? Why or maybe why not?
Cost / Service Loop
Cut to sever loop
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How do we currently work with partners to share the champagne and the bullets?
Why is this so?
How do we coordinate initiatives? How do they impact on customers? Are we just
exhausted by it all?
How do Executives align (or not) behind cost reduction and/or growth initiatives?
Why? How are their interests aligned (or not)?
What does being “digital” and “disruptive” mean for us and our customers? Where
will it end?
At the TCS European Summit this year, Mario Monti, the economist and former Italian Prime
Minister was asked what was the biggest threat to global prosperity. He answered
“populism”, by which he meant the offering of grossly inadequate soundbite “solutions” to
problems of massive complexity. One should not suggest that the shifting operations and
revenues of anything but the smallest organisation are straightforward, however it is clear
that sourcing can be the foundation that underpins many of the answers. With typical
models of engagement, the right conversations are simply not always being had and
significant opportunities are being missed.
A Sourcing Model for Client / Partner Collaboration
The client / partner collaboration cycle makes a direct connection between utilising partners
for cost reduction / service improvement and as gates to the future, enriching and
accelerating innovation cycles to deliver growth through leverage of their global delivery
footprints, vast networks and multi-industry, multi-disciplinary expertise. By linking the
loops in the Collaboration Cycle, a formal link is established between cost reduction and the
ability to invest funds in growth activities and customer experience.
Illustration. The Client / Partner Collaboration Cycle
The familiar right hand side of the model is about doing things differently for cost and
service benefit. The left hand side is about doing entirely different things. However, in most
Cost / Service Loop
Cut to sever loop
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cases, in an existing relationship, making the right hand side work is a precursor to engaging
on the left hand side. In this respect, the model flows from right to left. Delivery of benefit
in existing activities earns the right to drive strategic growth initiatives.
Earning the Right to Collaborate and then Collaborating
As it stands, many client / partner relationships are stuck on the right hand side of the
model with the invoice being the main topic of debate. Clients have used the scissors! It
conforms to an established approach of “buying” product but misses the point. As the
Managing Director of a domestic UK Energy provider said to me recently “It’s OK to be
tough, but it is hardly an end in itself”. To compound the issue, some partner behaviours are
also overly focussed on the short term.
Clients and partners must earn the right to collaborate, to extend their relationships for
mutual benefit and this boils down to having in place the right contracts, people and
governance as shown in the table below.
Table. Different approaches across the Client / Partner Collaboration Cycle
Innovation Loop Cost / Service Loop
Contracts Predominantly output or
Some short term input pricingfor
blue sky innovation.
Predominantly output or
Move to as-a-servicepricing.
Transfer risk towards partner.
Committed priceand service
People Greater Executive commitment.
Broader IT / Operational input
bringingpartner “within the fold”.
Usually contained within vendor
Light Executive input.
Governance Innovation Boards.
Innovation Steering Group.
Partners have a formal role in the
innovation cycleand are
potentially hard-wired into the
and commercial governance.
Defined escalation routes.
In meeting the demands being faced by organisations, sourcing has a key role to play in
providing agility and a set of capabilities that in all likelihood cannot be replicated internally.
Partners fundamentally expand opportunities and choices and although they have
historically worked predominantly on the right hand side of the Collaboration Cycle, their
greatest influence is potentially realised from the left hand side.
A Call to Action
Managing the transition across the model isn’t necessarily smooth. For example, if the right
hand side of the model isn’t functioning properly and at the same time competitors are
happily working on the left hand side of it, then can one afford to delay? There will be a
balance to be achieved in architecting the transition, but all of the following need
consideration. They follow a logical order, but in all likelihood we be initiated to some
1. Re-examine current contracts and partner relationships and establish remedial
actions if necessary to re-lay foundations or perhaps lay new ones
2. Prioritise customer retention, cost reduction and service improvement initiatives to
fund growth activities
3. Build innovation / growth partnership management structures and manage
4. Review and measure constantly and adjust as appropriate