The Why - Contracting Must Change and What will Happen if We Don't?

Contracting’s Collaborative Vision:
The Transformation Blueprint that can
Make it Happen
IACCM – Executive Webinar
February 24, 2016
Dalip K. Raheja, President & CEO Tim Cummins CEO
The Mpower Group IACCM

© 2016 The Mpower Group, Inc. All Rights Reserved.
Unauthorized Duplication, Storage or Transmission Strictly Prohibited.
Agenda
Why Change?
Wrong Stakeholders / Decision Drivers
New Role of Contracting
Transformation Blueprint
2

©2016 IACCM
Audit Office condemns
shortfall in commercial skills
(The Times, November 2010)
This is not a new problem
3

©2016 IACCM
Gen Y Missing
Commercial Skills
(Forbes, February 2015)
And it isn’t going away
4

©2016 IACCM
Troubled relationships = disappointing outcomes
Research suggests that
commercial issues
are the primary cause
in ~70%
of ‘troubled
relationships’
The likelihood of
significant innovation
or incremental value
reduced by
≥ 60%
So achieving improvement is important
5

©2016 IACCM
Ranked impact on outcome
1. Communication
2. Risk allocation
3. Problem solving
4. No-blame culture
5. Joint working
6. Gain and pain sharing
7. Mutual objectives
8. Performance measurement
9. Continuous improvement
6

Virtual
Corporations
Social/Political
Upheaval
“Green”Complex
Issues Require
New
Approaches
“Obsolescence”
7
Why Change?

Business Models are Changing . . . . . .
Why Change?
. . . . and dependence on trading partners is higher than ever
Globalization
Desire to enter new markets
Suppliers drive revenue
Customers drive cost
Innovation is key
Internet Of Things is here
8

Unauthorized Duplication, Storage or Transmission Strictly Prohibited. 9
Why Change?
Poor Supplier Relations Costing Bazillions
Are we sticking ours heads in the sand?

Contracting
(Buy/Sell Side)
Sales
&
Marketing
Engineering
Transportation
&
Logistics
Warehousing
Materials
ManagementPurchasing
Information
Technology
Higher Collaboration Drives Higher Value
Collaboration Must be Across the “System”
Why Change?
10

Removing Costs versus Shifting Costs
Source: ISM – Nov/Dec 2011
The most critical concept is removing (Collaboration) — not
shifting costs (Adversarial)
11
Why Change?

Coca-Cola + Heinz
• Collaborating to
develop more
sustainable
containers
Biotherm +
Renault
• Skin-careand
automobiles: an
unheard-of collaboration
Harvard + MIT =
edX:
• The collaboration
between the so-called
competitors
Corning:
• Collaborating with
clients to turn ideas
intoproducts
12
Why Change?

Next Practices Contracting Organization is Different
Why Change?
Will We Ever Get There?
• Contracting is expected to
deliver on corporate goals
– supported by senior
management
– early involvement in
customer / risk management
decisions
• Evaluated on basis of Risk
Management and Value
Creation not the efficiency of
the contracting process
• Raided internally / externally
for talent because it is a
talent factory
• Staffed to maximize impact
– includes best and brightest
– processes, tools & technology
enable value creation
• Leaders in building high
value relationships
• Drives portfolio risk
management
• A single Contracting
organization delivers
excellence to both the buy
and sell side
What C-Level Executives Demand of the Contracting Organization
13

When is a Hamburger NOT just a Hamburger . . .
Hamburger
TCO Value
• Best Price
Evaluation
• Recruiting
• Product Quality
• QOWL(Quality of
Work Life)
• Aggressive
Negotiation
• Employee
Retention
• Rationalize
Supply Base
• Value > Cost
Business owners place more importance on “Value” than Cost
Client Example
Why Change?
14

Poll
Why Change?
Questions ?????????
Are you Convinced that we MUST move
from Adversarial to Collaborative?
A. Yes
B. No
15

Agenda
Why Change?
16

Contracting
(Buy/Sell Side)
Sales
&
Marketing
Engineering
Transportation
&
Logistics
Warehousing
Materials
Information
Technology
Have you Identified the Right Stakeholders? Sell Side
Wrong Stakeholders/Decision Drivers
17

Customers Sell Side
CEO
Inside Sales DeptIT Managers Mfg
Pre-Sales Distribution
HR
Controller
-AP
-AR
-FA
-Payroll
-GL
Contracting
VP- IT VP-Sales Primary
BU
Board
CFO
Direct Sales
VP- Ops
Developers
Field ServiceOperations
Traditional Buyers
LogisticseCommerce
Dept
Procurement
Non-Traditional
Influencers
RFI Consultant
Y
O
U
18

Decision Drivers – Sell Side
CEOs Not cost conscious – focuses
on value
Strategic impact
Speed to market
Marketplace agility
Long term view
Geographic expansion
Concerned about non-
traditional competitors
Organic / Inorganic growth
CFOs Cost conscious
Strategic impact
Risk averse
Margin/profitability
Growth
Cyber security
Compliance
19

Cost
Management
Stakeholder
Identification &
Communications
Return on
Investment
Competitive
Analysis
Strategic
Planning
Relationship
Management
Lead
Generation
Differentiation
Industry
Awareness
Brand
Management
Sales
Support
Customer
Life Cycle
Management
Examples of Decision Drivers – CRM Example
CIO, CPO, CFO, ETC…
Others
Key
a
a
a
b
C
b
b
b
C
C
b
C
C
C
b
CMO
Traditional IT Focus
Stakeholder Focus (Sales)
Next Practice Focus (CMO)
20

Contracting
(Buy/Sell Side)
Sales
&
Marketing
Engineering
Transportation
&
Logistics
Warehousing
Materials
Information
Technology
Have you Identified the Right Stakeholders? Buy Side
21

Buy Side Suppliers
Traditional Sellers
Non-Traditional
Influencers
CEO
Inside Sales DeptIT Managers Mfg
Pre-Sales Distribution
HR
Controller
-AP
-AR
-FA
-Payroll
-GL
Facilities
VP- IT VP-Sales Primary
BU
Board
CFO
Direct Sales
VP- Ops
Developers
Field ServiceOperations
LogisticsContracting
Dept
Procurement
RFI Consultant
Y
O
U
22

Client Example: Uncovering Key Decision Drivers
23
Rotating Equipment
The category team reviewed
maintenance and repair data with
suppliers and implemented
“campaign maintenance” strategies
to drive stronger preventative
maintenance
Turbine Engines rated for 40,000
hours now operate for over 150,000
hours
“The Current calculation of Value is
that this team has enabled an
additional $40MM in revenue
enhancement with higher quality
and safety .”
Chemical Management
The team decided to “Spend”
money to motivate suppliers to
provide their best ideas and drive
innovation
In one case, a supplier was
provided a “gain share” for the
successful deployment and
revenue enhancement.
“A Supplier who previously thought
of us as a “nuisance” now looks at
us in a manner that is moving
toward “core” This means that over
the long term we will get the
suppliers BEST ideas and their
BEST resources. Our competitors
will not.”
Catering
Sourcing decided to “give” more
money to suppliers to drive better
performance for the service
Supplier and raise employee
retention
Three Suppliers Implemented a
retention bonus program for
catering contractors
“Contract staff retention has
increased significantly, leading to
better services for employees and
greater employee retention. This is
a competitive differentiator for us.”

Fundamentals of Value (Decision Drivers)
• Non-NegotiableCustomer Defined
• Non-QuantifiableOpaque
• Functional, Economic, PsychologicalMulti Dimensional
• Cost - ValueTrade Off
Contextual
Relative
Mind Set
Defined by How it is Used
Compared to Alternatives
Based on a Belief
By: Professor Mohanbir Sawhney)
24

Poll
Questions ?????????
Do you agree that focusing on different
stakeholders and THEIR Decision Drivers
MUST BE part of the change?
A. YES
B. NO
C. Still want to think about it
25

Agenda
Why Change?
26

Relationship
Manager
Adds value
throughout the
commitment
process and beyond
Process Leader
Improves efficiency of the
commitment process
Risk Manager
Identifies, assesses and
prioritizes risks in an effort to
minimize it’s impact on the
enterprise
New Role of the Contracting Professional
Strategic Business Partner
Influences key strategies as a
trusted partner with program
managers
Change Agent
Influences company’s
capability to embrace &
capitalize on change
Role of the Professional
This is the role
we all play today
• Ensures alignment with
C-Level decision drivers
• Delivers tangible
business benefits
• Proactive vs. reactive
• Understands the
business
• Innovative
• Listens
• Challenges the status quo
• Sells the new “context”
• Proactively communicates
• Engages / aligns
stakeholders
• Facilitates cross-functional
decision making
• Creates a “pull”
• Resolves conflict
• Influences others t
27

Price/
Risk
Contracting
Playing the Role of the Risk Manager
Next Practice
Best Practice Best Practice
Sourcing
Is your Contracting organization capturing the VALUE
across both the Buy and Sell Side ?
C
Sales
Customers
Supply
Base
Revenue/
Risk
Contracting
Risk
Contracting
Sourcing
Supply
Base
C
Sales
Customers
Risk
OrganizationalReadiness
Lead Time
Price
Inventory
Lead Time
Price
Inventory
28

Provides partner with a
platform to launch
innovation
Drives future
requirements for
Products/Services
Plays primary conduit
between both
organizations
Creates, builds and
grows mutual
benefits.
Helps partners to
understand and navigate
the culture
Holds both parties
accountable
Playing the Role of Relationship Manager
Creates “intimacy”
with partner
Avoids / resolves
issues
29

Context is . . .
. . . . the circumstances that form the setting for an event, statement, idea, object
or solution, and in terms of which it can be fully understood and assessed.
. . . . . the interrelated conditions in which something exists or occurs
30

Contracting Process
Tools & Templates
Regulations
Technology
Executive
Support
Higher
Expectations
Learning
Environment
Metrics
aligned with
the Business
New
Role
Strategic
Competencies
Adoption
Focused
Context Always Trumps Content
31

Functional vs. Strategic?Business,Industry,&EnterpriseKnowledge
Business Context /
Organizational
Competencies
Strategic
Competencies
Functional
Competencies
Change
Management
Consulting &
Facilitation
Information
Technology
Project
Management
Contracting
Processes
Legal terms
& conditions
Negotiations
“Customer”
Relationship
Management
Teamwork
Competency
Based
Talent
Management
Exceptional
Business
Results
OperationalManagement
Client Example

Poll
Questions ?????????
What Role(s) (in addition to Process
expert) is your organization playing today?
(check all that apply)
A. Strategic Business Partner
B. Change Agent
C. Relationship Manager
D. Risk Manager
E. None of the above
33

Join Us Next Month . . . .
Contact me at dalipr@thempowergroup.com with any
questions OR if you are interested in taking a short
assessment on Contracting Transformation
For Session Two: What Needs to Change and How to Do It?
Wednesday, March 23, 2016
TMG Transformation Blueprint
Define /
Optimize
Organization
& Talent
Create
/ Enhance
Infrastructure
Execution
Design/ Launch
Future
State
AEIOU (Enablers & Accelerators)
Exceptional
Business
Results
• Business Processes
• Tools / Templates
• Technology
• Organization
− Roles, Jobs & Teams
• Talent
− Competency Models
− Performance Mgmt
− Training & Development• Design
− Vision /Strategy
− Strategic Objectives
− Principles
− Business Case /
Rationale
• Launch
− Stakeholder
Analysis
− Communication
Plan
− Risk Assessment
• Information Visibility
• Performance Metrics
• Knowledge Continuity
• Decision Processes
• Business Alignment
• Change Management
• Learning Environment
• Coaching / Mentoring
34

The Mpower Group is in the business of Mpowering our clients to accelerate
Exceptional Business Outcomes by unleashing the full potential of their
organizations. We are a global consulting firm dedicated to serving the needs of
Fortune 500 Supply Chain (buy & sell side) organizations. We help our clients by:
– Accelerating Strategic Transformation: Rapidly move client organizations along The
Mpower Group’s Supply Chain Maturity Model to peak performance levels.
– Competency Based Talent Management: Advance the competencies of our clients’
professionals to World-Class performance levels.
– Maximizing Deal Value: Help clients realize the full value from large and/or complex deals
by focusing on A) “Customer” Value Drivers before and during negotiations, and B) an
adoptable, sustainable implementation once the deal has been reached.
About The Mpower Group
The Mpower Group is a World Class consultancy that delivers big results with a boutique feel.
We are Woman and Minority owned.
About TMG
35

Our Selected Clients
Enhance Med
About TMG
36

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