Transforming Procurement

Transforming Procurement

Transforming Procurement – Myth or Reality?
Peter Smith
November 2013

Real World Sourcing

Spend Matters UK/Europe
©ALL RIGHTS RESERVED - Confidential

Agenda
1. Introduction
2. What is transformation?

3. How do we transform - a step by step guide
4. Taking the organisation with you

5. Wrap up

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Part 1 - Introduction
The Real World Sourcing Series 2013 is a series of 6 sessions covering hot
topics for procurement professionals.
The Real World Sourcing Series is promoted and supported by
BravoSolution, and developed by Peter Smith (Spend Matters) and Guy
Allen (Real World Sourcing Ltd.)
Peter Smith started his procurement career with Mars Confectionery, then
was CPO for Dun & Bradstreet Europe, the Department of Social Security
and the NatWest Group. He is now a consultant, author, non-executive
director and editor of the Spend Matters website. He was President of
CIPS in 2002/3.

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Part 2 – WHAT IS TRANSFORMATION?

Transform v & n; 1. make a thorough or dramatic
change in the form, outward appearance,
character etc. of ....

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• Procurement transformation means delivering significant
results and benefits to the organisation.
• To call it transformation, it needs to be a step change in
performance and benefits, which we suggest means both
significant in scale AND achieved relatively quickly
(otherwise it would be a slope, not a step…).
• It cannot be just the usual continuous improvement that
we should all be aiming for constantly.

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• And it is very unlikely to be effective if it merely looks at the
procurement function, as opposed to the wider
organisation.
• Apart from anything else, it is unlikely to be perceived as
transformational internally if no-one outside procurement
notices!

• It will therefore generally address, and needs to address,
how the whole organisation interacts with and takes
advantage of its supply markets.
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SHOULD I EVEN THINK ABOUT IT?
• Take the Real World Sourcing assessment
questionnaire and see if you and your organisation
are ready for transformation!

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Part 3 – HOW DO WE TRANSFORM?
• Step 1* – Understand where we’re starting from (essential
to the journey and provides the baseline for measurement)
• Step 2* – Define where we want to go

• Step 3 – Work out what needs to be done to make the
journey
• Step 4 – Do it!
• Step 5 – Confirm that we’ve got there
(In practice, steps 1 and 2 tend to be somewhat iterative)

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Stakeholder
steps

Strategic
steps

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Step 1 – Understand where we’re starting from
• This takes us back to “Assessing the function” – a previous
RWS session
• We need to understand where we are starting from, our
strengths and weaknesses
• How do we compare to others?
• Wherever possible, should quantify the assessment
• A real baseline we can measure progress against is
invaluable

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Step 1 – Understand where we’re starting from
In terms of doing the assessment, the key questions include:
• Do I need to assess / baseline the entire function – what do
I want to transform?
• Can I carry out the assessment internally?
• Is all the data available internally (e.g. do I need external
benchmarks)?
• If not, who can help me do that?
• What methods are we going to use for the assessment
process?
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GOVERNANCE

Transactional Management - Purchase to
Pay
STRATEGY &
LEADERSHIP

Category / Sourcing Management

• Value / savings
• Stakeholder satisfaction
• Efficiency
• Risk Management

Contract & Supplier Management

PEOPLE

RESULTS / OUTCOMES

TECHNOLOGY
& TOOLS

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Step 2 – Define where we want to go
• What is the vision for our end-state?
• What will procurement deliver?
• How will stakeholders perceive us?
• What will be the tangible results?
• How will we know we’ve got there?

• Be realistic – but if it is not ambitious it is not
“transformation”
Every organisation’s transformation should be specific to its
needs and aspirations
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Something to be said for an “elevator pitch” – the 30
second description of what you’re doing and why
that you could use with a Board level stakeholder...

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• We want to be he best procurement operation in UK HQ’d financial
services in terms of results, capability and being a great place to work
as judged by the XXX study
• We’ll deliver £50M a year more in measurable cost reduction AND
contribute to the business top-line
• We will improve our survey ratings from suppliers and internal users by
20 percentage points

• We will put in place a controlled but easy to use “no PO no pay” P2P
system, linked to spend analytics so we can see exactly where our £2B
a year spend is going

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Transformation Quiz – Round One
Who wrote these songs (all well known artists
themselves) and who turned them into the hits you
are about to hear?

1.
2.
3.
4.
5.

To make you feel my love
Nothing compares 2 U
Take it easy
Hallelujah
I will always love you
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Step 3 – Work out what needs to be done to make
the journey
• The steps get harder...!
• Need to convert those aims into a detailed programme plan
• Break it up into sensible workstreams
• Critical to identify as early as possible what resources will
be needed

• A business plan / business case will probably be needed at
the end of this stage

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Step 3 – Potential elements of transformation
• Change in overall strategy / operating model / organisational model for
procurement
• Fundamental change in how you interact with stakeholders – service,
governance, business involvement ...
• A move to full Category Management / eSourcing
• Major P2P systems transformation
• Implementing contract and supplier management (SRM)

• Moving into whole new areas of spend coverage – capital projects,
complex services, working on sales side...
• People and skills upgrade (almost always necessary)

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Step 4 – Do it!
• A high proportion of transformation programmes fail in the
execution phase
• Common reasons include:
• Lack of stakeholder buy-in
• Lack of resources or skills
• Poor project planning and management

• Changing focus, people or priorities
• Running out of energy, motivation, will power...
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Step 4 – Do it!
• Run to a structured programme plan, with defined
workstreams, timelines, deliverables...
• Managing resources – your own and stakeholders - is vital
• Put in place reporting and governance arrangements
• Manage it as a programme with (very) regular reporting,
updates, communication...

• Keeping the energy and motivation going is a real challenge

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Step 5 – Confirm we’ve got there
• Measurement of progress and achievement is key

• Shows stakeholders that the investment has been
worthwhile
• Validates and celebrates the work, gives credibility and
motivates people involved
• Also provides the baseline for the next transformation...
maybe!

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After Step 5 – What do I do next?
• The business environment is always changing.
• You may NEED to transform again!
• And if you haven't become the absolute best yet –
why not aim higher?
• Remember it gets harder the better you get… a
logarithmic curve

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Improvement gets tougher as you get better....

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Transformation Quiz – Round Two
Solve the following topical word transformations
(anagrams to you)!

1.
2.
3.
4.
5.

Order cop recruitment
Mends pet rats
A shop recurred
Rusticates corn gig
Bonus violator

5.

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Part 4 – TAKING THE ORGANISATION WITH YOU
• It helps to have a “burning platform” – a pressing reason
why we need to do this urgently
• That can be financial – “revenues / profits are declining...”
• It could be competitive – “we’re in the bottom quartile in
out industry for procurement performance on this
benchmark”
• It could be risk - “we cannot guarantee supply to the
factory, that our brand won’t be tarnished by a CSR event,
or that our managers aren’t committing fraud”
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If a burning platform just isn’t feasible, there are some other
approaches:
• The “Promised Land” scenario – I can give you an additional
£50 million a year in savings...

• The “hard logic “ approach – here are the detailed survey
results that show we’re not very good, plus the evidence
that procurement excellence leads to higher profit....
• The “pride and emotion” strategy - this great firm should
be the best at procurement, we owe it to ourselves, our
staff and our shareholders...
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Once you get into the programme:

• May be worth segmenting stakeholders to help develop the
right management and Comms approaches – are they
supportive, opponents etc.
• A programme board, steering group or similar is
operationally useful and a good way of securing stakeholder
involvement / buy-in
• Remember to think about the benefits from the stakeholder
perspective – not just procurement's
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Don’t forget your own procurement team!

• Some staff will be threatened by any change to “the way we
do things around here”
• Communication and re-assurance can do a lot but
ultimately... Tough decisions may be necessary
• Remember Machiavelli... those who support change don’t
make a lot of noise, those who oppose it do

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When NOT to go for transformation • If you don’t have the support from key stakeholders,
particularly senior management
• If you don’t have the resources (assuming you need to
invest in people, systems, etc – which you probably will)
• If you don’t have the time for transformation e.g. RBS have
just bid for your firm
• If YOU don’t have energy, willpower, tenacity and skills
Continuous improvement should always be the aim – even
if it is not ‘transformation’
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Transformation Quiz – Round Three

D

Identify the people who made personal transformations.

A

C
B
E

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Summing up – three key take-aways
• Think carefully about whether you are ready and equipped
for “transformation”. Continuous improvement may be more
appropriate.
• Senior management and stakeholder commitment is critical
– you are unlike to succeed without it – so the business case
must be impressive.
• Treat it as a complex programme with all the disciplines that
suggests .

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Real World Sourcing Scholarship
• £2500 towards any procurement based training
• Log on to the BravoSolution Education Network
with the details you’ll receive tomorrow
• Complete the certification programme
• Check your ranking!
• The winner will be announced at the Sourcing
Experts Dinner in December
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THANK YOU!
Please feel free to contact me on
psmith@spendmatters.com

Real World Sourcing


Transformation Quiz – Round One
Who wrote these songs (all well known artists
themselves) and who turned them into the hits you
are about to hear?

1.
2.
3.
4.
5.

Bob Dylan / Adele
Prince / Sinead O’Connor
Jackson Browne / The Eagles
Leonard Cohen / Jeff Buckley
Dolly Parton / Whitney Houston
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(anagrams to you)!

1. Order cop recruitment
Procurement Director

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(anagrams to you)!

2. MendsMatters
Spend pet rats

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(anagrams to you)!

3. A shop recurred
Purchase Order

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(anagrams to you)!

4. Rusticates corn gig
Strategic sourcing

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(anagrams to you)!

5. BravoSolution
Bonus violator

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Transforming Procurement

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