What better time to set and start tackling key objectives for 2019? Your New Year’s resolution should be to be better than best-in-class…
“Achieving best-in-class performance won’t result in procurement becoming truly strategic and may actually hinder progress in the long term. So, don’t settle for best-in-class”, says Alex Saric, from source-to-pay suite provider Ivalua.
In this time of personal New Year’s resolutions, it seems appropriate for leaders to also consider a resolution for their departments. For procurement leaders in particular there couldn’t be a better time to do so. In recent years, the function has made tremendous progress when it comes to transforming into a strategic value driver.
Yet, as leaders broadly acknowledge, this transformation journey still has a long way to go. A recent study by the Hackett Group found that only 63% of procurement organisations have developed a plan for digital transformation and 33% bluntly stated that their service does not meet customer expectations. Similarly, a Forrester study on enabling smarter procurement found that only 22% of respondents believe that their reporting and analysis are where they should be and another 22% that they have the required agility to respond to changing requirements.
So what better time to set and start tackling key objectives for 2019?
My recommendation is to set an aspirational resolution that reflects procurement’s true potential but which is distinct from your management by objectives (MBOs): your MBOs are likely based on continuous performance improvement that is, in turn, aimed at closing the gap with best-in-class.
The problem with best-in-class
There is nothing wrong with benchmarking yourself and striving to improve performance to match the best of your competition. Organisations should do so, especially if still early in their transformation journeys. Success will result in greater value to those organisations. But achieving best-in-class performance won’t result in procurement becoming truly strategic and may actually hinder progress in the long term.
But how so?
Look at it in the context of the World Cup (or the upcoming Superbowl). Each team in the tournament has earned its spot by being the best in their region. Hence, each team can be said to be best-in-class. Yet only one is the champion and that team doesn’t win by playing at the same level as their best-in-class peers but by playing better, doing something critical differently. Best-in-class is not a competitive advantage in sport, nor in today’s increasingly winner-takes-all market. It is a stepping stone on the path to true greatness.
If leaders are to build competitive advantage and truly drive strategic value, they have to think beyond best-in-class and view this as an interim objective on their transformation journeys. Leaders must ensure that the people and technology they embrace to navigate those journeys have the capability to take them the full way and not become a constraint at some point.
Yes, your top competitors are doing this right now
So, what exactly does going beyond best-in-class entail? Is anyone actually doing this? Yes, they are! Your top competitors are extending their competitive advantage even as you’re reading this. Below are just a few examples:
– Revenue: A leading Telco leveraged the flexibility of our platform to create a private marketplace where suppliers can bid for used mobile phones in mass volumes, generating hundreds of millions of dollars each year.
– Innovation: In 2014, Meritor launched a three-year initiative to drive massive value by transforming their supply chain in what can be thought of as a drive to achieve best-in-class. They then followed that up with a new initiative to unlock massive innovation through a unique approach to new product introductions, configuring our platform to their ideas. The result? Their stock price rose from $4.45 to $13.30 at the end of 2016, and much further since, far ahead of competitor growth.
Note that in both of these examples the teams implemented best-in-class processes and wanted quick value. It should thus never be a compromise. But they kept the ultimate objective in mind and brought on the right talent and technology to take them to the next level when ready.
The talent challenge
In any meeting with CPOs that I have attended in recent years, the top pain point raised is attracting and retaining top talent. Talent that is up to the task of driving successful transformations to best-in-class and beyond.
The above examples illustrate an important point about talent as well as about the symbiotic relationship with technology. What good is top talent if your systems are too rigid for them to bring their best ideas to life? Out-of-the-box best practices are important, but that shouldn’t mean constraining yourself from doing a few strategic things differently.
Meritor has a great team with great ideas. So, when deploying software, they took embedded best practices but ensured that they had the flexibility to easily configure once they were ready for that next phase. This empowered them to realise a unique and innovative approach that supported their financial success.
Realise your true potential
So, as we enter a new year, filled with endless challenges and opportunities, I encourage you to set a procurement resolution. One that, if achieved, will set you on the path beyond best-in-class, to building a competitive advantage. One that will empower your talent to truly make procurement strategic and realise your true potential.