Is procurement a technology innovation buzz-killer?

I recently attended a startup conference that focused on citizen engagement technology designed for cities. I’ve been to hundreds of technology startup conferences over the years but this was the first that had a full-day track on the complexities of getting early-stage technologies past the procurement police.

Granted, most startups don’t have to deal with bureaucracies similar to state and municipal governments to get their product to market. But then again we’ve all had our horrifying experiences with the infamous “Purchasing Officer.”

I recall the days when major international firms started having the procurement department evaluate the selection of advertising agencies because of the lack of trust the CFO had for the CMO. On Monday procurement was evaluating Xerox machines and auto fleets and on Tuesday they were suddenly experts in the client/advertising agency relationship. In some organizations Wednesday and Thursday are the days procurement sequences in new startup technologies among their other vertical industry evaluations.

OK, I know I’m probably grossly oversimplifying, but let’s just say that one of the biggest complaints among the technologists at this startup conference was the inability of procurement to keep up with fast-pasted technology. After all, it’s hard enough for enterprise IT to separate the technology hype from the game-changers, no less for a multi-faceted buying group with little experience in implementation.

In all fairness, one of the areas getting the greatest attention is in the area of “procurement innovation.” It has become apparent that in order for procurement to understand innovation, they must experience it within their own service organization and ironically evaluate the quality of their relationships with “the businesses” in exactly the same way IT needs to do with their internal customers.

What was more interesting was a well-researched CPO report from IBM entitled The journey to value: Transforming procurement to drive the enterprise agenda that shows that Chief Procurement Officers are quite fond of themselves when it comes to driving innovation in the enterprise. About 62% of what the report calls Role Models claim that they “brokered new relationships with suppliers that introduced new ideas and innovative thinking.”

Clearly there’s quite a bit of wiggle room in parts of that last sentence that many CIOs and tech vendors would probably dispute. But to give the benefit of the doubt to the CPO, they realize they must bring more to the table than simply watching the purse strings. Not unlike CMOs, some CPOs might have already hired embedded or shadow IT in the procurement group in order to promote double-deep skills to the businesses. Others may still be operating under the model where their people know everything from staples to cybersecurity.

Regardless of whether procurement is a true innovation partner or an impediment, the quality of the relationship will be dependent on one key factor: CONTENT.

If technology startups or their surrogates in IT departments want to drive innovation in CPO-intensive enterprises, they must have a portfolio of content tailored to procurement’s level of sophistication.

This may sound quite obvious, but we’ve all read research that shows that CIOs and enterprise IT are not known for being great communicators, especially when it comes to complex technology issues. Hoping that the vendor’s marketing materials will by design be appropriate for the CFO and CPO suite is a recipe for disaster.

I had the opportunity to work on aspects of the launch of the international versions of the Dummies books during an early part of my career. While the books by definition are quite simple, actually creating compelling content at a dummies level is a very specific skill. Making things overly technical is not hard. Making them easy is, well, not easy.

CIOs need to work closely with skilled content developers to create materials (and storytelling) that match the level of sophistication of their procurement counterparts. They must encourage their vendors to help build cases that avoid innovation to be DOA at the procurement level.

How does your enterprise interact with procurement on complex technology initiatives?

Comments

  1. Elizabeth Giugno says:

    Frank, I’m intrigued by your article. Is content really the issue? How does “dumbing down” the content assist with getting Procurement to collaborate with IT and achieve the required outcome? Procurement’s involvement is to optimize commercial outcomes considering $ investment, risk and anticipated benefits – there’s a role for this somewhere in the organisation. I’ve seen plenty of sub-optimal IT implementations that fail to deliver on promises and poorly managed vendors and contracts.

    Capability, collaboration and early engagement are key. Many IT departments continuously engage with the supply market – which they absolutely need to do – to understand developments, road-maps and informally assess solutions 3-6 months before starting the conversation with Procurement. Why not bring Procurement into the conversation earlier? In my experience this works really well.
    Elizabeth Giugno

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  2. Elizabeth,

    Thanks for a very thoughtful comment. History tells me that the capabilities of procurement of IT products vary widely depending on the enterprise. I’ve seen many where the procurement and IT function is virtually inseparable, and as such the the technical awareness of the procurement team is excellent.

    However I talk to many IT vendors who find that procurement operates as a service center across a number of technical and non-technical segments. They may be researching contracts for furniture on one day, and on the next review an IoT deployment. In the latter case we’ve found that procurement needs content that explains technical products in a much more approachable way as opposed to the “random acts of content” approach many use. I used to produce materials that IT could give to non-technical C-level executives that help justify purchases in a non-intimidating way.

    Also, in my work I’ve found that many companies are asking their supplies for solutions in the RFP as opposed to giving them a list of components or services for pricing. For example the CTO for New York City will have an RFP that simply states that she wants to use old abandoned phone booths/kiosks as wifi stations around the city.

    Given the legacy of procurement leading the legal, contractual and logistical aspects of buying goods and services, this new solutions-centric model has changed the way of thinking of the NYC procurement departments.

    Finally, and to your point, I agree completely that procurement should be involved at the very onset of the planning process…WELL before a purchase is being made. Some of the most valuable insight comes during the strategic discussions, and these can’t be recaptured if procurement only jumps in at the very end just prior to RFP’s being sent.

    Regardless, one of the major challenges remains finding procurement talent with the double and triple deep skills that reflect the diversity in digital transformation. This is not unlike the gripe many business have for the IT department and CIO’s.

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  3. The act of obtaining or buying goods and services. The process includes preparation and processing of a demand as well as the end receipt and approval of payment. It often involves
    (1) purchase planning,
    (2) standards determination,
    (3) specifications development,
    (4) supplier research and selection,
    (5) value analysis,
    (6) financing,
    (7) price negotiation,
    (8) making the purchase,
    (9) supply contract administration,
    (10) inventory control and stores, and
    (11) disposals and other related functions.
    The process of procurement is often part of a company’s strategy because the ability to purchase certain materials will determine if operations will continue.

    Néné

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  4. Thanks for your reply….I agree with the processes you list above. However the challenge I hear about is finding procurement talent that can keep up with the speed of technology, and finding talent that can shift from a procurement mentality based almost entirely on product specifications to one based on creative solutions.

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