There used to be no greater oxymoron than procurement innovation. The procurement department was stereotyped as being about as glamorous as a term life policy.
But now, in many segments, a new art and science of researching, evaluating and purchasing technology goods and services has stepped up procurement in the cool-job meter.
I worked with procurement managers in many stages of my career, mostly in experiences related to buying large volumes of commodity products like chairs, paper clips and Xerox services. The typical process involved sending out RFPs for thousands of items with very specific details (even down to the paper-clip level). Vendors would then submit a bid based on their most leveraged pricing.
My first experience outside this widgets model was when the CEO and CFO brought procurement in to review pitches from large advertising agencies, after deciding to appoint a new agency of record. The reaction from the Chief Marketing Officer was not surprising. To paraphrase: “What do these pencil-buying bean counters know about the subtleties of running global marketing communications?”
The involvement of quantitative types in qualitative strategies created a revolution of sorts.
However, as purchases became more “considered,” procurement departments found themselves having a very hard time adapting to the velocity of change. Today, they’re faced with a totally different type of customer engagement than they had in the past.
So of late, there has been a wave of new branding strategies for procurement that reinforce the smart, agile innovation required for enterprises and the public sector to compete in a highly competitive digital world.
Tania Seary, founder of Procurious a web site dedicated to big ideas in procurement, notes the shift in perception from your father’s procurement department to new models that mirror the real-time needs of the businesses.
What’s happening to bring procurement into better alignment with the innovation and agility of the business?
- As the old guard retires, new school procurement professionals are coming in with double- and triple-deep skills necessary to understand such critical areas as SMAC (social, mobile, analytics and cloud). In essence, procurement is embedding “shadow technology” just like other business units.
- In hand with deeper skills sets, there has been a seismic shift from specifications-based buying to solutions-based procurement. For example, under direction of the mayor, New York City Chief Technology Officer Minerva Tantoco has transformed the thinking to a Request for Innovations (RFI) process, whereby vendors are asked to develop a plan for problems the city might not know they even have. Needless to say, this requires a totally different mentality from purchasing professionals.
- As I’ve written in the past, start-up companies have often looked at procurement as the ultimate “innovation buzz killer.” Use-case driven procurement may eliminate startups because their products have no track records. To counter this, cities like Pittsburgh have recently created programs that focus on an inclusive approach for startups that level the playing field with technology behemoths.
Other new procurement models require an approach to buying that’s much more creative, collaborative and financially risk averse. One example is Cooperative Purchasing, when public or private entities pool their needs across divisions or companies to gain better leverage of goods and services.
Many of the new as-a-Service models are shifting the burden of savings on to the vendor. For example, many procurement departments are purchasing “lighting as a service”, whereby the vendor makes profits from the cost savings experienced by the city when it no longer has to use taxpayer money to change light bulbs.
How has your enterprise IT changed its relationship with procurement and to what degree have you become that purchasing department for the businesses ?