Commercial directors and COOs are in a tough position. Expected to successfully deliver sustained change and innovation while under pressure to also manage costs. And even as those conversations shift to looking for areas to drive out costs, there remains a conundrum. Why do so few ambitious strategies manage to fully deliver on their promise? Too often that original vision gets obscured as it moves from strategy to implementation to its operational phase - mired in the complexity of multiple suppliers delivering constituent parts with little focus on the wider context. To fix it, COOs and commercial directors don’t need to rethink the boldness of their ambitions - they need to rethink how they approach procurement.
Focusing on value in a tough climate
Rising costs and disruption continue to keep procurement teams busy and under pressure to focus on the value they receive for each penny spent. As organisations of all kinds scrutinise their external spend for inefficiencies, two areas emerge. There are the big ticket items - ambitious transformation projects to help set the future direction and growth of an organisation. These tenders are likely to involve considerable input from the affected business functions around defining the what and how. And then there’s assessing where efficiencies can be found in existing, but vital functions. A more straightforward commodity contract - or is it?
Because here lies the opportunity. Tasking procurement functions to approach these tenders with the same old mindset limits the scope of outcomes that can be achieved. It reduces success to a narrow focus of SLAs and cost rather than looking more broadly to where there is the opportunity to turn these functions into more than the sum of their parts and deliver greater value for the business in the long term. So how can COOs make sure this need doesn’t take second place to the push to also manage cost?
Procurement principle: Innovation and performance doesn’t have to be in competition with cost efficiency
Complex managed services done badly simply replicates work. It doesn’t seek to improve or discover additional value in the process. Instead unloved or labour-intensive parts of the business - frequently in back office areas such as payroll or tax - are farmed out with a cost efficiency mindset.
However, if you procure with the mindset of improvement, then innovation and process enhancements can be implemented alongside taking that task off your hands. It’s easy to be complacent with less exciting, more functional parts of a business. But if you find the right partnership, with an expert who can bring their best practice to your problem, you can discover value and efficiency in places you didn’t know it existed.
Business leaders need their procurement teams to pay greater attention to the way they contract their managed services. They should be looking for providers that are going to look beyond the obvious and solve the business problem long-term, not simply deliver it the way it has always been delivered. This might involve greater costs upfront, but with the right contractual arrangements will be cost effective long-term whilst delivering a transformation of your business.
Procurement principle: Multiple suppliers doesn’t always lead to better outcomes
Conventional wisdom dictates that when procuring services for a project if you approach a traditional strategy house for the strategic work, an implementation specialist for the next phase and then finally an operational expert to make it all happen, you end up with the right experts in the right places. You also run three different tenders and introduce a helpful amount of competitive tension to drive better value. So far, so good.
But when this happens in reality, what you frequently end up with are inefficiencies, finger-pointing and reduced value. Who is responsible for ensuring that the vision you set out with is fully embedded with a minimum of disruption? Clearly, this linear start-to-finish approach needs rethinking.
This isn’t about just picking different suppliers, this is a fundamental rethink in how to go into the market for services. The future lies in partnership with a single supplier, who takes responsibility for the end-to-end needs of the business and joins together each phase of the project to achieve jointly agreed, guaranteed contractual outcomes. It’s about tying that high-value strategy work to operational delivery via a trusted partner who understands and is aligned to your business objectives.
““Probably the most common client issue is the difficulty in operationalising the strategy. Too often the operational side is left until last leading to compromised and reduced outcomes. The waterfall approach of handing over after each stage leads to unseen inefficiencies in my experience. You find that having taken a linear approach, the operational side has been left until last and you can find yourself trying to hammer a square peg into a round hole. The trouble is, when you introduce multiple suppliers, the incentives to make each part work in harmony are reduced.”
Ian McConnell , Execution Managed Services Leader, PwC UK
Procurement principle: Provider or partner?
By procuring with a different mindset - one that is focused on the overall outcomes for the project - you can reduce the handovers needed at each stage and bring each part of strategy, implementation and operations together. And amid cost pressures and disruption, procurement teams might baulk at the thought of putting all their eggs in one basket - but the benefits of a partnership approach don’t mean losing that focus on value.
Procurement teams can help by building in greater accountability and transparency at the contracting stage - coupling the end-to-end services with business outcomes, rather than traditional transactional SLAs. There should be skin in the game from both parties - tied to commercial outcomes and they should be able to share in the success of the proposed project.
Key to this is starting with the desired business outcomes - put to one side the siloed pieces of work to get there and actually procure with the outcome in mind, rather than the pieces that make up the puzzle. It should be about what you’re asking for and whether the supplier can deliver those outcomes - not about who you’re asking.
Increasingly, organisations are experiencing the value of partnering with one provider that can provide an end-to-end service, from strategy right through to delivery and run. Entering into this trusted partner relationship removes the value leakage that occurs through each transition stage, and ultimately, leads to better business outcomes.
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