Tuesday, 28 August 2012

Innovation scorecards

Public exposure of MPs expenses and the resulting scandal led to a belief that greater visibility of how public money is spent would lead to greater value for money.  This would be achieved as a result of an army of 'armchair auditors' leaving no stone unturned in their scrutiny and calling to account those who fail the test of good public stewardship. As if that would be suffice, in parallel the Audit Commission were stood down and CPA/CAA scores deemed unnecessary.  I have never met anyone who has taken the time to look at the published data on central or local government contracts over £500 and I suspect the cost of collecting and publishing the data far outweigh the benefits.  My own experience is that there is still a chasm to cross before the bland data published can provide any meaningful information.

However, it also came to light today that £36.4bn  is outstanding in late payments to SMEs over the year to July 2012.  With 1,011,000 SMEs affected that works out at an average of £36,000 each.  In turn that represents potentially quite a reasonable dent in unemployment statistics if that late payment were able to be channelled into salaries.

You may ask what is the connection between the NHS innovation scorecards and the late payment statistics?  Well to me the current publication of expenditure data has proved to be costly and an ineffective weapon in economic recovery.  Equally, we see an absence of innovation in public procurement in spite of the innovation in public procurement white paper having been published in 2008 and we have clear evidence that performance in paying debts isn't acceptable.  

My suggestion would be that rather than worry about publishing unheeded data on public spending and worrying about NHS innovation scorecards, why not shift the emphasis to public procurement innovation scorecards.  Scorecards which highlight how good a public procurement organisation is at adopting best practice, paying SMEs on time, and saving money.  Surely that would be more beneficial and push towards a tool which could actually assist with economic recovery.

Friday, 24 August 2012

The application of Porter's 5 Forces Model: Procurement resource or nemesis?

It's a funny old world. 5.5m results were found in a 'google images' search for Porter's 5 Forces Model. Hours are spent forcing the Model into students heads.  Yet could it be that using it as a tool for pragmatic analysis and development of strategy is cast aside on graduation like the mortar boards cast to the wind in pre-H&S days. Is the Model relevant or just a set piece of business school theory? If however we used the Model as a tool, would it suggest a change of strategy?

Let's think in terms of developing a procurement strategy. First we need to understand that the buying firm are in the middle - I appreciate that contradicts some well known texts!  As the buying firm we are part of a value chain supplying external customers and clients -  the buyers in this case are upstream from our firm.

While the bargaining power of buyers and, threat of of new entrants and substitutes should therefore be uppermost in the minds of the marketing manager, the later two should have a bearing on how the procurement manager thinks too and help in framing the procurement strategy.

When we refer to the firm's procurement strategy, the 'bargaining power of suppliers' relates to our suppliers.  The 'threat of new entrants' relates to potential new entrants which our customers could draw on (displacing us) but just as easily, how potential new entrants to the market could disturb the bargaining power of our suppliers and enable us to source elsewhere. The procurement manager would want to reduce the barriers to entry for potential new suppliers and in so-doing increase choice, potential new sources and a healthy competitiveness within the market. Equally, when we refer to the threat of substitutes we can view that as potential new products and innovations which could make us more competitive and replace the 'old spec'.

A few years ago I carried out some research on the Global Financial Crisis (GFC) and whether it had led to changes in procurement strategy. I was aghast to discover that the over-whelming response was that it hadn't - the respondents were, according to them, implementing a pre-GFC strategy, a strategy developed in an entirely different environment. Five years into the GFC I dread to think that the same situation may prevail. However, what I want to consider is whether a short term approach to procurement strategy may well be detrimental to long-term strategic objectives.

Let's consider the current environment which prevails in many countries.

Tuesday, 21 August 2012

The Collaborative Organization (Book review)

An excellent, pragmatic book for anyone concerned with Digital Strategy and particularly Social Media (Web.2/E2.0) Strategy. While presented as focusing on intra-organisational collaboration, I feel that doesn't do the book justice, since it also addresses customer-facing dimensions.

I particularly liked the maturity model and could see that being of great use for baselining and also developing an incremental route-map.  My only word of caution relates to the Framework for Feature Adoption - while it is useful, it is just one route-map and my experience suggests there is no 'one-size-fits all'; what is important is to work with the culture of the organisation and the primary business outcome you're aiming to achieve.

The book was an easy read, well structured and something I could see being dipped into time and again.

Friday, 17 August 2012

Lessons from Ecuador

What a complete and utter mess the Julian Assange extradition has got itself into. Yet I think there are lessons which we can apply to procurement.  But before we consider whether or not procurement can learn something from this, let's have a bit of context.

Julian Assange founded Wikileaks and appears to take pride in his orchestrating the publication of what are considered to be inflammatory state secrets. Whether or not that is a crime or a cause for adulation is debatable. To add to that inditement though there are allegations that Assange committed sex crimes in Sweden; those are serious allegations and, if he is guilty, his victims require justice. I can't even remember how Assage ended up in the UK but it predates the Borders Agency debacles.

The UK judicial process deemed that Assange should be extradited to Sweden to assist Wallander's mates with their enquiries. Assange, with his own interpretation of transparency and justice, wasn't just as keen on transparency as we would at first thought. He went to ground claiming this was all an American conspiracy to get him within the reach of the Stars and Stripes where justice would evade him.  The Celebrity Big Brother house wasn't considered a safe haven so he took refuge in the Ecuadorean Embassy.  (Let's not forget that while most could reliably make a stab at locating Sweden on a map, I think it would be an interesting challenge for those who have just received 'A' Level Geography to locate Ecuador on a map.) Assange lost his appeal against extradition to Sweden and now there's a stand off.  One man and one generally unknown country standing in the way of UK, Swedish and US aspirations.  This isn't David and Goliath, this is the equivalent of two hobbits against a gang of Goliath and his buddies tooled up with an arsenal.

Wednesday, 15 August 2012

Rail questions

We have now learnt that Virgin have lost the West Cost rail franchise to FirstGroup.  This raises some interesting procurement questions which are worth further discussion.

I have been using both the West Coast and the Great Western for 12 years.  If I was completely ignorant of who runs each of the current franchises and they were both using the same livery, I would have no problem comparing and rating service.  In fact I would say there was no comparison.  Then we have the facts:

Virgin is clearly ahead on past customer service. Yet it seems only a few weeks since we heard that the Government will have a blacklist of poor performing suppliers.  How much emphasis should be given to the evidence of past supplier performance or as the Minister ironically called it 'track record'? How much emphasis was given to it on this occasion?  If you were leading the evaluation, how much emphasis would you have given?  In your domestic shopping how much emphasis do you give? In your professional position how much emphasis do you give?

Saturday, 11 August 2012

"The costs of possible failure were always greater than the benefits of possible success"

I was surprised to read Matthew Parris' opinion piece in today's Times 'Hurray. But it wasn't worth the colossal risk'. Parris' acknowledges that the Games have been a success but speculates, sceptically, that a future cost benefit analysis of 'The Games' will seek to argue that we've all benefited as a result of the 'happiness and feel-good legacy ', yet miss the fact that it could all of gone so terribly wrong: "The costs of possible failure were always greater than the benefits of possible success" - we escaped by the skin of our teeth as some of the potential risks just didn't materialise. Parris' view is that we couldn't afford The Games and we couldn't afford the debt which will be the additional cost on society.

I'm afraid he forgets that the Olympics delivered an unintended consequence of providing the construction sector with something to do when we hit the global financial crisis five years ago.  'Things happen' - we hadn't planned the crisis but the Olympics provided an initial buffer.  When something unintended happens you have to respond - our failure was in not recognising that breathing space, excuse the pun, constructively.

But let's not forget that the Olympics have provided us all with some useful procurement disasters. We escaped by the skin of our teeth some of the risks which didn't materialise, but we also escaped by the skin of our teeth some of the risks which DID materialise! Just have a trawl through my blog for a plethora of useful procurement mishaps or even recall the outcry over the logo procurement.  Why do I say 'useful'?  Well quite simply we need to learn and step away from what I feel is wrongly celebrated as a virtue of 'Keep Calm and Carry On'; muddling through by any other name.  That's not in the Olympic spirit, it's folly and complacency.  The Olympic spirit is the success derived from constant learning, improving and refining.

Saturday, 4 August 2012

Thoughts on reshaping the procurement paradigm and 'The Elastic Enterprise' (Book review)

It's not often I come across a book which really makes me wonder are we looking at the early signs of a new procurement paradigm - well The Elastic Enterprise does.  However, before I get to the procurement implications ...

The book would sit comfortably beside Porter's 'Competitive Strategy',  Lamming's 'Beyond Partnership' and Sandel's 'Justice' as saying something worth dipping into and mulling over, time and time again.

Strangely, I can't remember how I came to receive this book but I'm fairly sure it was through responding to a social media invitation. I'm not going to name the organisation, but thanks RA and LM for the book, yes, it was excellent.  As a one sentence summary, The Elastic Enterprise is a descriptive account of how organisations such as Apple and Amazon have been successful based on five dynamics, namely, Sapient Leadership, Business Ecosystems, The Cloud, Universal Connectors, and Business Platforms.

I actually read the book out of sequence, starting with Chapter 3, 'Creating the elastic enterprise'.  I thought this was one of the clearest explanations of digital strategy I have come across - the section on Cloud was particularly good but perhaps more could have been said about the implications of BYOD and social media.

Having said that, it was Chapter 4, 'People Unlimited' stirred my imagination.  Yes, I recognise and have long argued for supplier integration and co-production to deliver innovations through procurement.  I have also been advocating social media and recognised the role of ecosystems for some time - indeed spent two years working on a social media as a tool for efficiency improvement. However, prior to reading the book I hadn't made the connection between the two or how firms, like Apple and Amazon, lead an ecosystem in which suppliers provide, at a cost to themselves.  To me the ecosystem represents a new procurement paradigm: many small innovative providers working individually within a structure orchestrated by a leader. SCM thinking needs refreshed. The traditional idea of competing for contracts needs refreshed. The traditional model of contracting needs refreshed. Procurement's approach to M&A needs refreshed. That's quite a shift.