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2021 Annual Letter (Part 1): Day 1 for Procurement

By December 30, 2021April 9th, 2024No Comments

In 2018, I started writing a pair of annual letters to close out the calendar year by reflecting on the strides that procurement – and Art of Procurement – had made during the year. I took a hiatus last year because, frankly, there was not a lot I could say that hadn’t already been said. However, this year, they return!.

Today is Day 1 for Procurement

I love the notion of “Day 1” on a number of different levels.  

A mindset that every day is “Day 1” drives me personally as I build and grow the Art of Procurement. Opportunities exist to be taken advantage of; challenges exist to be overcome; and both should be addressed head on.

“Day 1” also symbolizes the ability to reset. To reflect on what has worked, what has not, and to learn from both. Reimagining the outcomes that you want to drive allows you to build or adjust your plan of execution.

The end of 2021 is an exciting time for procurement. We have become increasingly important within most businesses simply by doing what we do best: ensuring continuity of supply and managing cost pressures in times of inflation. 

However, I would argue that a number of businesses did not pick up the phone out of a newfound understanding of our value proposition, but out of a need to solve a challenge. That’s been great for us over the past 18 months, but ensuring supply and managing cost pressures is NOT what will carve a new path for procurement – after all, we’re already in that “box.” It is the outcomes we drive beyond savings and supply that will drive the future role of procurement once the pandemic pressures have passed. 

In my conversations with prominent CPOs, many of whom have 20+ years of experience, there is almost a giddiness about the technology that is now available for them to leverage.  Our ability to reshape procurement is limited only by our imagination, not by the technological limitations of the tools and software at our disposal.

As Dr Elouise Epstein passionately made the case for in an interview from November 2021, the greatest time to be in procurement is NOW. 

If today is Day 1 for Procurement, what can you achieve? 

Does Your Procurement Team Have a Day 1 Culture?

Jeff Bezos and Amazon have operationalized the idea of “Day 1” into a culture that has built one of the world’s largest and most successful companies.

From Amazon.com

“Those principles—maintaining a long-term focus, obsessing over customers and their needs, and boldly innovating to meet those needs—have remained consistent for over two decades, and lie at the heart of what is known at Amazon as a “Day 1” mentality. Day 1 is both a culture and an operating model that puts the customer at the center of everything Amazon does. We strive to deeply understand customers and work backwards from their pain points to rapidly develop innovations that create meaningful solutions in their lives.”

To go further, Amazon contrasts “Day 1” with a “Day 2” culture:

“Day 1 is about being constantly curious, nimble, and experimental. It means being brave enough to fail if it means that by applying lessons learnt, we can better surprise and delight customers in the future.

Contrast this to a “Day 2” mentality: as a company grows over time, it needs to adjust its approach to effectively manage the organization as it scales. The danger is that as this happens, decision making can slow down, and the company can become less agile, moving further and further away from the customer as it rotates focus towards internal challenges rather than external customer-centric innovation… Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death.”

Does “Day 1” or “Day 2” best represent your procurement team?

The entire reason I started the Art of Procurement podcast in 2015 was to steer us away from the “Day 2” mentality. I spoke about it in the teaser episode over 6 years ago:

“Our greatest challenge is to become, or remain, relevant to our organizations. Being relevant gives us the platform we need to show there is far more to our profession than just sending out RFPs or squeezing the last margin point out of a supplier.”

One of the constant messages across all of our content over the past 6 years has been that, if we don’t crack that nut, then there will be no procurement in the future, just a death by a thousand cuts.

It is always a worthwhile exercise, especially at the end or the beginning of a year, to reflect on where you are. Anecdotally, across the leadership teams of the procurement consulting community there is a consensus that we still have a long way to go. Throughout 2021, we have been showcasing the journey underway at BT Sourced as an example of a team who is rapidly transforming in real time. Of course, not all procurement teams have the scale or resources at their disposal as BT – but that doesn’t mean that lessons cannot be learned, even if they must be applied more pragmatically. 

3 Big Themes to Drive a “Day 1” Culture

There are a number of key issues that will gain greater prominence in 2022: the continuing digitization of procurement and the focus on ESG (environmental, social, and governance) initiatives to name but two.

However, we believe that there are three broader themes that procurement must focus on which provide the platform for investment in technology, in delivering ESG initiatives, and the entire spectrum of value that procurement can create.  These are what enable the relevancy that I spoke of back in 2015:

Theme 1: Outcome-focused procurement

Procurement must obsess over the outcomes we deliver for our customers. By customers, I am referring to all of our stakeholder groups – internal and external. The hard truth is that nobody cares about our features and benefits outside of procurement. They care about the outcomes that they must deliver and whether or not ‘we’ (procurement) can assist them in doing so.

We’re going to place a lot of focus on three different ‘outcomes:’ speed, scale, and strategy.  All three can be viewed from the internal procurement perspective as it applies to building our own capability and through the lens of our business executives. 

Theme 2: Experiential procurement

Procurement will not get the chance to drive outcomes that matter without delivering seamless, consumer-like experiences. This is particularly important on the transactional end of the procurement value proposition: ordering basic supplies, onboarding suppliers, and ensuring they are paid – for all those purchases traditionally considered tail spend. 

We’re always going to have to be on guard to avoid slipping back into our old ways – especially with transactional spend. We can’t emphasize experience in meetings with the business and then return to the status quo once the meeting is over. 

Experiential procurement requires a thought process transformation, but ‘muscle memory’ is strong. It may take some time before experiential procurement comes to us naturally, but we should keep at it – after all, as the experience we provide to the business improves, our experience will change as well, definitely for the better.

Theme 3: Insight-driven procurement

You only get one chance to make a first impression. In procurement, that means showing up with data and insights that go beyond what is already known by stakeholders across dimensions such as customer, business strategy, supply market, and delivery best practices (see below).

By collecting and collating these insights and translating them into actionable recommendations procurement can (finally) differentiate ourselves. At Art of Procurement, we’ll be sharing more insights in 2022 than ever before, utilizing our ecosystem of subject matter experts along with partners such as ProcurementIQ. 

None of us knows what 2022 will bring, but the mindset we have as we start the year will certainly color our perspective on opportunities as well as challenges. Sometimes it is enough to believe that this year is our year, this time is our time, this day is our ‘Day 1’ to make it true.

If you also find the start of the new year a good time to look backwards and forwards at the same time, we would appreciate hearing from you. What actions are you prioritizing to start the new year? Do you agree that there is no time like the present? What challenges might get in your way?

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