Where Do You Stand on the Use of Rabbits in Strategic Sourcing?
Sometimes the most interesting part of a blog post is the comment thread that follows it. Such was the case with a recent blog post on the Harvard Business Review Blog Network.
The post itself was written by Reed K. Holden, and titled, ‘The Game Buyers Play with Vendors.’ I advocate reading at least the article itself as it provides a concise overview of the difference between what Holden calls relationship and economic buyers. For the economic buyers, those focused almost exclusively on driving down prices, suppliers fall into a few groups when it comes to RFP participation:
- The Preferred Vendor is the one list likely to win the business from the outset of the process
- The Rabbits are the vendors invited to participate just so that there are enough bids to drive down the price of the Preferred Vendor
- The Advantaged Player is a Preferred Vendor that uses a warren of rabbits to beat up and scare into the best proposal possible
All very interesting, and whether you see yourself as a relationship or economic buyer, many of the dynamics described in the post (from a sales perspective) seem realistic enough that they likely take place all of the time.
The string of comments following the post contained some run-of-the-mill sales people agreeing with what they read or adding some details from their own experiences. The exchange really started to pick up when a buyer-side reader by the username ‘AG45’ took the author to task for portraying the procurement community and the sourcing process as unfair and calculating. Several other readers jumped to the defense of the author until ‘AG45’ logged back in to defend him/herself.
To my surprise, several other procurement professionals weighed in, some on the side of the author and some not. All mud slinging aside, the overall exchange was fantastic. The very best thing about it is that sales and procurement people were talking – not about a deal or a negotiation, but about the dynamics that underpin ALL deals and negotiations. Some of the sales professionals even defended procurement in a way, proving that they clearly understand the inherent conflict in tasking an organization (procurement) to create value while measuring them on their cost cutting performance.
I think the primary take-away from the entire exchange is that your motivation as a buyer OR a seller will come back around to you. If you are asking suppliers to participate in a bid process because you are genuinely considering them for an award, or asking for a price adjustment because you believe there is additional margin that needs to be negotiated away, then you will always be able to justify your actions to the sales team you are addressing. On the other hand, if you invite a supplier to participate just to beat up an incumbent, or bluff a price reduction request just to get better savings figures, an educated sales person WILL see through your tactics and the reputation of your organization, not to mention the results of the project, will be negatively impacted.
Disclaimer: No rabbits were harmed in the writing of this post.