This week’s featured webinar was presented by Denali Group and Sourcing Interests Group. Two members of the Denali Group team discussed four challenges procurement organizations face as they attempt to move away from tactical work and retool themselves for strategic category management:
In Denali’s hierarchy of goals and strategy, category management falls between procurement strategy and the strategic sourcing process. Whether your organizational priorities are structured this way or not, the application of their content goes well beyond the specifics of category management and applies more broadly to the procurement group and how they engage with the rest of the company. A great example from the event is considering how a company’s choice to focus on sustainability should impact the handling of a category like facilities management services. The emphasis on ‘green’ capabilities will appear in the requirements, supplier qualification, and award criteria.
Early in the event, Denali shared the following quote on strategy from Michael Porter, Harvard Business School Professor and creator of the Five Forces analysis model:
"Strategy is about being different. It means choosing a different set of activities to deliver a unique mix of value. Strategy requires you to make trade-offs in competing – to choose what not to do.”
The key from the quote is that procurement needs to engage in a different set of activities to deliver a unique mix of value. In order to deliver on this, we will be forced to move beyond savings, advancing the corporate strategy and reflecting stakeholder priorities. Taking such an approach allows procurement to introduce the operational advantages of addressing total cost of ownership: risk management, resource efficiency, improved service levels, and supplier innovation and capability development.
When you are just starting to address the tactical or strategic nature of your own procurement team, evaluate your responsibilities to determine what portion of the work is strategic. Denali made the interesting point that the level of strategy employed in any given task is not the same as the level of value creation associated with that task. Even tactical activities may be completed in support of a strategy and can be of high value to the organization. But as demands increase, we will have no choice but to follow the second piece of advice from Porter’s quote – to choose what not to do.
Once procurement has identified their strategic responsibilities and made the necessary staffing or capabilities adjustments in their own organization, the next step is to make sure that identity reaches the rest of the company. Many procurement teams end up typecast as tactical because internal stakeholders or executive leadership refuses to see them as anything else. The answer is to figure out why you are seen as tactical and address the cause. There are a number of possible explanations, but each requires a different corrective approach:
The resolution may not be easy, but finding ways to be ‘different’ as Porter said, is essential to being (and being perceived as) strategic.