Surefire strategy #8 for producing a consulting train wreck: “Just focus on what you can control, you can’t be blamed for the actions of others”
The next of my guaranteed approaches for driving the 4:55 to Deliverable City off the tracks at Milestone Curve is “Just Focus on What You Can Control, You Can’t be Blamed for the Actions of Others”. Strategy #8 typically unfolds something like this –
During the development of your strategic sourcing consulting proposal you include a section, usually somewhere near the back, called “Project Assumptions and Risks” (or something similar) where you lay out all the things that could possibly go wrong on the project and define all the assumptions that must be true for these things not to happen (e.g. business unit buy-in to ensure adequate spend is available to negotiate best possible pricing with suppliers, availability of client resources to support collection of all required data, etc.). You might even define a proactive risk management plan describing actions that can be taken to doubly ensure that the dark events do not occur. This could include steps such as forming executive steering committees, cross-functional project work teams and stakeholder focus groups. You submit your proposal, win the work, and arrive at the client site. You engage first gear and start rolling down the work plan track, confident that (i) you have every possible eventuality covered and (ii) that if something does go wrong it must be some force majeure, the fault for which cannot possibly be laid at your door…..
About six weeks into the project disaster strikes. One of the client’s largest business units decides it will withdraw from the project and instead renegotiate with its incumbent supplier (who had declined to respond to the RFP), effectively removing over 40% of your spend base. Within 48 hours, five of your shortlisted supplier candidates have got wind of the spend that has “left the table” and not surprisingly become much less willing to extend the type of pricing you were hoping for. At a hastily convened executive steering committee meeting, some key of the key dialogue includes:
CLIENT CFO: Quite frankly I was concerned about something like this happening. The complete value proposition of the sourcing exercise was always questionable if we lost business unit support.
YOU: I have to admit I’m very surprised. Sarah seemed completely on board at the kick-off meeting. I guess their supplier decided to do what it took to keep the business.
CLIENT VP PROCUREMENT: Colin tells me that our five shortlisted suppliers from the RFP first round have rescinded their pricing based upon the lower spend. The average contract savings is now only 3% - hardly the solid business case for persuading the other business units to switch….
CLIENT CFO (turning to you): I thought your risk management plan was designed to address every contingency. Don’t we have a plan B? I put my neck out for this project – really hyped it to the business units and the board.
YOU: Well, we did specify that a major assumption was having full business unit support, and like I said Sarah was saying all the right words at the kick-off. I don’t know what else we could have done...
(CLIENT CFO shakes his head in frustration).
Shortly after this meeting takes place the client cancels the sourcing project, pays your firm for services rendered to date and you are left scratching your head about whether you could have done anything differently. Well, could you have? Sarah turning to the Dark Side was outside of your control wasn’t it? Well, it turns out that you could have done something different and you might even have been able to prevent Sarah succumbing to the siren call of her incumbent’s bargain basement pricing. What? You could (in fact, should) have implemented a Stakeholder Management Plan.
A stakeholder management plan is the only way to deal with those pesky client folks who sneak up on you and drop grenades into your project team’s bunker just as you are all enjoying the idyllic peacefulness of a smoothly unfolding work plan. A stakeholder management plan is an approach to unmask these individuals in the earliest stages of project planning so that you can understand their motivations, their objectives and – most importantly - their ability to derail your engagement. A best practice stakeholder management plan should be incorporated into any consulting project that requires the involvement and support of influential individuals that are not members of the core project team. This will certainly be the case in the majority of strategic sourcing projects, particularly those addressing categories where procurement has not historically enjoyed a strong decision-making role. In these cases the following steps should be taken:
Step 1: Immediately post-sale, work with your client’s project sponsor to map key stakeholders on a matrix of “Influence (low or high)” against “Support (low or high)”. Utilize your sponsor’s knowledge of his/her organization to surface issues that may not be instantly apparent such as Sarah’s long term relationship with her business unit’s largest incumbent supplier and the ease with which her support might crumble if the supplier moved to aggressively protect its business.
Step 2: For stakeholders like Sarah you should work with your sponsor to secure her support by suggesting ways that her objectives could be met by supporting the project. For example this could involve asking her to persuade her incumbent to participate in the RFP, or perhaps to more aggressively market the impact that the sourcing project’s savings will have on her business unit’s P&L.
Step 3: Enlist the help of high influence/high support stakeholders to market the positive aspects of the project to the “Sarahs” of the organization, particularly those in similar situations, e.g. ones that have their own incumbent suppliers who stand to be impacted by the sourcing project. Ask these stakeholders to explain why they are supporting the project – task them to bring Sarah into the “high support” camp.
Step 4: Monitor stakeholders like Sarah closely during the project to make sure they stay committed. If they waver, do the work to understand their concerns and leverage your supportive stakeholders as needed to help her maintain her resolve.
Follow the steps above and you will avoid the derailing of your project by client stakeholders over whom you have no control. In fact, by following the steps above – by proactively identifying and managing these stakeholders – you will in fact have a large measure of control over any individual who could foil the success of your project.
In other words – yes, AVOID AT ALL COSTS Surefire Strategy #8 for Producing a Consulting Project Train Wreck “Just Focus on what You Can Control, You Can’t be Blamed for the Actions of Others”!! Implement the antithesis of Strategy #8 instead! Always include Stakeholder Assessment & Management as a formal, integrated component of your project work plan.
How to get away with almost anything, and while people are looking too - the power of brand capital
Originally posted on January 29, 2010
This is a momentous occasion - my first blog post from the air. Taking advantage of VirginAmerica's inflight wi-fi I am penning this missive from seat 23C on Flight 411 from JFK to LAX. Why you might ask? Well for a start to take my mind off the non-stop turbulence we've been suffering since we left New York. (Ooops - upchuck). Secondly because this flight and this airline bring to mind a seldom discussed aspect of procurement, that of brand capital.
When I walk off this plane tonight at LAX (oh speed ye to me thy blessed moment! Ooops - upchuck) I will be one green and weary traveller but my love of flying VirginAmerica will be undiminished. Why? Because for me VirginAmerica possesses significant brand capital. Brand capital, that "feel good" factor for a company's products that allows buyers to forgive the occasional bad experience, causes me to ignore this isolated nightmare because of all of the other delightful experiences I've had flying this airline.
Brand capital is a powerful value lever both to suppliers and to the Procurement organizations that select them. If you are a supplier that consistently exceeds all your service level metrics then your resulting brand capital will prove invaluable when life's occasional slippery spot causes you, your coke and your large popcorn to careen headfirst into your customer's lap. They'll laugh, pick you up and dust you off because they know it's a very rare incident in a Titanic-length success story.
Similarly if you are a Procurement Department that proactively sets out to select and develop suppliers that consistently exceed internal customer expectations then you will develop brand capital with these same internal customers yourself. An example of this is a client of mine that places over 80% of its commercial print spend with one supplier. This supplier has consistently exceeded all minimum required performance metrics for quality, delivery and service since it was selected through strategic sourcing by my client's Procurement Department four years ago.
The one potential blight on this supplier's copybook during this run of excellence occurred during 2008 when prices of some paper grades rose by more than 30%. As you can imagine this printer had to pass on some fairly significant cost increases to my client during this period, even though my client's Procurement Department had negotiated best practice caps and collars on allowable percentage price increases. Despite the stinging blow to my client's print budget the print supplier was not tarred, feathered and duct taped to the front railings. No, the supplier enjoyed brand capital and thus was held blameless for market prices increases over which it had no control (and there lies another lesson - without brand capital you often will be blamed for events outside of your control).
Further, in addition to the print supplier enjoying brand capital directly from its performance my client's Procurement Department built its own brand capital (in this case with the Marketing Department, the main consumer of commercial print) by selecting the supplier in the first place and doing it in a way that clearly placed appropriately high weight on non-cost factors. This would make it considerably easier for Procurement to broach the subject of cost reductions with Marketing in the future because Marketing would know from experience that its quality and service needs would not be ignored in the quest for improved bottom line performance.
So whether you are a supplier or a buyer, I recommend that you proactively work on building the highest possible levels of brand capital with your respective customers. Come on - at least put as much effort into it as you do to maximize your frequent flyer miles or your Starwood points! Be warned - when your brand capital balance gets low and the sky falls you risk the buck not only stopping with you but it being super-glued to your desk.
And VirginAmerica Flight 411? No turbulence for an hour...but here come the Rockies. (Ooops - upchuck). No worries, Mr. Branson - you got brand!
This past Christmas I was watching one of my favorite holiday season movies "Love Actually" and was watching the part where Hugh Grant (playing the British Prime Minister) is giving a press conference following meetings with the U.S. President (played excellently by Billy Bob Thornton). In these meetings the President has said that he will give the Prime Minister anything he wants unless "it is something he doesn't want to give". In the press conference Grant's character calls the President on his bullying tactics saying that the formerly special relationship between their countries has become a bad relationship for Britain. From now on the Prime Minister will make his own demands clear and stand firm on issues that are important to Britain. Go Hugh!
I was reminded while watching this scene of my time as a procurement practitioner in one particular company when I was often invited by user departments to provide assistance with sourcing activities. My relationship with this department was considered "special" from the department's point of view so long as my involvement was limited to providing general guidance on procurement best practices such as RFP procedures, contract templates and the like. On those occasions, however, where I challenged the rationale behind a supplier selection decision (especially when it involved an incumbent vendor) it was made clear that I was going outside of my area of responsibility. So, in effect, the relationship with procurement was only special from the department's point of view if I did not ask for something that they would not give.
What had happened in this instance was that the relationship was not "special" at all but had become a bad relationship for everyone - the user department, procurement, and the company. The user department was making supplier selection decisions based on entrenched histories with certain suppliers rather than an objective evaluation of total cost of ownership. Procurement (in this case, me) was not being assertive enough in challenging user departments with data-driven arguments for considering alternative supply options. And the company was suffering from the relationship because ultimately there were sourcing decisions being made that were not necessarily in the best interests of the organization or its shareholders.
So if you are a procurement practitioner facing the same issues I did how can you turn the relationship you have with your user departments from bad to truly special? Take a leaf out of Hugh's book and hold a press conference. Step out into the spotlight and tell your user departments and your company's senior management that the relationship you have with your internal customers is currently dysfunctional. Tell them that for your company to realize maximum value from its supply relationships there must be open and honest evaluations and communications about the relative merits of alternative vendors. There must be crucial conversations about whether incumbents still offer the most compelling value propositions for total cost of ownership, quality, service and supply risk. There must be a global recognition among internal customers, procurement, senior management and suppliers that the correct sourcing decision is not necessarily the most popular.
For sourcing insights that can be gleaned from "National Lampoon's Christmas Vacation", stay tuned for my next post.
In the 1982 Boston Marathon, world record holder Alberto Salazar outsprinted fellow American Dick Beardsley to win the "Duel in the Sun", one of the most memorable races in marathon history. Interviewed years later Beardsley said his undoing had been "taking a breather" immediately after he and Salazar had negotiated notorious Heartbreak Hill, the last of the four Newton hills just four miles from the finish of the grueling Boston course. Beardsley recounted how he glanced to his side as the two men crested Heartbreak and saw his rival coasting down the hill, obviously recovering after the tortuous climb through Newton. Beardsley likewise "eased off the gas" in his words until the two men reached the bottom of the grade. At that point both runners kicked up the pace and began the frenetic two mile sprint through downtown Boston that culminated in Salazar pipping Beardsley at the tape in Copley Square. In his interview Beardsley told how in hindsight he should not have relaxed after scaling Heartbreak Hill but should have kept his "foot on the pedal". By doing this Beardsley believed he would have built an unassailable lead on Salazar and would have won the duel in the sun.
Would history have been different if Beardsley had kept his foot on the gas? We'll never know. It does however conjure up an interesting parallel with today's economic landscape and, specifically, the reactions of different business organizations to changes in this landscape. For example, throughout this most recent economic downturn supply chain executives in private sector companies have faced tremendous pressures to protect profits in the face of falling sales through the aggressive pursuit of reductions in all supply chain-related costs. In the public sector it has been a similar story as state governments, faced by steeply declining tax revenues, have needed to drastically curtail expenditures on many state programs. During this period numerous supply chain organizations have delivered outstanding cost savings results that have helped companies stay profitable and states avoid the need to eliminate many essential government services. These success stories have been due to the effective implementation of a broad range of supply chain best practices including strategic sourcing, demand management, and process improvement to name just a few.
As we emerge from this recession and rebounding customer demand eases margin concerns it would be natural to assume that organizations could safely "ease back" on the cost reduction pedal (just as Beardsley did after Heartbreak Hill) and redirect effort towards the customer-facing activities that impact quality and service. Companies making this assumption, however, may be missing a golden opportunity to achieve unassailable competitive advantage over their competitors. By continuing to apply cost management best practices during economic growth periods a company could potentially accelerate away from its competition in terms of operating margin performance. The company with superior operating margin will, through its increased contribution to retained earnings, be able to invest a greater proportion of its revenue in product development activities. Since product development dollars as a percent of sales is a metric that has been empirically associated with share and profitability growth, any strategy that accelerates a company's operating margin advantage relative to its competitors will also accelerate its overall competitive advantage in the marketplace. By keeping firm post-recession pressure on the cost management pedal an organization gives itself an excellent chance to build a healthy lead over its less enlightened competitors in all key areas of strategic, operational and financial performance.
Likewise, public sector entities can also enjoy the benefits afforded by a continued focus on cost management in the post-recessionary period. State governments with procurement departments that maintain a strong strategic sourcing focus, for example, will be able to do "more with less" and expand the reach and effectiveness of their current programs and services without the need to automatically increase tax revenues.
Just as Dick Beardsley can never be certain that doing things differently would have secured him the Boston Marathon in '82, no company can take any business strategy to the bank until events have played out. Numerous other bumps in the road can rise up and unseat the surest rider. But by placing bets on strategies that have empirically yielded superior returns - and those based on maximizing product development investment fall into this category - you will undeniably reduce the probability of ever having to look back and regret your own lost duel in the sun.
The Magic of BBP
Interesting piece in the Pharma Times this week about how the UK's National Health Service (NHS) recently discovered it was paying widely varying prices for the same equipment and supplies. In NHS procurement waste “costs £1 billion a year” John Neilson of NHS Shared Business Services (NHS SBS), an alliance between the NHS and IT services firm Steria, reveals that a new NHS SBS database identified up to 19 different prices for the same pacemaker, and 22 different prices for a surgical tool. The article goes on to suggest that one of the biggest barriers to the NHS achieving significant cost savings in medical equipment & supplies procurement is that physicians are reluctant to participate in initiatives such as strategic sourcing because they fear they will have to compromise on quality and performance.
What jumped out at me from this article was the basic question: did anyone even know the NHS was paying all these different prices for the same product? To be fair, the article does not make it 100% clear whether the different prices being paid are for products with identical manufacturer brand names and specifications or only equivalent specifications from different OEMs. I read it as the former, for example the cardiology department in an NHS hospital in London might be buying a Boston Scientific Altrua Model # S404 Pacemaker for one price while another NHS hospital in Manchester could be buying the same S404 pacemaker for 10% less. This would be a totally believable situation with all the hundreds of NHS locations in the UK that could be buying this and other products with no coordination or communication between them.
If it is indeed the case that the new NHS SBS database has unearthed the previously unknown fact of multiple NHS buyers purchasing identical products at widely varying prices (and often I'd bet from the same supplier) then questioning the willingness of physicians to embrace the principles of strategic sourcing best practices is premature. What has been stumbled upon is actually one of Procurement 101's most basic but also most productive source of quick win cost savings - find out who in your organization is buying this product at the lowest price today and get everyone buying at that price, or "Buying at BBP (Best Buyer's Price)" as some purchasing veterans call the practice.
Buying at BBP is completely non-strategic but in some cases can deliver levels of early savings sufficient to fund the truly strategic investments required to create and sustain value over time such as strategic sourcing, supply chain optimization and demand management. In my opinion it's overlooked in many cases because it's so simple and, well, because let's face it we didn't go to business school to create value for our customers with such trivial solutions.
In the case of the NHS (and the same could apply to any mid or large-sized organization with multiple decentralized buying locations) I would be concerned that nobody is considering the Buy at BBP approach. Someone should be getting hold of those new database reports and identifying the name, rank and serial numbers of the buyers that secured the lowest pricing for those items with the highest annual combined usage across all NHS locations. Two things should then happen. First, these buyers should all be sent generous denomination Marks & Spencers Gift Cards. Second, someone should be assigned responsibility and authority to negotiate with the BBP suppliers to have the lowest price extended to all other NHS buying locations that are buying these same items. Suddenly, simply, almost magically a windfall of hard savings will have showered down upon the NHS without a single physician being asked to consider another brand or back down on a specification.
And one last thing. A new enterprise-wide database is not necessary to identify BBP opportunities. The same outcome can be achieved by pulling accounts payable vendor disbursement data from different locations and consolidating the data into one file. Look for those vendors being used by the most locations within your organization - these will likely be the vendors selling the same products to different buyers at different prices. You can then go the locations those vendors are selling to and pull item level usage and pricing data to identify specific pricing discrepancies and the savings available from buying at your organization's BBP. Sure, this approach requires a bit more manual effort and legwork but do you really want to wait around for one of those enterprise data warehouses to be built before you can create the cost savings? Besides, to quote Booker T. Washington: "Nothing ever comes to one, that is worth having, except as a result of hard work."
There's been a joke going around for a while now that some of you may have heard already. It goes:
Question: "When are consultants not consultants?"
Answer: "When they're hired by Thames Water."
Referring to the outsourcing deal won by Efficio last year to manage $500M of the British water utility's procurement spend the joke is at the expense of Thames procurement head Simon Rutter. Rutter's detractors - and there's been a few of them - criticize him for not knowing the difference between outsourcing and a 5-year consulting engagement. Hmm, now I don't know the specifics of the Efficio agreement but neither does anyone except Thames and Efficio (Thames Water is a private sector company so doesn't have to make it's vendor contracts public) and that's why I think Rutter's critics are at best presumptuous and at worst disrespectful to assume he's been Jedi mind-tricked into gifting the procurement consultancy with a multi-year time and materials goldmine. Having structured some (admittedly smaller scale!) projects in the last few years existing in that neutral zone between outsourcing and consulting I and the customers in question have come to realize that several approaches are available to ensure such arrangements are genuinely mutually beneficial. For example it clearly doesn't make sense to pay a consultant $200/hour for 40 hours a week for five years to do the job a company employee would have done for $100K/year no matter how skilled the consultant. It doesn't compute. What you have to do is pay the consultant a significantly lower rate but top it up with bonus compensation tied to some form of created value that can be measured, like perhaps contract price reduction through sourcing. Smart customers will also cap the bonus pay at levels that provide incentive but don't end up paying the consultant five times what you would have paid them under a fixed cost structure.
And what about the seemingly interminable length of some of these deals? From the press release soundbites it would seem an Alpha Centauri round-trip could be completed before Efficio and others relinquished their sweaty grips on the procurement throttle of those who would outsource it all. Well even here there's a route to sanity. It comes by way of a telling little term spilled by Simon Rutter but ignored by those who assume the man with responsibility for leading the procurement function of the UK's largest water utility knows only how to throw a heavy set of keys over a high wall. In Supply Management this week Rutter spoke of having consultancy capability on tap. What he probably meant was that one condition of the deal with Efficio was that he have the flexibility to turn that tap off if and when the situation warranted. This is another lesson I've learned working with companies looking to augment their organizations with external resources, that is that they want to take advantage of the variable cost feature of outsourcing. What's the point of having experts on tap if you can't turn the tap off? I'm flooded with consultants here people! Of course you should give the provider a fair notice period that you intend to downsize (or even terminate) the support - say at least 90 days if the services firm has to restaff 15-20 consultants - but at the end of the day the customer must have the flexibility to offload cost structure in response to the market.
So, again, I know no details of the deal in question other than what has been released into the public domain but I would be most surprised had Mr. Rutter not built some common sense language into his outsourcing contract to prevent it becoming the gift that keeps on giving for Efficio. If not then I suspect the time may come at some point in the future when it'll be all hands on deck trying to turn off those taps at Clearwater Court.
Surefire Strategy #10 For Producing A Consulting Project Train Wreck - "Have Faith That Everyone Will Know What This Project Was All About At The End"
So here we are folks, the first of my proven strategies for ensuring that your consulting project never actually delivers a single ounce of value for your client. And remember, the key is to ultimately identify the antithesis of this strategy and implement THAT instead! Surreal I know but then the writer of this blog is British and very much a fan of all things Monty Python.
The "Have Faith That Everyone Will Know What This Project Was All About At The End" strategy refers to the approach of never actually letting the client in on the secret of what you are planning to deliver by the project's end. These projects generally start out well enough but invariably reach a point where client and consultant have a conversation something like the one below:
CLIENT PROJECT SPONSOR: Thanks for meeting with me at short notice, Jim, but I have a concern about something. I’m sure it’ll only take a minute to clear up.
CONSULTANT PROJECT MANAGER: Sure, Susan. What’s the problem?
CLIENT PROJECT SPONSOR: Well, I dropped in on Rob this morning to get an update on the project and he showed me the Phase 1 deliverable document you guys have just finished. I was a bit confused. It wasn’t quite what I expected.
CONSULTANT PROJECT MANAGER: Really? In what way?
CLIENT PROJECT SPONSOR: Well quite frankly I’d been expecting more from eight weeks of work than a PowerPoint document with a few tables on observations and issues. Didn’t we talk about “as is” process flows? And what about the item level savings analysis? All I saw were some industry average percentages applied to the same numbers our accounts payable group gave you in June. There’s more detail behind what Rob showed me, right?
CONSULTANT PROJECT MANAGER: Hmmm, well not really Susan. I think we talked about process flows being something that could be done in some situations but that what made more sense here was working with stakeholders to get to key issues. We’d then structure the to-be vision to directly address these issues. As for the savings analysis, well we always said that the ability to go the item level would hinge on being able to collect the data. Unfortunately we just couldn’t get the data from the field so we had to use the accounts payable numbers.
CLIENT PROJECT SPONSOR: I have to admit, Jim, I’m not happy about this. I had a very different picture of where we would be at this stage of the project. Until I feel expectations have been better met I’m going to delay signing off on the Phase 1 deliverable. Let’s pull the project team together at 2 o’ clock and figure out how to fill in the missing pieces.
What eventually transpired in the project above? Susan found out in the meeting that the field had indeed been unable to provide the required data and that the smartest and most resourceful consultant in the world would never have been able to generate the “promised” item level savings analysis. And the as-is process flows? If producing these flows had been expressed as a must-have requirement at the beginning of the project it had never been documented. Susan ultimately became resigned to the fact that she had no clear grounds to deny payment to the consultants for the Phase 1 work. What she did do, however, was to exercise her right to terminate the project before embarking upon Phase 2. Losers all round – the client received no value from its perspective and the consultant lost the remaining revenue as well as the chance to ever do business with that particular client again.
What went wrong? First, it is clear that the major work products and deliverables for this project were not clearly defined up front. It was the responsibility of Jim to provide clear and unambiguous definitions of these to Susan before the start of the project. It would then have been clear whether or not process flows were to be produced or not. Secondly, expectations were not set with the client about potential project risks and the impact of these risks on project deliverables. If Jim had explained to Susan up front about the risk and impact of not being able to collect the item data then Susan could have made an informed decision about whether to move forward with the project or not. But because the risks were never explained she never had the chance to make that decision.
The takeaway from the above is:
Always define clear and unambiguous work products and deliverables for your project and, in addition, set clear expectations about potential project risks and the impact of these risks upon the work products and deliverables.
In other words, AVOID AT ALL COSTS Surefire Strategy #10 for Producing a Consulting Project Train Wreck – “Have Faith That Everyone Will Know What This Project Is All About At The End”!! Implement the exact opposite instead! Get the idea? Good!
Coming next week – Surefire Strategy #9 for Producing a Consulting Project Train Wreck: “Sub Out Major Parts of the Work, Get On With Other Stuff Then Check In With The Contractor At The End”
1 Procurement Place
Non-spin commentary on the world of procurement, supported every now and then by the occasional piece of factual information.
Mark is Founder and CEO of SpendWorx LLC, a provider of spend analytics services. Prior to SpendWorx Mark co-founded Treya Partners, a boutique procurement consultancy. Earlier in his career Mark held various positions at Accenture, GE Aviation and Rolls-Royce.