“Bad best practice is a terrible thing, because it blocks real best practice from being put in place. And it’s a remarkably common phenomenon. Many times, companies truly believe they have done all the right things. In other instances, CPOs dress up their achievements as a defense mechanism against eternal consultants or other perceived threats. In all cases it acts as a value blockage.”
- Profit from Procurement, p.10
If you’ve never heard the expression, ‘Don’t judge a book by its cover,’ you’re overdue – and Profit from Procurement is the perfect case example. The cover is smart but simple, and it mentions a specific figure - 30% - that procurement should be able to contribute to the corporate bottom line. These two facts belie the reality that this is a very thoughtful book. It is not numbers-driven, although the authors make a strong case for procurement’s ability to contribute to both profitability and shareholder value. It is also not a dry academic text. The authors, Alex Klein, Simon Whatson, and Jose Oliveira, all of whom are consultants at Efficio, have contributed their stories as well as their perspective. The combination makes this an incredibly readable book that offers much in the way of practical advice.
If I had to boil the message down to one word that repeatedly occurred to me while reading, it would be ‘mindset.’ The importance of mindset is everywhere in this book. Procurement’s mindset and the CPOs mindset as well as the mindset of the board/executive leadership, stakeholders, and suppliers are always at the forefront. Even the reader’s mindset makes an appearance early on. In the Introduction, the authors engage in a preemptive exercise of self-examination and share the list of feedback they would prefer not to receive from readers. As an author and a former consultant, I found this list highly amusing, but more importantly, I found it to be honest.
Here are three ideas from the book that stand out:
We’re all guilty of complaining at one time or another that procurement does not have sufficient representation or support at the highest level of the company, and we aren’t wrong. Where we do ourselves an injustice is putting too much emphasis on how much that really matters. As this book makes clear, a CPO or procurement professional with the right skills, relationships, and mindset can accomplish an awful lot without a C-suite title. Being able to speak the language of the business, constructively challenging the status quo, and being comfortable (or in my words satisfied) with making others more effective are key.
To be blunt, how much spend your company has with a supplier has absolutely NOTHING to do with whether they should be flagged for a strategic relationship. Neither does the fact that their product or service is operationally critical. If those two statements were untrue, every company in the world would have strategic relationships with the same short list of suppliers. It would include Microsoft, Oracle, and SAP and it would deliver exactly zero value to the business. These authors make the case that the more important factor is a supplier’s ability to contribute to competitive advantage. Knowing who those suppliers are and partnering with them in a meaningful way will allow procurement to do far more than a spend-based approach. Last note on this: Procurement regularly makes the same mistake about when to engage with suppliers that the business makes without: we engage them too late. We should stop complaining about when the business engages us until we have resolved the same with our suppliers.
This is my favorite chapter in the book, in part because it is so different. When we look at procurement’s capabilities through the lens of a PE firm, the picture is quite different. Procurement is well positioned as an EBITDA lever – creating shareholder value through cost reductions that can be reinvested to drive growth. PE firms provide us with a roadmap for empowering procurement even when they are not involved. They reject the ‘status quo’ argument, are not afraid to invest, and provide the sponsorship needed to help procurement effect real change.