This article is part one of a three-part series on transforming topline revenue growth. Read the second part of the article here and the third part of the article here.
Businesses that are still operating in silos, consciously or unconsciously, are losing ground when it comes to achieving industry leadership and increasing topline revenue growth. In this article, we’re referring to those organizations that do not collaborate with other areas of their organization.
As Chief Strategy Officer for Valeo Strategy Group, I’ve spent my career observing, researching, and consulting with Fortune 500 companies to understand and apply best practices for topline revenue growth. A key part of my knowledge base is derived from the competitor research my firm has conducted on behalf of our clients.
In my work and in interviews with clients and other industry experts, what I’ve found is that when departments align and integrate with a CEO’s overarching revenue growth goals, they become more relevant, essential, and valued as contributors to a company’s success. When departments regularly communicate with internal stakeholders and collaborate for firm-wide goals, they find innovative ways of not just getting their own jobs done but become integrally important in helping others in the organization get their jobs done, ultimately impacting stakeholder satisfaction and topline revenue growth. In fact, we’re finding that the breaking down of silos has become a common CEO strategy for top revenue producing companies.
Pushing up against this need to dismantle silos are advances in technologies such as Artificial and Business Intelligence that are reducing the need for human participation in “check the box” type job functions. Many roles that tend to remain limited within silos, where more time is spent “checking the boxes” of a job versus aligning with the CEO’s corporate strategy, will experience diminished relevance to their employers.
Through collaboration, now is the time to break-down silos, stop checking boxes, and integrate with internal stakeholders to develop the expertise that will support corporate-wide strategy.
Throughout this three-part article series, we discuss the function of procurement in an organization as an example of what every department or silo of a company should be looking at and changing. Procurement teams are typically the first stop in engaging with external vendors, meaning their policies and procedures can have a considerable impact on revenue growth and the ability to compete in the marketplace; and they have a frequently under-appreciated or under-emphasized opportunity to positively impact revenue.
For example, in procurement, what I’ve seen is that however diligently departments work with internal clients to reduce costs, identify the best vendors, mitigate third party risk, and negotiate contracts – these objectives are often achieved in a vacuum due to a lack of alignment between single, siloed departments and other operational areas of the organization. The results often inhibit topline revenue growth, even inspiring fear from stakeholders to engage with procurement, and turning off quality vendors who are averse to certain Procurement approaches.
I’ve also observed and worked closely with organizations that have already matured away from siloed operations and have grown company cultures that encourage integration and collaboration across all areas. These are the companies that are finding ways to grow revenue exponentially.
Gone are the days when some departments are seen as non-revenue-driving. To succeed in today’s marketplace, every department, every employee, must be actively aligned with and working toward CEO revenue growth strategies.
It’s Time to Grow Up: Collaboration is Where it Begins
Michael Van Keulen, Chief Procurement Officer at Coupa Software, and former Global Procurement Director at Lululemon, says the first thing organizations should be thinking about is procurement maturity.
“Very often, organizations have highly immature procurement within their organization. Rather than being given the task of sourcing a pink elephant, procurement needs to be brought in early – making it a part of specifications, requirements, volume, strategic objectives, and long-term goals. These are the tactical, level one functions of procurement maturity.”
“What I often see is that procurement is stuck somewhere under finance and is fairly immature in the way it supports the business,” Van Keulen explains. “They’re not involved at the point of ideation. Often what you see is that procurement has made itself become a very tactical function because it is unable to express its full value proposition. Procurement’s value proposition is not just about taking out cost.”
“Level two is where you start to understand your spend. You understand your suppliers. You run strategic sourcing events, not sourcing events – meaning events where you understand your business, you understand the objectives of your stakeholder, and you understand your business partner internally. What’s the outcome that we’re trying to achieve? What does success look like? What are the metrics? What are we trying to accomplish as a team internally before we go to RFP?”
“Level three procurement is even higher level,” Van Keulen states. “It’s about well-thought-out management of contracts; supplier relationships, partnership, and collaborations; demand; category; and strategy.”
“Level four is highly sophisticated, mature procurement: asking how can we help drive top-line growth? How can we become an innovative competitive weapon, if you will, or competitive advantage? How can I help drive top-line growth?”
“Levels three and four take time,” Van Keulen adds. “You need to understand your checkbook and understand your spend. Eighty percent of your spend is always with 20% of your suppliers. But as these processes are taking place, procurement is demonstrating its value to the organization. Demonstrating value, in the face of AI and BI, is essential.”
It’s also important to note that contract size is not always indicative of the impact on potential revenue growth. Often, smaller providers offering specialty services have the potential to significantly impact revenue growth, yet they are treated as “less-than” and receive poor and delayed attention by procurement.
Collaboration is Key
Dawn Tiura, CEO & President of Sourcing Industry Group (SIG), the world’s largest global association for sourcing, procurement, and risk professionals, agrees, collaboration is key.
“We’re putting a lot of work on procurement people, dotting I’s, crossing T’s, making sure they fill out this form, send out that 100-page, or 100-point questionnaire to every supplier,” Tiura says. “Organizations are forcing procurement teams to waste so much time in the minutiae. We’re forcing them to operate at five feet off the ground, when they should be at least 10,000 feet, and leadership should be at 30 or 40,000 feet off the ground. We’re not giving them an opportunity to rise up, because we’re keeping them smashed down into the ground with gravity of all of this weight of work that they have to do. That’s really the biggest issue.”
“Procurement professionals need to spend time with the organization,” Tiura adds. “They need to read their strategic business plans, have the sensational curiosity, get to know the business on an intimate level, get to know fellow leaders. It takes time.”
“It means taking colleagues in other areas of operation out to lunch, having coffee with them, attending their monthly staff meetings,” she explains. “Ask them to let you observe. Don’t contribute right away, don’t offer thoughts until you understand what’s driving them. Then when you can have an intelligent conversation – because you’ve really listened – you can say, “This is what I’m hearing you say, I think these are the objectives you’re driving to. This is your outcome that you would like to drive to, is that correct? Let them give you feedback.”
“When you involve the community rather than two or three people, you’re going to get a lot more buy-in,” says Paul Santilli, CEO of Strategic Consortium of Intelligence Professionals (SCIP), former leader of Hewlett Packard Enterprises WWOEM Business Intelligence and Customer Insights organization.
“You’ll gain a lot more credibility because you’ve got community behavior now and the touch points from the individuals inside and outside of your intelligence procurement team, which naturally touches many other organizations in the company.”
“Getting those folks engaged and working with procurement is essential,” he adds. “Start by looking at how small changes can be made. Say, ‘Hey, we need to look at this,’ or ‘Maybe this problem caused us this amount of cost impact in the past and we should really be developing some modeling around this to minimize and hopefully improve upon it, so we don’t repeat what’s happened in the past.’ These are the sorts of conversations procurement teams should be having with their leadership as well as with other peripheral organizations that they deal with.”
Aligning Goals Firmwide
“The CEO is going to have certain strategic goals, milestones, and deliverables,” explains Gary Anderson, retired and former 30-year veteran Chief Commercial Officer and senior B2B sales leader of multi-billion-dollar global financial services organization that targeted the Fortune 1000.
“The key for procurement is to have departmental goals that foot directly to that overall strategy. If your procurement team doesn’t have goals that are tied directly to what the company’s strategic objectives are, then procurement ends up potentially being a missed opportunity to make a meaningful contribution to the company’s success.”
“Different disciplines within the organization share ownership for those goals,” Anderson adds. “The most effective procurement organizations I’ve worked with build teams that excel at taking a disciplined approach to the bid process that is representative of those shared goals.”
“Getting a cross-section or cross-functional group of people that ultimately are going to end up partnering with a supplier helps avoid a breakdown after the fact, when it’s too late and everyone’s asking, ‘Well, who made that decision? Why weren’t we involved in that buying process?’ Mature procurement organizations work with people upfront and get their buy-in as to a path forward, especially, if they are going to make a change from an incumbent provider.”
“Oftentimes, procurement people are looking for hard, tangible cost savings and they may overlook very important soft savings,” says Anderson. “These might be aspects of service delivery that improve the productivity of revenue producing personnel or operational excellence. Many times, unfortunately, those areas of potential soft savings are dismissed in the absence of an agreed upon financial number or a methodology to measure them. But they are no less important than the hard tangible savings; both soft and the hard costs impact the organization on a long-term basis and can impact top-line growth.”
“CFOs tend to be very focused on cost, more than revenue,” says Michael Koontz, founder and president of strategic sourcing consultancy SimplSourcing LLC.
“CFOs in most companies are not as focused on top line as they are on the cost side of it. Because sourcing organizations traditionally report up to the CFO, the CFO is having them report on how much they’re saving the company, not how much they’re supporting growing revenue for the company.”
Toppling Silos + Fostering Collaboration = Topline Revenue Growth
Procurement professionals should be employing these tactics to ensure topline revenue growth for their companies; a side benefit will be that doing so will also help to secure their jobs and advance their careers. The essential component is initiative-taking: taking steps now on their own rather than waiting on dictates from upper-level management.
Equally important, senior management needs to recognize the strong impact that a high-functioning, department – once set free from the restrictions of working in a silo can have on top level revenue. If a department like procurement isn’t prioritizing strategic goals from the outset, a domino effect follows and those goals get muddied, overlooked, or lost in the process. The company is ultimately harmed and unable to achieve top level revenue or create new products and services.
The key takeaway is that yes, AI and BI can do a lot of tasks and check a lot of boxes, but relationships and the value-add of meaningful collaboration are irreplaceable. Teams and departments that break free from the confines of a silo mentality and dedicate themselves to collaborating with business partners at a “level four” of maturity – those are the teams that most consistently and meaningfully deliver results in supporting, and not hindering, topline revenue production and achievement of industry leadership.
In part two, we continue to use the example of procurement, taking a deep dive into how teams and departments can become more mature, move beyond constrained responsibilities and thinking, and contribute more powerfully to topline revenue growth for the businesses they serve.
About Valeo Strategy Group
Since 2014, Valeo Strategy Group has applied sophisticated competitive intelligence techniques to capture and analyze global market intelligence to guide clients through the maze of potential paths they might take so that they can forge ahead with confidence, knowing they are making the right choices, every step of the way. Our unique value comes from decades of research and analysis experience combined with the ability to capture insights only trained researchers can. Valeo works with the range of Global 1000 industries such as, healthcare, insurance and financial services, manufacturing, industrial, technology, and others.
On a blinded basis, Valeo examines competitors, B2B customers, potential acquisitions, won and lost sales opportunities, global markets, and new product development opportunities. When working with the Valeo team, you will be supported by seasoned professionals who understand your industry and global business. Beginning with your hypotheses, we examine the market and return highly customized insights that guide your choices, driving breakthrough strategies and market growth.
For More Information:
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About the Author:
Lisa Hicks, Chief Strategy Officer, Valeo Strategy Group, LLC
Biographies of Contributors:
Gary Anderson, Retired Chief Commercial Officer, Global 2000 B2B Financial Services
Michael Koontz, President, Simplsourcing LLC
Paul Santilli, CEO, The Strategic Consortium of Intelligence Professionals (SCIP.org)
Dawn Tiura, CEO & President, Sourcing Industry Group (SIG.org)
Michael Van Keulen, Chief Procurement Officer, Coupa
