This article is part two of a three-part series on transforming topline revenue growth. You can read part one here and part three of the article here.
As discussed in part one of this series, when teams break free from the confines of a silo mentality and dedicate themselves to meaningful and mature collaboration with departmental partners, organizations and companies experience significantly improved topline revenue production and increased visibility as leaders within their industry.
Continuing to use the example of procurement, in part two we will take 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.
Measuring Your Maturity
No team or department should let itself stay in an adolescent level of maturity. Adolescent maturity is where tasks are completed, and boxes are checked, working inside a vacuum. The goal should be to focus on the overarching strategic and revenue goals of the business. All teams should aspire to grow up and become an integrated contributor to topline revenue success.
The first step is to assess current maturity level by asking the following questions about the department:
- Does it focus mostly on tactical functionality?
- Is the team zeroing in primarily on cost-cutting and saving money?
- Do team members keep to themselves and avoid opportunities to connect with other departments?
- Does the team behave as if it is operating within a silo, uninvolved in the CEO’s strategic plan?
- Do we leave strategic planning and product and service ideation to others?
- Does our team understand the CEO’s strategic plan and are we using that plan as a guiding framework for how we approach all our efforts?
A “yes” answer to any of these questions is an indicator of where the department could lean into greater maturity.
Grow Up for Growth
“Procurement is tremendously and intrinsically engaged with all the components of the organization,” says Paul Santilli, CEO of Strategic Consortium of Intelligence Professionals (SCIP), former leader of Hewlett Packard Enterprises WWOEM Business Intelligence and Customer Insights organization. A key part of the ability to ask these questions is having and applying influence.
“If procurement teams don’t have a Chief Procurement Officer who can effectively influence an organization, it means respect isn’t being carried up to get that kind of attention, says Dawn Tiura, CEO & President of Sourcing Industry Group (SIG), the world’s largest global association for sourcing, procurement, and risk professionals. I would say that is a failure of leadership.”
“Although procurement leaders and teams aren’t specifically tasked with revenue growth, they always have to be aware of it,” Tiura says. “For example, way back in time, when we first started getting telephones on planes and the movies that were embedded in seats, that idea came from an airline supplier who kept saying to the airline management team, ‘We’ve got an idea for revenue,’ but the airline ignored them. The supplier backed up and went through the airline’s procurement department instead.
“Because the supplier was a trusted, longtime partner with the procurement team, they listened, and became the champion of this idea,” Tiura says. “They had to build the business case to take it back up to management and explain more fully the revenue opportunity this supplier was suggesting. At the time, it sounded like pie in the sky – really? A telephone on a plane? Of course, now, no brainer.
“What people see procurement is doing is making contracts, negotiating terms, blocking, taking a lot of time,” Tiura explains, “but everything that procurement really does is below the water and not visible. The CEO needs to understand that there is so much more than what is seen above the waterline.
“Making sure that understanding exists is the job of the CPO. “Procurement has a unique vantage point to see the redundancy, the stupidity, the waste. It sees all the areas that could change the outcome of the financial statements. If the CFO is at the right hand of the CEO, Procurement should be at the left hand.”
Measuring – and Maintaining – Success
“There is not a correlation to the size of the company and the level of best practices,” says Michael Koontz founder and president of strategic sourcing consultancy Simplsourcing LLC. And one of the best practices, he says, is understanding the difference between what you do and how you do it. “Procurement isn’t sourcing,” Michael explains. “Procurement is a transactional buy of a commodity or a product. Sourcing is the strategic process of going out and identifying suppliers, negotiating contracts, and executing those contracts. There is an enormous difference. Procurement is a standard operating procedure, transactional-driven operational process whereas sourcing is a strategic activity in the company to drive revenue.
“Sourcing teams cannot be seen as bureaucrats. They must be enablers,” Koontz says. “I have seen teams that drive something out for two months for $50,000 or $100,000. They think they are doing a great thing because they are saving $100,000, but they don’t have appreciation that by rolling that out a month sooner, the company could make $500,000 in additional revenue. In essence, they’re going to cost the company $400,000 for every month that they delay, but because they’re not integrated and not understanding the business and are living in their vacuum, they think they’re doing a great thing for the company: they get to report to the CFO that they saved $100,000. And what will be completely lost is $500,000 in revenue.”
“Sourcing teams deal with contract value, run rate, and final contract value, and savings are calculated on what they were spending and are going to spend,” Koontz adds. “I have never seen a sourcing dashboard with a revenue number anywhere in it. Not one ever—at any company. Because sourcing traditionally reports up to the CFO, the CFO is having them report on how much they are saving the company, not how much they are making the company.
“One of the best practices? There should not always be a requirement to do an RFP. If I have a contract coming up for renewal, and I have an incumbent that has done an excellent job, guess what? I am not switching,” Koontz states. “There should not be a requirement that I have to go out and get three bids on that renewal process. They should be content that you should be able either to find a reliable resource to benchmark, or you should be able to do a sole source negotiation with that supplier, but you should not have to go out and make three bids.”
“If you don’t know what you don’t know, you have no choice but to do an RFP,” Koontz notes. “But, if you are in touch with your industry and the category that you are supporting, then there is little need to have to do that because you already know where the pricing is, what the terms are, and how it’s all done.
“If you want to drive revenue, you’ve got to have forward-thinking individuals who see not just what was done yesterday, but what could be done tomorrow,” Koontz says. “They need to be continuously out at conferences, learning about new technologies, and how businesses are evolving in response.”
Beyond Strategy: Understanding Agendas
“There is always an inner world of agendas whether it’s in procurement, operations, or finance,” says Gary Anderson, retired and former 30-year veteran Chief Commercial Officer/ senior B2B sales leader of a multi-billion-dollar global financial services organization that targeted the Fortune 1000. “There are always agendas that are built into the teams that are making the decisions. You want to understand what those agendas are. In my career, the insight I would always want to know about every person on a team is, ‘What do they really want to get out of this?’ ‘What are their true motivations for participating in this evaluation process, activity, or for considering making a change?’
“In procurement,” Anderson says, “one of the things he and his teams always asked was, ‘Can you tell us exactly what your criteria is for making a change?’ If they were transparent with us, they would be able to articulate what is not working today, what things they are trying to solve for. It would even extend to, if, as a seller, you are in the final evaluation group, will the buyer make site visits to our operational center to really understand how our service teams will interact with your reps to deliver a consistent and reliable customer experience? Depending on the depth of their selection criteria it would tell us a lot about whether they were genuinely interested in making a change.
“More often than not, if you don’t find those insights out early, it can be very disruptive later – affecting your sales process and maybe even cause you to not win the business,” Anderson explains. “There are lots of inner world agendas that people have. As an example, maybe the career of one of the key buyers has been negatively impacted by the incumbent’s poor service and so they have an ‘inner world’ agenda to ensure that provider is replaced. In that situation, they could be a hero advocate and coach supporting your efforts to win the business.”
Uplevel for Maturity
How do you begin to move from level one maturity to level four? Michael Van Keulen, Chief Procurement Officer at Coupa Software, and former Global Procurement Director at Lululemon, lays it out:
- Nurture relationships with advocates,
- Free up resources to invest in people (procurement, for example, is often under-resourced),
- Build the right operating model,
- Get involved at the right time, at the right place.
- Buy the right technology,
“Going from level one to level four typically takes three to four years – and it’s not a straight line,” Van Keulen explains. “To me, it always starts with really understanding the checkbook, running events, driving value. Demonstrate the value and then explain to the business what is needed to capture the value, which is often where better software is needed.
“One of the biggest ways sourcing teams can contribute to revenue growth is found in supplier collaboration. The biggest hub for innovation is not internal, it is suppliers. If you think about the magnitude of most supply chains, it’s really large,” Van Keulen adds. “Open up to your suppliers, be transparent, and be willing to share with them what your strategic objectives are and where you want to go as a company. A lot of great companies do this – they bring suppliers into the office to talk and encourage cross-pollination between their suppliers and encourage partnerships that help everybody thrive more in business.
“In procurement, it’s essential to get involved at the right time,” Van Keulen says. “We often get involved too late, when the business has already made a lot of different decisions. If we get involved at the right time, we very often can help optimize the requirements that are better, more efficient, and more effective for the business. By doing that, you make your organization much more efficient. By driving more efficiency, taking out administrative complexity, people start to free up time and resources to invest in top-line growth type of ideas.
“Removing administrative friction allows the business to focus on activities that are more value-based,” Van Keulen notes. “And, lastly, really understand your strategic objectives. I ask CPLs, ‘What is your three to five-year roadmap?’ Their response is often, ‘I don’t really know.’ My response is always, ‘You’re managing billions of dollars in spending. You should know.’”
Look for our final part in this three-part article that is now published here.
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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
