During a Leadership event of small and medium sized business owners last week, we had the opportunity to kick off discussions with David Cameron on the massive opportunity that exists within public sector procurement. We wrote a strategy for deficit reduction, service delivery and economic growth around 18 months ago and outlined how to make it happen. I gave the PM a copy, which he flicked through as we spoke and promised he would read after our chat.
After introducing myself and Future Purchasing to the PM I went on to discuss how central to his government’s long term economic plan is reducing the deficit and that it’s our belief that having a clear plan about how to transform the way money is spent in all areas of public procurement is central to the UKs economic performance. I added that transforming procurement could be one of the quickest and most effective way to achieve the deficit objective, and safeguard the economy for the longer term by moving from cost to value over the change programme.
He was interested to learn that the private sector typically sees 25-30% returns from undergoing a change of this nature and that through our own discussions with the NHS in particular we think this is very achievable. Following our category management survey last year all public sector respondents saw themselves as Followers which means, according to our research, there’s nearly 50% more savings to be had just by catching up with the Leaders. To us the opportunity is still at the Category Planning stage – agreeing a plan basically to stick to (e.g. understanding the opportunity and getting the ‘right buy-in’ to entirely focus on the delivery of that in the next 12 months, 24 months and 60 months). There is, as we all know, only one way to eat an elephant. Far too often (and we all will recognise this – public and private sector alike) nibbles are made to the trunk, the legs, the ears, which doesn’t really change the way the elephant looks at all. Then, in my view from the public sector discussions I personally have had, the focus needs to go to strategic sourcing and transforming the implementation of new deals – so much waste and inefficiency in the execution exists. And stop jumping on new bandwagons and initiatives – SRM, supplier innovation programmes can only be successful when built on solid foundations when the strategic nature of that supply relationship is properly and wisely understood by the key decision makers and leaders. In short – agree a simple and structured plan and focus on it.
I went on to say how public sector procurement is an area of deep frustration for me and for Future Purchasing overall. Why is it that the private sector procurement has been reinventing itself successfully since the 1980’s and continuously improving? Why is it that private sector organisations are continuously humble and seek benchmarking services like ours year after year – how are they performing versus the best? What are they missing out on? How could they change for the better? CPOs across the world are continuously asking us those questions, and pose these questions to their first line in regular strategy sessions. And then they do it – something is executed. Public sector Procurement Leaders talk about it, but struggle to get traction due to the structure of the government – which is why we need support from the government, at the very top.
There’s an interesting debate about leadership versus management in these situations and firmly we need people like the Prime Minister to get right behind such a change, to see the opportunity with a firm, clear vision and stick to it. For any of us who have done a procurement transformation – whether in a relative small organisation or a huge global concern, it does not all happen overnight. Some changes can happen quite quickly – in the first 3-6 months with associated benefit, but it usually takes some 18 months+ to move beyond the initial price attack approaches, to value based approaches and some further 18 months + to move beyond both of those to a more holistic approach (revenue focus), and playing all the techniques out across the whole spend in a sustainable way. David Cameron was in complete agreement with the highlights I provided and took hold of my notebook, and my pen and wrote down the right number of the right person to talk to in Downing Street to take this to the next stage. Next blog – How discussions go with the policy unit.