Posted 4th Apr
In our day to day lives, we are used to being conditioned to believe certain things: we are subject to a barrage of advertising materials and images, clever marketing and sounds designed to associate particular products and services with particular feelings. A range of research suggests that we have between 2000 to 5000 marketing messages visible to us each day. Of course, we don’t take all of them on board; many pass by, relatively un-noticed, although the cumulative effect may also be impactful.
Supplier Conditioning is our opportunity to fight back. Within a negotiation, we need to make sure that our counterparty has a number of messages in mind, about the outcomes we need to achieve and about the shared sense of purpose our organisation has in achieving these outcomes.
This highlights the fundamental challenge of supplier conditioning; firstly, our organisation may not be clear on the outcomes from the negotiation that it needs to achieve. Secondly, there is rarely a shared sense of purpose about those unclear outcomes.
There is good news amongst this misery, however. Our two challenges can be fixed with application and perseverance.
Advanced procurement approaches (or Category Management) have an intense focus on getting the organisation to look coldly at its needs and wants, and to get clarification and agreement across the business on what they are; the process of establishing the Business Requirements in a particular area of spend. These Business Requirements should become the core of the negotiation: after all, if it’s not important enough to be in the business requirements, why is it an issue in the negotiation? Well-developed business requirements will also give us a sense of the negotiation range we have available in particular areas (or if we have any range at all).
Getting to a well-developed and robust set of business requirements is tough, but necessary. The next part is just as daunting; getting the business to align with key messages for the supplier.
The whole of Purchasing has a story where someone in the business has come along and said, ‘I’ve told the supplier they have the work, can you just sort out the price…’ This goes to the heart of the problem we face in getting a shared sense of purpose in the organisation about the outcomes of a negotiation. We need to get the organisation to share in the entirety of the negotiation process and see it as a joint effort in which we are all working for our shareholders (or non-profit equivalent) rather than working for the supplier. We also need to get a good degree of understanding that the messages we all give to the supplier do influence the outcome.
So, now we have done the background work in agreeing what we’re negotiating for and creating that shared sense of purpose, we can develop a series of messages to provide to the supplier before the negotiation happens, and describe how those messages will be delivered. To be fair, it should be said that the supplier conditioning activity is clearly a part of the negotiation anyway, as the negotiation is the sum of a series of activities, not just a single point of meeting.
This may be as simple as getting our colleagues to link different business requirements together. Statements like ‘we need to be happy with the commercials as well as the technical issues’, or ‘the best specification is useless without the right payment terms and delivery approach’.
However, we can get sophisticated in the messaging as well, showing how competition and other solutions exist, setting targets in particular areas, raising expectations for specific areas of performance.
The way in which we deliver messages also needs careful consideration. It is not just daily verbal or email communication which is available to us: we can also use a wide range of other mechanisms. As an example, the request for information document is capable of being engineered to reflect a wide range of specific messages which conditions the suppliers throughout. We can also think about messages in other spaces, particularly if the supplier is meeting with us on a regular basis in the run-up to the negotiation. We can use messages in the physical environment to state, restate and emphasise areas in which we have particular concerns or a need for a specific level of performance.
If we consider carefully what we want to achieve here, it is possible to deliver a range of targeted messages with the aim of delivering specific outcomes. If we do not do this, the messages to the supplier will come from other directions and we need to think if that will give us the outcome we want or deserve.
There is no need to be shy about this. The supplier will be conditioning us on a regular basis so we should take every opportunity to push back and make sure our messages heard.
Go and look now at what messages your supplier is receiving from different parts of the organisation and see how well they support any negotiation you might have in future. Once you've done that you may want to plan your supplier conditioning approach and we would be more than happy to help you think about that. Feel free to contact me or one of the Directors via the website for a discussion.
Tagged by topic: Negotiation