Posted 11th May
I was going to write this blog, but something more urgent came up. I was going to deliver this strategy, but I had to fix some requisitions. I was going to… this seems to be the refrain that gets in the way of creating insightful, value-delivering category strategies, as we get distracted by something shiny somewhere else.
Right now, we’re in the midst of something that is genuinely detracting from our ability to focus on the longer term. The short-term has gotten right in the way of anything else. Propping up supply chains is more critical than finding long-term value. Finding alternative suppliers is more essential than ensuring all value is identified and delivered. Innovation takes a distant second place to delivery.
However, this too shall pass. Other crises have arisen and been overcome, and even though the crystal ball looks a little shrouded, experience suggests that we’ll work our way into a future which, although having some areas of difference to it, will also have similarities.
One large bet is that as stability slowly returns, the focus turns to optimised outcomes, finding a competitive edge, seeking advantage. The areas may well be different. Supply chains may well reorganise to remove key elements of risk. The profit motive may turn longer term rather than shorter term. Building a way out of a recession through margin protection and resourcefulness may become the norm.
Seeking value in category strategies is a critical way of delivering the insights on which those much-desired outcomes are based, and we are going to have to look at our approaches and find ways of shifting in that direction.
The first step seems to be looking at our existing approach within a category and deciding on whether it’s going to have to change at a fundamental level, or if it will recover over time to something like its previous state.
Using risk evaluation tools may be the place to start (see https://www.futurepurchasing.com/blog/2020/04/23/improving-supply-chain-resilience for our improving supply chain resilience). This gives us a way of both testing and reporting on our view of risk as we progress. We don’t, at this stage, need to know exactly what the future will look like. Still, we should be in a position to clarify if our category has a risk profile that suggests that building a new category strategy will be essential.
We need to do this in the context of other categories in the business, most likely as part of a planned assessment. We need to ensure that we’re dedicating resources to the most critical areas, rather than those which don’t need work. It is useful, at this overall level, to use a triage approach: identity which categories of spend will continue to work if I do nothing, which will collapse no matter what I do, and which will improve with focus. The first category can be left alone for now. The second category is likely to need a broad, business-wide approach to consider exactly what to do. This may require business strategy decisions to be developed and put in place. The third will need resourcing to deliver a new approach.
It can be argued that the second and third situation above will require the same response. However, the difference may be that in the case of areas which will collapse no matter what you do, it is likely that the fundamentals in that part of the business will need a severe re-evaluation. Procurement should be helping with that, no doubt, but it is likely to be a special project.
Once, as procurement, we know what we need to focus on, we can start the process of looking at both internal data and market data to understand what is possible, while building a coalition in the business to co-create a new category strategy.
We will come back to this more in the coming weeks, to look at COVID-19 impacts and what tools and approaches we might want to use.
by Mark Hubbard