Sustainability in Category Management – what it means for Porters 5 Forces
By Mark Hubbard |
Sustainability sits in an increasingly central position for many organisations, and is only going to increase in importance. As procurement professionals and category leaders, we need to understand how to incorporate the general direction of travel needed into our category, supplier and negotiation strategies.
At the moment, most organisations seem to be at a more theoretical level with this application; high level targets which are often distant, and not yet flowing into the overall strategy development approach. However, we can see a challenge looking forward: if we wait until the last possible moment to incorporate detailed sustainability approaches, we will need big, and rapid changes to meet the targets set.
So, our working hypothesis is that it’s better to start now, and look for smaller improvements to build on later.
To do this in practice, we need to think about how sustainability might fit into a range of individual activities, and see the implications for this.
So, let’s start with Porters 5 Forces. We already know that the traditional teaching of the model needs adapting for a procurement environment: we’re buying from a marketplace, not competing in it (marketing vs. procurement approach), and the ‘threats’ are actually ‘opportunities’ from our perspective.
When we’re thinking about the marketplace we’re buying from, we can consider how well developed sustainability is within that marketplace, by looking at both the marketing from the players in the marketplace, but also (and more importantly) at the actions taken by the players. We will need to understand how their sustainability journey is unfolding, and whether their public announcements are backed up by concrete actions. This will require a level of research.
In Substitutes, we will need to consider if there is an alternative approach to deliver the outcome we need or want, and also whether that substitute approach is a better sustainability solution. We might want to link this thought process to the LEAN manufacturing philosophy of challenging the seven wastes (TIMWOOD), and consider if reduction or elimination of use might play a part in our strategy.
In New Entrants, we might consider if a new entrant has a fundamentally different approach which delivers a better sustainability outcome.
In Suppliers ( in this case, suppliers to the players in the marketplace we buy from), we might look for key suppliers who are more attuned to the delivery of sustainability goals.
Lastly, looking at ourselves as buyers in competition with other buyers, is there a sustainability advantage or story we can bring which is beneficial to our suppliers – perhaps in co-marketing. This allows us to distinguish ourselves and be a more attractive customer.
All this implies a deeper knowledge of the supply marketplace than we might have at the moment, and suggests a need for research, either by ourselves, or with a partner. As ever, this implies a need for time spent in this space to ensure we have enough knowledge to make the right decision, all within the constraints imposed by current workload.
It is clear that sustainability outcomes in category, supplier and negotiation strategies don’t come for free, but it is also clear that starting that journey is a necessity now to help us reach targets that will, more likely than not, become more challenging and more expected in the short to medium term.
For more on incorporating sustainability into category management, talk to Mark Hubbard at [email protected]
Blog post: Sustainable Procurement
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