News U Can Use

A Supply Chain/Strategic Sourcing learning community devoted to ideas you can use in your work or daily life.

Strategic Sourcing Is Ready For A Revolution!

Posted by lowellyarusso on October 7, 2010

Today’s post is from Dr. Lowell Yarusso, Senior Vice-President, Talent Management, of The Mpower Group (TMG) and a contributor to the News U Can Use TMG blog.

In my last blog, I raised the possibility that the “Curse of Knowledge” has significantly influenced the inability of Strategic Sourcing to deliver on its promise to drive Exceptional Business Results.  In that blog, I indicated that there are several steps that should be taken to address that failure.  One of the steps I offered was a reevaluation of the underlying theory that drives Strategic Sourcing.  That is the topic I want to begin to consider here.

The current debate over the life or death of Strategic Sourcing calls to mind the work of Thomas Kuhn who wrote The Structure of Scientific Revolutions in 1962.  His main point was that science does not march forward in linear progress towards ever-increasing knowledge.  Rather, it jumps as the result of revolutions in the paradigm that informs scientific inquiry.  Between revolutions, the periods Kuhn termed “normal science”, the major activity is applying the currently accepted paradigm to address the problems that are most readily solved using the current paradigm.

How this comes about is fairly predictable.  There is an issue, a question, a class of problems that are not well handled by the current paradigm.  During the period of normal science, those issues, questions and problems are less important or considered too difficult to resolve.  Eventually, however, the scientific community is faced with a crisis because of the unresolved tension between the theory and the practice of the science.  In response, a revolution (a new paradigm) is launched.  The scientific community responds in a predictable way.  Most ignore the challenge.  Some respond with vehement defenses of the existing order.  A few wonder if the challenge is viable.  After a good deal of thrashing around, the new paradigm, if it proves to be useful in addressing the tension, the new paradigm is accepted and the scientific community settles back into another period of normal science based on a new theory about the way things are.

How does Kuhn’s work apply to Strategic Sourcing?  Reviewing the debate in a variety of blog sites indicates that the reactions to Dalip Raheja challenge (click here and here for details) of the “Strategic Sourcing Community” is quite similar to the “Community of Science” that Kuhn was attempting to explain.  Briefly, for the past 25 years or so, Strategic Sourcing has been guided by a shared paradigm, the “Sourcing Process”.  During that time, the members of that community have been largely involved with what can best be thought of as “normal sourcing”, i.e., the effort to apply the process to the types of problems that it is expected to address.  Now, the community is responding to Raheja’s call for a new paradigm as Kuhn would expect any group that is guided by a shared world view would respond if that world view is challenged.

To make the point clear, virtually every Strategic Sourcing practitioner understands that, regardless of the way they have defined the process for themselves, the process they propose is derived from a common source, the A.T. Kearney sourcing process.  Whether they have recognized it or not, that process implies a certain paradigm, or theory, about the business world.  Following Kuhn’s thinking, that means that their focus has been on improving the application of the theory, not on demonstrating the validity of the theory itself.  What has that meant?

For most of the past 25 years, a great deal of effort has been expended demonstrating the results obtained from the application of the theory, that is, the Strategic Sourcing Process, in a wide range of venues.  That is the activity of “normal science” and, in this analogy, would be the natural focus of “normal sourcing”.  As a result, we have a great deal of evidence that specific applications yield demonstrable outcomes, i.e., specific ranges of cost savings.  Whether the original theory underlying Kearney’s ground-breaking process did or did not focus on cost is immaterial.  The problem that sourcing was seeking to address was “excessive supply chain cost” and that problem was being successfully addressed by the process driving the sourcing community.

What was largely unnoticed, or at least unremarked upon, was that a cost focus has an inherent limit on the results that can be obtained.  No matter how far up or down the supply chain you apply the process, there is a finite limit on the cost savings that can be obtained.   Now I doubt that any practitioner or any organization would argue that they have approached that limit as a result of applying Strategic Sourcing.  What has happened is that, once organizations pick the low hanging fruit on the cost tree, they find that the return on subsequent applications of the process quickly diminish.  And that is what has led to the current crisis for Strategic Sourcing.  A second order problem has arisen and the current process has had, at best, limited success dealing with it.

Now, back to Kuhn.  In his explanation of what happens in communities of practice, this is as it should be.  While the current world view is achieving the results the community in practice is seeking, the community will continue to apply it and will seek to measure and demonstrate success in the terms defined by that world view.  It is not that the community does not want to go beyond the terms of the world view.  It is that they can’t do so until they find that there are bigger (or at least different) issues that have to be addressed.  If the existing paradigm is sufficient to encompass those issues, there will be no revolution.  If not, tension will gradually build until some individual proposes a competing paradigm that will provide a response to the crisis issue.  And, interestingly, the new paradigm is often LESS successful at addressing some of the old issues.

Kuhn would say that where we are as a community of practice is on the cusp of a new, emerging paradigm.  The theory has not been articulated as yet but the source of tension has been identified.  What is critical at this point is to return to the underlying theory that supports the Strategic Sourcing process and begin to analyze it.  Until now, it has not been necessary to do so and, in fact, Kuhn would tell us that it would be counter-productive to have done so.  So long as the “Theory in practice” allows practitioners to address the problems with which they are confronted, the theory should be unquestioned and the focus should be on improving the results.  If Raheja (and some others) are right, then it is imperative that we re-examine the theory (and not just the process) that informs our collective thinking about Strategic Sourcing (or whatever it may be called under the next paradigm.).  Only when we have evaluated the effectiveness of the theory can we successfully amend the processes, procedures, and tools.  And that is about revolution, not evolution, of a community of practice.

Please share your comments.  If Kuhn is even partially right, the key at this point is to explore the limits of our current thinking so that we can clarify the direction we need to go.

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