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Archive for the ‘Next Practices’ Category

Next Practices Innovators Award – Executives Who Elevate Our Function

Posted by nicolashummer on October 25, 2010

Next Practices Innovators are a distinct group of professionals singled out as leaders in Strategic Sourcing and Supply Chain Management.  Whether through trial-by-fire or groomed at the top universities, the executives awarded this distinction run some of the most successful supply chains in the world.  These men and women create differential value for their companies by pushing the boundaries of our function; what these men and woman are doing today, the rest of us will be aiming for in the future.  As a result of the success they bring to their companies, they have raised the level of our function immeasurably.  For that we recognize them.  The purpose of this award is to single out and take a peek into the minds of these leaders and visionaries in order to perhaps learn a few things and further the success of our own careers.

 

Lamar Chesney – Inaugural Next Practices Innovator

We are pleased to announce the inaugural Next Practices Innovator, Lamar Chesney, EVP and Chief Procurement Officer for SunTrust Bank.  Mr. Chesney is a seasoned financial professional with nearly forty years of diversified business experience as a senior executive in the financial services, manufacturing, audit services, educational, transportation, professional services, consumer products and energy industries.  His career has spanned some of the world’s finest brands including, Marsh & McLennan Companies, Mirant Corporation, Delta Air Lines, and The Coca-Cola System.

Mr. Chesney is a noted thought leader and presenter across the United States on diverse business topics.    Mr. Chesney has the further distinction of being named 2010 Keynote Speaker at Aberdeen Group’s Chief Procurement Officer (CPO) Summit.

Aberdeen’s Chief Procurement Officer Summit is the premier event for global procurement executives to learn, network, and discuss the strategies needed to extend the broad transformation of their organizations. “This year’s event offers our most comprehensive, industry-leading roster of presenters yet: true visionary thinkers and executive-level presenters who are ready to share their strategies for success,” says Andrew Boyd, President, Aberdeen Group.

CPO SunTrust Bank

TMG: Do you feel that Strategic Sourcing/Supply Chain Management (for now, we will assume they mean the same) has delivered the results that it promised over the last 25 years?

Lamar: Success can be measured by not only where one is but also how far one has come.  We have clearly come a long way from being contract specialists to a role requiring diverse technical (functional) as well as strategic (leadership) skills to align business strategies with its own supply management strategies.  Unfortunately, we still have a long way to go.  Having failed to measurably move beyond a cost focus, we have not been able to convince our stakeholders that we possess the capabilities to make a significant impact on many of their other value drivers as well.  We have spent too much energy on selling our technical proficiencies such as negotiating prowess, jockeying for “control” and conveying our worth via cost savings. This has blocked our ability to convince others that we can make a strategic contribution.  For us to be viewed as strategic, we must become thought leaders in our organizations, and convincingly demonstrate our ability to engage and contribute to business strategy development and link their value drivers to our process.  This will demonstrate creativity and action as well as strike the right balance.

TMG: What would you say has been a major part of the problem?

Lamar: I do think that because it has been predominately a cost focused process, it has not reflected the many other priorities of our stakeholders.  This is understandable but not acceptable.  Understandable because cost was and is the life line procurement grew up with as its only internal and external measure of contribution.   We continue to reinforce its importance at the expense of moving to a “value” measure.  It’s unacceptable because we have permitted ourselves to be viewed as little more than cost cutters because for the most part that is what we do. This leads to continuing frustrations manifested through the desire for (but inability to achieve) a “seat at the table”, early engagement with executive stakeholders, eliminating directed sourcing events, enhancing the diminished value of Supplier Relationship Management.  We need to change our Sourcing process to go beyond cost and focus on those value drivers that are most important to our business partners.

TMG: Has this cost focus had any un-intended consequences?

Lamar: The disproportionate focus on optimizing cost (TCO etc.) has led to sub-optimizing many other value drivers that impact the elements of importance to our stakeholders.  And they know that.  While we have started at least acknowledging the importance of risk mitigation, buyer/supplier collaboration, continuity, visibility and certainty (to name a few), that is not the same as valuing them throughout our process.  Our stakeholders know those value drivers have a measureable and meaningful contribution to their success.  That has to be our starting and ending point and it must be reflected in our metrics and decision processes.

TMG: Why are organizations not getting the desired results?

Lamar: Companies naturally measure their maturity in terms of improvements in tools, technology and processes, and people.  We in supply chain management tend to rely on the same measures.  However just like with our kids, providing a good school, the right extracurricular activities, good habits, the right friends, etc. are important but they do not, per se, ensure success.  This “foundation/infrastructure” is vital not to success but rather to permitting success; Adoption, Execution, Institutionalization, Optimization and Utilization must be present to enable success.  The investment in the “foundation/infrastructure” must be matched by a corresponding investment (budget, sponsorship, resources, etc.) in promoting the vision and values that we as a profession bring to commercial operations. I assure you that we will never be seen in a light greater than that which we shine on ourselves.

TMG: What do we need to do differently as far as our process is concerned?

Lamar: There is good news and some not so good news.  The good news is that we don’t need to discard the principles or the toolkit. They have been and continue to be of great value.  What we do need is a significant shift in the perspective, or the axis.  As I said above, the starting and end points have to be ALL of the value drivers.  From there, we can determine what we need to change in terms of our process and tools. This will take significant effort as we have “trained” our stakeholders (and ourselves) to primarily articulate cost savings as a measureable metric.

TMG: Let’s start with ourselves then.  Do we need to “train” ourselves differently?

Lamar: Yes.  First we need to change what we “train” ourselves on.  The historical view of competencies is technical, functional and managerial.  While these are critical, they must be supplemented by strategic competencies such as exerting personal influence, activating organizations, optimizing self capabilities, systemic thinking, etc.  They turn managers into leaders.  They marry strategic capability with tactical capability.

Second, we need to change how we “train”.  Achieving the right proficiency will require explicit definition of the competency, describing the behavior required to demonstrate competency and engaging in practice and feedback to refine and enhance competency proficiency.  Without this combined focus, we can never hope to be fully “capable”. Competency development requires consistent application and a support system such as ongoing coaching and mentoring.

TMG: Why are these strategic competencies often described as “soft skills” then?

Lamar: These are the critical differentiators and we short change their importance by referring to them in an inferior, intangible, or nebulous way.  To infer that technical and functional skills are harder to master than strategic competencies is intellectually insulting. These strategic competencies, as well as the “functional and technical” skills, need to be clearly defined, behaviorally delineated, and metrics need to be in place to measure their effectiveness and proficiency.  We need to manage our talent as our most critical asset.

TMG: How do we change the context and the content of our dialogue with our internal “clients” to make sure that they have a value based expectation and appreciation of our role?

Lamar: Expectations are as important as results.  Without them, one cannot meaningfully measure results.  So positively changing the context and content of our dialogue with our business partners requires that we (from the onset) change our thinking, our expectation setting, our interim measures, and our post-mortem assessments to incorporate the value drivers of our stakeholders.  If we do not think, speak and act with a consistent focus on these value drivers from commencement to conclusion, we can never expect others to see, embrace and value them.

TMG: What do we need to change about our metrics?

Lamar: Currently the metrics utilized for a Strategic Sourcing function are predominately tactical in nature such as spend under purview, percentage cost savings, etc.  These metrics perpetuate a cost focus.  If we want to change behavior and move toward a value focus, then we clearly need to change the way Strategic Sourcing is measured.  If Sourcing wants to be recognized as a value contributor to the business, then the measurement system (metrics) should be developed in collaboration with the business and focused on their value drivers.  Only then can we begin to change the conversation and begin to deliver results that are “valued” by our business partners (by the way, cost savings may continue to be a key metric for certain business lines).  The right metrics can also aid us in moving our organizations toward more systemic “Supply Chain” thinking.

TMG: How do you define the terms “Strategic Sourcing” and “Supply Chain”?

Lamar: I view the world of commodities through a life cycle lens and the cycle moves through a company’s “supply chain or value chain” of which “strategic sourcing” is a major activity engaged predominately during the early stages of the commodity life cycle.   I think we must clarify this distinction as a profession and with our stakeholders.  Only then can we incorporate “Supply chain” or systems thinking into our process and their decision making.  That will allow us to change their expectations and therefore our metrics.

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Troops in Afghanistan – a Dramatic Case Study for AEIOU

Posted by thempowergroup on October 21, 2010

Today’s post is from Anne Kohler, COO & Executive Vice-President, of The Mpower Group (TMG) and a contributor to the News U Can Use TMG blog.

What do these historic events have in common?

  • U.S. Invasion on North Korea
  • The Bay of Pigs
  • Watergate
  • Escalation of the Viet Nam War
  • The Hostage Rescue in Iran
  • The Challenger Disaster
  • The Bush Administration’s Invasion of Iraq

This list represents some of the biggest decision-making disasters in history.

A few weeks ago, the famous Washington Post White House author, Bob Woodward wrote an article entitled “Military thwarted president seeking choice in Afghanistan” which was all about the critical nature of decision-making.  What greater decision can there be than deciding the fate of tens of thousands of young U.S. men and women as they are sent into war-torn Afghanistan?   The article chronicles the process that President Barrack Obama undertook in finally deciding to send 30,000 additional troops as opposed to the 40,000 (which came highly recommended by his military leaders) in December 2009.

Obama discovered after months of negotiating with national security officials and being in the middle of a war entering its ninth year that three simple questions could still NOT be answered:

  • What is the mission?
  • What are we trying to do?
  • What will work?

In other words, what is the intended consequence in Afghanistan? . . . . . . . . . . . . . . . .

As it turned out, Obama’s military leaders wanted to provide a solution (40,000 new troops) without defining a strategy – the answers to those three simple questions (obviously not so simple!).  Obama asked for a strategy (the answers to those questions) and asked for options, but the inability to answer those questions kept leading back to NO viable options except for an option that was UNacceptable to Obama.    

Having been well versed in decision-making disasters from the past (see above), Obama chose to follow a more structured decision-making process.  He knew he had many intelligent key stakeholders at his disposal and wanted input, alignment, and buy-in from all of them.  He actually made a meta-decision – he decided how to decide by answering the following:

  • Who needed to be included in the decision-making process (stakeholders)?
  • What role would each stakeholder play in the decision-making process?
  • How would the decision be made – what criteria would they use to decide?
  • When did the decision need to be made?

Obama did a thorough stakeholder analysis to determine who needed to be included in the decision-making process.  He realized that it was critical to include both military and civilian leaders.  He also determined each stakeholder’s role in the process; keeping the final decision for himself.  He then determined the decision criteria and insisted on being provided options by his advisors, which was critical.  Finally, he did not allow himself to be rushed into making a quick decision (his military leaders tried to do just that) which allowed him the opportunity to consider many alternatives.

 At the end, he “sold” his decision to all his stakeholders and insisted that they put their full support behind it.  Obama said, “I don’t want to have anybody going out the day after [the speech] and saying that they don’t agree with this.”   

Time will tell whether or not this was the right decision for the U.S.  BUT what we can glean from this article is the importance of having a disciplined approach to decision making.  Even if all of Obama’s stakeholders did not necessarily agree with the final decision, it appears that they did respect the process.  Right before the decision was announced Obama gave Robert Gates, his Defense Secretary, a final opportunity to dissuade him saying, “Can you support this?  Because if the answer is no, I understand it and I’ll be happy to authorize another 10,000 troops, and we can continue to go as we are and train the Afghan national force and just hope for the best.”  Gates did not take Obama up on his offer.

This is just one example of the importance of decision-making.  This is the one skill that most leaders are never trained in, even though it is the most critical part of their job.  It is one of the elements of our AEIOU model, which stresses that the best infrastructure (people, process, tools, and technology – the consonants) in the world is useless without the glue that holds it together (Adoption, Execution, Implementation, Optimization, and Utilization – the vowels that turn the consonants into a language). 

Some of the most important events in history required effective decision making and yet we spend little to no time on developing the skills necessary to make good decisions.  The recent deaths in the California wildfires have been attributed to poor decision making by the firefighters.  The good news is that this has led to the addition of decision-making to firefighter training.  One of the most critical decisions that affects all of us is that of a jury.  Yet numerous articles have been written about the fact that our present system does nothing to provide jurors with the tools to decide the fate of a human life.

We need to think about this key skill beyond our politicians and public servants.  How about executives of any kind?  Supply chain leaders?  Sourcing teams?  This should be a critical leadership skill that is purposely taught to all professionals – let’s provide the vowels to complete the language!

Thanks Anne!

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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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