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Archive for the ‘Sourcing/Supply Chain – Lessons Learned’ Category

This is a place for you to share what you have tried in your professional life, what lessons you have learned, what worked, what didn’t, post questions for others to answer etc. etc.

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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Did the “Curse of Knowledge Shoot Strategic Sourcing?

Posted by thempowergroup on October 5, 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.

As I commented in Six Keys to a Sustainable Supply Chain Advantage, “A number of ‘high promise’ approaches to obtaining goods and services have been introduced to improve supply chain operations. In retrospect, “high promise” techniques such as Strategic Sourcing, LEAN Sourcing, Supplier Partnerships, etc. all have two things in common. First, proponents of each can point to outstanding examples of the tremendous promise they hold. Second, every one of them seems to fall short of expectations far more often than not.”  That failure to consistently achieve expectations seems to be, in general, the most unchallenged premise fueling the “alive or dead” debate around Strategic Sourcing swirling through the blogosphere of late. (See “Strategic Sourcing Is Dead!” for the blog that jump started the debate and “It’s Your Turn To Join The Great Strategic Sourcing Debate” for a recent compilation of the discussion.)

When I came across a recent (brief) article from Harvard’s Program On Negotiations (PON), that summarized some of the findings related to what is called the Curse of Knowledge, I saw some connections.  The article tells us that, “Researchers Colin L. Camerer, George Loewenstein, and Martin Weber have shown that once people know something, they assume that others without access to this knowledge will nonetheless behave as if they share the privileged information.” This phenomenon has been labeled the curse of knowledge. Another key point is that “…individuals who correctly solve a problem overestimate the percentage of their peers who will be just as successful solving the same problem.”

Much of the conversation that has been generated around the issue of life or death for Strategic Sourcing seems to me to be directly related to the Curse of Knowledge.  To put a little more meat on that bone, I’m going to ASSUME FOR THE MOMENT that, if not “alive and kicking”, Strategic Sourcing has, at least, not yet expired.  First, as indicated above, even the defenders seem to accept the premise that Strategic Sourcing efforts frequently “…fall short of expectations.”  Why should that be the case for a process that is relatively well-defined and understood by its proponents?

Simply put, those who attempt to implement Strategic Sourcing have great difficulty overcoming the legacy of their own experiences and knowledge.  As a result, they unintentionally and erroneously assume that every organization and every sourcing professional shares all the key insights upon which Strategic Sourcing success depends.  For example, if, when I speak about “Total Cost of Ownership”, I know that I mean intangible as well as tangible costs, the Curse of Knowledge will make it difficult for me to grasp how few of my listeners don’t get the larger perspective.  In addition, within an organization the Curse also has an impact.  When one sourcing team “gets it right”, the PON article tells us that they will assume the next team will make equally effective decisions and, therefore, achieve equal success in solving the problems they face.  To the extent that proponents of Strategic Sourcing fail to make ALL their knowledge accessible to every stakeholder and do not help others improve their problem solving ability, the process, whether alive or dead, fully developed or fatally flawed, cannot succeed.

If, on the other hand, I ASSUME FOR THE MOMENT that Strategic Sourcing is, indeed, dead, what (or who) killed it?   Here, again, I think that the Curse of Knowledge concept can help us gain some insights.  In my experience, one of the causes for failure to achieve value through Strategic Sourcing is that organizations and their people make far too many assumptions about how others, both within and outside the sourcing group and the enterprise, will behave.  Those assumptions are based on the inability to fully understand the limits of shared knowledge about the impact on culture, politics, processes, procedures, stakeholders, goals, needs, strategies, etc. that Strategic Sourcing requires.  And that inability is a direct result of the Curse of Knowledge.  Strategic Sourcing’s death, then, was both inevitable and predictable so long as practitioners (internal as well as external) have been unable to overcome key gaps in their knowledge, whether because of organizational silos, flawed processes, or the impact of the curse.

Interestingly, it makes little difference if Strategic Sourcing as we know it today is alive, expiring, or dead.  In any case, unless we can address the issue of the Curse of Knowledge more successfully than we have in the past, the promise of Strategic Sourcing will be ever elusive.  If successful Strategic Sourcing is more about overcoming the Curse of Knowledge than about the mechanics of any system or process, then the assassin (or attempted assassin) of Strategic Sourcing is anyone who has ever tried to apply Strategic Sourcing tools, policies, procedures, and processes without finding a way to avoid that curse.

What, then are we to do?  I see several significant steps that need to taken.  Among them are:

  • Reevaluating the underlying theory that drives Strategic Sourcing
  • Revisiting the process derived from the theory
  • Revising the tools that implement the process
  • Refocusing on how to avoid the Curse of Knowledge

I will return to the first three in a later blog.  For now, I want to take a little deeper look at how to avoid the Curse of Knowledge.  We have suggested elsewhere that successful transformations, whether in the Supply Chain or elsewhere, are all about the vowels, i.e., Adoption, Implementation, Execution, Optimization and Utilization.  (See  “Achieve Exceptional Business Results … Buy a Vowel(s)!!! for a detailed discussion.) Everyone “knows” that at one level or another.  Few can grasp how difficult it is to achieve a common level of understanding that will ensure consistent actions across the enterprise.  And, when the focus is on the Strategic Sourcing process, the lip-service paid to things like Stakeholders, Change Management, Alignment, etc. only deepens the impact of the Curse of Knowledge.

In an attempt to avoid the curse myself, I’ll try to take this a little further.  First, it has long been clear that, as Robert Quinn (Deep Change) puts it, “Culture eats process for lunch; all day, every day.”  In other words, you have to change the environment before any process change can gain traction.  (A point that is often overlooked in such other process laden efforts as implementation of new ERP systems, educational reform, and leadership development.)  And that means that the traditional focus on tools, processes, and models is bound to fail UNLESS it is paired with an equally powerful and rigorous approach to spreading and embedding knowledge throughout the organization.  More importantly, it also means that the two efforts, i.e., embedding the process and expanding the knowledge, MUST be integrated and orchestrated to be mutually supportive.

For those who say, “We do that now”, I return to my earlier comment that one of the most intriguing results of the blog storm around the reports of the death of Strategic Sourcing is that there seems to be wide agreement that promise and performance are far apart.  That implies that we really aren’t “Doing that now”, nor have we in the past.  Whether some of the other steps outlined above, such as rethinking the underlying theory behind Strategic Sourcing, will tip the scales to the “Strategic Sourcing lives” side of the argument, there is still the issue that whatever is going on now is not working.

And I am convinced that the focal point of any effort to understand why has to include our tendency to fall victim of the Curse of Knowledge.  We are too quick to assume others are “on the same page.”  We are too anxious to get on to the next big project.  We are too insecure to say, “We can’t fix that overnight.”  As a result, we talk at a high level about techniques like stakeholder analysis, developing push strategies, finding champions, and the like.  But we do not take the time to ensure that our constituents both know what we mean and how we expect them to do it.

The bottom line is that, no matter how successful any particular Strategic Sourcing effort, the Curse of Knowledge, if it is not successfully addressed, makes it impossible for others to understand how to integrate those techniques as an ongoing part of their daily activities.   No matter what we do in the future to address the issue, if we do not figure out how to successfully implement the vowels, we’ll simply end up having this conversation again in 5, 10, 15, etc. years.  As a result, Strategic Sourcing devolves into a set of procedures and falls far short of becoming a way of looking at the Supply Chain in a strategic, holistic way.  And that is why I believe that the Curse of Knowledge shot Strategic Sourcing. We may need to await further developments to find out whether it hit our collective foot or more vital parts of the anatomy.

As always, I’m interested in getting your thoughts and comments.  Please raise the questions you have.  I’ll try to provide an answer and we can all keep the conversation going.

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Strategic Sourcing is Dead!!! (The Debate Rages On!)

Posted by thempowergroup on September 27, 2010

This is a repost from Sourcing Innovation.

The Strategic Sourcing Debate, Part VI: Yup. It’s still dead!!

Today’s guest post is from Dalip Raheja of The MPower Group, who declared that Strategic Sourcing is Dead, and who has returned to poke the hornet’s nest once more.

A very special thanks to those who engaged in a substantive debate, whether you agree or disagree with us. I am grateful for your time and kind consideration of our arguments and hope that you will continue to engage in the conversation. That was the Intended Consequence. The Un-Intended Consequence was the tone and tenor of some of the reactions. Let me apologize to those who got quite offended by my writing/language skills. As I have said in almost every conference I have spoken at over the years, I am a 3rd world immigrant trying to make a living here and learn the language at the same time, and that is still obviously a challenge for me. 🙂

I did not realize that this was a contest and that the doctor was playing Simon Cowell.  🙂  Had I known this, I at least would have gotten a haircut and put on a nice suit! But let’s forget for a moment who won or lost, according to the doctor, and let’s look at the substantive points made by a number of the respondents. I will address some of them here, and others in a later post.

Clearly, Tim Cummins (IACCM, The Death of Procurement) and I mostly agree on the substance of the hypothesis. Where we may disagree is how to solve some of these issues. What is unique about IACCM is it represents a very innovative nexus in that it brings both the buy and the sell sides together. Especially if you fundamentally believe at the end of the day that the Intended Consequence for both sides is to establish relationships (commitments according to Tim) which create and deliver mutual value beyond the contracted transaction. In fact, there are organizations where both of these functions (buy AND sell side contracting) have been organized under a single leader and we think that is just a fascinating opportunity to maximize value. We call it the JANUS model (feel free to come up with your own name). We think one of the Next Practices the community should adopt is that the Sourcing/Supply Chain function should be an integral part of the sales process (Mpower Blog). Let that sink in for a while and hopefully you will agree. For a detailed discussion between Tim and me on this topic, you can listen to arecording of the webinar Tim and I just delivered:

It is also interesting to note the most recent post entitled “(The) Strategic Sourcing (Debate Part V): My 2 Cents” where the author states in his opening paragraph:

“It’s called strategic, but it’s not used strategically.”

  Strategic sourcing, for the most part is seen as a procurement function, and typically, a transactional process leveraging tools such as RFx and Reverse Auctions in a tactical manner. Some large consulting firms, who offer services, treat Strategic Sourcing services similarly and mainly are utilized as “staff-augmentation”. For manufacturing organizations, where materials can be 60%-80% of the cost of goods, sourcing of direct materials needs to be approached as a Supply Chain challenge. Take the direct materials at the point of consumption and work backwards in the supply-chain several tiers, and understand costs. When the Supply Chain is worked cooperatively with suppliers, an organization can ask the question “How we reduce each others costs without adversely impacting each other’s margins”?

No disagreement with what he has to say. He does go on to give some examples of exceptions and while I don’t agree with all his examples, I would be very happy to agree there are many examples of pockets of excellence and we should find them and extract the Next Practices. However, I still maintain that to make the kind of dramatic change we need to make, mere CPR at this stage may not be enough.

In the post titled “Where does Strategic Sourcing fit in?”, the author shares a very similar professional background as mine (been there/done that, speaker and advisor) and has clearly posted a very thoughtful, measured response and I could not agree more with the gist of what he has to say. He lays out three questions, which he writes are even more fundamental, and I am happy to concede his point for a minute. What becomes obvious is we both end up in the same place … it hasn’t worked, it ain’t working, and it needs fixing right away.

Do your senior executives understand the enormous potential of modern supply management (only one element of which is strategic sourcing)?

I concur with this totally and this is exactly the argument we are laying out. What the author calls the “enormous potential” is what we are referring to when we talk about the destroyed value. And it is very clear senior executives do not understand that their Sourcing/Supply Chain organizations can help them get at this value because they only see their Sourcing organizations focused on cost/TCO.

Do your senior executives understand how to achieve that enormous potential — i.e., how to build the transformation roadmap and how to support it?

The quick answer is no. The more detailed answer is almost all organizations assume if they keep investing in their infrastructure (the consonants), they will get the results. And if the past few years have proven anything, it’s that this misses the whole issue of the vowels … how will these practices and the latest gizmos and technology be Adopted, Executed, Implemented, Optimized and Utilized?

If the answer to the first two questions is ‘no’, are you prepared to take a leadership role in helping your senior executives achieve the necessary awareness? If not, then debating the ‘strategic sourcing is dead’ question is moot at the company level.

And this gets at the crux of the issue because in a large majority of the cases, the answer to number three is a resounding NO!!! Furthermore, the follow-up question is why are we still where we are after 25 years? Until we understand that issue, I’m not sure how we go about determining how to fix it. Our research suggests that the biggest reason is the singular focus on cost (TCO etc.) gets in the way of senior executives achieving the necessary awareness because cost is but one element of their decision criteria and that is why we must fundamentally alter the sourcing process and initiate the process with their decision criteria while not abandoning cost.

The author then goes on to say: 

And to all of the above, I have a simple one word response … AMEN!! And that is exactly why we are issuing the clarion call to acknowledge that it hasn’t worked, it ain’t working, and we need to fix it right away. It was also very heartening to see a reference to a Transformation Roadmap because that is exactly what we have been recommending and delivering to clients for more than a decade. I will agree we are going further and saying the current approach and process (even with the latest technologies, decision optimizers, risk simulators, etc.) ain’t gonna work; and, we can either keep trying to fix it or we can all agree that we need to apply a fresh perspective and come up with something totally different.

  • Believe it or not, 25 years after the birth of strategic sourcing, many companies of all sizes still are not aware of “true” strategic sourcing.
  • Equally astonishing, a surprising number of companies believe they are using strategic sourcing, but in fact are not.
  • Perhaps as a reaction to the need for “quick wins” in the current business environment, some companies who previously used a true strategic sourcing process have since “dumbed down” their process into a tactical ghost of what it used to be.
  • As noted above, trying to introduce and embed strategic sourcing without the supporting pillars of a transformation roadmap is likely to generate only short-lived benefits.

 

So please join the debate, and yes, debate implies a conversation. All I ask is that we keep the confrontations constructive and stay away from the name calling, innuendo, and disparaging comments. We will be the first ones to admit that if we are now right, then obviously we too have been wrong in the past. And if you are truly a committed defender of the status quo, our best wishes to you. I will respond to some of the other commentary in a later post. I will also provide my reading of the Doctor’s TVM and Gartner’S DDVN.

Thanks, Dalip!

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