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Capability Maturity Model — a vehicle to understand and drive commercial excellence

Published: 15 Feb 2008 Average Rating: unrated Print
 
This article appeared in Contracting Excellence magazine on 15 Feb 2008 view edition
 

The IACCM Capability Maturity Model provides a mechanism to rapidly and accurately assess both buy-side and sell-side process performance by focusing on the key commercial attributes that drive business outcomes. This article provides an insight into the model, discusses the procedures required to implement the model, and the benefits which flow from it, with examples from Rockwell Automation and Cisco Systems.

MARK DAVID, COMMITMENTOR; KATHERINE KAWAMOTO, IACCM; AND TIM MCCARTHY, ROCKWELL AUTOMATION

by MARK DAVID, COMMITMENTOR; KATHERINE KAWAMOTO, IACCM; AND TIM MCCARTHY, ROCKWELL AUTOMATION

 

The IACCM Capability Maturity Model provides a mechanism to rapidly and accurately assess both buy-side and sell-side process performance by focusing on the key commercial attributes that drive business outcomes. This article provides an insight into the model, discusses the procedures required to implement the model, and the benefits which flow from it, with examples from Rockwell Automation and Cisco Systems. 

Main points

        A unique feature of the IACCM Capability Maturity Model is that results are immediately benchmarked against a portfolio of similar companies and processes, enabling valuable insights on competitiveness and the areas for priority improvement.
       Drawn from Six Sigma techniques, the model addresses nine business dimensions which are discussed.
       To assist primary users in assessing their commercial contracting capability, IACCM has developed a Six Step Plan that enables rapid movement through assessment, validation and improvement planning.
       The model is of benefit as a vehicle in understanding not only an organization’s current capability status, but also to assess, review and consider how best to advance its functional capability.

As we strive to improve our contracting organizations, it has been common practice to focus on benchmarking ‘best practices’ that others have implemented and found useful. This approach has provided useful perspectives and yielded functional improvements. However, what passes for ‘best practice’ is often simply something others are doing that hasn’t reached your radar screen yet. In other words, best practices may not be best in class, or even best in business, but simply a flavour of the month that everyone seems to be trying. Benchmarking can give valuable insights but provide limited perspectives to achieving true leadership.

This is not to say that using practices that are successful in other companies should stop, but how do we get beyond best practice sampling and achieve a more mature level in our performance and behavior? Various professions and functions have developed models over the years to tackle this challenge — from software engineers to Six Sigma practitioners. At IACCM, we recognized the need to move to a maturity-focused model to better assess our member organizations and drive needed improvements in our respective markets.

IACCM has developed its own Capability Maturity Model to identify the characteristics defining world-class performance and provide the capability to assess the status of commercial contracting functions. Organizations that use this model are able to rapidly identify how they currently relate to global standards and map out a change program relevant to their business.

Led by IACCM Board Member Tim McCarthy, the IACCM online Capability Maturity Model (the model) was developed by a cross-industry, international team of practitioners and experts who used their Six Sigma experience and techniques in the underlying design. The model addresses nine business dimensions:

1.  leadership;
2.   customer/supplier experience;
3.   execution and delivery;
4.   solution requirements management;
5.   financial;
6.   information systems/knowledge management;
7.   risk management;
8.   strategy; and
9.  people development,

and provides descriptions that help people to identify the maturity level of an organization for each of the nine business dimensions. This enables an assessment to be made as to which of the following phases reflects the current situation:

        Phase 1: start up
        Phase 2: disciplines under development
        Phase 3: discipline is functional
        Phase 4: continuous development
        Phase 5: world class (best-in-business)

The model provides a mechanism to rapidly and accurately assess both buy-side and sell-side process performance. Its focus is on the alignments that drive business outcomes in market or supplier selection, terms and offerings alignment and outcomes.

A unique feature of the model is that results are immediately benchmarked against a portfolio of similar companies and processes, enabling valuable insights on competitiveness and the areas for priority improvement.

The methodology and associated tools have been tested and validated by more than 200 senior professionals and managers from over 15 countries, to ensure their ease of use and that they generate accurate results. These initial users also provided the core set of benchmarking data that enables future users to benefit from immediate comparative performance data (the fact that the model is online means that the benchmark data continues to grow in its size and scope).

Primary users to date have been assessing their overall contract negotiation and management procedures (‘commitment management’). To support their assessment, IACCM has developed a fast and accurate Six Step Plan that enables rapid movement through assessment, validation and improvement planning.

The Six Step Plan

Step 1: Maturity benchmark and gap analysis

IACCM sets up a custom portal to enable the following online survey and data collection.

  • Undertake (a practitioner led) self-assessment of current process performance.

  • Undertake (a user/stakeholder) analysis to identify process user perspectives of process maturity (web-based survey).

  • Compare practitioner/user views to identify areas of weakness, and items for more detailed investigation.

  • Use IACCM-provided benchmark data to identify key weaknesses in current processes (and the gap-to-market and industry norms).

  • Undertake an assessment of the impacts that will result from a failure to close these gaps (description of consequences over a 24–36 month timeframe)

Step 2: Develop capability value proposition/statement of need
(This can occur in parallel to Step 1.)
  • Analyse corporate strategies and goals and create a statement of required process outcomes (deliverables and characteristics):
   need;
—  status today (weaknesses/inhibitors); and
   capabilities to be created.
Step 3: Set the framework for measurable results
Develop plans for ongoing measurements, which in turn will allow continued analysis and improvements, and will support initial assessments of ROI/validation of results.
Step 4: Define potential projects and outcomes
The initiatives required to drive improvements will be defined as discrete projects; each project will be based on specific and measurable outcomes that include both qualitative and quantitative targets.
Step 5: Prioritization
Analyse the relative importance and costs of the improvement programs. For each potential initiative, plot its contribution (to the priorities established in Steps 1 and 2) relative to the resources it will require. This analysis allows overall costing of the improvement program and supports prioritization/selection.
Step 6: Create a business plan
Consolidate data to produce recommendations and build internal consensus:
The plan sections should include:
       why contracting excellence is important;
       what is wrong today;
        why it matters;
        what improvements could be achieved;
        the benefits that will result;
        analysis of importance versus costs;
       recommended actions; and
        what it will take to get there in terms of:
        time;
        people;
        cost; and
        executive commitment/sponsorship.
Case studies
Rockwell Automation
The experience Tim McCarthy has had at Rockwell Automation is a case in point. Taking the model’s workbook, Tim had each of his regional managers complete an assessment for their respective regions (North America, Europe Middle East and Africa, Asia Pacific and China, and Latin America). He then held a discussion with all of them in which they reviewed each other’s assessments and challenged the assumptions they had formed and the perceptions they had of the maturity level and demonstrated behaviours. At the end of the discussion, each region rebalanced their maturity assessments to more ‘realistic’ levels.
What do we mean by more realistic? Well, there may be a tendency to over-emphasize the positive attributes of our organizations’ performance and achievements and, conversely, under-play the negatives or areas of needed improvement. Having to defend your assessments to your peers and take a second, more rational view at your organization usually yields a more realistic assessment.
Rockwell is now in the process of determining its next steps, be they discussions with internal contracting teams on action plans to improve performance, or discussions with business leaders to discuss variations in the perceived maturity and what can be done to close any gaps. The value is not in having an accurate assessment of one’s maturity to the third decimal point, but in using the model to facilitate meaningful discussions with key stakeholders to ensure agreement on, and commitment to, performance indicators essential to business success, and how Rockwell implements actions to address shortcomings or make improvements.
Cisco Systems
Cisco Systems has also undertaken a similar organizational self-assessment using the IACCM model. In the spirit of collaboration, in addition to the commercial management team driving the maturity assessment, Cisco included several key stakeholders in the process such as legal, purchasing and finance. By including the other functional organizations in the process, Cisco’s commercial management team was able to validate their own assessment as well as identify areas where the perception of the functional groups differed. They, too, intend to use this information to help them identify areas for improvement as well as prioritise their 2008 initiatives. ‘We are just at the beginning of this journey, but we are excited by the possibilities we see’ says Brett Pauly, Director of the Service Provider Commercial Office. ‘We feel this will be a valuable tool to help us achieve our desired level of contracting maturity.’
Conclusion
The Capability Maturity Model has generated significant interest as organizations see it as a vehicle to understand not only their current capability status but, more importantly, to assess, review and consider how best to move their functional capability forward. The internal, cross-functional dialogue that this process generates also provides the possibility for commercial functions to deepen their cross-functional relationships — a beneficial by-product of going through the Six Step process. IACCM envisages making further improvements to the model and we welcome your thoughts and suggestions to help this process.
Katherine Kawamoto.
Vice President of Research and Advisory Services,
IACCM,
Email: kkawamoto@iaccm.com,
www.iaccm.com.
 
Tim McCarthy,
Director of Global Contracts and Pricing,
Rockwell Automation,
Email: tsmccarthy@ra.rockwell.com,
www.rac.rockwell.com.
 
Mark David,
Principal, CommitMentor,
Email: mark@commitmentor.com,
www.commitmentor.com.
ABOUT THE AUTHORS
Katherine Kawamoto is responsible for developing IACCM’s research and advisory services and has been heavily involved in building IACCM’s relationships with academia. Prior to joining IACCM, Katherine was the Worldwide Director of Contract Management at NCR Corporation. Her experience spans more than 25 years and includes both buy and sell-side leadership roles.
Tim McCarthy is responsible for improving Rockwell's bottom-line profitability, project cash flow and customer requirements management by strengthening key sales contracting fundamentals. Tim joined Rockwell after two and a half years with Invensys, where he led the contracting process globally, re-engineering their contracting and negotiations practices, both pre- and post-award. Prior to Invensys, Tim worked for 24 years with Honeywell International where he had a varied career, including directing contract and risk management for the home and building control business and sales and operational positions in the military avionics business unit.
Mark David is the founder and principal of CommitMentor, a consultancy providing innovative commitment management coaching, training and operational services. Mark has over 25-years’ commercial experience living and working in multiple cultures in 31 countries. Mark has been involved with IACCM since its inception, was a board member from 2000 to 2007, the association’s chairman in 2003 and 2004, and is an honorary vice chairman.