Author: Dalip Raheja, President & CEO, The Mpower Group, Inc, US
The big impacts of today's global problems can't be tackled if we're all playing a 'zero sum' game focused only on what's in it for us. Collaboration holds the key - and contracting can lead the way. Our essential Blueprint for Transformation sets out the steps that can make it happen for you.
Is your contracting function a back office cost center or competitive differentiator? The secrets of successful transformation are revealed in this article, supported by a two-part virtual workshop with Tim Cummins and me – see below for details -- that builds on the Executives Only session that occurred during IACCM's 2016 Americas Conference, The Year of Transformation: Maximizing Value through Collaborative and Agile Relationships.
If transformation wasn't your New Year's resolution it should have been!
Globalization, sustainability, immigration/labor shifts, climate change affecting markets and supply chains – these global issues are fast changing our business context and the way we work. But the impacts are too big for any organization to face alone. We can only overcome them by fundamentally rethinking the role and value of our trading relationships – moving away from the adversarial processes of the past and transforming our organizations to become more collaborative.
So, whether on the buy or sell side, isn't it time to stop discussing why we need to transform and start actually transforming?
Contracting's choice – enabler or roadblock?
Trading/commercial relationships are at the core of any organization's success today, not just contracts. Contracting has a choice. It can either embrace that reality and be at the forefront of change, or continue to be perceived as a roadblock to be worked around. Harsh as this may sound, the tone is deliberately provocative to shake us out of complacency. Without a fundamental rethink, our processes are likely to be destroying, not creating, value – and any attempts to make them more efficient will only mean more value destruction, faster.
Increasingly, the value we create totally depends on successful trading relationships. A perfect example of this is Apple. Mostly a design and marketing company, the value Apple creates depends totally on its trading partners. Contracting can follow Apple's example and multiply value achieved for all trading partners. Its new role must be that of competitive differentiator - a strategic business partner, internal consultant and change leader, bringing together internal partners with their customers/suppliers to create alignment and match risk.
Rethinking role and purpose – organization-wide
The journey to collaboration begins by re-assessing what drives our decision making. Are our own goals most important to us, or those of our collaborative “system” – our internal stakeholders AND our trading partners? Do our Decision Drivers support our relationships and the overall success of our partnerships, or do they cause conflict and resistance?
For example, your key Decision Drivers might be price, cost, process controls, time to contract and delivery accuracy. But if “time to market” is of the essence, your stakeholders are much more likely to be interested in locking up capacity in the supply chain AND enough customers to be one of the first suppliers in the market. Thus, the Decision Drivers are not aligned.
This assessment is a fundamental and powerful first step in rethinking the role and value of our trading relationships. It will enable us to move our Decision Drivers closer to those of our stakeholders (internal and trading partners) – creating a strategic link that can be actively supported by all stakeholders, and changing the whole context of our business relationships.
For those of you in contracting struggling with resistance from your internal stakeholders, this may hold the clue! To become a competitive differentiator you MUST change who you consider to be an internal stakeholder (there are more of them than we might think), and how you engage with those stakeholders. The way to do this is by focusing on their Decision Drivers. Your approach to collaborating and working with trading partners must also change similarly. With Decision Drivers more closely aligned, the contracting function can start redefining its process management role and add internal consultant, change leader, and strategic business partner to its portfolio.
Change leadership becomes critical
The journey to collaboration may start within contracting – but, for it to succeed, reassessment and change needs to take root in the organization as a whole, through organizational transformation. The road to change will be a challenging process that needs to start at the top. Additionally, it needs to focus on the adoption of your solution, not just its design.
Once the decision to transform has been made, and your organization is fully on board, the real work begins. It is clearly a process, not an event, requiring competencies that you and your organization may or may not possess. Change leadership becomes critical and changing the context may require some heavy lifting, especially with your stakeholders and staff – while you simultaneously keep the business going.
I say this not to sound discouraging but to acknowledge reality. And to also point out that issues you will face are both predictable and inevitable, and therefore can and should be incorporated into your Transformation Blueprint (below). The good news is that there is a tremendous body of knowledge and practice to draw on to handle these and other challenges.
Ignore context at your peril - context trumps content!
One critical discovery we have made is that transformation efforts that fail have spent huge amounts of time and energy in the design of their solution - and very little on its adoption. It should be the other way around.2 Context always, always trumps content (just Google that term). Our Transformation Blueprint seeks to change the context as well as the content. Unless we do this, all changes to content (i.e. process, tools, new skills and competencies) are doomed to fail. For example, let's say you, as a contracting function, embark on a transformation and reskill all your employees to fulfill the three additional roles of internal consultant, change leader and strategic business partner discussed above (content). Yet the rest of the organization still expects your employees to be efficient process managers and nothing more (context). How effective will your employees be in carrying out these new roles? And were they not set up for failure before they even got started because we changed only the content and not the context?
Extending transformation to trading partners
Of course the transformation to collaborative behavior must also extend to trading partners on both sides. Surprising to a few perhaps, we have found that getting alignment internally around more collaborative relationships with trading partners is a significant challenge. Long held assumptions around "what suppliers may do" or "how customers will squeeze for the last penny" may have calcified the context over a long period.
The goal should be to establish successful trading relationships. We need to recognize that we are all playing the same roles within the same context – we are customers to our suppliers and suppliers to our customers. Organizations' core processes and the competencies required - buy and sell - are essentially the same, and if not they should be. Next Practice companies (those that go beyond Best Practices), have already moved to consolidate the two functions.
TRANSFORMATION BLUEPRINT webinars coming - join us!
For a more robust discussion and deep dive, please join us for a two-part thought-leadership workshop1 series being hosted by Tim Cummins and myself, the continuation of the Executives Only session at the IACCM conference and the recent discussions around Transformation: Maximizing Value through Ccollaborative and Agile Relationships, IACCM's 2016 agenda. We will provide a provocative venue! .
You will walk away with a Transformation Blueprint that you can adapt to your organization to launch your efforts. If you are already in the midst of an initiative, we invite you to share your learnings and perhaps pick up a few short-cuts along the way.
Meanwhile here are some key questions for contracting to consider:
Join these important thought-leadership webinars by Dalip Raheja and Tim Cummins: