This article is for: CEOs, CFOs and CPOs trying to do more with less, looking to identify and unlock hidden value in their businesses or drive digital transformation without large budgets.
Topics Covered: Procurement Strategy, Immediate ROI, Spend Analytics/Intelligence, Private Marketplaces, Purchase to Pay (P2P), Single Vendor Model, Consumption-based Pricing, ‘Pay as you Save®’, Digital Transformation, Process Efficiencies, Process Automation.
5 Minutes Read, Dan Quinn, September 21
It’s fair to say that the number of priorities CPOs have to manage is increasing and this is taking its toll on the Procurement function. CPOs are under increasing pressure to manage short-term cost reduction strategies as well as long term risk mitigation and supply chain transformation, often while continuing to drive value for their business using the same or fewer resources than they had before.
Deloittes’ 2021 CPO survey shows the top 3 priorities for a CPO are typically:
- Operational Efficiency (78%)
- Reducing Costs (76%)
- Digital Transformation (76%)
However, I often talk to senior executives who are finding it difficult to effectively address these top 3, let alone the long list that follows them. The investments in people, processes, and technology required to make a real impact are not always available and even if they could afford to make the (significant) investments in technology and professional services, it could take years to embed it enough to start driving sufficient measurable benefits to break-even and maybe longer to provide a solid ROI. You can see why such investment is often not an option for many organizations. There is another way…but be warned it requires a different strategic mindset!
Another Way?
For years businesses have been encouraged to ‘focus on the core’ or ‘stick to the knitting’, essentially to concentrate on what they are good at, where they can add real value and better serve their customers. Much of this advice has come from the customer-facing B2C world, think of Nike outsourcing the manufacturing of their sneakers whilst concentrating their resources and efforts on design, which is what’s truly at the heart of their value creation.
Read More: – What is Source to Pay – A Guide to Source to Pay (S2P) Process
Now, increasingly, the procurement world is starting to adopt this approach, in an environment that has forced many companies to do ‘more with less’. Forward thinking companies are looking to see where they can be laser focussed on the core of their business and direct limited resources towards the areas with the greatest impact on the top & bottom lines and ultimately hand over the rest to someone else that has the skills, technology and scale/market power to mange the non-core spend more efficiently than internal resources
“…80 per cent of companies that achieved profitable growth through the ’90s did so by focusing on their core business…” Source: Bain & Company Profit from the core: Growth Strategy in an Era of Turbulence (2001)
For sure, handing the controls of even the non-core element of your business to someone else takes a strategic mindset, and maybe a little faith. But by thinking carefully about what you are really good at (your core) and letting someone else manage the rest for you is the best way to maximise value delivery while keeping risk firmly in control. But perhaps controversially for some, it does mean they may need to put aside the perception that a manager’s value to an organisation (and consequently remuneration) is based on the size of the spend, or team size. That’s rarely the case in most forward-thinking organisations, rather it’s the value you add (i.e. unlock and drive to the bottom line) that gets you noticed and rewarded, after all how many procurement management incentive/bonus plans are linked to growing teams/costs?
We are seeing this new mindset already, of a sort, particularly in the US where companies are handing over much of their indirect spend to marketplaces such as Amazon Business, Google Procurement, and the IBM marketplace. However, this approach is often limited; sometimes to common spend only; such as stationery, laptops, PPE, etc, sometimes only for companies who are able to offer large levels of spend out of the range of many medium-large sized companies, and sometimes these are the companies disrupting their sectors, handing them further ammunition is simply unpalatable.
At Simfoni we see things differently, we have an innovative business model combined with a pragmatic (and even ‘democratic’) approach to procurement spend, technology and expert services. We don’t believe value driving technology and services should only be for the global blue chips, or those with deep pockets and large technology budgets.
Here are the 3 key elements to the Simfoni approach that illustrate our model/mindset:
1. At the heart of our business is Spend Intelligence, a blend of AI-driven analytics combined with additional specialisms such as savings opportunity assessments and diversity reporting, it allows CFOs and CPOs to see the woods for the trees to ‘see the spend’. Spend Intelligence also leverages our core skills in strategic sourcing to build savings programmes to identify and unlock areas of hidden value in your business. Some of our customers may use us just for a one-off strategic initiative, such as a group-wide savings programme or delivering acquisition/merger But many continue to use us to provide an ongoing strategic capability to arm their category managers with the analysis to make the best business decisions and proactively drive value.
Crucially, the insights that spend analytics provides allows our customers to start asking the ‘big questions’. Simfoni helps them move from just ‘seeing spend’, to ‘seeing spend differently’, to ask themselves: what is my core business? what if I just focussed all of my efforts onto these areas only? can I optimise my core, whilst at the same time taking cost out of the non-core part of my business? And perhaps even: “Should I really be devoting precious procurement resources to buying cheaper stationery, when someone else can be doing it better whilst my (larger) core spend could benefit better from more focus and resources?” And/or “could I leverage my supply chain and volume pricing to create a marketplace offering that drives sources of new revenue to my business? Could I make procurement a profit-centre instead of a cost-centre?”
Read More:- What is Procure to Pay – A Guide to Procure-to-Pay (P2P) Process
2. Those customers leverage our Spend Automation approach; a blend of digital technology solutions, professional services, and buying power that drives both hard savings and process efficiencies in companies non-core spend, thus improving their overall economics and allowing them to become laser-focused on the core spend that leads to further economic benefits, without the distractions of the non-core spend
“Whats the biggest single cost for most businesses? Procurement… . ....Purchased products and services account for more than 60% of the average companies total costs. Bringing down procurement costs can have a dramatic effect on the bottom line 5% cut can translate into a 30% jump in profits”. Source: Degraeve & Roodhoft (2001), Harvard Business Review
Simfoni customers realize immediate ROI through quick-win savings and efficiency gains, to quote one customer “Payback was instantaneous with savings of 3% from quick wins and a roadmap to save a further 20% from cost optimization initiatives”. The diagram below shows the tangible business benefits we unlock by leveraging Simfoni Spend solutions… Oh, and it gets better!
Oh, and it gets better!
3. Simfoni’s business model features an innovative consumption-based pricing approach, we call ‘Pay As You Save®‘ – it simply means you don’t have to make the large upfront investments in technology, implementation and professional services that are typical in the industry. We are so confident of our success and ability to add value to our customers that “we put our money where our mouth is” – our Spend Automation fees are based on a share of the savings we deliver to our customers, if they don’t benefit, we don’t benefit, its a simple proposition that aligns all parties on true customer success and makes their business case a ‘no-brainer’.
If you are a senior executive in a large or mid-sized company and would like to know more about how Simfoni could help step-change your organizations economics, let’s talk – you can reach me using the form below or my LinkedIn profile HERE.
About Dan
Dan Quinn is the General Manager of Simfoni for the Middle East & North Africa Region, he has worked in senior procurement and supply chain digital transformation roles for over 20 years with a diverse array of organisations and sectors.
About Simfoni
Simfoni is a digital platform and professional services company that works with some of the world’s most successful businesses to help CEOs, CFOs, and CPOs to leverage AI, digital technology and expert services to identify and unlock hidden value in their procurement spend, quickly. We are a global business with regional offices in San Francisco, Chicago, London, Abu Dhabi/Dubai, and Melbourne.
