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April 21, 2016

The Procurement Maturity Curve – Collaboration is value creation – Part 4

In this series of posts, we have looked at how procurement can progress from meeting the fundamental requirement for savings and ensure their continuation through process compliance. We have also considered the potential associated with a shift from an outward-in focus to one that is externally driven, allowing us to position the enterprise to take advantage of the best available options as well as to minimize the risks associated with them.

Although this progression tracks an expanding perspective and set of objectives, it is still dominated by what procurement alone can and should do. But no function is an island, and by acting unilaterally we can achieve success, but only so much.

When we learn to collaborate with others, making joint efforts for shared benefits, we not only increase the potential for value creation, we open the door to new types of value. Nothing worth having is easy to get, and a state of effective collaboration is no exception. In fact, achieving a state of mutually received advantage requires procurement to completely alter some of the ways we’ve worked – and thought – in the past.

We can no longer think of our objectives as being at odds with those of our suppliers: Information must be hoarded for the leverage it could represent in a negotiation. We pay a dollar more, and the supplier adds a dollar to their profit margin. We insist on better prices, so they reduce our service levels. There can only be one winner, which requires a loser – and no procurement professional intends to be that.

In a state of collaboration, none of those old lessons apply. Information has no value unless it is shared in a way that advances the causes of all parties. We invest a dollar – as does the supplier – and the joint effort pays dividends for both sides. Contracts become about innovation and advantage rather than enforcing service levels. Both parties are able to ‘win’ in ways that do not represent the need to dominate or squabble over a zero sum solution.

For procurement, reaching a state of effective collaboration with suppliers represents the realization of our full potential. This allows us to create value above and beyond the financial figure represented by savings. In fact, becoming collaborative has more to do with reaching a point of mutually shared mindset with the objectives driving the organization as a whole rather than remaining confined by a procurement-only perspective.

Be sure to check out our entire blog series on The Procurement Maturity Curve covering savings, compliance and more. Along with many other procurement blog posts and resources, don’t miss our webinar with Forrester about Building a Holistic Business Case for Procurement Technology.

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