The future for commercial is bright… but are we staring at the sun?
Commercial teams in the public sector are taking huge strides to improve their capability and influence, but Proxima asks - do we risk being blinded by undeliverable promises and expectations?
“It’s tough to make predictions, especially about the future" - Yogi Berra (New York Yankees baseball player)
Oh, how true!
15 years ago, who would even have known what you were talking about if you’d said you aspired to be a YouTuber, Mindfulness Guru, Vlogger or Drone Operator? Or that the political landscape would be undermined by the near-collapse of the global banking system, completely unpredictable electorates and TV personalities becoming presidents?
Nevertheless, as Mahatma Gandhi said, “The future depends on what you do today,” – achieving the kind of future we want to see will depend on the plans and actions we put in place today.
At Proxima, we’ve therefore been trying to envision what the future of procurement could look like and how Commercial teams can influence their organisations to drive ever more value out of their supply chains.
Of course, technological advances will be a part of this; driving efficiency, speeding up decision-making, improving data availability and quality, but other factors and drivers are also coming to the fore in the current climate: social and sustainability objectives, welfare and wellbeing issues, all contributing to an overall desire for “innovation” and “creativity” to meet these needs.
The value equation is therefore no longer a simple a cost vs. quality comparison but has become increasingly complex as the number of variables multiplies.
High tech vs. skill sets
Whilst it is tempting to see technology as the silver bullet that will solve this equation, as Simon Geale, Proxima’s Vice President Client Solutions, says “it’s important not to be seduced by possibilities over practicality. Most of the current technology is targeted at end users rather than Commercial functions and at large-scale organisations. As a result, the focus, even of robotic or ‘AI’ solutions, is still on simplifying and standardizing rather than dealing with complex decision-making.”
The full benefits from a fully-enabled and empowered supply chain will be delivered by buying organisations and their supply markets cooperating, creating and driving innovation to meet the ever more complex needs of their end customers.
In order to enable this, forward-thinking organisations are moving away from the traditional ‘pyramid’ structures as task-based roles can be taken over by technology or delegated to end users, towards a ‘kite-shaped’ model with increased focus on both delivery, the knowledge of how to get things done, and consulting, the ability to identify new solutions and ways of working that facilitate innovation and growth.
In the diagram below, moving up this value chain requires not only technology enablement to ensure consistent delivery of the day-to-day requirements, but also highly-skilled resources that are able to understand, interpret and formulate stakeholder needs, identify and access the right routes to market and supply sources and then partner with suppliers and broader networks to deliver more than the sum of the parts.
Credit: Proxima 2019
Is the public sector being left behind?
It’s very tempting to see public sector procurement as being stifled by bureaucracy and regulation, unable to access the best suppliers and most innovative solutions or practices. Yet that would ignore the great strides taken in recent years to improve the competence, working practices and collaborative working that have been driven by individual Departments, the Government Commercial Function, Crown Commercial Service and other cross-functional organisations.
When I asked colleagues about their experience of working with our clients, we highlighted many ways in which the public sector is ahead of the game in best practice management of sourcing and supplier management as well as having the skills to deliver this, such as:
“The processes force more discipline in setting out requirements and how we’re going to evaluate them.”
“Suppliers don’t get complacent due to fixed term contracts.”
“The definition of ‘value’ can be much broader than simply cost – issues such as social value, sustainability and the use of SMEs make for richer decision-making.”
“Suppliers are treated more fairly and in a less cavalier fashion than in much of the private sector.”
Yet at the same time, we also see that “some buyers are scared of conversations with the market,” “the fear of challenge leads people to default to certain tried and tested procedures,” and as a result “buyers’ ability to be proactive and develop the market is constrained.”
So what’s stopping you?
Within the public sector there are some inherent obstacles in the path of a radical change of direction:
Investment in technology is frequently constrained by budgets that demand short term cost reductions from any investment – too often procurement-related investments have historically under-delivered against their business case and other political priorities will often hold sway over “back office” investments.
However, most of the technology gains can be facilitated through effective use of existing financial systems to drive governance and control, backed up by relatively cheap analytical tools.
Perhaps more structurally, the perception that public contracts regulations hinder the effective use of supply markets is strongly held in many organisations. Yet pre-tender engagement with the market is, in fact, positively encouraged by these and this is increasingly being tapped into by buyers across the public sector. Supplier days, where requirements can be discussed and subsequently adapted, innovation forums and an increasing use of negotiated procedures and even Innovation Partnerships are all examples of public sector teams embracing the need to work with, rather than subject to or against supply markets.
But perhaps the hardest barrier to overcome is cultural. Resistance to change and the reliance on “how we’ve always done things” is probably the one way in which public sector buyers and stakeholders will fail to grasp the opportunities the future could bring; and in this, it is no different to the private sector.
In this respect, the Government Commercial Function’s role in sharing best practices and building coordinated strategies and approaches offers an excellent foundation for success. In order to drive tangible behaviour change, Departments now need to consider how to practically adopt these best practices into everyday ways of working, and track their own journey to meet the higher commercial standards which are now expected from and valued by the centre.
Click here to read Proxima's report - Why 'savings' is a dirty word in government