Government Commercial: A year in review
As 2019 draws to a close, Proxima looks back at the topics which have shaped this year in the commercial and procurement sphere – and predicts which buzzwords may feature heavily in 2020
Looking back and forward
This year at Proxima we’ve written a number of pieces, some published here on CSW , commenting on the challenges facing Commercial Functions and Commercial Professionals up and down the country. As 2019 draws to a close we look set for a quiet December and January (I write in Election week!), so what better time to reflect on 2019 and look forward to 2020?
Many of the issues we discussed are still ongoing. In fact, we expect many of these issues to continue into next year. Some will seem more important than others - though of course Brexit will be solved, sorted and a thing of the past...
Looking back: In 2019 we highlighted the capability conundrum facing GCF and indeed the wider public and private sector. We argued that whilst a lot of progress had been made, the central government strategy was effectively vacuuming-up (mainly) London based talent and that it could hit some talent hurdles and cost inflation over time. Anecdotally there was also some emerging dissention in the ranks as incoming staff sought to avoid being dragged into more operational work.
Looking forward: It will be interesting to see how this develops as the talent pool will not be magically expand at 12.01am on January 1st 2020. For now we are expecting more of the same, but should be looking to monitor how the government continues to move from buying people to outcomes and specifically:
- -- IR35 regulation, or lack of, affects those contractors who have been moved onto fixed term contracts in Government Commercial. Will there be a mass exodus?
- -- New and innovative SOW focussed technologies such as Deployed evolve and offer buyers the tools to architect statements of work as a credible and simple alternative to day rate hiring.
- -- Regulation supports or hinders progress.
A lot of the progress seen here is ascribable to the leadership, and which fires they fight. The current pool of Commercial Directors is arguably more talented than at any time before, and they have both an opportunity and burning platform for change. Perhaps they will need to consider broader collaboration and supporting technology, particularly if they want to save, automate and innovate. But they can only fight so many fires at a time.
Our most recent white paper sought to understand “Why Savings is a Dirty Word in Government”. For all the talk of austerity, the UKs largest buyer of goods and services seemed to pay only cursory attention to savings whilst engaged in delivering high quality and faultless sourcing processes. In casual conversation with civil servants in the last year, the link between austerity and savings didn’t seem to be widely recognised; some mentioning that they were even rewarded for how close they were to hitting budget rather than creatively coming under.
Looking to 2020 and the next Parliament, both the incumbent and opposition parties are proposing to ramp up spending, but financial constraints are well known across all of our public services. As unpopular as it is to say, part of the challenge here often seems to be the application of common sense in the face of procurement rules. We should be looking out for:
- -- How parties propose to fund election pledges and if government finance functions and procurement functions translate budgets into actionable savings targets
- -- How/ if Brexit impacts the ability to be more flexible through the sourcing process and post-award relationships
As the rest of the world seeks to be more agile and entrepreneurial, it cannot be that government, having made such progress, is forced to remain in the dark ages. This will be a talent turn off.
In 2020 we will all be robots, or at the very least forced to wear silver suits, refer to each other as numbers and talk in monotone phases.
Ok, perhaps not. In 2019 we argued that digital transformation was not as widespread or as rapid as one might be led to believe, and we have been proven right. But we have also argued the case for digital and its place within a customer centric operating model that uses technology as an enabler, and people as the “magic”; engaging each other, being creative and solving problems.
The noise around digital will continue. But, as the market seeks new ways to sell digital services, expect more talk of transformation failure, a narrative that works for consulting firms and software houses alike; blending fear and opportunity in the mind of the buyer.
In any event, it might be helpful to think of digital transformation in 2020 less as a huge all-encompassing change programme, and more in terms of opportunities to use technology to solve problems and or make things better, faster and more accurate. In simple terms there are two tracks: 1) digitising procurement, or 2) understanding markets and helping our customers to go digital. Both have value. Both are perceived differently by customers.
Expect 2020 to be the year the narrative changes slightly and the battle between the Goliaths and the start-ups intensifies.
Should a recession appear in 2020, the theory of sustainability being a profit accelerator and driving customer loyalty will be tested.
This could well be the buzz theme of 2020 with an increasing amount of airtime devoted to this topic and some very senior support. Much of the narrative in 2019 has been around “sustainability as a competitive advantage”, stealing a march on the competition and appealing to the emerging purchasing power of Generation Z. In plain terms, right now “sustainability sells”. Whilst this narrative is clear for private sector, what about public sector?
Undoubtedly, the public sector is leading the way on social value. It’s now an increasingly important part of many central and local government evaluations and civil servants should spend 2020 helping SMEs in particular to understand their needs and how they can make this a part of their corporate DNA. Many SMEs won’t be as “clued up” on the market as their government customers, so a little education and support will go a long way.
In private sector land it feels increasingly inevitable that greater guidelines on sustainability, and perhaps even wider regulation, will come to pass. In previous administrations this may well have been an unpopular move, this time around it almost feels like society and businesses are driving this change. Think about the climate, diversity and inclusion, modern slavery, the poverty gap and others - businesses are starting to ask for change.
Of course, one thing that Generation Z (for example) have never seen as consumers is a recession. This is not to say that they are fickle, but during a recession difficult decisions have to be made. Should a recession appear in 2020, the theory of sustainability being a profit accelerator and driving customer loyalty will be tested. Let’s hope it passes the test.
Sustainability and risk are intrinsically linked, reputational failure being just one of the things that can destroy companies and careers. Now think about all the different types of risks out there; financial, ethical, environmental, cyber, geopolitical, the list goes on, and on. This may be why risk gets a lot of (digital) column inches but still hasn’t really taken off mainstream. Risk has multiple business owners and budget holders, making it hard for suppliers to build and sell and all-encompassing solution.
Enterprise platforms have failed to deliver. In 2020 expect the continuation of what is happening now, smaller, more innovative solutions popping up that can solve a budget holder problem. The real outlook for procurement might be in facilitating these and working out how to knit the data together to tell the right sort of stories.
2020 could be a seminal moment for risk. We’ve got supply chain transparency needs, a potential recession on the horizon, increasing frequent cyber challenges and an emerging generation with purchasing power and strong buyer values. It’s taken a long time for risk to get to near the front of the line, don’t expect it to go anywhere in 2020.
So more of the same for commercial teams?
Yes and no. The above might feel like old news, but it is representative of the incremental progress that commercial teams need to make. CPOs and Commercial Directors are already feeling the talent pinch and are busy building digital roadmaps.
Risk and Sustainability, whilst known topics, are starting to emerge as a leadership priority. Increasingly, the executive is looking to commercial teams to play a leading role. Indeed, we are seeing the emergence of the CPSO (chief procurement and sustainability officer).
And for Proxima?
At Proxima we have to both react to markets and predict change. We’ll be continuing to offer government commercial functions unique solutions to capacity and capability challenges, as well as providing wider transformation skill sets that can drive real change. We’ll also be releasing some exiting new products into the market, more on that to come. 2020 looks like a year to collaborate.
Finally, you will note no mention of Brexit, as we’re expecting things to be reasonably quiet on that front in 2020…. Aren’t you?
Click here to read Proxima's report - The Capability Conundrum: Resourcing Challenges in Government Commercial.