In this guest post, the latest in a series on tackling complex spend, Procurement Leaders invites Vantage Partners’ Danny Ertel, along with Jon Hughes, to look at ways to work with suppliers to explore ways to take costs out, deliver more, or decrease the cost of doing business together.
To deliver benefits beyond price reductions, engage the business’ preferred providers in a structured joint value discovery process, putting real business challenges on the table, asking for help, and recognizing that sometimes to unlock value, buyers must make changes in how they consume the services and how they partner with their most strategic providers.
To be effective, they need to design these efforts to facilitate candid interactions about problems both sides face. There are often many things users of services don’t understand about how they make themselves more costly to serve or discourage providers from making innovative suggestions or investments in improvements that can improve value for both. Similarly, unless providers can genuinely (temporarily) set aside their focus on delivering the current scope of work and selling the next engagement, they often fail to see opportunities to become much more valuable to their clients.
Procurement teams can play a useful role in convening joint value discovery sessions with internal stakeholders and service provider and ensuring that the participants are well prepared and the meeting is well-facilitated. In our experience, such sessions work best when the agenda is based on input from key stakeholders internally and at the provider.
Advance preparation should include: a simple gap analysis around the goals and value expectations for the relationship; gathering stakeholder perceptions about "the basics" (provider performance, scope management, forecasting, responsiveness); hypotheses about leading opportunities for future value creation; and indications of how well governance is working in the relationship. With such information in hand, procurement can then design an agenda and ask participants to do their own preparation for one or more structured workshops to uncover, address, and test opportunities for value creation.
Among the topics usefully covered in such sessions, are:
- How can the company make it easier and more efficient for the provider to serve them?
- What are the things the provider can do to add more value – with and without charging more?
- Are there tasks that internal company staff can take over to free up provider resources to add more value?
- What incremental benefit would the company get for sharing with the provider strategic direction/planning more fully and earlier?
- What insights and suggestions has the provider shared in the past that failed to get traction at company? Why did they not go anywhere?
Approaching the value improvement question as a shared interest, in an environment expressly focused on problem-solving, goes a long way toward stimulating creative discussion. Critical to the success of these sessions is ensuring that stakeholders feel heard and that real business problems get on the table and are addressed collaboratively.
Danny Ertel is a partner at Vantage Partners.