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Complex services: making the case to reluctant stakeholders

Category managementConsulting ServicesCategory Strategies

In this guest post, the second in a series on tackling complex spend, Procurement Leaders invites Vantage Partners’ Danny Ertel to look at how procurement teams should go about engaging with stakeholders to start to manage difficult categories.

 

In last month’s column we highlighted the barriers to procurement involvement in what may be a huge, largely unaddressed category of spend – complex professional services such as consulting, marketing, legal, etc. One of the most significant of those barriers is resistance by typically senior, highly expert stakeholders, who fiercely protect their autonomy and their preferred providers.

 

The key to persuading such stakeholders is to change procurement’s value proposition. Instead of asking a chief marketing officer, general counsel, or other functional or business unit leader to let procurement run a sourcing event – which to their ears will sound something like "replace my trusted advisor with someone cheaper, leaving me to bear the risks and clean up the mess" – procurement needs to consider ways to help address what such stakeholders might actually consider to be in need of fixing.

 

Change the value proposition

 

It is in the nature of these services that expertise, judgment, and trusted relationships are of paramount importance. Value gains thus have to come through process improvements, service unbundling, innovation, risk reduction, and incentive alignment, rather than through discounts.

 

The real opportunities are in identifying ways that suppliers can help the company better meet its business objectives, avoid costs, consume less, and become less expensive to serve. Supplier margin compression is possible, but there are real limits to those strategies in these categories. Instead of leading with savings, consider the ways in which procurement can help business stakeholders gain a better return on their investments in these services.

 

Sourcing Value Propositions Levers of Value
Improve reliability of department budgets
  • Alternative pricing models
  • Project management
  • Scope management
  • Demand management
Engage optimal talent for each assignment
  • Strategic discussions about access to service provider’s “A team”
  • Disaggregation/unbundling of services
  • Regular discussions about staffing mix
Enhance vendor performance
  • Scorecards that track outputs and necessary enablers
  • Quarterly business reviews
  • Value discovery
  • Alternative pricing models
Mitigate risk
  • Standardised contract terms
  • Project management
  • Standard Operating Procedures
Improve business case for spend
  • Alternative pricing models
  • Scorecards that track where money goes and what it buys
Improve value for investment/budget
  • Demand management
  • Value discovery
  • Disaggregation/unbundling of services
  • Re-engineering of services (standardisation, re-use of knowledge and materials)

 

 

Do your homework; engage early and often

 

 

Like the service providers who sell complex services to your stakeholders, try to engage in consultative selling: Do your homework, ask lots of questions, and build relationships over time; try to add value as you engage with prospective internal clients; and tailor your solutions to meet the concerns and desires of their clients.

Recognise that unlike other categories of indirect spend, buyers view complex services as critical enablers of business results, and thus, that measures of value achieved and ROI are much more relevant to buyers than are measures of savings. Ask smart questions about how stakeholders assess their service providers, how they drive them to do better, and what steps buyers have already pursued to bring fees down and make them more predictable.

 

Find out what their peers at other companies are doing, especially those who are being called out as “leaders” by their respective professional organizations, and ask questions of your internal stakeholders about what they think of those kinds of initiatives. Consider sharing lessons you have learned in procuring other services or materials that might be useful to buyers of complex services.

 

These kinds of smaller elements of engagement can demonstrate your knowledge and may enable you to get into the conversation with stakeholders without eliciting defensive, turf-protecting reactions. Next month we’ll start delving into proven value-adding strategies you can pursue once you get past the initial resistance.

 

Danny Ertel is a partner at Vantage Partners.

Guest Blog
Posted by Guest Blog

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