In the past decade, the impact of procurement's role within organizations has become increasingly profound. No longer is procurement considered a tactical arm of the enterprise whose key tasks are purchasing and brokering deals. We've entered a new era of category management where category managers are evolving as leaders, and stakeholders are recognizing procurement for the significant value it brings to the table.
With change comes a new set of challenges. So how can you best ensure that your team is prepared for the new era of procurement?
A while back, Denali Group released Tactical to Strategic: Retooling for Better Category Management, a whitepaper that discusses procurement's shift from a tactical mindset to one that is more strategic through better alignment with business goals and a proactive approach to get involved earlier with stakeholders.
I'd like to further expand on these concepts by 1) identifying what strategic actually looks like, and 2) delineating more clearly the challenges and changes required to close gaps between current and ideal performance for a more strategic future.
Procurement's evolution has been a fascinating evolution, starting with the "buying era" prior to the 1990s. At that time, procurement was often a back-office tactical function whose primary objective was purchasing and ensuring cost savings. Starting in the mid-1990s, technology created options and new processes, giving way to an era of strategic sourcing. Technology solutions and streamlining processes helped to improve efficiency and effectiveness, prompting a shift towards a more strategic mindset. A new set of eSourcing process and technology solutions highlighted the importance of increasing market visibility as well as competition in the marketplace to drive more substantial cost savings.
Today, most procurement organizations have driven efficiency successfully through strategic sourcing efforts. However, in order to take the organization to the next level, the first critical step is to advance skillsets, mindsets, and modes of operation - shifting focus to category management in order to achieve breakthrough value.
Most procurement organizations are now examining the types of people in category management roles and assessing whether or not these individuals are equipped with the tools, templates, and technologies for success. While some are making the investment to enhance their team's skillsets, others aren't sure where to begin.
Transitioning into an Era of Category Management
For procurement to take on a strategic category management focus, major shifts need to occur. Often, the three main category management roles - stakeholder management, strategy development, and procurement execution - are the responsibility of one person. This typically results in the category manager being buried in tactical activities and execution, with no time to assess what might be done in the future to help procurement increase value for the enterprise. Unfortunately, identifying ways to be more strategic and proactive ends up on the back burner.
The ideal means of moving into the era of category management is for the procurement team to shift its mindset to an operating model that's based on a division of labor. By moving tactical work away from the category manager and delegating it to a qualified execution-focused team (internal or third party), it allows the category manager to focus on stakeholder management and category strategy development, the two key strategic elements.
Building Strategy Through Category Management Enablement
Initially, most category managers struggle with how to transition from tactical to strategic. They often ask: What does it actually mean to be strategic with regards to day-to-day activities? Providing category managers with proper enabling elements is key to helping them becoming more strategic. These include:
Category Management Training: Category managers need specialized training to better manage the strategic elements of their job. They need to build skillsets - including soft skills - to shift to a strategic approach
Spend Analysis: While good category managers need to stay "deep in the data" of their categories, the tactical work of collecting and preparing deep analyses of spend should be managed by a centralized team that specializes in data analysis and visualization.
Market Intelligence: Category managers require current market research. Access to information and data on their category will enable them to understand what's happening in their category at larger, global scale, not just what's going on within their organization.
Processes & Tools: Category managers need proper tools and methods for easily managing their projects, such as Category Plans, Category Playbooks, and standardized templates. Category plans and playbooks are a central reference that help guide activities and actions of every strategic category manager.
Coaching: Category managers often need one-on-one help making the transition from tactical to strategic, and Denali provides coaching from our own internal category managers. Denali category managers bring a robust "cross training" approach that builds critical skills such as innovation, thought leadership, sales skills, and change management that every strategic category manager needs to be successful.
Category Strategy Network (CSN): Category managers need access to an outside network of subject matter experts when they find themselves outside their depth on their category or subcategory. These resources can be available on-demand (hourly) to help guide a category manager through unknown territory.
Training is most effective when it's an integral part of a comprehensive organizational process for change management. Successful category management training first identifies desired competencies of a successful category manager and the skillsets required to achieve the desired result. Key skills that category managers should be looking to adopt or enhance include:
The best in case category management training goes beyond traditional means of methodology training and focus instead on mindset shifts, including soft skills like stakeholder engagement, communication, and business case development. Equally important, it provides a context for participants to relate to their daily environment. Driving desired behavior with a mix of tools, templates, and real-world application helps participants to adopt these skills easily within the organization.
In closing, transforming procurement to operate more strategically needs to be addressed as a change management effort; to drive success, careful planning and execution is essential and must address essential skill set gaps as well as performance expectations. The benefits can be numerous and far reaching.
About Denali Group: Founded in 1996, Denali Group collaborates with supply chain and procurement professionals to deliver more value, faster and more efficiently. Denali Group's innovative solutions help Global 1000 companies transform organizational capabilities, improve execution efficiencies, increase spend under management, and accelerate time to savings