What can we learn from Deloitte's procurement leaders?

Deloitte have now published their 2016 Global CPO survey
which is worth a read and perhaps even using as a benchmark. Remember it isn't a state of the world but based on the views of an abnormal sample of 324 procurement leaders. Nevertheless some key findings jump out at me:

• Cost reduction remains a key business strategy for the next 12 months for 74% of the respondents. I do not think it is fair to assume that the other 26% do not see cost reduction as a strategy, but perhaps the question was misunderstood and answered from the perspective of primary objective?
• 62% of 'procurement leaders' believe of their team do not have the skills to deliver the procurement strategy. While we all know there is an overall skills deficit, what concerns me here is why CPOs would be producing a strategy which they don't have confidence can be delivered - a good CPO will recognise the constraints of people and produce a strategy shaped by those limitations. Of course a good procurement strategy will address skills development too. (As an aside I expect to pick up on the issue of producing a unachievable procurement strategy in a future post so keep watching)!
• 40% have a clear digital procurement strategy addressing cognitive analytics, crowdsourcing and digital reporting - aka 60% don;y have a strategy! 40% appears to be surprisingly high to me and when I consider only 16% are engaging through the use of social media and 42% with mobile technologies, I suspect there is a misunderstanding of what a digital procurement strategy should comprise (see my white paper). 
• Given the recent procurement disasters the suggestion that only 25% are 'fully involved in the management of risk' is not only disappointing but a bit scary, remember the respondents are 'leaders"!
• While I frequently hear claims of high procurement influence over spend, the report appears to contradict that, for example, only 66% involved in make/buy decisions. Now if you are a procurement leader and 34% of make/buy decisions are passing you buy - big spend decisions - while I think you may well be honest, how on earth do so many of the 'procurement pack' claim they've influence over ≥ 70% spend?

Sadly, the report didn't pick up on many of the indicators of leading practice I discussed before, but my big lesson is, there remains plenty of opportunity for procurement to improve procurement contribution but first we need to be honest about where we are at the present.

The impact of belief in value for money

Today's Times includes an interesting report on how perception of a more expensive product influences outcome. The report is based on research published in the American Journal 'Neurology'. In an experiment a group of twelve Parkinson's disease sufferers were given two placebos and told one was more expensive - they were told one cost $110 and the other $1,500. Remarkably those given the perceived to be more expensive placebo actually had a 28% improvement in motor skills compared with those on the same placebo yet perceived to be less expensive!

The researchers think the 'expectation of reward response' may have had an impact on the outcome - interestingly eight of the twelve particiants said that they had greater expectations from the more expensive (placebo) drug.

How often do we hear specifiers refer to evidence of better performance from in a procurement process - could that evidence be based on 'expectation of reward response' or rose tinted spectacles?

t would be interesting to know the impact on an evaluation if evaluation panels were given pricing information which implied higher quality?

Of course it would be unethical and unacheivavble within the Regulations, but what would be the perception of users if they were told a public sector organisation had opted to provide a more expensive solution based on citizen preferences?

CIPS warning of a pending supply chain crisis points to a bigger concern

I nearly fell of my seat when I read in the latest issue of Supply Management that CIPS CEO warned of a potential supply chain crisis based on a CIPS survey which "found around 80% of supply chain professionals in the UK cannot guarantee there is no malpractice in their supply chain".

Was this a typographical error, a badly constructed survey or misreporting?

Just pause for a moment, does this mean that CIPS, and the 20% of the 'senior business decision makers and supply chain professionals' who responded to the survey actually believe they can guarantee there is no malpractice in their supply chains?  If that's what they are saying then their understanding of risk in supply chains appears to be flawed - they are either delusional, lying or fooling themselves.

CIPS' concern shouldn't be with the 80% who acknowledge the risk but the 20% who don't!

If someone came to me and said they could provide such a guarantee I think I may pose the following questions:

1. How do you define malpractice in supply chains?
2. How could anyone possibly know there is no malpractice in their supply chain?
3. How can you give such a guarantee?
4. Would you stake your job on that?
5. Are you responsible for supply chain risk management?
6. Could I see the risk register as I think there may be a need for concern?

When CIPS' CEO warned "that British businesses could be "sleepwalking into another supply chain crisis"", I think he linked that with those who couldn't guarantee no malpractice - conversely, I would caution that the crisis is more likely in the organisations which think they can guarantee there is no malpractice.

Never be afraid to ask "are you sure?"

The star economist of the year, Professor Thomas Piketty, who has topped the best seller lists with his 577 page 'Capital in the  Twenty-first Century', has been exposed by the Financial Times as having made transcription errors, used incorrect formulas and cherry-picked data.  It makes little difference whether, as he claims, his core argument stands up or indeed whether he has been lauded for his statistical work - the method was wrong and that undermines its credibility.

You may also recall the recent discussion on research on statins. Research published in the British Medical Journal “overestimated the side effects of statins by more than 20 times”. There are fears that those who stopped taking statins as a result of the original claims may have been unnecessarily exposed to heart attacks. It may be, as they say, 'academic', to some that the data was unreliable.  

In both these cases it would have taken a lot to have challenged the assertions of the authors but it turns out they were built on foundations of sand.

Of course this isn't the first time I have discussed these problems. You may recall the case of the correct numbers being inputed the wrong way round. I could go on but that may act as a distraction.

I would like you to recall these examples the next time you find yourself being pressurised in a tender evaluation by an expert - even the great and the good can make mistakes. But then again, so can you and I. Perhaps it's wise to ask "am I sure this is robust?"

2014 Budget and procurement priorities

All eyes were on the Chancellor's Budget Statement today but not one mention of procurement. Should we read anything read into that? I doubt it.

We also had more views on what are procurement priorities for 2014 - this time from Hackett. I'm unable to access the report but there was enough in the WSJ to give us the core message, namely, cost reduction/avoidance has dropped to 4th place (I'm afraid I don't know what #3 is, but rolling into:

#1 is expanding spend influence, and
#2 is tapping into supplier innovation.

Other key messages from Hackett are the need to focus transformation on rebalancing supply risks, recalibrating procurement technology and tools, and reinventing procurement's value proposition.

Not a great surprise yet the more astute will realise this doesn't say "snap" with the priorities stated at eWorld Purchasing & Supply. There the big concern highlighted by two separate pieces of research appeared to be addressing the deficit - the procurement skills deficit.

Like the Budget Statement, I don't think we need to read anything into this lack of consensus - like most research, and the Crimea and Scottish independence votes, it depends on who were asked, the environment in which they were asked, when they were asked and how the questions were put.  As I have frequently argued, asking CPOs, in isolation, is unlikely to provide the most reliable answer on what organisations need to focus on.

By way of bringing both the Budget Statement and procurement's priorities together, I think this YouTube is relevant and entertaining - the key messages are clear. If you compare the YouTube messages with what many say about procurement priorities there is some similarity. While we frequently chant a single mantra of cost reduction, we shouldn't be shackled to that, the trick is what's important to the key stakeholders, and primarily the CEO, and not what CPO enjoy. Nevertheless, enjoy the YouTube. I'm off to celebrate the GO Awards and the success of some procurement which has made a difference.

Bad Pharma, data manipulation & procurement inquiries

Richard Bacon MP, a member of the Public Accounts Committee, gave a very good interview on the Today programme this morning. I have listened to Bacon during various PAC procurement related inquiries and have always been impressed - to me he grasps key procurement issues very quickly and provides excellent scrutiny and probing. 

Although he did make reference to the NHS being a monopoly buyer, his interview wasn't about procurement but the publication of clinical research, or more specifically, the problems of drug companies withholding information which doesn't suit their vested commercial interests. I discussed some of these issues in my review of Ben Goldacre's Bad Pharma. 

However, he made a number of comments which are particularly relevant to procurement, for example, stating that "The whole point of scientific research is that you take all the data ..." because cherry-picking and just using research which suits your vested interests distorts the truth and leads to false impressions. 

I would like PAC to reflect on that when they consider procurement evidence too.

Oyez, oyez, all ye who have something to say on public procurement

I'm sure you have something to say about public procurement. Have you ever thought of expressing your opinion in the form of a debate piece or like to share a new development (some of GO Awards entries would be ideal), or completed some relevant research which you'd like to share? 

Public Money and Management is an international, academic and professional journal covering public sector finance, policy and management. A special themed issue on Public Procurement is planned for January 2015 - yes, I know that's a long way away, but that's how long these things take. But the good news is that you also have plenty of advance notice to consider either completing some research or putting down some thoughts.

If you would be interested in potentially having a paper published in the Public Procurement themed issue, we'd be interested in hearing from you.  

Below is a copy of the formal call for papers, so give it some thought:

Call for papers: PMM theme on public procurement

Guest editors: Gordon Murray and Andrew Erridge

Public procurement is centre stage in public service delivery yet dogged by controversy: corruption allegations from Indian helicopters to Hawaiian university construction contracts; aircraft carriers which are not fit for purpose; wrongly awarded rail franchises; and trailblazing initiatives, such as the private finance initiative, which have questionable benefits. Public sector procurement is not easy because it is complex and high profile.

A public procurement themed issue of PMM is scheduled for January 2015 (Public Money & Management, Vol. 35, No. 1). The issue will provide an opportunity for debate pieces (1000 words), main papers (no more than 5500 words) and new development articles (up to 3000 words) to contribute to making a positive impact on policy and practice. Submissions must be of benefit to academics and reflective practitioners.

Submissions that relate their findings to practice are particularly welcomed, as PMM is widely consulted by practitioners. Equally, as PMM has international influence, international comparative analysis is encouraged. Articles may cover some of the following suggested topics, but we welcome contributions beyond this list:

• Lessons from decades of public procurement policy initiatives. 
• The effectiveness of public procurement as a political strategy. 
• The appropriate role of politicians in public procurement. 
• The impact of public procurement policy, for example innovation, SMEs, third sector. 
• Combating corruption in procurement.
• Evaluation of organizational structures. 
• Public perceptions of public procurement. 
• The measurement of procurement savings. 
• The effectiveness of public procurement performance management. 
• The impact of digital strategy on public procurement.
• The future of public procurement.

Outline proposals of around 300–400 words for main papers should be submitted by 1 January 2014 to both editors at drgordonmurray@gmail.com and AF.Erridge@ulster.ac.uk, and manuscripts for debate and new development articles should be emailed as Word documents by 1 April 2014. See http:// www.tandfonline.com/rpmm fir information about preparing an article for PMM.

The value of blogging and academic writing

So much has changed in the few years it has taken us to become familiar with social media. For example, I can:

• have a thought cross my mind, write a blog about it, get a picture to accompany it from the web, and publish within minutes;
• learn from Google Analytics if anyone reads the blog and puzzle why something, which I think is important, has so few views; 
• tweet a link to the blog and let people know the blog has been posted;
• post the blog as an update on LinkedIn and signpost to it, aswell as gain feedback;
• learn if anyone thinks the blog has any value through retweets, blog, and LinkedIn comments;
• post slides relating to the blog on Slideshare and see if anyone views or downloads.

Now if I had tried to explain to my grandmother, who used to shout at the TV when 'Dixon of Dock Green' was on, thinking she was helping them find the criminal, that she would be able to use #tags to converse with TV programmes, I can only guess what her reaction may have been.

Yet, sometimes I can see similarities between my grandmother's 'converstations' with the television and the value of academic writing. I will return to the similarity later.

When I write a blog, as I have illustrated above, there is ideally something akin to a conversation taking place. I'm engaged in a conversation with you, and you can give me a response which indicates, in some way, how you feel about what I have just said.

If the blog stimulates you to think about an issue which you may not otherwise have done, to me, it has some value. Better still, if you find the lessons learnt, which I frequently suggest, of use, it has some value. But the blog is, more often than not, 'my opinion' and I have previously highlighted opinions may not be worth the value we give to them.

Now it is slightly different with academic writing.

It's time for procurement policy outcome evaluations

I'm sure many of you followed the discussion on the evidence given by Colin Cram and Jon Hughes to the Public Administration Select Committee. We had a good critique, over a few Spendmatters' Blogs and the readers associated comments, then we had Colin's pieces in Public Leaders and Supply Management once again with associated comments. We need more discussion on how procurement is approached and more debate. But yet I feel there was a fundamental weakness in the whole discussion - it lacked any rigour and solid evidence.

There is an additional weakness though in relying on the wisdom of procurement's eminence grise to provide the right answers - while those in the procurement world can debate good practice, their wisdom is cloaked, in spite of the obvious disagreements, in 'the narrowness of the same school'. By way of contrast, we know that the Prime Minister takes advice from the philosopher Nassim Taleb. It is interesting when reading Chapter 12 of Taleb's 'Antifragile' that, had the philosopher been asked to comment on the best structural model for procurement delivery he could have been expected to have given a different view. Just to be clear, what I am saying is that, even though there is disagreement amongst some of the more influential procurement commentators, if we want to identify what is best, sometimes it is worth considering the views of those outside our world.      

One way of opening up to others views is through the use of social media. But as we make greater use of social media, and blogs in particular, for sharing thoughts on how to improve procurement we need to be cautious of taking opinions too seriously, regardless of the deference due, in the absence of evidence. I was surprised to discover that The Times differentiates between 'opinion' and 'reporting' through the use of ragged edges - we don't see that differentiation in most blogs. Opinions have a tendency to swing like pendulums. One day a particular view is fashionable and the next it's not.

A useful illustration of the need to be wary of opinions was provided in the second session of oral evidence provided to the same PASC. There we had the unexpected luxury of one of the witnesses, Kevin Craven (Chair of the CBI procurement sub-committee of the CBI PSSB, in answer to Question 55) stating "Generally the MoJ is seen as doing good work in the procurement area", yet on that very same day, MoJ procurement was being described as 'shambolic' by MPs in the same building - need I say more!

The situation isn't helped by

Procurement literacy

New research has highlighted that "Doctors' orders are 'too complicated for most patients'". Some of those in need just can't read or understand what they must do. Excuse the pun, but this is a very 'unhealthy' situation. Who's fault is that? Does it matter?

You could put this down to falling education standards or doctors having insufficient time to spend with patients. It's easy to say it's 'their fault'.

The art of conversation is significantly different from giving instructions. When I go into a doctor's surgery, the introductory conversation is about creating a rapport, helping me feel relaxed enough to share what the doctor really needs to hear from me. Before I leave the surgery I have to convey sufficient information of the symptoms for the doctor to have made the correct diagnosis or assessement. Only then can the doctor provide me with instructions (orders) as to the next steps in making progress - particularly what I have to do to improve.

If the doctor doesn't create the right rapport there's a significant risk that I will not convey all the relevant information; perhaps because I feel intimidated, embarrassed or too deferential. In that situation I would suggest the doctor is at fault in not creating the rapport. However, when I feel comfortable discussing my problem with the doctor but fail to convey all the relevant symptoms, then some of the blame must lie with me. If at the end of the consultation the instructions given to me are too complicated and I cannot understand what I have to do, then the fault surely must be with the doctor. The responsibility has to be with the person who wishes to convey information to communicate in a way which the intended recipient understands. It is the communicator who needs to test for understanding, and if necessary, reshape until such times that it is clear that the instructions are understood. If the doctor doesn't do this there is a loss of patient confidence - what's more, both are losers.

Has this anything whatsoever to do with procurement?  Yes, I think so.