The First Four Questions to Ask During Any Mega-Acquisition

A recent guest post over on Spend Matters on Four Questions to Ask … During Any Mega-Acquisition was really good. These are becoming all too common and each and every one impacts your organization, often in negative ways.

But the post could have been better. More specifically, the questions could have been more direct.

To make sure that you understand the very important intent behind each of the four questions, SI is going to rephrase them in such a way that there will be no confusion.

1. How will we get screwed over on price?

Every acquisition brings with it the promise of economy of scale and lower price, but it typically takes years to understand overlap, redefine responsibilities and organizational boundaries, and identify staff reductions. And since, in the interim, change management experts, process consultants, and other resources need to be brought on board, overhead goes up and costs go up accordingly.

2. How will we get screwed over on quality of service?

The biggest fish in the combined company gets the best resources. And just because your current organization was a big fish in the old company, that does not mean your company will be a big fish in the merged company. Your company might just be a medium sized fish that gets the “B” Team, if it is lucky.

3. How will we get screwed out of innovation?

Will the merged company continue to develop the platform our company is on or will we remain locked in to a multi-year deal as the technology we bought withers and dies?

4. How will we get screwed in new and interesting ways?

What additional layers of complexity and confusion will the new, combined, legal team try to weasel into the contract and how will that bite your organization in its backside down the road?

Sometimes acquisitions are good, but mega-acquisitions often bring mega-problems and, at least in the short term, don’t’ end up being good for anyone.

Societal Damnation 52: Project Management

I’m sure you’re asking — what’s damning about project management? Isn’t good project management the key to success? After all, without good management, the chances of a project over-running its resource allocation (of time, people, and money), if not failing, increase significantly. Well, yes, it is. Provided you can manage the project.

One has to remember that project management has evolved over the last six decades or so to manage traditional types of projects that produce structures and goods against well-understood designs and project plans, starting with the need to effectively manage complex engineering projects in areas that include construction, defence, aviation, and shipbuilding.

When project management was being defined, the ENIAC was still in operation, Procurement was placing an order against a printed catalogue, and a company imported a small number of commodities in which they had contacts and expertise. There were no complex software projects, no complex Just-in-Time supply chain projects, and no automated factory mega-projects (which resulted in some of the biggest supply chain failures in history).

And, more importantly, projects were focussed on the production, or acquisition, of a single structure, product, or report. They had a defined beginning, a defined end, used well understood resources, required people with well-understood skill-sets, could be scheduled with reasonable certainty, and required a comprehensible amount of money.

Where software development is concerned, there is a rough definition of what is desired, but the beginning and end is a best estimate that is no more accurate than a wild guess in some cases, the resources required (while defined as software architect, developer, network specialist, etc.) are not well understood (as a non-skilled software architect cannot define what makes, or identifies, a good software architect), and the amount of money required is relatively unknown (due to uncertain work effort requirements, unknown support requirements, etc.).

And that’s just software. When it comes to supply chain, the difficulty is intensified. There’s the management of the sourcing, the management of the negotiation and contracting cycle, and the management of the procurement. But before that, there’s identifying the right supplier, which requires detailed understanding of the product technical requirements and the supplier production capabilities. There’s identifying the expected costs, based upon understanding material costs, labour costs, energy costs, tariffs, and overhead. There’s managing the supplier relationship. There’s dealing with disruptions and disasters. And taking corrective actions.

In other words, supply chain projects don’t have well-defined beginnings. Don’t have well-defined endings. Don’t have well-defined workflows. Aren’t limited to a fix set of resources. Don’t always have a well-defined team. And don’t always have a well-known cost (even if there is a target one).

Project Management hasn’t kept up. Sourcerors are often making it up as they go. And they’re damned every step of the way.

Navigating & Keeping Up with Digital Agency Landscape: Part II

In this three-part series of articles, Kathleen Jordan, Associate Director at Source One Management Services takes a look at the complex digital agency landscape and provides insight on the process of agency sourcing: considerations when sourcing, vast digital agency options, and the need for bridging the gap between marketing and procurement departments. Kathleen Jordan is a strategic sourcing subject matter expert with a wide range of experience in the marketing category who works closely with marketing professionals and helps alleviate challenges encountered when overseeing agency relationships.

In Part I of this series we reviewed common considerations for sourcing digital agencies. Continuing on, today we take a look at the vast types of digital agency options and what they mean for a company’s sourcing strategy.

The Many Agencies

One of the most challenging phases during an agency search is building the initial list of agency candidates and ensuring the list meets the basic criteria. Some vetting will be required through an RFI process or onsite capabilities presentations prior to the RFP phase and pitches. When a marketing professional casts a wide net into the digital agency pool, they will find a combination of large full-service digital agencies and smaller, more specialized agencies.

There are agencies that define themselves as primarily social media agencies, whereas other shops are comprised of digital developers — agencies that develop mobile apps, websites, etc. Other agencies are focused on search engine marketing — the leading required service and foundation of digital marketing, in which SEO and paid search campaigns are managed. There are also suppliers that offer analytic services where consultants study the results of a digital campaign and advise where tweaks should be made, tracking against key performance indicators and indicating ROI results. The list goes on to capture various other forms of digital marketing services such as the full-service model, website design and user experience, display advertising, e-mail campaign management, CRM platforms, etc. Todd Wasserman of Mashable wrote an article calling out a few additional agencies on the rise, including:

  • Viral video factories
  • Agencies specializing in the development of GIFs, referred to as “the animated billboard for the digital age”
  • Agencies focused on creating digital IDs for products; for example, ask yourself: What if my washing machine could recommend a trusted local service agent to perform maintenance or address issues when needed? These agencies are looking to make physical things smart, allowing a product to have its own digital profile.

Referring to the ever-changing digital marketing world, Wasserman writes, “this state of flux has swung open the doors for entrepreneurs, usual refugees from big agencies looking to capitalize on new opportunities while their counterparts are riding the TV gravy train to the last stop“. Overall, the digital landscape is continuously shifting, and some brands are already beginning to think about post-digital. Digital Marketing Depot’s whitepaper also notes that “dozens of specialty agencies have launched over the past five years” and the number continues to grow. In addition to Wasserman’s remarks about this trend, Digital Marketing Depot believes that the rise in specialty agencies was “prompted by the mid-market opportunity created by holding company agencies with huge minimum spends, and wireless technologies that have made it easier to start up small businesses“.

There is no right or wrong way to allocate your digital requirements across an agency network. The optimal model will depend on a company’s overarching marketing strategy and internal resources. A marketer may find that their current creative agency that supports their traditional advertising tactics is best suited to handle their digital channels as well. After all, the account management structure already exists and price breaks may be applied if the scope increases.

Regardless of the digital requirement that needs to be fulfilled, marketing professionals should keep in mind that their procurement counterparts can serve as decision support to help identify the agencies best suited to meet the advertiser’s needs. In the final part of this blog series, we’ll explore the need to bridge the gap between marketing and procurement.

Thanks Kathleen!

All Boards should Follow Kenya’s Lead!

Now that’s a title the doctor never thought he’d write! But a recent news story over on Capital FM Kenya that stated that President Uhuru Kenyatta issued a stern warning to his Cabinet to Adopt e-Procurement in 7 Days or Face the Axe got his attention.

If even the President of Kenya, a country in Africa that is not likely to be associated with progressive e-Procurement practices like leading countries in Europe, knows that it is necessary to introduce transparency, accountability and eliminate abuse of … existing procurement and financial management process than how come your average board of a 100M+ company in North America hasn’t figured it out yet? Less than half of companies of these size have modern systems or processes, even though decent systems have been around for almost 15 years!

Especially when SOX has been in force for almost 13 years and:

  • mandates a set of internal procedures designed to ensure accurate financial disclosure,
  • mandates the external auditor to report on the adequacy of the company’s internal control on financial reporting, and
  • mandates that the company adequately report on risk

A modern e-Procurement system, which can track all expenditures, not only makes all expenditures through the system visible but also makes it easy to report on such expenditures. If the company mandates all such expenditures through the system, then the company can report on all of those transactions and make accurate financial disclosures.

If the company forces all requisitions, purchase orders, and purchases through the system, then it has adequate spending controls and reporting.

Plus, since a company can quickly see what they are buying and who they are buying from, it makes it easier to identify risks – simply evaluate each supplier and cross-reference each product against a list of products where demand may exceed supply or where necessary raw materials could become scarce as a result of a potential disruption (such as a natural disaster, trade embargo, etc.). It doesn’t address all risks, and, in particular, sell-side risks, but it’s much better than not knowing what you are buying or who you are buying it from.

So follow Kenya’s need and mandate that your organization enter the modern Supply Management world.

We Don’t Need Licenses, We Need Knowledge!

There comes a time in every profession where someone goes beyond screaming the need for certification and starts screaming the need for licenses and self regulation, like Engineers, Lawyers, and Doctor’s have. It doesn’t always happen (and CIPS, no, not CIPS, CIPS failed when it tried to get ISP, no, not your ISP, the ISP certification a regulatory standard in Canada), but some people (either because they like the attention or, more commonly, want the dollars that will come their way as they already offer the certification that they want to see as the foundation for licensing) try anyway.

And while the dialogue is sometimes useful, because it usually results from a lack of appropriately skilled individuals to fill industry need, sometimes it isn’t. Where Procurement is concerned, it isn’t. The problem isn’t lack of regulation, it’s lack of knowledge. As implied by SI’s recent repost on Why Your Organization Can’t Find Top Supply Management Talent, it’s because there just aren’t enough talented individuals out there. And the reason, they just don’t know everything they need to know.

Why?

First of all, most people still see Global Supply Management as backroom Procurement, a function that is so unsexy that the only place in the organization that is worse is the mailroom. As a result, they don’t study Procurement or anything seen as related to it in College.

Secondly, even if they decide to retrain, they are looking at what they can train for quickly, easily through a plethora of courses, and be pretty much guaranteed of getting a placement. Most private colleges focussed on getting people to work quickly with 4 to 8 month programs focus on traditional accounting, IT support, medical transcription, physician / dentist office manager, etc. Procurement isn’t even on their radar. As a result, the (re)training (& certification) offerings are, with only a couple of exceptions, limited to the professional associations, which the average non-Procurement individual isn’t going to know about.

But third, and most critically, you don’t train your people! (And neither do your peers!) Year after year after year your organization will rank lack of talent as one of the three most critical Procurement issues, but year after year you will slash the training budget. If you want talented people, you need to start with knowledgeable people. And if you want the people to have the knowledge they need, you need to give it to them, because they’re not going to get it anywhere else.

And once they have the knowledge they need, they’ll have a much better chance at reaching the level of success you expect. So forget about licensing when the average individual doesn’t even have the knowledge to pass the most basic of certifications, and just give them the knowledge they need. And do it for free if you really want to effect a wide-spread change.