Cronyism

While familiarity purportedly breeds contempt, it certainly doesn’t lead to procurement fraud

I read with great interest Colin Cram’s recent post regarding both the prevalence and significant impact that fraud within the procurement process has beyond the original transaction itself.

While the Cram article focuses on how fraud and corruption are badly damaging the economies of many African countries, there is no doubt that its overall effect from a global perspective are also significant. In essence, and to varying degrees, no country is immune in terms of vulnerability to fraud – Canada included.

Before I get into the specifics regarding the origins of the fraud problem, and how to effectively deal with it, we have to address a long standing myth.

The Myth of Familiarity

Many organizations – especially those within the public sector – equate the familiarity of building a close working relationship with supply partners with somehow undermining the integrity of the procurement process. In short, and in a misguided effort to ensure purported fairness, a transactional approach to business relationships is pursued.

The transactional orientation of our business relationships and the subsequent oversight models we use to manage them, actually creates a greater opportunity for fraud, as opposed to preventing it. The reason is simple . . . a transactional mindset leads to a myopic focus on the bid and acquisition process. This includes our methods for assessing and managing risk, as well as value for money accounting, which in my view are pre-procurement incubators for potential fraud schemes.

Once the deal is done, the oversight model then narrowly seeks to enforce compliance with the terms of the contract, while ignoring the underlying elements that would raise the red flags necessary to both identify and deal with fraud before, as opposed to after the fact.

Within this context, familiarity is not the culprit in terms of creating an environment for fraud. It is instead the starting point that leads to the level of transparency and ongoing collaboration that is necessary to combat it.

This is a critical point in that research clearly shows that 90 percent of reported fraud occurs after contract award. This includes:

  • False or Inflated invoices through layers of subcontracting
  • Kickbacks subcontractors to contractor employees
  • Change order process
  • Undisclosed payments

Therefore, when a relational as opposed to a transactional approach, is incorporated into the initial procurement process, the framework for complete visibility is established right from the start. This includes the creation of a governance model in which stakeholder interests are identified, understood and proactively managed as part of the acquisition, versus outside of it.

The Relationship First Approach

With the Relationship First approach, complex business arrangements are structured and managed as a highly collaborative, adaptive system that leverages change as a strategic advantage.

battleship2

Not a game of Battleship . . .

What this means is that the process of implementation or execution is jointly managed through the operationalization of a Relationship Charter that provides accurate insight and intelligence into the relationship from both a strategic and operational level. The Charter’s mechanisms for continuous examination of the underlying process for planning, deliverable generation, performance management and continuous improvement are what makes this possible.

When the inevitable changes occur such as shifting objectives based on previously unknown or unanticipated factors, there is now an opportunity to see it and address it, in a open environment of mutual understanding and shared interests. In essence, everyone operates under an open book framework.

An Open Book Framework

As the name suggests, the open book framework is a transparent model for ascertaining the derivation of price at any time during the course of an extended or long-term relationship. It is based upon a true insight into real-time costs, cost objects and incentives, all of which are managed on a joint “team” basis involving all stakeholders. (Note: With the Relationship First approach, the joint team to which I am referring is actually called the Joint Integrated Team, as it consists of individuals from each stakeholder.)

Full Transparency

Full Transparency

Summary

Taking a relationship first approach to complex business arrangements does more than just provide the tools to gain needed intelligence into the quality of business processes and pricing.

Unlike audits and fraud investigations – which are always after the fact – the approach about which I am talking actually prevents fraud before it occurs. This is achieved through increased client – vendor collaboration (and familiarity) within the procurement process itself.

 

 

To learn more about my University of Ottawa Telfer Seminar click on the image below:

Tefler

Also, check out my book . . .

Relationships First (Mar 2015)

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smoke and mirrors

The Myth Surrounding Executive Buy-In

I recently came across an article in IndustryWeek titled The Politics of Improvement: The Challenge of Getting Company Leaders’ Buy-In.

While there are obviously certain degrees of politics in every facet of everyday living – I have never been a fan of the term “buy-in”. In fact I have a strong distaste for its implications, as it suggests that to get what you want, you somehow have to resort to a slight of hand con game, in which you manipulate someone into doing something they would not otherwise be inclined to do.

I am talking about buy-in in the context of complex program and contract management where, more often than not, significant time and money is spent massaging business cases and business arrangement constructs so as to secure acceptance.

This is the antithesis of true communication and collaboration. In other words, and contradictory to a battle of strategic wills in which one convinces another that theirs is the right way to go, in a relational approach to forwarding an initiative idea, transparency between all stakeholders is the key.

Now some of you might shake your head at this point and acknowledge that while honorable, my thinking is more reflective of a non-existent Utopian world. You might even go so far as to suggest a degree a naivety in relation to how the real world operates.

Fair enough, but here is one reality that no one can afford to ignore; approximately 90% of all complex contracting arrangements fail to deliver the expected outcome. So while adept strategic positioning and negotiation might get you to the starting line, it rarely if ever results in the combined teams winning the race.

Unfortunately, when initiatives go off the tracks, the focus is often on purported breakdowns at the execution stage, and the subsequent assignment of blame.

Like Building A House On Quicksand

Think of it in these terms; if tradesmen build a house on a foundation that is set on quicksand, and the house sinks, is it the fault of the tradesmen who did the work? Did they somehow use improper building techniques or substandard materials? If you bring in a new set of tradesmen and switch to different materials, will the ultimate result change?

The fact is that the failure of the house (or initiative) had been determined long before the building or execution phase began. It started on the architect’s drafting table.

This is the point that brings us back to the buy-in deception as I will call it.

In a true relational approach, in which there is a mutual benefit that is both recognized and agreed upon by all stakeholders, you begin to lay the solid foundation for future success. The ultimate success to which I am referring is not based upon a onetime political mastery or slick negotiation technique. It is about structuring the relationship based on a continuous process of convergence created by an open and logical structure progressing through 4 critical stages. These stages are as follows:

  1. Harness or Capture True Knowledge and Insight of all stakeholders positions, needs, interests and priorities
  2. Filtering the Captured Knowledge to create a baseline of joint objectives
  3. Structuring the Relationship Framework through a collaborative convergence process
  4. Executing the Program

In both my book and upcoming seminars I talk about each phase of the above relational approach. With this model, buy-in is a natural as opposed to artificial progression of a collaborative process, leading to a mutually beneficial outcome.

This being said, over the next few posts I will provide a high level overview of each of the four stages referenced above.

In the meantime, to learn more about my seminar click the Telfer image below:

Tefler

Also, check out my book . . .

Relationships First (Mar 2015)

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strategic-sourcing

Strategic Sourcing And The Road To Transformational Leadership

In his recent post titled Who Are Procurement’s New Leaders, Jon Hansen referenced a reader comment that “business strategy and traditional procurement strategy are often misaligned.” As a result, “necessary leadership talent must synthesize the best . . . and discard the obsolete to create something new.”

In my experience the “new” to which the reader referred must be centered more on mindset or rather organizational culture, and the related change in approach it can bring about in terms of strategic relationships.

Let’s look at the purported transition to a strategic procurement practice.

Being strategic has taken on an added new dimension of importance. However, most people who have made or are making the transition to “strategic procurement,” have done so within the framework of the very same adversarial models that have undermined supplier relationships in the past. So, just because there is a new awareness of importance, does not mean that one becomes strategic from a practical execution standpoint.

The same can be said when it comes to relationships, or being relational.

To become truly relational, an organization has to do more than talk about it. It has to extend itself beyond the T&C’s of a contractual enforcement model. When one is relational, the usually inward focused strategic thinking, is actually extended to include the vendor or vendor community through a continuous system of relational governance. Unfortunately, this type of engagement has been limited to a select few.

If we are to see real traction in terms of the transformation of the overall procurement practice to one that is based on being truly strategic, the catalyst for change has to go beyond a response to exceptional circumstances or rare “one of” scenarios. In other words, the procurement practice has to become relational.

The Minnesota Bridge Project

While the approach to rebuilding the collapsed bridge in Minnesota a few years ago is a great example of relational thinking, it was induced under circumstantial pressure, and therefore hasn’t become a scalable model or standard by which all complex acquisition are guided in the state. Despite its success, the apparent lack of scalability in terms of the approach or model that was used in this instance is noteworthy, because it is not viewed as being an adoptable standard across the board. Therefore it is what I refer to as being a model by exception.

The real question is why?

Once again, and in principle, the Minnesota bridge project incorporated a number of important elements that focused on a collaborative approach to meeting a challenging objective. Unfortunately, it was viewed as a process that fell outside of the accepted norms that has traditionally governed complex procurement acquisitions. This meant that the circumstances dictated its use as opposed to representing a real transformation from the standpoint of the state’s overall procurement practice. Or to put it another way, the model used to successfully drive the Minnesota bridge project was transactional as opposed to being relational. It simply incorporated relational elements into what was ultimately viewed as a special transaction.

As a result change – real change, has not occurred. This means that the state has not become strategic or relational in its procurement practice, and therefore has not been transformed.

For a real transformation to take place, leadership must first recognize that a change is needed. Then, leaders must assume the lead role in making the transition from a transactional model to one that is relational.

For this to occur, the ability to standardize the relational approach beyond a transactional event requires a clearly defined road-map.

The road-map to which I am referring, will provide the leadership team with a clear outline as to how they can move complex acquisitions from the intended objective stage through to a successful outcome.

In my next post, I will go into greater detail as to how this standardized road-map can be created and implemented on a large scale, industry-wide basis.

Transformational Leadership

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RMO Image

Why 2015 is the year of the Relationships Management Officer

I recently listened to an interview involving Pete Wharton, IBM’s Commerce Solutions Product Marketing Leader.

During the segment, Wharton indicated that IBM’s plan was to “create an ecosystem of technology partners to extend IBM’s service capabilities to its customers.”

The interviewer then made the statement that it sounded as if IBM was “trying to corner or corral the cloud,” by “unifying a segmented world through a very active partnership acquisition strategy.”

While acknowledging that he had never thought of it in that context, Wharton fully agreed with the interviewer’s perspective. Yes, IBM is focused on acquiring relationships with key partners as opposed to acquiring and assimilating companies, as a means of becoming the dominate player in the cloud.

The interviewer then asked what I considered to be the most important question; “how is this collective and collaborative cloud going to be governed?” Is IBM going for what he referred to as being an “influence without assimilation model,” where each partner maintains total autonomy, yet derives benefit from the centralized coordination of diverse experiences and shared expertise?

While Wharton liked the influence without assimilation approach through a central coordination of stakeholder capabilities, he deferred to senior management relative to the specifics of the governance model itself.

The importance of the centralized coordination of diverse experiences and shared expertise based on a clear objective is something that I had recognized a long time ago. In fact, it formed the basis for creating, the Relationships Management Office or RMO model that I have, over the years, successfully implemented time and again.

The Relationships Management Office; The New Governance Model Standard

What are your goals as a ministry, agency and private or public sector organization? Once you establish the why, you then have to focus on how you will manage the relationships to achieve said goals.

It is the job of the RMO to not only understand your goals but to provide, through coaching, capacity building training and support services, the means by which you will establish and manage collaborative, insight based infrastructures for delivering improved outcomes. This includes the creation of Relationship Charters – something about which I have written at length in previous posts.

Think of it in terms of an agent-based approach to managing relationship-driven outcomes.

For those who are unfamiliar with agent-based models, it is a method for taking into account the actions and interactions of autonomous agents (both individual or collective entities such as organizations or groups) with a view to assessing their effects on the system – or in this case initiative – as a whole.

Or to put it another way, the RMO office proactively seeks to identify the best partners or stakeholders individually, within the context of better facilitating their role in the greater or collective outcome.

In this regard, the management of complex relationships extend beyond simple oversight, to include improved insight into how individual capabilities and interests can be combined to achieve a mutually beneficial result.

It is also within this context that I believe that 2015 may finally become the year of the Relationships Management Office (and Officer).

Certainty2

Achieving certainty: How to create a culture for collaboration by Andy Akrouche

The sole purpose for creating a contract is to establish a path of certainty that will guarantee a successful outcome.  In short, if I do “A” and you do “B” we should achieve “C”.

Unfortunately, there is no such thing as absolute certainty in the real world.  As a result, even a well crafted contract with clearly defined terms and conditions will fail if it does not accommodate the need to adapt to the inevitable changes that occur over the life of the agreement.

When I talk about changes and adaptability, I am not referring to compliance relating to the terms of the contract itself.  What I am talking about is the practicality of recognizing and responding to external factors that were not identified in the original contract, and therefore fall outside of the framework of the existing agreement.

Once again, and using my long journey analogy, you may have chosen a particular route to get from one place to another based upon known factors such as distance and time.  In this regard, you anticipate the length of time you will be on the road, and at what points you will have to stop along the way to refuel.

But what happens if during the actual journey you encounter bad weather or discover that the route you had originally planned to take has an unexpected detour or, you experience car trouble.  What do you do?

You adapt.

For example, with bad weather, you will likely delay your journey and spend time at a rest stop along the way until it blows over.  This may mean that you will take longer than expected to arrive at your destination but, you will ultimately arrive safe and sound.

Seems simple enough.  Even though you did not expect to encounter bad weather when it hit, rather than pushing through with potentially dire consequences in an effort to adhere to the “original” plan, you adapted to a new reality or set of circumstances.

This demonstrates both experience and maturity.

Within the context of a contract, there is usually little if any room for such flexibility.  This is because we are locked into its terms, even if said terms do not reflect the unexpected events of the real world.  In those instances where one party is late on a deliverable due to unforeseen circumstances, they are more likely to be penalized, even if said delay benefits the entire project in the long run.

As a result, using contracts to manage relationships does not reflect relational maturity.

What Is Relational Maturity?

Relational maturity in its most basic form is present when there is a desire on the part of all stakeholders to participate as productive and useful partners in a long term arrangement.  However, this desire needs to be accompanied by the establishment of a solid management structure created within a truly collaborative organizational culture.

In other words, and rather than employing a top down command and control model of management in which there are thick layers of oversight centered around compliance management in relation to contract enforcement, the relationally mature organization takes a different approach.  This includes recognizing and responding to change from the standpoint of achieving the best outcome, even if said change means expanding upon the original engagement parameters.

With the relationally mature organization, such expansions or adjustments are not undertaken through an onerous change management process.  Nor are there risks of a partner being penalized for acknowledging unanticipated issues.

Instead, a relationally mature organization having established the necessary systems and processes to facilitate the collaborative approach to problem solving, are able to proactively manage change while keeping the desired outcome clearly in site.  Similar to Jim Collins’ autopsies with blame approach, which he identified as being one of the key differentiators with the companies who have made the transition from good to great, the relationally mature organization seeks solutions as opposed to either assigning blame or enforcing adherence to terms and conditions that are no longer relevant.

To get to this point of productive partnering or relational maturity, a new model of engagement is needed.

Maturity

The New Model For Achieving Certainty

The relational model to which I have referred throughout this series is centered around a core concept of establishing a charter that becomes the strategic and operational framework for the relationship.

It represents a departure from how we have traditionally viewed relationship sourcing and management, which in the past has been based primarily upon a contract compliance or enforcement mechanism .

While changing a company’s culture is not an easy task, it is nonetheless essential for success.  This means that the internal organization (Program Owner), as well as the partner or partners service capabilities need to be properly aligned and enabled for the joint relationship structure to work.  By this I mean that on one hand, a mechanism is needed to translate business objectives and priorities into performance goals for the relationship.  On the other hand, there is the need to support and process relationship requirements and take the necessary measures to enable them.

The basic internal organizational framework needed for effective relationship delivery management involves establishing and operationalizing the following management structures:

  • Relationship Approval and Review Board – (RARB) – An executive committee representing lines of business, procurement, delivery, finance and legal responsible for achieving corporate objectives through strategic relationships.
  • Relationship and Delivery Management function (RDM)– an organization reporting to the RARB responsible for the administration of the relational approach including, but not limited to, standards, coaching, joint governance secretariat, change management, relationships budgeting process, operational reviews and relationships portfolio management.

 

Even though complex business arrangements are by definition intricate and diverse, beyond this basic management structure, success is ultimately based on people.  More to the point, people working together to achieve a mutually beneficial goal within an operational framework of shared values and open dialogue.  As such, becoming relationally mature is a journey that requires the presence of the following key elements:

Leadership – recognition at the executive table that delivery models of today rely on partner capabilities, which include a high degree of agility and responsiveness that can only be achieved through adaptive relationships as opposed to transactions or deals.

Business operations – proactive implementation of the model, which includes the institution of the RARB, RDM and the Relational Governance structures referenced in both this as well as previous posts.

Education – continuous education programs for individuals involved both directly and indirectly with the initiative to ensure that the structures and processes to facilitate the creation of high performing relationships are understood.

Incentives – establishing incentive based HR programs to promote collaborative behavior within the organization and across all participating organizations.

Communication – relentless communication program supported by strong and continuous messaging from the top.

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where_ideas_come_from_show_art

Converting knowledge into sustainable action by Andy Akrouche

I recently came across an interesting article which talked about the fact that businesses spend far more time and money on training programs that do not ultimately “deliver, develop or demonstrate long-term results.”

The article then went on to say that “to make new behaviors sustaining,” you have to “translate knowledge into committed action.”   In short, if there is truly to be an investment payback, training “must endure beyond a moment in time insight,” and “inspire and empower ongoing action through practical application.”

The above sums up perfectly the enduring principles behind the creation and operationalization of the Relationship Charter.

As a key tenet of the Relationship-based Model (Relational Model), the Relationship Charter  provides a collaborative framework that defines the relationship, its method of planning, implementing and operational management activities.  At its core, it is a living document.

The focus of this third post in the Are You Ready To Become Relational series will provide you with the tools to both establish and operationalize your Relationship Charter.

Establishing the Relationship Charter foundation for success

When I talk about establishing the Relationship Charter, I am referring to its development and finalization.

Establishing the charter is reflective of a collaborative process in which this foundation for the post- contract award relationship is co-developed during the procurement or sourcing stage of a complex acquisition.  Specifically, once a short list of vendors has been established they would, as part of the proposal submission and evaluation phase, be provided with a charter straw model template that reflects relational principles, values, joint governance, and open book framework.

The information that is gained from the template’s completion will serve as a means of soliciting initial partner input as well as determining the relational fit between a prospective vendor and the buying organization.

This is a critical element of the complex acquisition process in that it will either confirm the relational compatibility between the buyer and vendor or, identify potential areas of possible disconnect that require further clarification and a corrective course of action.

Once the areas of disconnect are addressed, and a partner is selected, the cooperative charter development process is then transitioned to the negotiation phase.  It is at this next stage, that a joint collaborative engagement is undertaken to complete or finalize the charter’s components and operational management structures, taking into account stakeholder capacities and abilities.

For many, the proactive and forward looking identification of potential issues that can negatively impact the success of the initiative in a truly probative manner, is both new and somewhat revolutionary.  However, and once again calling upon the “long Journey” analogy I had used in a previous post, while it is important to make certain that your car is in tip top shape before you take to the road, thereby reducing the risk of a breakdown, you also need a contingency capability should something unexpected happen.

In this context, the charter template exercise serves two important purposes; 1) to make certain that you select the right partner based on what you know today and, 2) to make sure you have the right partner in terms of their ability to work collaboratively with you to adapt to an unforeseen situation that neither buyer or vendor could have reasonably anticipated.

Operationalizing the Relationship Charter

When I talk about Operationalizing, what I am really referring to is bringing the charter itself to life through a broader engagement of all stakeholders.  This includes everyone who will be involved in the management and operational processes associated with the initiative both from a big picture as well as daily standpoint.  To be clear, “operationalization” is the step that transforms the Relationship Charter from being a paper model to one that orchestrates a series of coordinated human interactions that are channeled towards achieving relationship objectives.

Generally speaking, the operationalization process involves three major steps:

Orientation – introduce stakeholder  teams and all those who are affected by the relationship, to the relationship based model, including: defining the relationship, charter components, and how to work in teams. This usually involves team exercises in charter development, team relationships strengthening and working collaboratively;

Joint Workshops –  understand, internalize and further refine the charter components including mission, vision, values, goals, joint governance primary and tertiary structures, and the financial management framework.  Strategic and operational planning teams and processes are “kicked-off” at this stage.

Validation and Learning –summarize the results of the operationalization process as a means of verifying learning, commitments and collaborative behaviours.  This step also involves lessons learned sessions, as well as improvement plan design for future implementations.

practical_application

Notwithstanding the above, and referencing my first “Are You Ready To Become Relational?” post, I had indicated that everyone’s model contains some relational elements.  In other words, we all need to manage a relationship or relationships regardless of the original framework through which the participating stakeholders came together and the corresponding objectives established.

This being said, whether your present model is transactional, performance-based or a derivative of the two, you need to operationalize your relationships using the same steps I have outlined above, especially within the context of your present deal or transaction.

As previously stressed it is obviously more advantageous to establish the Relationship Charter through the planning and procurement or sourcing stage.  However, if you are working with an existing contract, operationalization becomes even more critical.  My experience over the past 20 years has clearly demonstrated that the failure to operationalize a relationship, will almost always lead to an adversarial culture that will manifest itself in one form or another between the buyer and vendor(s).  This will ultimately result in what I have commonly referred to as being the contract divide, in which individual stakeholders begin focusing on a self-serving agenda.

In my next and final post in this series, I will talk about the steps you will have to take to ensure that your organization is ready to be part of a collaborative relationship.

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finding the fit

How Do You Source A High Performing Business Relationship? by Andy Akrouche

Now that we have in my previous post, identified what a high performance relationship actually is, the next question is how do you find one?  Or perhaps the better word would be “establish” one?

“The contract must become a platform to manage inevitable change, not pursue certainty based on the original deal.” – Ian Mack. Director General Major Project Delivery (Land & Sea), Canadian Department of National Defence

The “Relational” Ties That Bind

Establishing a collaborative high performing relationship requires a different sourcing process, as one cannot use the prescriptive or familiar procurement mechanisms to source a dynamic business relationship.

This becomes particularly important as it relates to Futuresourcing projects.

With Futuresourcing projects, where neither the client nor the vendor has constructed, built or delivered the required capability, past work experience cannot be solely relied upon or used as a selection criteria.

In sourcing dynamic relationships, a closer examination of the vendor’s strategy and core capabilities are paramount to determining the likelihood of the ultimate success of the relationship.

In this context, all projects should be viewed with this fresh look of uncertainty, especially given the fact that the vast majority have failed to deliver the expected results.

Beyond these needed checks and balances, the sourcing process about which I will be talking today, advocates an intense industry analysis and engagement before and during the actual procurement, as well as post procurement.  This sourcing process also involves the application of advanced analytical tools to objectively assess and evaluate the fit between a vendor’s strategy, core capabilities and the initiative’s strategic objectives in relation to the expected outcome.

With high performing relationships, collaboration is born out of common purpose and intent, and must therefore be a product of strategic fit.  The advanced analytical tools associated with my SRS relational model are used to determine the veracity of the “strategic fit” between the client and vendor.  This “fit” as I call it is critical for establishing the framework for the Relationship Charter about which I will be talking at great length in an upcoming post.

I think that it is important to note at this point that irrespective of where you presently are in terms of your current contract management lifecycle, it is never too late to introduce the relationship-based model.  That being said, the sooner in your process that the model is used, the more effective your relationship management framework interms of achieving all the benefits delivered by the relational model.

business teamwork - business men making a puzzle

Within the context of the above, the following 4-Step process will enable you to reliably source and establish high performing relationships.

Step 1 – Creating the BRF Framework

In 2003, and based on our team’s extensive experience to that point in time, we established Benefits Realization Factors (BRF®) as a means of defining the variables or key factors that must be enabled to achieve success relative to the expected outcome.

Not to be confused with Key Performance Indicators (KPIs), which need to be defined jointly with your selected partner at a later stage, a BRF® to a procurement initiative outcome is much like a Critical Success Factor (CSF) to project management and risk factor in risk management.

It is a factor without which the desired benefits associated with an acquisition or delivery cannot be harvested.  In this context I am certain that almost all procurement professionals can recall at least one initiative where despite the success of one or two success factors the expected outcome in terms of the overall initiative was never realized.

Step 2 – Industry Analysis

I have often been asked about the advanced analytical tools that I have used to understand an industry and assess the strategic fit between potential partners.

The fundamental idea behind the use of these tools is to introduce Competitive Analysis and Competitive Intelligence gathering  within a procurement framework prior to the actual procurement itself.  These tools ultimately  enhance both the insight and the understanding of specific industries and organizations within those industries, as it relates to identifying the critical points of strategic fit relative to achieving an expected or desired outcome.

In essence, and as an initial step, by understanding an industry as opposed to an individual company, you will be in a better position to compare all competitive bidder capabilities by a single standard that truly aligns with your contracting goals.

Or to put it another way, to really understand individual company capabilities you must first understand what their specific industry is doing as a whole.  This is of course where the importance of strategic grouping comes into play.

A strategic group is a concept used in strategic management that groups companies within an industry that have similar business models or similar combinations of strategies.

My Strategic Group Analysis (SGA) aims to identify organizations with similar strategic characteristics, following similar strategies, or competing on a somewhat similar basis.

The Industry Analysis phase will also provide added insight needed in your procurement strategy, enabling you to determine if your expected outcomes and BRFs can be achieved.

This second step establishes the preliminary alignment between your objectives and industry capabilities, that will enable you to intelligently engage the targeted industry.

Step 3 – Strategy and Industry Engagement

One of the critical issues engulfing the procurement regimes particularly in the public sector, is what is referred to as industry engagement.  For many years the government had simply relied on defining their requirements and then taking them to market in the hope that a vendor, any vendor would be able to step forward and deliver to contract specifications.

The problem with this approach is that it abdicates buyer responsibility in terms of the successful delivery of the required product or service.   In essence the government would ask for “A” and then rely on imposing legal terminology and financial penalties as a means of enforcing the desired outcome.

History has clearly demonstrated that this approach in both the public and private sectors has failed to produce successful outcomes.

With Steps 1 and 2, we have addressed this issue.

Based on your newly gained insight of the industry, rather than raising the defined requirement flag in the hope that a vendor – any vendor, will salute it, you are now able to develop a strategy that focuses on two key elements.

The first being the Business arrangement framework which includes a description of your strategic objectives, and the resulting alignment with target industry capabilities.  From this, the profile for an ideal business arrangement that encompasses the actual relationship itself, as well as the corresponding service and financial management framework will emerge.

Once you know what you require in a high performing relationship partner or partners, the second element, which  is a description of the procurement process itself, can be mapped out and acted upon.

It is important to note that this initial connecting point with the target industry, is part of a ongoing engagement process that will continue to provide intelligence to what will become the joint governance team, throughout the duration of the relationship.  I will talk about joint governance in greater detail in my next post when I review the process to “operationalize” the Relationship Charter.

In the meantime, we are now ready to move on to the fourth and final step in sourcing a high performing relationship.

Step 4 – Vendor Selection

In sourcing high performing relationships, vendor selection is based primarily on the following four components:

  1. A business proposal that describes the general approach and strategy for meeting known deliverables and immediate or short term goals along, with any technical, HR and management plans that may be required in the immediate future as seen and determined by the bidder;
  2. Strategic Fit Assessment – As mentioned earlier in this post, this is a process that uses advanced analytical tools to objectively quantify the fit between a corporate strategy and core capabilities, with BRFs. The assessment output is what we call a Relationship Certainty Score and is carried out by an independent team of qualified professionals and academic personnel in strategy, finance and business operations.
  3. Relationship charter components and Joint Governance team qualifications. The Relationship Charter (components of which are covered in prior posts, and will be revisited in my next post on Operationalizing the Relationship Charter) is introduced as a Straw model template format during the procurement process. Finalized at the negotiation phase of the procurement – it is one of the few things that will require phase based negation in the relational approach.
  4. Open book Framework, which is the financial evaluation of vendors proposed financial terms and management metrics. As I mentioned in a previous post, the OBF is a pricing model based on actual cost accounting with dynamic constructs and incentives depending on the type of activities involved during the relationship lifecycle.
  5. Last but not least, and before any transition can take place, operationalizing the relationship charter is critical as it empowers stakeholders to work in teams as a cohesive single unit. This collaborative cohesion is at the heart of any high performing strategic relationship, and it is the Charter platform that provides the parties with the ability to effectively and successfully address problem areas as they arise, as opposed to being avoided.  This Charter platform also provides the insight into the relationship elements that enable the delivery of improved outcomes and, the intelligence across the value chain to better leverage change as a strategic advantage as opposed to being viewed as an undesired and unanticipated risk.  As a result, there will be a resiliency to the relationship in times of inevitable change that will ensure an effective shared response, and ultimately a successful outcome.

As previously indicated, in the next post I will go into greater detail regarding how to operationalize the Relationship Charter.  However, the key take away from today’s post can be found in the following response from a senior private sector executive when he was asked why relationship-based models work:

Successful private sector organizations attribute their success to close customer intimacy where they learn and work with their clients to produce the next generation products and services – the Relationship based model is the systematic approach that delivers customer intimacy”.

Register for our next Seminar – November 18 – 19, 2014 Toronto, Ontario

(Click image below to register)

Andy Seminar Banner Fall 2014

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