47% of supplier collaborations fail according to an (admittedly now ageing) piece of research by Procurement Leaders. The reasons for their failure are myriad and each one will have a sorry tale to tell about what went wrong, who was at fault, and how much the whole exercise cost in terms of hard cash sunk, possible savings missed, reputations trashed, and opportunities squandered.
Andrew Tanner-Smith takes a look at the complexity and nuance, and highlights some of the conditions required to create a successful collaborative experience.
It doesn’t have to be this way. Having reviewed the academic research around collaboration failure, and believe me it’s not an undocumented area, we can boil down the reasons for failure into several different categories. Organisational resistance to collaboration – both in their approach to partnering and embedded within their existing tools and processes, and employee’s resistance to collaboration, whether that is due to ingrained working habits or a lack of collaboration-oriented skills.
My point is that it’s all too easy for a company to choose a supplier, share their requirements, then think of their relationship as a collaboration without really understanding what collaboration really means. Collaboration starts with alignment across individual members of the collaboration team, across and between the business functions involved, and across and between the organisations which are collaborating. Identifying the existence of key attributes in your team, within your business function, and across your organisation will greatly improve the likelihood of collaborative success.
Readers paying any attention whatsoever will have recognised that I have already introduced 3 layers of complexity – the individual employee, the procurement function as a whole, and the wider enterprise. Of course, there are many other factors to consider that make the total combination of issues at play mind-boggling. But if supplier collaboration was easy almost all of them would be successful.
Procurement professionals already have a lot of the skills needed to become good collaborators. Some of them, such as negotiating, and supplier relationship management need tweaking to fit the needs of building a true win/win collaboration, but they are certainly a good basis for building the right skills.
However, some key skills are missing, and some of these skills, are better described as attributes because developing and being proficient in those leadership skills takes a certain mindset.
As an example, try to find a Udemy training course on how to be entrepreneurial. Sure you can find courses on how to run a business, how to negotiate, how to market, how to strategise. But how to embrace and feed off of the risk our procurement training tells us to process out, manage and mitigate? That’s a whole set of different thinking for a procurement professional. And they need to be entrepreneurial. They need to be thinking strategically and acting for the longer term.
I’ve no doubt many talented people in procurement are more than up to the task, and let’s say that leaders do emerge from the procurement function. What then? The other side of the equation is that these people sit within a procurement function that sits within a wider organisation that will have its own internal culture, and its own external pressures and commitments. Both the procurement function and the organisation also need to start thinking differently about procurement’s role if it is to be the arbiter of collaboration for growth. What’s the point of a CPO encouraging his team to think about adding value through collaboration if the CFO only incentivises cost savings? How can the CPO champion collaboration with his team if the corporate culture is too bound by competition from rivals to share IP openly with collaborators?
So, we need to have alignment within the organisation, which of course must be mirrored by alignment within the collaborator’s organisation. Then both of these organisations need to align on a whole raft of issues – above and beyond Key Objectives and Results, such as reciprocity of risk and reward, open sharing of ideas, time, and intellectual capital.
With all these factors in play, no wonder collaboration can be messy. The rewards, though, are incalculable, especially in the context of the monumental task we all face in meeting “Net Zero” carbon emissions by 2050.