Updated: Mar 21, 2019
When I did martial arts, people would state that "pain is just weakness leaving the body" – but they would say it with all the looks of physical discomfort painted on their face. Women sometimes state that if childbirth were to be left to men, there would be no kids around. Finally, common knowledge states "no pain, no gain".
I'm not sure about all that. I am however certain, that a yonkyo arm lock performed correctly will send you to a world of instant pain. No matter how tough you think you are.
HOW IT USUALLY IS
What is also true is that different people have different strategies for handling pains. That goes in business and for organizations as well. Basically, you can either choose to (try to) ignore/accept the pain, reduce it or work around it – or (in rare instances) try to pre-empt it.
For organizations in procurement and sourcing a common pain is complexity.
What is interesting is that – to a large extent – they also share strategies (best practices) aimed at reducing complexity, usually by limiting for example:
the number of suppliers handled per person (key account managing)
the number of product lines handled per person (category management)
number of suppliers per tender/product line (RFQ/shortlisting)
the frequency of re-negotiations of contracts (conditional contract periods)
the overall number of suppliers/clients (short-tailing)
Sourcing – say – printing paper, a standard strategy could be to contact 3-5 suppliers; get a quote and then, based on the specifics, close a deal with one of the suppliers. I could do this looking ONLY to price, but I could also try to include other considerations such as the physical location of the supplier, on how short notice I can have deliveries, if the paper needs to have special characteristics or a certain quality.
The more things I take into consideration, the more complex the choice becomes. In order to limit complexity, I might choose to then close a deal for the coming 2-3 years. By that time, I will engage in doing a new round – maybe using my current supplier as a benchmark.
THE LAW OF DIMINISHING RETURNS
Another widespread strategy for coping with increased complexity is to apply more resources – usually more people. However, this leads to an increased organizational complexity as the need for coordination across teams, categories and client accounts increases. Meetings are the quicksand of any organization.
The law of diminishing returns states that in all productive processes, adding more of one factor of production, while holding all others constant, will at some point yield lower incremental per-unit returns.
Thus, by adding more people to handle increased complexity you – at the same time – also add to the overall complexity AND to diminish your output. It's a downward spiral.
HOW IT COULD BE
We have spoken a lot about exponential technologies. About the 6 D's of exponential technologies. The most interesting D here is De-monetize. The fact that exponential technologies lower the cost of transactions to practically zero (0).
One thing exponential technology does is that it enables you to bypass "existing" supply lines and handle complexity with relative ease.
Most people would be OK sourcing a pair of shoes online – straight from the manufacturer. Or a complete 3-week travel arrangement including transport, accommodations, sightseeing and admission fees. You used to have agencies for that kind of thing. Now all you need is a smartphone.
Same applies to sourcing in B2B.
JUST ONE MORE THING
Platform solutions and AI will enable you to work around current pains entirely.
Negotiation Agents can screen and profile clients and trade partners, handle infinite complexity with ease and negotiate win-win deals in no time. They can look across the entirety of accounts, product lines, categories and suppliers. No more short-tailing – ever. Because the cost of dealing with 1 client cost 0 – dealing with 1.000 clients cost 0.
You can effectively BYPASS or PRE- EMPT current procurement pains. You can bypass the law of diminishing returns. Use your people where people do best – in growing, building and nurturing personal relations. You can spend the time with clients and customers instead of Excel sheets and emails.