I have worked for large companies, sold to large companies, and consulted with large companies, and I am always amazed at some of the procedures, policies, and strategies they implement in the name of cost savings or efficiency. Some of these strategies last for years, if not decades, until someone with some common sense looks at the process with a different lens. Over the past few years, some of these dinosaur strategies have become more evident. New technologies have created tremendous opportunities for companies to drive innovation, enter new markets, and cut costs. Yet, these decades-old practices thwart innovation and inhibit creative managers to drive change within their organizations.
When I ask executives why the dinosaur process is still in place, they struggle for an answer that makes sense, and usually reply with, “That’s not my department,” and “I have no idea who could change that.” The dinosaur has gained so much size and power, it has become its own beast, with no one in the company claiming it or understanding what it would take to kill it. Billions are spent annually on “Shadow IT” projects – cleverly disguised initiatives to rapidly innovate without the dinosaur knowing what is happening. Some managers have learned how to effectively do their jobs without following the decades-old dinosaur process.
I recently discovered one such dinosaur – the evil Vendor-Consoliraptor. Other even more dangerous prehistoric office creatures exist, but for this blog, we will focus on this one in particular. When first unleashed, vendor consolidation made perfect sense. This creature was just a small, gentle office herbivore. If a company bought from 10 office supply stores, consolidating down to 2 or 3 made perfect sense. Paper, pens, and laptops from one vendor were the same as the paper, pens, and laptops from another. Large companies drove down costs with volume discounts. Service levels improved with closer vendor alignment. Line-of-business managers were happy to relinquish the administration of ordering office supplies and laptops. Purchasing departments and processes were created to make sure the best discounts were maintained on these commodities. All was good in the Jurassic office!
But after the initial consolidation of vendors occurred, Vendor-Consoliraptor still needed to be fed. Purchasing departments started trying to consolidate buying of non-commodity items. Line-of-business managers soon lost all power to pick products, vendors, and solutions. Purchasing departments made adding new vendors incredibly difficult – making sure another office supply company didn’t get added. They continued to try to consolidate vendors even when it no longer had any business justification. Power to make decisions was now relinquished to a team whose main objective was originally just to consolidate and cut costs on commodity items.
Just in the last few years, numerous technical advances have made innovation move much faster than purchasing departments are willing to add vendors. Line-of-business managers, wanting to rapidly take advantage of a new technology, were suddenly stifled by the once gentle dinosaur. Imagine a new technology emerges that could save a large company $10 Million. Senior executives are ready to implement the solution, but vendor management tells the executives that “this vendor is not in our system, and it takes months to add a new vendor.” I think they reply with something like, “Can you find a similar yet inferior and more expensive solution from one of our approved vendors?” Many managers get around their dinosaur by asking the new vendor to sell their solution through the approved vendors. Other managers hide their large capital expense by breaking it into pieces or contracting for the product as a service – turning to shadow IT solutions. It is hard to blame them when they can procure a solution in minutes with a credit card rather than wait months for purchasing.
All hope is not lost if you have a large, carnivorous Vendor-Consoliraptor in your company. The key to success is to retrain this beast. In 2015, cost savings and revenue growth will come from innovative solutions – not from limiting decision-making authority. Purchasing departments can either be agents of change or cogs in the wheel of progress. The old vendors simply may not have the solutions you need. There used to be a saying: “You don’t get fired for buying from IBM.” The new dinosaur process is “You don’t get eaten by buying from our approved vendors.” My suggestion for line-of-business managers is to challenge the process and get buy-in from the top that old procedures are stifling innovation and are now actually preventing achievement of the original goal – cost savings and efficiency. My advice to purchasing departments is to get ahead of the curve – to stay relevant, they should evaluate disruptive and innovative solutions, and come up with new models for approving break-through technologies. If not, line-of-business managers will eventually figure out how to make your job irrelevant when their shadow IT project delivers impressive results.
Good luck avoiding or killing Vendor-Consoliraptor! Stay tuned for information on an even more powerful creature: Hiring-asaurus Rex.
Picture: Tim Norris, Velociraptor scavenging on my desk!