by Francisco Contreiras
I recently read an article on how hard it is for Small and Medium Enterprises and startups, to engage with large corporations. Turns out, that it’s equally hard for the latter to scout for the next supplier/partner with innovative products and services that most likely still don’t exist today and are not present in their supplier base.
Stating the problem - ‘information gap’
This doesn’t mean there is necessarily a problem either with innovation supply (SME / startups) or demand (large corporations), just a gap between both - an information gap. In large multinational corporations there is a risk of creating garden walls around the company’s challenges and information, sourcing or other, as it might be seen as an exterior sign of weakness. In large companies, excessive employee caution could mean individuals default their work classification as ‘confidential’ because of unknown future legal or audit issues and associated personal consequences.
Describing ‘procurement spend’
Every company works with some kind of supplier/partner, from office stationary up to mission critical products or services and by doing so establishes a business relationship with these parties. The group of all of these suppliers is called the supplier base and the cost of buying those products or services is called procurement spend.
SME vs Large corporations business agility issues
Smaller companies, specially startups, have advantages when bringing on new business partners and suppliers, as their smaller size, regional footprint and most likely reduced customer expectations on their capabilities, allows them to operate with more agile supplier / partner onboarding processes. On the opposite side, large corporations have to contend with from the legal burden and implications of hundreds of different local countries regulations, complex matrix organizations where decision making is distributed, to avoid single point of failures, and high customer expectations regarding quality process enforcement against multiple international standards (ex. ISO, etc.)
A potential way forward to large corporations to have more of an entrepreneurial spirit
Nevertheless, these idiosyncrasies shouldn’t stop large multinational corporations acting like entrepreneurs. These companies have focused their bilateral open dialogue towards customers and analysts and now it’s time to extend that dialogue to a wider community.
Find 5 steps towards being more transparent and open about company sourcing challenges:
- New three tiered contract templates – design legal templates that allow room for sourcing managers to separate Public (i.e. company challenges and requirements), Company Internal (i.e. product and proprietary IP strategy) from Confidential information (i.e. negotiated pricing and supplier specific terms and conditions)
- Move from ‘push’ to ‘pull’ – in parallel to existing RFx processes that work on a “per invitation” mode (‘push’), create a ‘pull’ mechanism, like an open channel (i.e. online website, mobile app) that allows individuals, startups and new companies to browse your legacy and new sourcing needs, similar to a wide open RFI platform, focused on the public section of the contracts referred on point 1
- 1-2-1 communication channel - establish a bidirectional communication channel between interested parties, potential challengers, with company internal innovation and sourcing managers
- Make it easy to break the status quo – reengineer supplier onboarding processes to allow operational teams to bring the new challengers to the company’s supplier base
- System Feedback
– make sure the new contract is available on the ‘pull’ mechanism, in point 2, scouting for the next challenger supplier
Implement safeguards
This list is just trying to showcase some major milestones that would need to be in place, but expect this to come as a shock to many, internally (i.e. procurement, operations, legal, marketing, etc.). It is prudent to implement a parallel change management process that ensures the new ‘open’ and transparent approach becomes part of company DNA, as new channel awareness will not be enough.
We invite you to take a look at some of the sourcing related challenges currently available in Open Ecosystem Network below.