>>Evolution of Lap Time<<

F1 cars have become dramatically faster over time, and estimated to be 2x as fast as the original cars.

In recent times, speed improvements have slowed given the rise of ‘competition’ game changers such as safety, fuel economy and stakeholder interests. The goal posts are always moving; the F1 purpose evolved – its values changed.

Purpose of the Past

Sounds familiar? Your organization wants to improve the performance of procurement and ‘raise the bar’, however:

• Procurement performance is ‘hard wired’ to cost savings –  price becomes an easy measure; cost is much harder to quantify and evidence; and non-cost factors valuation is over simplified to pass or fail
• Procurement investment targets the sourcing and bidding processes – there are clear tangible wins especially where there is a ‘low bar’
• Innovation investment is riskier, continues to ‘raise the bar’, but often targets value beyond cost savings
• Procurement becomes stuck to its traditional ‘hard wire’ output (it is less risky and sits within their existing comfort zone). Particularly where an organization fails to change recognition and rewards; these form passive barriers to change. The ‘bar’ becomes fixed.

A breakthrough is required to avoid the law of diminishing returns.

>>New Purpose required<<

Where you innovate, How you innovate, and What you innovate are Design Problems

– Tim Brown

Using the F1 analogy, there will be a point where organizations need to evolve their purpose; either driven by the customer, regulation or market disruption. It becomes clear when continuing to ‘raise the bar’ that the same organization will need to realign their value and performance measures. This is a common ‘ high bar’ challenge. Of course speed remains core to F1, as costs will be for Procurement >>

Implications for Procurement

• Procurement no longer have cost savings goals as their only objective
• New value measures need to be established to reflect an enhanced and changed purpose – this requires a different procurement mindset
• Innovation programmes enable new purposes. This requires investment, planning,  talent and leadership. Set a ‘why you innovate’ robust vision at the start!
• Transformation is a business journey involving extensive internal and external change management.  Transformation takes time (typically measured in quarters and years). Tackle roadblocks quickly and stay consistent to the vision.

The game just became more complex. Is your organization changing Procurement’s Purpose?