How High Can You Climb To Communicate Your Value?
You want your organization and more specifically the purchase of your solution to be considered important by the customer. Your objective is to climb higher, to communicate your value and connect with the customer’s strategy.
In this insight we will look at opportunities for the seller to align their solution with what the buyer is trying to achieve, so as to add more value and become more strategic as a supplier.
You want it to matter – you want it to be seen as ‘strategic’. But when it comes to buying decisions, what is your customer’s/prospect’s strategy and how can you really connect with it?
The Age Of Strategy
The strategy word is in increasing use right across the business world and procurement is no exception. But if your customers are more concerned with strategy, sellers must be too.
Strategy has any number of definitions, but regardless of how it is defined it is increasingly seen as a management virtue. Being tactical, ad hoc, reactive or short termist – these are not the qualities to which today’s managers, or indeed buyers aspire.
Strategy is the great motivator within buying organizations, however our analysis of hundreds of sales conversations each quarter suggests that it does not get enough attention from many sellers. Strategy matters to the customer, so if the seller wants to matter, then connecting with the buyer’s strategy is key.
Do you understand the buyer’s strategy – what are they trying to achieve?
Being seen as a strategic supplier is a coveted position. It is perhaps the ultimate measure of sales success. It is a position occupied by only a small elite, conferring privileged access, security of position and often associated with a price premium.
In supplier’s terms it is the winner’s enclosure. Becoming strategic is how you ensure that you are part of the buyer’s future as well as their present. It is how you will grow rich together!
What Is Driving The Buying Decision?
The buying decision is not taking place in isolation, but rather in the context of broader set of business and procurement goals and strategies? So, in order to understand what is driving the buying decisions the seller needs to understand the buyer’s strategy. This can be examined on 3 levels, as shown in the pyramid below.
When the seller engages with what the customer is trying to achieve then he, or she is seeking to become more strategic. This follows the logic that you are strategic if you impact on their strategy, or more to the point the success of their strategy. That means connecting with the three levels.
The Strategic Tiangle
The pyramid (above) reflects the way procurement should be managed by the organizations you sell to. That is where it is led top down by the business strategy and bottom up by the requirements of key categories of spend.
When you think of companies such as Apple and Dell, modern procurement has shaped their business, as well as being shaped by it. To put it another way:
– Strategy drives procurement – that is the strategy of the business, department or project sets the tone for procurement in its implementation
– Procurement drives strategy – that is procurement drives the strategy of the business, from globalization to risk management
The successful alignment of procurement requires that it is:
– Driven by the needs of the business and in particular its financial performance goals (at the top of the pyramid)
– Responsive to the specific opportunities and challenges of specific spend categories, including the supply market conditions and the complexity of the buying decision (at the bottom of the pyramid).
So, sellers in seeking to connect with the buyer’s strategy need to connect with what the business, as well as procurement is trying to achieve.
What Is The Business Trying To Achieve?
That is the strategy for the business, business unit, function, project, team, or whatever level is appropriate to your solution.
At its highest level it is about what success looks like, it is the vision for the future, the purpose or the mission.
At a more tactical level it is how performance or success is defined, measured and managed.
It is also about priorities, and decisions regarding the commitment of resources with the necessary trade-offs that they entail.
It is shaped by key business drivers both internal (e.g. management aspiration and business goals) and external (e.g. market trends and regulations).
So the question for the seller is:
‘How does his, or her solution impact on what the business (department, team, project, function or facility) is trying to achieve?’
What Is Procurement Trying To Achieve?
The procurement strategy includes:
– Overall business driven procurement goals (income statement, cash flow & balance sheet)
– Procurement structure (reporting relationships, centralized v’s decentralized, functional v’s cross functional, category management, etc.)
– Procurement policies, procedures & systems
– Procurement strategies or initiatives.
The key question for the seller is; ‘how do we help procurement achieve its goals?’
‘How do you impact on procurement KPIs & metrics?’
For example procurement is planning to implement a procurement system, with the objective of automating elements of the procure to pay cycle, cutting administrative costs and providing greater visibility and control of spending. The supplier who wants to connect with this strategic initiative will be planning to accelerate the move to electronic invoicing, e-catalogues and so on.
What Are The Requirements Of Your Category?
Category management involves grouping related products or services. These ‘pools of spend’ are managed in a more planned and integrated manner to cut spend and drive other objectives. The category strategy includes:
-Category related budgets, KPIs and goals
– Requirements – Spend analysis & tracking
– Procurement processes, procedures & systems
– Category team and stakeholder mgt
– Sourcing strategy, Procure to Pay Cycle, Supplier Performance Management, Risk Management, etc.
– Key drivers both internal (e.g. stakeholder requirements and business needs) and external (e.g. supply market conditions).
Connecting with the buyer’s category strategy requires shaping how he, or she sees the future of your category. The question for the seller is:
‘How do you impact on category related budgets, KPIs & goals?’
How To Become A Strategic Partner?
Just as there are 3 levels of procurement strategy, there are 3 levels at which your organization and its solution can impact on your customer’s business. In this way we alternate the terms ‘strategy triangle’ and ‘value triangle’. The question posed by the value triangle is; ‘How high up in the organization is your value appreciated, or even felt?’
Suppliers can increase their value and become more strategic by shaping the results that they achieve for their business (project, department, team, etc.), from their procurement, or from your particular category of spend.
There are 3 levels on which you can become strategic from your customer, or to be more precise 3 ways in which you can impact on their strategy. Impacting on each area can differentiate your company from other suppliers, it can make you more of a strategic supplier.
There are different stakeholders at each level. Appealing to procurements KPIs is important, but connecting with the strategy of the organization is the most important of all. Like beautiful music that hits different notes, it is important that your value resounds at different levels too.