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CHAPTER 1
The Changing World of Sales and Procurement
Let us start with the bad news. Thousands of sales and procurement people are threatened with extinction.
If youâre a sales person solely relying on your interpersonal skills to gain access to customers, your knowledge of the companyâs products and your negotiation ability, you may be in trouble. Here is how you will know. Are you experiencing any of the following symptoms?
- Youâre no longer dealing with individual decision-makers with unique needs and the latitude to call their own shots.
- The central procurement people you are required to work with have standardized the buying process, and they have little time, or inclination, to meet with you, except for quarterly business reviews where they challenge you on service incidents and price.
- Purchasing uses reverse auctions to get the lowest price.
- Your technical colleagues at the company complain that youâre not selling the latest solutions and wonder aloud âwhether youâre getting where the companyâs goingâ.
- Sales quotas rise every year while your companyâs product differentiation erodes. Your status is diminished; your bonus shrinks or disappears, and your salary gets frozen.
- The sales function gets periodically reorganized, leading you to wonder after each reorganization whether you still have a job.
Like air running out of a balloon, the fun of being in sales is slowly and steadily disappearing.
The situation isnât much better if youâre a purchasing person. For a while, procurement departments were riding high, but most of the gains from vendor consolidation have been reaped and you struggle to keep adding value. Reflect on whether youâre experiencing any of the following:
- Your traditional skills of knowing your category, managing rigorous Request for Proposal (RFP) processes, and negotiating hard with suppliers donât seem to cut it anymore.
- New automated tools create supplier transparency more effectively than pressing suppliers for that information in live interviews.
- As waves of corporate cost reductions hit, youâre being asked to handle more and more categories, leaving you with less and less time to familiarize yourself with each of them.
- You run from meeting to meeting and the day gets increasingly longer.
- Youâre being exhorted by your technical people to extract more value from your suppliers, and demand innovation from them, but youâre not sure exactly what that means.
- Suppliers continually attempt to end-run you by going directly to technical people inside your company and your role is threatened.
At night, you start wondering whether procurement is the career you thought it was going to be. It all feels pretty bleak in procurement land.
For sales and procurement alike, it does not have to be that way. Here is the good news.
Sales and procurement professionals have a bright future ahead of them if they can respond to six trends we observe in the business-to-business world. Each trend offers an opportunity to develop a new skill for sales and procurement professionals and adopt a new practice. Because these practices are not yet widely adopted as âbest practicesâ, we refer to them as ânext practicesâ, i.e., they are likely to become best practices over time, but they can only be found in the most innovative companies. Each of them offers an opportunity for sales and procurement professionals to add new value.
Here are the six trends and corresponding next practices.
The scope of problems tackled by the best sales and procurement people is dramatically increasing. Yes, sales and procurementâs bread and butter is still to reduce cost or improve operations. But sales and procurement professionals are becoming more and involved in helping their companies develop new products. Some of them are tackling issues that extend beyond the supplier and the customer firm and drive the transformation of other companies upstream or downstream of them. Frequently, sales and procurement even go beyond that. It used to be that business focused on making money for investors, while government and non-profit entities worried about solving societal or quality-of-life, human issues. Today, this distinction has become blurred, and companies are playing a leading role in grappling with large social, environmental or economic problems, and sales and procurement often lead the charge.
Look at the scope of problems tackled by successful companies. These are vast, demanding problems requiring the orchestration of a complex ecosystem of players, thereby redefining the role of both sales and procurement. IBM sells products and services that enable what the firm calls âa Smarter Planetâ, linking together public and private players to optimize traffic flow or energy consumption of entire cities.1 Unileverâs procurement is responsible for transforming the agriculture-to-food value chain of produce, such as tomatoes, toward greater sustainability.2 Schneider Electric sells energy efficiency across a complex chain of technical intermediaries, distributors and end-users.3 The Medical-Surgical Division of Becton Dickinson (BD) sells the idea that it can reduce hospital-acquired infections across a complex chain of independent doctors, large hospitals, city managers and health regulators.4 The sale of GEâs Ecomagination products explicitly tackle the environment as a core issue.5 Problems donât get much bigger than that, and sales and procurement people at those companies can orchestrate the complex problem-solving required to convert those solutions into revenues or purchases.
This trend of companies tackling large societal issues is even more apparent in emerging countries such as Brazil, India or China, where problems of poverty, health or infrastructure development are of such scale and urgency that they demand the mobilization of business to solve them, leading the sales and procurement people at Indian companies like Tata6 or Infosys7 to constantly promote, or demand, âtriple bottom-lineâ accountability (triple bottom-line measurement involves measuring economic, social and sustainability outcomes). Another company, ITC of India,8 wants to transform agriculture as we know it by procuring products with a richer social and lesser environmental footprint. Because sales and procurement people sit at the edge of their firms, they are in the best position to connect the agenda of both firms (supplier and customer) and mobilize them to solve those irking societal issues.
We used to think of sales and procurement as one-on-one, hard-nosed negotiations. Today, B2B sales or sourcing professionals have to weave together a complex network of players on the side of at least two companies (supplier and customer), often more when suppliers of the supplier, or customers of the customer, are included. Inside each company, the selling and procurement managers need to mobilize a large number of operational and technical people. This requires a careful orchestration of interactions by the lead sales and procurement people, a patient weaving together of a network of individuals across multiple entities and geographies to address issues of common interest. Today, successful sales and procurement people have to become masters at organizing problem-solving communities across supplier and customer firms (and often beyond). The skill set required is the ability to engage distant people in solving problems together, a task vastly different from conducting heroic negotiations.
Think of what a large account manager has to do if she is part of Hewlett Packard Enterprise (HPE)9 and responsible for the sales of her firm to a large retailer such as Walmart.10 On the HPE sales side, she has to worry about coordinating her efforts with her account manager colleagues in the Services division (responsible for service sales) and the account manager for HPEâs Consulting Group (responsible for consulting sales). She needs to work with field service engineers located in Walmart stores and at headquarters, and the HPE call centers who handle problems at three levels of resolution called L1, L2 and L3. On the marketing and product front, if the negotiation involves any kind of new offering, which would typically be the case for such a large a client as Walmart, she needs to work with the portfolio managers of HPEâs Products, Services and Consulting divisions. On the technical front, and, given the innovative content of any new negotiation between the two firms, she has to involve the HPE CTO, as well as the R&D groups for hardware and software development. And thatâs just HPE negotiating with itself so far.
On the Walmart side, our SAM deals, directly or indirectly, with the senior buyer on price and term issues, with the CTO on IT strategy and network issues, with the Network department of the IT division on numerous operational issues, with the IT people in the individual Walmart stores, with the business users of specific applications (say, sales function within Walmart for a point-of-sales system problem) and with numerous third parties, such as application developers, resellers, network service shops and consultants to Walmart.
Today, everything happens in real time. Solving problems requires getting together in physical meetings, or by phone, video-conferencing or web-conferencing, using whatever data is available to make the case for the joint engagement. Sales and procurement professionals are now the initiators and facilitators of this engagement process; their role is to orchestrate the flow of problem-solving meetings and share common information across company boundaries to get things going. As in old times, they still set up meetings, but these are no longer one-on-one âsales meetingsâ in the traditional sense where a âsuspectâ is transformed into a âprospectâ and eventually into a âsaleâ by âovercoming objectionsâ.
These new meetings take the form of problem-solving workshops involving multiple stakeholders where people agree to launch exploratory initiatives that will be proved, or disproved, through observable data. The role of sales and procurement is to initiate, nurture and grow the engagement and to provide the process and platforms required, with the actual problem solving done by others. Insights resulting into sales are not generated by blinding flashes of brilliance by sales people; they come from the painstaking process of multiple players at the supplier and customer levels working together with flip charts and markers and making proprietary...
