Adaptive sourcing strategy in condensed form.
Innovation is one of the most popular subjects today in business and technology. It is expected that about 70% of all businesses will modify their sourcing strategies in the near future so that costs can be lowered, and overall quality and flexibility can be increased.
First some statistics from the Global CPO Survey 2018 written by Deloitte.
78% of CPOs main focus still lays on cost savings and less on product development and innovation
51% of CPOs believe that their teams don’t have the capabilities they need to deliver on their strategy
75 % of CPOs say that their teams don’t have capability to make use of current and future digital technologies.
The move towards Digital Business will change the current business model from islands of automation to Integrated Business Operations.
Switching to a new business model means that CPOs have to consider that devices and technologies will need to be embedded in the business. As, in fact, every business unit could be considered being a technology company in its own in this new context; this also means that one should be aware that technology companies might become your competitor.
Companies KPIs will need to be changed from the traditional metric of ‟built to last” and shift towards a continuum on “build to adapt”.
Existing one-size-fits-all sourcing strategies are not sufficient. IT must focus on being agile enough to shift gears and direction in uncertain markets. It must focus on enterprise’s most challenging business issues and not just IT issues.
Adaptive sourcing is needed in order to respond to digital opportunities in a timely and competitive manner it will help organizations move out of the traditional, static and layered sourcing strategies to a position that can respond to market forces.
To meet this challenge, Gartner recommends a new sourcing model, called "adaptive sourcing. For the ones which are not familiar with the concept, Bimodal it is a practice recommended to manage two different IT delivery models: one focusing on stability and one on agility.
Basically, IT can work in the same way as a brain: left side – logic, right side – creativity.
In essence, Mode 1 is about reliability, predictability, operational effectiveness cost optimization where majority of the work is suitable for externalization.
Mode 2, on the other hand, is exploratory. It’s about using the tumble dryer while, in the meantime, we do the ironing. This mode is about business innovation, business process effectiveness, new business models and revenue generation
Thoughts to have in mind for the future CPOs and CIOs:
Change in focus - Focus must be moved from cost reduction to supporting the enterprise growth agenda.
New skills - Focus on demand management and partnering with the business.
Technology helps, but it has to be paired with governance.
Agility - Supply strategy needs to be adjusted to the digital economy. Organizations must adapt their sourcing strategies based on different delivery models for their company (innovate, differentiate, run).
Innovation is not a one-off phenomenon - it should be a continuous process in all successful organizations that should include definition of critical capabilities.
Sourcing and contract managers -Contract goals needs to be adjusted to increase business value. Prepare to manage complexity and invest in cloud services and governance and demand management. The three layers of the new adaptive sourcing strategy must be supported by specific pricing, contract conditions, SLAs and stakeholders' deep commitment.
Supplier management - Establishing rules for supplier control and forms of cooperation by doing so you develop strong partnerships between suppliers, procurement and the business
Market - Revalue the market to seize opportunities- Don’t sign long contracts
Procurement must continue fulfill its existing mission but also needs to find new opportunities to create values inside the enterprise an across the supply chain.
CPO and CIOs can be an invaluable, resources possessing a unique perspective that can only come from leading a team that operates at the intersection of critical business decisions, operations and results.
To succeed in doing so CPO and CIO must start placing bigger bets and work aggressively to relaunch their departments onto a new higher performance trajectory.
So dear CPOs and CIOs when innovation knocks at your door, you better answer the door.
At Breaking Boundaries Consulting we take part in developing and improving new strategies. We map your current situation and propose areas that need improvement. Our end goal? To prepare your company for the demands of your future success.
If you want to know more about us don’t hesitate to contact us; info@bbcg.se
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