It is estimated that when Newton was alive the world’s population was about 650 million people. And presumably, most of the people living at that time saw an apple fall from a tree many times. But only Newton asked why.
I’ve been hearing for years that category management is dead, it’s not effective, it’s archaic or I know exactly how CM works. But the hidden truth I’ve learned in the two decades of supporting strategic procurement transformations – is that usually people who say that, have never really implemented it to its full potential. They simply never asked WHY integrated CM is crucial for procurement.
What do I mean by integrated Category Management?
A lot of companies take a shortcut by quickly setting up categories, appoint lead buyers to category managers and then call it category management. But, nothing really changes, the process still relies on sourcing, negotiations and firefighting. That doesn’t bring in significantly better results. Integrated Category Management for me and my team means to think bigger. We started off by introducing strategic perspectives and by enabling buyers to see their categories in a new light supported by facts. That mission quickly evolved into a strategic software that gets rid off scattered presentations and spreadsheets and structures the process. That’s why in our CM software module we have integrated an in-depth analysis of spend, supply market, business requirements, Five Forces, SWOT analysis, risk assessment, stakeholder mapping and cost calculations. On the base of that analysis, we then develop strategic objectives which we validate with internal clients and create strategy business cases. Next comes strategy breakdown into specific initiatives and savings and objective realization tracking. If you want to know more about Cirtuo’s approach, you can check out our video.
That’s the big picture in a nutshell that I like to see. Integrating tools and people. But the road to that picture is paved with micro-challenges that need to be addressed in every company.
Usually, when I’m asked to implement the strategic software, or simply to consult and when I begin to inquire about the company’s categories, I get an answer such as: “Our categories are straightened out, no need for change.” When I insist we simply scratch the surface of those categories, we regularly find barren category trees or trees that can hardly be called trees, because the treetops are non-existent and the tree, in simplified terms, consists of one horizontal line with a hundred categories. Something like this:
Oftentimes it happens that companies adopt a certain standard of a category tree. But to extend the metaphor, every company is a different garden and it grows different trees. In order for it to bear fruit it needs to be grown and worked on from the beginning, because every company has specific needs. Why would you mix apples with oranges? It’s important to have an in-depth knowledge about what makes each category tick, so you can make informed decisions later on. Let your tree and your knowledge branch out:
How can CM mobilize internal clients?
It’s a simple answer – with facts and a collaborative mindset. You may have noticed that stakeholder mapping is a part of our process. It’s important to know who are the people that procurement can collaborate with and on what projects. Once the analyses are completed and risks revealed, then new information surfaces and strategies can be formulated together with colleagues who can contribute with their insights. As John Kotter mentions in Leading Change, the first two steps are creating a sense of urgency and building coalitions.
Business cases are rarely done in procurement and we have never had a situation where people didn’t respond to a fact-based approach. It naturally brings people together toward a common goal and that is to continually support business requirements.
Commitment anxiety in procurement
I have to share with you what I have found to be the greatest fear when devising strategies in CM. It’s committing to goals or objectives. Let’s say after a thorough analysis, it becomes evident that certain categories require a 10% savings. But actually writing that down and committing to that becomes incredibly difficult and everybody wants 100% proof that it will happen. It’s perfectly understandable, nobody wants to promise something and then not deliver. But those estimates are always conservative in the first place and if the necessary analyses are in place, it is not such a daunting task. The knowledge provided with integrated Category Management brings a new level of confidence to the decision-making process and it sets the foundation for equally thorough Supplier Management, but that’s a topic for a different occasion.
Category Management as a recipe for success
When we bring it all together, it becomes clear that CM is alive and well, but only if approached systematically. By implementing new tools and researching categories to an expert level, suddenly hidden savings, better internal organization and collaboration surfaces in order to bring continuous success to a modern procurement organization. I’ve seen it happen countless times and I just want to spread the word: Why integrated CM? Because when a company knows a proven recipe, it can then make a delicious apple pie for everyone involved.