October 29, 2021
Written by
Mark Perera

The hard things about supplier relationships

One of the best books I’ve read in the last few years is The Hard Things About Hard Things by Ben Horowitz the co-founder and General Partner at Andreessen Horowitz. In a departure from most management books I’ve come across, Horowitz steers clear of the ‘management made easy’ spiel and instead opts for a far more personal approach to the topic highlighting accounts of his personal challenges in the corporate arena.

Rubik's cube on a light blue background

The overwhelming theme of Horowitz’s book is that doing some groundbreaking is hard work. There are no shortcuts. Horowitz explains this through the lens of his own business which, despite selling to HP for more than $1 billion USD, he thought was destine for immediate failure on numerous occasions.

Collaborative supplier relationships are like startups

It’s true that start-ups are tough, I know this from personal experience, but so too are supplier relationships. Horowitz’s mantra that doing something groundbreaking requires hard work certainly holds true for supplier relationships.

Building a successful, sustainable and scalable supplier collaboration environment is a challenging process. It requires a dedicated ongoing commitment from you, your team and your suppliers. Having the tools and techniques is not enough. For success to be achieved, a strong human commitment is a prerequisite. Like starting a business, if you think it’s going to be easy or if you fail to accept that people are the keystone to your success, your program will fail, it’s as simple as that.

In The Hard Things About Hard Things, Horowitz discusses the need for business leaders to think differently in order address new challenges and again, I believe this applies to supplier relationships. If we are trying to effect a change in this space, we cannot approach the challenge with the same old mindset. We need to think more broadly and address the full potential of a supplier relationship. We need to be ready to hear new ideas and to run with them, we need to be ready for our own ideas to be challenged.

“A healthy company culture encourages people to share bad news. A company that discusses its problems freely and openly can quickly solve them.”
– Ben Horowitz, The Hard Thing About Hard Things

Technology is merely the scaffolding that supports our ideas

As I mentioned earlier, establishing bold projects is about people and little else. Tools, processes, and technologies are certainly important, but they are merely the scaffolding that supports the endeavours and intentions of the people involved. I fear that in procurement we often fall on the wrong side of this ledger. We tend to start with the process in mind and then aim to train the people to fit in around it. Rather than asking ourselves how we’d like to solve a particular problem, we review the existing solutions and processes and try to retrofit our problems into these proposed solutions.

Traditional SRM is a great example of this. The majority of SRM systems in the market today, simply do not serve the developing needs of the procurement function or our organisations. As we’ve discussed before, the future of procurement is innovation. Current SRM systems simply do not support these sorts of engagements. In order for innovation to flourish, collaboration between buyers and suppliers must be encouraged. SRM isn’t something that a buyer ‘does to’ a supplier, nor is it solely about performance management. It’s all about people and how both companies align themselves to create and capture a real return on their relationships.

Don’t think ‘what’s available’, think ‘what’s possible?’

If we are talking aspirationally, leaving aside what current tech permits us to do, supplier engagements should not be limited to procurement and account management professionals. It should be actively engrained in the behaviours of all people in our businesses, particularly the executive teams of each organisation. Everyone in our organisation’s should be aware of the importance of suppliers in our business’s success and be able to access the levers to activate change in this area. This is the sort of mindset we need to effect. We need to understand what more can come from our supplier relationships. As I mentioned earlier, it won’t be easy, but the payoff for our organisations are huge.

For years, we’ve trumpeted that procurement is about more than cost reduction. Now is the time to act on that promise. It’s true that procurement can be the engine behind the generation of real business value. In order to bring this into reality, we need to move away from our old practices and consider what is possible outside the limitation of technology and processes and then work hard to put these ideas into practice. If the future of our organisations lies in supplier innovation, it’s time for us to start making some changes.

If you would like to read more about redefining your commercial relationships to create collaborative environments that support innovation and business growth, download our whitepaper on Supplier Collaboration

Published April 2017.

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