P is for procurement and process, process, process…

Last month I was reminded once again that there is a long way to go before we can claim that the UK is a good place to be a start-up. The week started promisingly enough. One of the start-ups that I work with - a classic example of a small, smart, innovative British company run by a fantastically talented bunch of people - received a call, out of the blue, from one of the UK's biggest retail brands asking them if they wanted to work with them on a new online project - so far so good. However as the conversation moved towards contracts and budgets, procurement got involved and that was where the good news ended.

Now don't get me wrong I am a businessman and I understand the need to get the best value you can out of your suppliers. Negotiating with procurement teams is all part of the 'fun' for any organisation - indeed some people I know positively relish the challenge. However when you are as big as this particular brand is and you are dealing with a tiny company that you have proactively sought out and approached because you want to work with them, I would have thought that the main priority would be securing their services, as opposed to beating them down so far on costs that it actually becomes unworkable and they have to withdraw.

So what initially started out as a great example of a major British brand proactively reaching out into the start up community to find innovation and a fresh approach and (I foolishly thought) to support new, young companies, very quickly became another example of short-sighted, self-serving behaviour from what is supposed to be the crème de la crème of British business.

So what has this got to do with you? Well the first contact between the two companies came from a proactive approach by a programme director tasked with solving a particular business challenge. They were a classic example of the kind of visionary talent that you hope marks out the CIO of tomorrow. He was bold enough to take risks, not only in the kind of company under consideration but also the technology they were hoping to deploy. They understood the need for innovation as a platform to drive the company forward. Unfortunately, as is the case with so many big companies, all of that vision and ambition stood for nothing once process and administration got involved.

The problem here is a cultural one. Companies built in siloes with departments which singularly focus on one particular area means they lose sight of wider objectives and so become a barrier to progress. The job of a procurement officer is to secure the best deal possible from a supplier once the decision-makers have decided that they are the company that they want to work with. If a procurement officer fails to seal the deal because of a narrow focus on getting it as cheaply as possible then surely they have failed in their job.

I am not suggesting that procurement officers require in-depth and specialist knowledge of the rationale behind every decision to select every supplier, however I would suggest that some understanding of why they have been selected, what value they bring and an understanding of who they are as a company may be valuable. If you engage a tiny consultancy that you really need to work with in order to be able to deliver on a particular project you cannot treat them in the same way as you would someone who supplies potatoes. In fact many people would argue you shouldn't treat the potato supplier that way either but that's not an argument that is relevant here.

There is another element of the procurement role here – one that seems to have become forgotten in the almost obsessive drive for cost reduction. Procurement should be about developing and maintaining strong relationships with suppliers, about measuring value and performance on both sides. This element of procurement is hugely valuable to both buyer and supplier, as it helps to build relationships based on trust, value and loyalty. Our retailer would do well to remember this.

What it boils down to is the fact that unless our own blue chip brands are willing to stand up and invest (both time and money) in British start-ups then no amount of tax breaks, incubators and roundabouts (Silicon or otherwise) are going to make the slightest bit of difference. I am not suggesting that we throw budgets out the window and go British at any cost, but the old adage stands that you get what you pay for. If you want cheap technology, delivered by an outsourced team based overseas with all the flexibility and agility of an iron bridge then fine, you know where to go and the procurement team can wield their scissors with impunity. If, on the other hand, you want something different, something that has the potential to make transformational changes to your business and, most importantly, something no one else has then you might want to take procurement out for a beer and suggest that they lighten up a bit.

Copyright © 2013 IDG Communications, Inc.

Security vs. innovation: IT's trickiest balancing act