Suits & Sneakers TV is hosted by the founder, Anne Miles. It is their online channel, where you can hear from the best of the best in marketing, advertising and media. Here, Anne challenges convention by looking at conscious marketing practices, breaking down old stereotypes, and discussing how as an industry we can break the learned behaviours of the past that are no longer working.
In this episode Anne, invited Matt Perfect, Procurement Specialist and Darren Woolley, Marketing Management Consultant from Trinity P3, to chat about how to align magic and logic, how to see marketing as an investment and discuss the role of conscious capitalism. You can watch the episode here on Vimeo or read the transcript below.
Suits&Sneakers: Aligning procurement and marketing in a conscious climate from Suits&Sneakers on Vimeo.
Transcript:
Anne:
Thank you both for coming today.
Darren:
Pleasure.
Matt:
Great. Great to be here.
Anne:
Thanks. So, Matt, like the procurement whiz, I’m wondering what themes of conscious capitalism topics are coming up for you like all the industries in procurement?
Matt:
Yeah, it’s definitely an increasing time, I think for conscious capitalism across the business but I certainly think in the procurement field.
I remember when I first came across conscious capitalism as a concept, and that’s how you and I connected, Anne, through the network — I thought it had a lot of relevance to procurement, but probably back then, I was probably one of the earlier people to see that and that’s really started to take hold, I think.
And I think really, I mean, social procurement has really taken off in the last couple of years and that takes on a number of forms. It’s driven by the government in a lot of cases, but also corporates are really picking up social procurement. So, that’s really driving social outcomes on top of the purchasing outcomes that we’ve always looked for in procurement.
So, social outcomes leading from job creation, diverse suppliers in Australia and indigenous procurement and supporting indigenous businesses with our procurement activities is a really big focus. And then at the other end of the scale, we’ve got issues like modern slavery, which through the Modern Slavery Act that’s come in the last couple of years has really started to drive a lot of focus on that end of what I call the impact spending spectrum from the real negative end of modern slavery right through to the positives.
So, I think there are a lot of areas of intersection. I think that stakeholder orientation, which is really central to the conscious capitalism piece is really what’s coming to the fore with procurement now, is really thinking a lot more broadly around all the stakeholders that we are working with from our suppliers and our supplier’s suppliers, and the workers through our supply chain, and the people that we can impact positively with our spending decisions through things like social procurement as well.
So, I think it’s very much aligned with that broader corporate social responsibility push that we’re seeing coming through and sustainability. And yeah, it’s been exciting to see from a procurement perspective.
Anne:
Especially when it’s your personal cup of tea, I’m sure it is. And I think it’s exciting too. I’m curious for Darren, too, do you think that the marketing industry is grappling with some of these topics as much as the broader market like Matt’s seeing?
Darren:
Yeah. Look, Anne, I think it’s interesting because the United Nation sustainability goals are really setting this agenda. Many things like modern slavery, indigenous business, gender equality, and business are all being driven by those sustainability goals.
Unfortunately, while we see it as increasingly part of the conversation with procurement, it’s not necessarily part of the marketing conversation. And I think marketers often feel conflicted because especially around sustainability, one of the roles of marketing is to drive consumption. How can you create sustainability at the same time as driving consumption?
And I know a lot of marketers feel conflicted in this area when we’re talking about net-zero emissions by 2050 and the like, because how do you achieve that unless there are major changes to the supply chain and the manufacturing process?
Where we do see it is where they’ve embraced brand purpose, but then it’s usually in quite a narrow way around a specific area that is relevant to the brand and that’s about it.
Anne:
Do you, Matt, think there are areas missing generally across the industry, and you’re seeing the same thing in the marketing niche?
Matt:
Yeah, look, I think that’s true. I think when I talked about the impact spending spectrum from a procurement perspective, I think we do tend to focus on the ends of the really bad stuff we need to eliminate like issues of modern slavery and there are really positive things like social procurement we can create.
But Darren mentioned the sustainability development goals before, and I think that’s really an opportunity that I think is missing in procurement and probably more broadly in the industry as well, that I think the middle is missing, the spectrum of decisions that we’re making in all of our spendings as corporates and as governments that actually we can influence the better direction for our suppliers through the supply chain, including marketing.
So, I think the purpose was the other thing that Darren mentioned before that I think is really starting to come to the fore and is very much a marketing topic. I think that’s something that speaks more clearly and articulately around the impact we’re creating in our supply chain, it is a really great opportunity for marketing and procurement to collaborate. And I think we’re seeing that more as we talk about the good that we can do in our supply chain, it becomes something that marketers are more interested to talk about on behalf of the brands that they’re working for.
So, I do think that the storytelling of marketing is a really good opportunity when it comes to sustainability. But I agree, I think, to some extent, there’s a bit of a conflict there between that increased consumption that’s driving a lot of marketing activity and what we’re trying to change in society.
Anne:
Yes, it’s the vicious circle, isn’t it? So, how do you think that the procurement teams know when they’re getting it right? Because I know Darren’s also talked about getting that balance right as well, in a lot of the TrinityP3 blogs. So, what do you think is the right balance?
Matt:
Look, I think, procurement has always had a variety of criteria to consider whenever it’s making award decisions to suppliers, whether it’s in marketing or any other category.
So, I think the evolution of procurement really has traced this idea of a very narrow focus on the price that used to be what we saw as dominating what would probably have been termed the purchasing profession, I guess. And as it’s evolved into a more strategic function of procurement, I think we’ve started to see a much greater introduction.
Price is still important, but there’s a greater introduction of things like quality and service and a broader definition of value that procurement is starting to, or has been for some time now, evaluating through the way that they look at deals and the way they advise their businesses.
And now, I think this impact is really the next frontier for that definition of value: is how do we start to measure and track the impact, both the positive and the negative impact that we’re having through our spending decisions and how do we bring that in?
So, I think our procurement is very well-placed to do that kind of evaluation and to help businesses and remember that typically, procurement as a profession is just like marketing, is really working on behalf of a business. They don’t typically control the budgets, they’re not the ultimate decision-makers — they’re there to advise the business on the best decision taking into account all the stakeholders. And I think they’re in a good position to do that.
So, I think that is really expanding, we’re seeing a lot of tenders now that are starting to weigh, put more weighting on these sustainability criteria on social procurement outcomes, and that’s obviously having an influence on suppliers, thinking about as Darren’s alluded to, how are we supporting the sustainable development goals? How are we driving that? And how do we then use that to differentiate ourselves and win more business where customers are now through procurement starting to say that’s a higher priority for us?
So, I think we’re seeing an increased weighting on that. But I think that some of the other more traditional weightings still certainly dominate and there’s room for improvement there. I think we need to get some of that weighting up on certain things like sustainability and necessarily start to reduce some of the weightings on price all the time, which can be an obvious trade off sometimes in these cases.
Anne:
I’ve definitely heard, Darren, you’ve talked about the price focus being a bit of a challenge before. Do you agree … or maybe the better question is, where do you think that the sweet spot is for a procurement person to sit, to know that they’ve done their job properly?
Darren:
Well, look, it’s interesting, Anne because out of Europe and the UK where marketing procurement often seemed to have evolved, there’s a move towards talking about value and having a more balanced scorecard beyond price. And that must be a positive thing. We’ve got the WFA who have done a big research piece and made recommendations called Project Spring.
My concern is that the danger for the procurement profession is to see these types of things and go “Well, job done” when in actual fact, it’s interesting that that may be the conversation that’s happening in Brussels. But by the time I get to Asia or Australia, procurement teams are still being held accountable for delivering savings.
And many of these big global European companies, who in the head office are talking about value, when it translates to Singapore, suddenly, the procurement people are telling us “I’ve got to save 10% or I will be seen as underperforming.”
So, I think we’ve got to be careful that we don’t fall for our own propaganda as a procurement industry and especially in the marketing space because there’s a long way to go. It’s great that people are talking about value, and I like Matt would love to see the scorecard balanced across the supply chain being sustainable and being aligned and embracing the sustainability goals.
But I think we need to be honest and say, while there are still CPOs being told by the CFO that procurement’s role is to cut costs, then they must understand that marketing is quite different because it should be a revenue driver and a driver of growth, not a cost of consumables. And so, it does need a different approach and we should be having more conversations around proving the growth component.
So, we eliminate waste because that goes to sustainability and focus on growth, and sustainable growth because ultimately, that’s where every good organisation should be heading.
Anne:
I think that sounds like awesome advice. And to me, that balance of why I think two of you are so smart and at the top of your game in different parts of the industry is so important together.
Matt, you’ve talked in the past about what you think the perfect combination of the procurement team looks like, what is that to you?
Matt:
Yeah, I think a lot of the time now when I’m working with clients, I’m talking about responsible category management as the new paradigm, I think for getting this focus within categories. Because I think a lot of procurement activity is done with a real sourcing focus, which leads to that strong focus on savings, quite short-term thinking around transactional buying, negotiating over the short-term, to drive short-term savings.
I think what category management has always had the potential to do and is only really starting to now, I think to start to get real traction, is to really think much longer-term around what we’re trying to drive and actually the sustainable development goals that Darren’s talked about before, are actually a framework for planning for the long-term, 2030.
It’s not that far away on a scale of humanity, but certainly, from a procure perspective, 2030’s still quite a long way away: three or four sourcing cycles away. So, by having that ability to bring, and this is really at the heart of responsible category management — to bring those kinds of goals and to say, well, what change do we want to drive with our supplier partners in these categories over time, and leading towards those sustainable development goals, and how do we need to align the short-term incentives of our suppliers and the medium and longer-term to ensure that we hit those targets over the long term.
So, I think it’s really being able to take that more category approach and to bring in expertise like Darren’s specifically in categories that can say, well, I understand the expertise and the needs of the marketing category as opposed to the recruitment and labour-hire or opposed to even consumables as Darren’s talked about.
That’s often, I think the mistake we make when we move a procurement person from one portfolio to the next and they just source, source, source, source. They don’t really have the depth of understanding of the category to be able to understand what the nuances of that industry are and what the drivers of impact are going to be within that category.
So, I think that real category expertise, and if you don’t have the depth of resources to have that developed internally, that category management approach is really what I think is going to be best practice.
Anne:
It does sound best practice, and I’m sure Darren’s seen plenty of procurement working in isolation. And so, yeah, I agree. I think though, Matt, you’ve raised a good point that each industry has some nuances.
And Darren, I’m wondering which parts of the industry you think are particularly sensitive, because that brand versus digital discussion comes up too, like where do you think you have to be especially sensitive to when you are going through a procurement exercise?
Darren:
Yeah, look, ultimately, we still rely heavily on buying talent. Much of the contracting done through marketing is about buying talent even though increasingly, there are technology components and things like that. And I think one of the hardest things from a procurement perspective is how do you evaluate talent in a way that can be quantified into and verified in a way that you can do like for like comparison.
I think one of the big challenges for procurement teams and especially in Australia, is to Matt’s point, you could be a category manager in indirect, but that would mean there is one resource doing possibly 4, 5, 6 different areas of procurement in that indirect category, of which marketing’s one of them.
The head office in Europe could have 20 or 30 people as the indirect category managers, each one specialising in their own area. And you could have 5, 6, even 10 workings just on marketing and each one, a different aspect of it. From media and creative or content right through to packaging and point of sale. They could be specialists in each one.
So, it’s a real challenge when you are doing, let’s say, you’ve got five categories in your indirect category. That means you’ve got one day a week, let’s say, to really understand all the complexities of marketing.
And so, that becomes incredibly difficult and understandable that you would then default to the way you would source, let’s say, travel and accommodation or you’d source some other component that perhaps isn’t so human resource-intensive and isn’t related to actual growth and return on investment, but is more about cost reduction.
Because don’t get me wrong, I have no problem at all with cost reduction if it’s not at the expense of growth performance.
Anne:
Yeah, I think that’s a good measure, isn’t it? So, typically, are there certain areas — and perhaps this applies for both of you, but Darren, particularly, with the marketing industry: are there areas that you typically see that you can make an impact on cost-saving?
Darren:
Yeah, absolutely, absolutely. There are traditional processes in advertising and media from the last century still being used today. And procurement could be doing an amazing job at driving that forward and getting agencies and marketers to embrace the opportunities.
We’ve said this quite often, that in 2005, the average brand was producing around 200 pieces of work a year. Today, because of social media and digital channels, they’ll be producing 3000 plus pieces of work. Now, that’s exponential growth over one decade. And yet, the process to do it is the same technique that was used back in the 1960s in the Mad Men era.
And yet, there’s now technology that allows the automation of a lot of that. But we have agencies unable to embrace technology because they’re on a let’s say, a time and cost contract, which means that if they introduce automation, they can’t charge an amount to even cover the technology cost because they only charge on the number of hours involved. I mean, it’s just ridiculous.
And when I have that conversation with procurement people, they literally say to me, “Oh my God, I didn’t realise I was just going on what we’d always done, and my job was to get it at 10% less.” And that no one is helping anyone. The marketers are not helping themselves, the procurement team’s not helping the marketers, and the agencies are the last people to help themselves because they’re so busy just trying to survive.
Anne:
Yeah, I agree. How do you think that they can reasonably say no?
Darren:
Look, it’s easy to say no. I do it a lot. And that is that you’ve got to frame it as a business decision. I will ask … because we must tender. We tender all the time for projects, and I will ask the procurement person a number of questions: how many people will you be inviting to the tender? What is the approximate value? What are your payment terms? Just some very basic business questions.
If they’re unwilling to answer them or the answers I get are unacceptable, then I just say, “Look, we’d love the opportunity, except not under those conditions.” It’s a perfectly reasonable business decision to make. I’m not getting emotional about it, I’m making a business decision. And I think most procurement people will completely get that and respect it.
And we’ve even had circumstances where they’ve said, “Okay, I’ll go away and talk to my stakeholders and see if we can accommodate some of those areas.” That’s a mature business discussion. I think there’s sometimes way too much hysteria and emotion related to it. You can say no, can’t you Matt?
Matt:
Oh, absolutely, absolutely. I do a lot of work with suppliers now helping them to navigate procurement processes from the other side. And as a consultant, I’ve been on both sides of that, for sure.
So, I often say, I think the only thing that’s worse than losing a good deal is winning a bad deal. And I think that is the mantra I think for then saying no. And your questions I think are exactly right, Darren. I think there’s a lot of fear that is often misplaced around procurement processes and unwieldy tenders. And I don’t think procurement often do ourselves any favours by the way that we are hiding behind these documents.
Sometimes, we make ourselves a little bit inaccessible, and often for good reason, because I think a lot of procurement people are really stretched. And so, as you’ve talked about before, their ability to really engage well with every supplier is limited.
But I think, yeah, absolutely, there is an expectation whenever a procurement process runs in a market, that the suppliers understand their business, they understand their market, and they know what they can say yes to and what they can say no to. And I think that’s crucial that suppliers do feel empowered to do that and use the question process.
I think that’s one of the most underutilised aspects of most formal tender processes, is no question. I think suppliers often have a fear that if we ask questions, we’ll give something away. Whereas I think it’s the opposite that is often true.
Suppliers that engage with the process from the outset that ask the smart questions that demonstrate they understand that they’re commercially astute and they’re not going to be signing up to a contract or a tender that’s not going to work for them are the ones that often procurement take quite seriously.
Anne:
It’s interesting that you talk about it… I thought it was perfect that you can win a bad project. So, what do you think are often the impacts of making a bad deal or the procurement process?
Matt:
Oh, look, I mean, I think sustainability, I guess, is the key in all of this. And I think that’s certainly taken on a stronger environmental and social meaning in the last few years, but I actually think sustainability fundamentally is about the ability to sustain the service.
And that goes to the core, I think, of any business decision to engage in a tender and to accept or to go into a contract, are we going to be able to sustain this? And if there’s a mismatch between what’s expected of us and what we’re going to be able to generate in revenue, then that should be a red flag straight away.
And I think there are too many examples still, of particularly smaller suppliers. And I think that’s been certainly one of the challenges procurement faces as we try to work with more diverse suppliers and recognise the impact that we can have by working with smaller suppliers. And I’m sure this is true in the marketing space too, actually, working with independents and smaller businesses and diverse and women-owned businesses, and social enterprises and indigenous businesses.
A lot of these businesses are still relatively new and smaller than the main players that we’ve been used to dealing with. So, I think we have to recognise our responsibility in trying to engage those in running more inclusive procurement processes. I think that’s the big leap that we haven’t yet made in procurement, is recognising that to go from where we are today to have a much more diverse and rich supply chain, we’ve actually got to make the way of doing business more accessible and support suppliers.
So, I think that’s something that I think procurement is working quite hard to do now, is to recognise that inclusivity needs to be there in the way we do business. And otherwise, the impacts particularly for smaller suppliers are really quite detrimental.
Darren:
And I think that one of the big issues is that agencies generally are not necessarily good business people. They’re good advertising people. They may be good media people, but they’re not necessarily good business people.
And I say that because they will often go after any opportunity because they think that they can make any opportunity work. And underpinning that, is perhaps a lot of the behaviours that we’ve seen over the past decade, especially around 2014, 2015 with media, where the way to make it work in the face of the constant downward pressure of procurement was largely unethical, if not illegal in some cases.
And so, everyone involved must take responsibility because, to the point you just made before, there is an onus on the buyer to ensure that the deals they do are sustainable and not encourage illegal or unethical behaviour.
But likewise, there is a responsibility on the seller to be able to enter a contract, knowing that they can fulfil that without having to result to things like secret commissions and kickbacks and the like or to engage with low-cost employees that could possibly be working in breach of the Modern Slavery Act and the like.
So, I think everyone has a responsibility and I don’t think anyone in this process gets off scot-free because as an industry, it’s been very slow to embrace either guidelines or agreed measures or the like. And I’ll use an example of that, is that the number of people trotting around the world saying they have salary benchmarks, and really, all they’ve got is whatever the lowest benchmarks that they could … or the lowest salary costs they could find.
One of the things that we’ve always said is let’s stop talking about average benchmarks and actually have a tiered approach so that people can make decisions around top tier, middle tier, and low, and you can then match the type of supply that you need to either the strategic and financial importance or to what you see as the value of that.
So, I don’t have a problem with a client offshoring a cheap solution if the quality that they want is actually matched. But I do have a problem with someone going for a cheap solution, and then expecting high-end performance. It just doesn’t make sense, but that’s the type of behaviour that we find ourselves observing.
Anne:
Yeah, it’s also tapping into something that’s bothering me as well, just as a point, it’s impacting ageism, and also like how diverse we are as a community as well. So, I love that tiered approach because you can actually then have a way to support the different ages in our industry that are currently pushed out.
So, that’s good learning and I’m going to take something away from that, thank you. Yeah, so Matt, did you want to add to that?
Matt:
I just think that’s a great example of an alternative model that I think increasingly, you’ll see procurement processes are open to. They might have gone to market with a certain specification to how they want to do things, which as you’ve said, Darren, is usually based on the way we’ve always done things, but often there is a genuine interest in the opportunity for innovation. And you’ll often see that language around an alternative proposal or if there’s some way that you can propose is a better way of us doing things than the way we’ve specified it, then we’re open to hearing it.
And I think that’s another — just like questions, that’s often underutilised, partly because I think it’s more work. You always have to submit what’s called a conforming bid first, before you’re allowed to submit a nonconforming bid.
So, there’s also a little bit of extra work, but I think that’s the opportunity for suppliers to then be able to demonstrate why the value of their innovation and in this case, the tiering, that would make sense for the customer as well. And Darren’s point before, I think a lot of agency people and I think this is probably true of a lot of suppliers, are experts in what they do, but they’re not necessarily great business people.
And so, I think there is a challenge often with the sales ability to demonstrate the value, to understand the business and translate it into the language of the customer. And likewise, on the procurement side, it’s that ability to really understand the industry and not rely on the procurement process to try and do what is essentially the job of relationships and collaboration.
So, I think that’s why increasingly, we’re seeing a focus on things like supplier relationship management as part of a broader category management approach where procurement are starting to recognise the value of managing relationships over a longer period in a more collaborative way and the value that they can add to those working in partnership with marketing.
So, I think there are some positive signs there, but I’m a bit impatient. I think a lot of these things should have happened by now already. So, we’re still banging that drum a bit.
Anne:
I think that’s raised an interesting point for Darren, and knowing that Darren measures the relationship between supplier and client. Darren, are you finding there are like signals when you can tell that the procurement deal has been done to stretch people, is it coming out in the relationship?
Darren:
Oh, absolutely. And you don’t need to run a survey to see that. When a marketer phones up and there are specific problems that they have with the performance, the relationship — the first thing we would do is a benchmark of the fee being paid against the outputs that they actually produce.
So, this is the problem, is that a lot of agencies are appointed on the basis of the number of people that are going to be retained with no link to the work that they’re actually going to produce. So, there’s no workload factor built in. It’s just assumed that if I pay a retainer, let’s say I retain 50 people, that they’ll just do any amount of work.
And of course, the onus is on the buyer to then provide as much work as possible to ensure that they’re not underutilised. The trouble with that is that you end up overutilising them. People work long hours, they get burnt out, they suffer mental health issues and the like. There’s a high turnover of staff, and suddenly, the marketer is complaining because they’ve got a high turnover of staff and the quality of work and services dropped off. This is the type of thing we see.
Now, why did the agency agree to enter a contract where they’re under-resourced? Because they didn’t know, because no one gave them an indication of how many people would actually be required to do what work.
So, in an engineering environment, I would say, I need you to specifically build this and I need a number of units of those, and I need them delivered on this date. In marketing, it’s rare to ever get that. It’s, “Oh, well, we need you to do a bit of this and a bit of that. And oh, I’ve got about this amount of money, so how many people does that buy?”
Is this any way to run multimillion-dollar contracts? I don’t think so, but there are ways to be able to monitor and measure these things so that both procurement and marketers and the suppliers have a much better understanding and believe me, it’s not timesheets. I mean, if I see one more agency turn up with an Excel spreadsheet going, “Oh, look, we’re 25% above the allocation” it’s, “But yes, what were you producing? What did you actually produce in that time?”
Anne:
For sure, because I can guarantee that most of the bigger agencies hire freelance talent to help them with their own pitching because it’s efficient and it’s cheap. And sometimes their own process, they’re coming back with a timesheet and validating that their ineffective process is justified because they’ve got a timesheet. So, yeah, don’t get me going on that.
So, Matt, how do you think that the two departments (procurement and marketing) could work better together?
Matt:
I think the sustainability development goals are providing that framework that the whole business needs to sign up to. And I think back to when Darren and I first met many years ago, Darren, you introduced me to, I think it was the white paper at the time, The Magic and Logic. I don’t know if people still use that, but at the time, it struck me as wow, this is really the challenge we have.
We’ve got the marketing team being the magic and the logic of procurement and they’re just butting heads a lot of the time. And I think that still is the case a lot of times. I think you’ve got to find something that is … and this goes back to conscious capitalism: what is the higher purpose of the organisation that both marketing and procurement have to drive together. And that has to be at the heart of any collaboration, is recognising that common ground.
So, I think the sustainability agenda more broadly in business does provide a really good opportunity for procurement and marketing to collaborate more and to achieve some of those wins in the marketing space. As I said, I think a lot of marketing and the opportunity for marketing is to tell the sustainability story better, including what’s happening in the supply chains. So, I think there are a lot of good reasons for marketing and procurement to be getting on better now than they perhaps ever have.
Anne:
That sounds…
Darren:
Look, sorry, Anne, I absolutely agree, Matt. I think we’re seeing some great examples of where procurement is embracing those sustainability development goals and using that to help even marketing, even if it’s on the basis of mitigating risk, which is a huge issue, and then aligning them.
And a great example. Over the last 12 months during the pandemic, there’s been both Coles and Woolworths. Marketing can’t go out and talk about how they are sourcing more reliably, sourcing better quality, sourcing in a way that’s actually helping the farmers and other suppliers unless procurement is on board, managing those processes and actually ensuring that the suppliers are able to do that. Then, it can be expanded beyond that, to procurement then starting to look at the whole marketing process as well.
You know, there was a paper — or not a paper: it was an article by Professor Galloway. He said 88% of digital media is actually false. 88% of the spend on digital media is being clicked on by bots. And it’s interesting because that’s because of fraud, and fraud is actually largely putting money, advertising dollars to things like criminals, drug lords, terrorists and things like that.
So, if marketing wanted to clean up their house and procurement was going to help them, there’s a prime battleground that procurement could bring great insights and methodology to solving.
Anne:
Amazing. That’s horrendous, I didn’t realise it was so dark in that area of the industry, Darren. And Matt….
Matt:
And I think that’s a great example of the kind of industry expertise that we need to be bringing into categories. Because I think there’d be very few procurement people that really have much understanding of that issue.
But I think as we start to look more deeply into our supply chains and understand what’s happening, the banks are certainly very much onto this in terms of, I guess, the broader financial supply chains and the issues that can occur with them and how money gets transferred and is working towards supporting some of this criminal activity.
And so, I think procurement is starting to get involved in areas now that they’ve never had before around corruption and bribery and the whole range of things. So, I think they are starting to develop some of the skill sets and the capabilities to be able to support marketing and look at those risks in that particular category as well.
Anne:
That’s awesome. Matt, before, you talked about Magic and Logic as a resource, is that something that is readily available?
Matt:
That’s a good question. I think I’ve got an old copy somewhere, but Darren probably could answer that better than I can.
Darren:
Yeah, the PDF download is all over the internet. If you type in “magic and logic marketing procurement,” you’ll find a free PDF to download.
And look, as Matt said, it was revolutionary for its time. It’s probably about 15, 20 years ago now, and it came out of that, again, out of the UK, where marketing procurement really was first established. But I think in some ways, it’s a good introduction. It’s a little bit past its use-by date. Because to Matt’s point, I think there’s a much bigger game.
That’s the conversation to have when marketing and procurement first engage with each other. I think most organisations that are playing at that level have already had that conversation. The next point is where are the opportunities for procurement to really bring value to the relationship beyond even financial value: to the point, conscious capitalism, sustainability development goals — all of these things are becoming bigger and bigger issues for organisations. There are shareholders, boards, and CEOs, who are all considering these issues.
Marketing has an important role and procurement could be the way for the marketers to actually sit up and have those conversations. So, I think that’s probably a better starting point, sharing with your marketing partners the UN sustainable development goals and saying, “Okay, here’s what our organisation’s doing, here are some opportunities for marketing. Now, let’s have that conversation.” Because most procurement teams are at least aligned in with the CFO through the CPO, if they’ve got a CPO — but the CFO. And that’s a really important starting point.
Anne:
You’ve just made me think of a left-field question. Darren, you first: do you think that procurement potentially could have a role in accountability, like you talked about profitability like a certain spend is going to have a certain business growth impact? Do you think that’s an area that procurement could get into?
Darren:
Well, look, absolutely, Anne. And in fact, the best marketing procurement people end up embedded in marketing doing all of the analysis. Magic and Logic’s right, in that generally, you find people attracted to procurement that do have a terrific analytical bent to the way they think. But they also need human communication, and empathy as well.
And marketers will often be big picture, and this is generalising — but they’ll be big picture and more relationship-focused. Bringing those two together is such a huge opportunity, but that’s to make marketing worth your while. I’m talking about the opportunity for marketing and procurement to get the CMO actually aligning their strategy with the organisational strategy beyond growth.
How do you align it so it becomes sustainable growth? How do you align it so that it becomes growth in a way that supports the organisation, supporting all of these initiatives around more diversified supply chains, and more sustainable economic behaviours? These are all things that I think every organisation should be looking to if they’re going to have any long-term future.
Anne:
Matt, anything else you’d like to say before we close?
Matt:
Yeah, I mean, I think that is starting to happen, that procurement has definitely started to look much more broadly at a lot of spend as an investment rather than an expense. And I think when we talk about social procurement, indigenous procurement, I’m not seeing any organisations talking about how much money they’ve saved doing business with indigenous-owned businesses, or how much money they’ve squeezed out of social enterprises.
This is the shift that’s starting to happen now. It’s like, hang on, we can’t talk about savings anymore because that’s not the goal. What we want to talk about is how much we’ve spent with these organisations, how much we’re investing in creating jobs, and how much we’re investing in more sustainable packaging and how much … so it’s actually starting, this sustainability agenda is starting to flip the conversation for procurement from – what can we save? And if you look at the overall spending of the organisation, the tiny piece that we can actually save is very much overwhelmed by the rest that we’re going to keep spending.
So, actually flipping that around and talking about what we are spending our money on and how it’s driving our growth agenda, how it’s driving our sustainability agenda. That’s very much where procurement’s starting to have a much more strategic conversation now and actually, flipping that around. So, I think sustainability is driving a lot of that.
Darren:
And that’s fantastic, Matt, as long as then they don’t put the other hat on when they go back to the non-indigenous, largely male-owned supply chain and then start looking at well, we’ve got to deliver our savings this week, so let’s see if we can cut a bit deeper here to support that. That’s what I’m saying, is let’s apply it universally rather than … and one of my bugbears is this extended payment terms, and yet almost all of the big global companies are pushing their suppliers out to 90 and 120 days.
It can take up to two to three months to be on-boarded as a vendor in a lot of these systems. So, that’s on top of those payment terms. It’s a bugbear because it happens to us and we’re a small to medium enterprise.
But where I have seen change is those procurement teams that say, well, depending on the size of the supplier, we can meet 30-days. It’s not this universal blanket, you will become our financial hub by actually supporting our cash flow at your own expense. They’re actually differentiating between small to medium enterprises and large enterprises. I don’t care if the big boys beat each other up, that’s fine. But when the big boys are beating up the small operators, then that’s, to me, corporate bullying.
Matt:
Yeah, look, I think that’s a really good point. I mean, there’s certainly, there’s even legislation and there’s a lot of focus around payment terms in the UK and we’ve got that same focus here now. But you’re right, it is very much driven towards protecting those smaller suppliers in the supply chain as opposed to the bigger ones.
And I think on that diversity question you raised before, I think the game has been rigged for bigger suppliers/in bigger suppliers’ advantage for a very long time. So, I think if we’re going to address the balance, and I think that’s what a lot of procurement is trying to do now through supplier diversity and social procurement — we need to tip these scales a little bit in favour of the little guys and the little girls and those businesses that need the support to get into our supply chain.
So, I think that’s why we are going to see for a while, at least there’s going to be a bit of favouring those while we continue to perhaps treat some of the biggest suppliers the way we always have and expect that they’re big enough and ugly enough to look after themselves (that may or may not be true), but hopefully over time, we’ll start to see changes throughout.
Anne:
No, that’s brilliant guys. Thank you so much. I feel like both of you are bringing such expertise to this topic and it’s been sensitive and like nothing better than the two of you collaborating so well here. It’s like a dynamic duo now, isn’t it?
Darren, I know you’ve blogged a lot on procurement. I’ll grab a link from you and let’s put that in for everyone so that they can find some of your other topics, you’ve written a lot about this.
Matt, you too — and I think you were also working on a checklist specifically for this category challenge as well. Do you want to just talk about that, and what that includes?
Matt:
Yeah, well, I was starting to develop a theory of change, I suppose, for procurement. A theory of change is a concept that’s being used widely in not-for-profits and social enterprises. But it’s a way of linking those sustainable development goals that we’ve been talking about and the impact of the short-term decisions that we are making in procurement as a way of trying to link those together to provide a clearer pathway towards the outcomes that we want to have, and that our organisations are signing up to, and the procurement decisions we make on a daily basis at the category management or sourcing level.
Anne:
Awesome, thank you both. I really appreciate it. There are lots of insights there and I think yeah, there’s a dark side that we’ll have to watch out for. Thanks very much.
Ideal for marketers, advertisers, media, and commercial communications professionals, Managing Marketing is a podcast hosted by Darren Woolley and special guests. Find all the episodes here
