The world is changing swiftly, and the Fourth Industrial Revolution (4IR) is ushering in a new era of innovation and technology. From how we manufacture and consume products and services to how we experience life and work, 4IR is transforming and enhancing every facet of modern life. Digitalisation has become critical for businesses to remain competitive through greater productivity, asset reliability and advanced process control, and there is a huge emphasis on doing things simply and quickly to drive business growth and success.
When a task or transaction is complex, it involves a significant investment of resources, and usually, this ends up being time. The age-old adage of ‘time is money’ comes into play here – organisations can no longer afford to waste time, especially considering the rate of technological change. Ten years ago, it took more than a year for technology to change, but today, it’s anything between three and six months. If a business is stuck in a complex procurement process, your business requirements will most probably evolve so much that you no longer need that specific technology. That’s why organisations need procurement simplicity that enables businesses to be agile and adapt quickly. Finding and prioritising simplicity in an ever-changing, increasingly complex business landscape is key and can set your business apart.
Responding to complexity starts with understanding risk
Increasing complexity is making life more difficult for businesses of all sizes and across all sectors. Considering how quickly our world is shifting, if business owners and leaders don’t have a clear handle on what they’re working through because of complexity, their business risk position increases exponentially.
If you look at software, the major risk five years ago was compliance, with businesses asking themselves if they were consuming the right amount of software and licences versus what they procured and licensed. Today, in the Software as a Service (SaaS) space, the value proposition has become the focus. Businesses should look at software as a consumable – using only what is needed, when it’s needed and by whom it’s needed.
At Dante Deo, we’ve seen many implementation projects fail because organisations don’t understand the risk position or the protection that exists within the contract. Most people don’t even understand the licencing conditions on their phones, let alone the complex transactional conditions, which creates massive risk for most businesses today.
The link between simplicity, efficiency, and agility
The ultimate goal for any business transaction with a vendor is to obtain a benefit that will improve your margin, sustain your margin, or grow your revenue. If your organisation gets stuck in a complex environment, you’re at risk of ‘analysis paralysis’, where you either do nothing and lose the benefit you’re seeking, or you never actually optimise that benefit. Therefore, all businesses need to cut through the complexity and focus on a few critical things that will ultimately deliver the core benefit – that’s where simplicity sits.
More so, finding and prioritising simplicity translates to increased efficiency, optimisation, and risk management – the three core outcomes of every commercial transaction. Simplifying business processes and transactions also allows companies to be agile in the face of change. If you lose your ability to adapt quickly, the odds are your competitor will grab that initiative.
Practical examples of bringing simplicity to complex commercial projects
In my years at Dante Deo, we’ve helped other companies reduce complexity and clarify their own simplicity. During our work with National Treasury, we looked at the incredibly complex IT category across many different spheres of government, bringing everything together with a unified, standardised contractual agreement structure. This simplicity allowed for a consistent, predictable process of obtaining goods and services, saving the taxpayer money in the process.
Similarly, during a reorganisation conducted for one of our multinational customers, we took complex transactions and unified them under a global framework agreement, focused on standardised terms and conditions, and defined processes and risks. In turn, this enabled the business to turn around the procurement transaction in just three to six weeks, instead of the usual months it previously took to put an agreement in place.
We also play a role in the mergers and acquisitions space, dealing with very complex environments and complicated transactions. In this industry, businesses must understand what supply contracts they have and the various details of these contracts. As such, we’ve developed a robust methodology to give these companies an overarching picture of the most critical components and risks in their agreements, and have built repositories of how these details affect mergers and acquisitions in a short space of time. This allowed us to lift, shift and split over 1000 contracts in eight weeks from when the transaction was announced to the market to the listing date on various stock exchanges in SA and Europe.
For us, simplicity comes from the knowledge we have gained over many years of harnessing the power of experience to drive business growth and success for our clients.
Many business leaders may cringe when they read this, but processes, procedures and policies don’t add simplicity to an organisation, instead, they elevate complexity. I’m not disputing that these three Ps are not critical to a business; however, the truth is, they don’t manage risk, don’t offer efficiency, and don’t result in simplicity – they offer predictability, though.
Businesses should focus on understanding the information that is available to them, and most importantly, invest in partnering with the right people who will understand the environment that they need to operate in exceptionally well. Many procurement practitioners just stick to tick-box procurement and don’t have the skill set to understand the complexity of the business. You need to find people who know the commodity and the environment in which that commodity is utilised in order to translate the business complexity to simple, cost-efficient and optimised supply ecosystems where the risks are managed as well. I rarely look for a procurement expert – instead, I opt for specific technical skills in the relevant market. Identifying the gap between the business need and the specific transaction is key – you need to hire people who can fit in this gap.
Pick your partners in this space in the same way you would choose your spouse. Consider that it’s a lifelong commitment; the wrong partner can destroy your business – just look at Eskom today. Put real time and effort into creating and nurturing a team that will move your organisation forward by offering simple solutions to complex business requirements.
Main Image: UNIDO