Procurement, especially for complex purchases, involves groups of people from different functional areas within the buying enterprise. Here is Gartner:
“The typical buying group for a complex B2B solution involves six to 10 decision makers, each armed with four or five pieces of information they’ve gathered independently and must deconflict with the group. At the same time, the set of options and solutions buying groups can consider is expanding as new technologies, products, suppliers and services emerge.
“These dynamics make it increasingly difficult for customers to make purchases. In fact, more than three-quarters of the customers Gartner surveyed described their purchase as very complex or difficult.”
Most purchasing events are complex, driven by an increasing number of players at the decision-making table, each convinced of the strength of their perspective. Anyone can go to the Internet and find some opinions about the good or service in question. Perhaps different supplier salespeople have tried to influence some of the members of the committee. Or maybe these individuals have shifting preferences, so the committee is trying to hit a moving target.
Complexity is a function of the difficulty of the underlying business problem, the number of options competing for the business, and the number of people judging the relative merits of these solutions.
Here is Gartner again on this team dynamic:
“Digitalization and the increasing democratization of technology mean that enterprise tech is increasingly funded, procured, developed and managed outside of the IT organization. Your next tech purchase, then, is likely to involve a buying team of diverse stakeholders – a team that can be the difference between a tech purchase you’ll regret and one you won’t.”
The key is consensus among all the stakeholders:
“Gartner research shows that buyers who don’t later regret their tech purchases tend to be more thorough in their approach to developing and agreeing on the business case and more disciplined in gaining consensus across a broad set of stakeholders. They don’t just vet technology solutions; they evaluate a range of requirements against specific desired outcomes.
“To do that effectively, your organization will most likely assign a tech buying team. Who sits on that team, and what they focus on, is critical to success.”
What makes things even more difficult is that buying enterprises will flex teams up and down, from project to project, depending on the size and nature of the procurement:
“Buying teams include six to seven members on average, but they can include far more. For IT services deals greater than $5 million, for example, the buying team averages 15 stakeholders. That creates enormous complexity, especially given that purchase teams are rarely static anyway …
“Representatives with specific expertise or purchase power are often brought in to advise, for example. And they frequently derail purchase teams and can lead them down a path to high regret. Gartner research shows that 80% of buyers who reported high regret after a technology purchase saw occasional decision makers overrule their team. Only 1% of no-regret buying teams reported such behavior.”
HBR talks about the problem from a technology perspective:
“The inability of internal and external stakeholders to collaborate on a shared data set is a primary reason for the misalignment of operational and financial planning and sourcing. Many organizations use legacy solutions that rely on manual and inefficient processes for planning and sourcing, which can result in siloed information systems that impede growth.”
The larger your purchasing team, the more likely it is to include some functional expertise, but this diversity, if not managed correctly, can produce inferior outcomes.
It’s not only the buying decision that gets more difficult. Selling is harder, too. IDC explains the evolution of the sale:
“Especially under the weight of the current economy, it’s critical today to move away from product and feature selling. This model makes the technology you are selling the focus and the value. That’s not what buyers need today. Buyers are looking for a clear understanding of how your solution will solve their business challenges and provide real value.
“As marketers and sellers started realizing this, it gave way for the consultative selling approach. This model, as it compares to product and feature selling, aimed to provide problem solving as value and this results in larger, more transformative deals. Once the transaction is over, consultative selling isn’t an approach that integrates with the buyer’s business strategy. Enter value selling-focused on on-going value generation, co-created with the customer.”
Not only does the complexity of the procurement lead to potentially sub-optimal selection, it can also take longer to achieve the modicum of consensus deemed necessary to declare the purchase complete.
Inferior outcomes mean higher opportunity costs. Longer time cycles translate to higher transactions costs.
The landscape for procurement technology has lagged the transformation of the B2B buying model. Ideally, the procurement technology suite would include tools for internal collaboration and consensus-building. These could include a dedicated messaging platform for project-specific communication, a set of structured data for internal sharing, and a way to score supplier proposals leading to a cardinal ranking that frames the ultimate decision. Existing solutions do not include this functionality.
Buyers can enhance their current procurement infrastructure with a low-risk addition of a software layer that includes these features, wrapped in a simple user experience. This new layer sits at the top of the procurement technology stack, making it accessible to the breadth of constituents in the 21st century purchasing decision, while preserving the underlying core tool as the system of record. It can be a complementary arrangement.
This is what we have built at EdgeworthBox. We are a simple-to-use tool with messaging that connects users from the buyer organization to the procurement project and structured data, as well as a scoring mechanism that enables each member of the buying committee to evaluate supplier offerings. We aggregate the various evaluations to a weighted average cardinal ranking of the supplier proposals that provides structure to the subsequent qualitative review. This leads to better outcomes and a faster time to deeper stakeholder consensus. If you’re curious, give us a shout.
