Strategy versus Tactics in Services Procurement
How procurement can use data to deliver value through better strategic sourcing decisions.
With Dana Small, Head of Commercial Global Strategy Sourcing, BioMarin Pharmaceutical
00:00:00 - Sourcing: influencing the business on the front-end, preparing for growth
00:07:30 - Procurement's access to data in making strategic decisions
00:14:20 - The business case for better tailspend insight
00:21:00 - Innovation and aligning values with suppliers
00:31:00 - Procurement's impact on hidden headcount and statement of work
00:42:40 - Understanding and realising the value of services and consultancy
00:57:00 - The evolution from 'buyers' to strategic sourcers
01:00:00 - The MarPro Podcast
Episode Highlights
Transcript
Auto-generated. Please excuse any minor errors.
Jonny Dunning: 0:01 Okay. And we’re off. I’d like to give a very warm welcome to Dana Small. How are you Dana?
Dana Small: 0:07 Good. How are you, Jonny?
Jonny Dunning: 0:09 Very good. Thanks very much. We really appreciate you joining me. Super early o’clock in California. And it sounds like we’ve actually got better weather in the UK than you’ve got in California at the moment. Is that really true?
Dana Small: 0:23 Yeah. Past couple of days have definitely been overcast. But it’s much appreciated when it gets to be 100 degrees here in the summer. So I’ll take the little bit of cool off we get.
Jonny Dunning: 0:34 We don’t really have that problem over here. So where you are? You’re kind of about 30 miles away from San Francisco. Is something like that?
Dana Small: 0:44 Yeah, by 20~30 it’s not too far.
Jonny Dunning: 0:47 So there’s some really amazing places near you. Like how long does it take to get to places like your [unclear 0:00:52] at? Like, a couple of hours?
Dana Small: 0:55 Yeah, I haven’t been to you [unclear 0:00:56] that definitely takes a couple of hours. And it’s interesting. You can drive to LA, you could drive to San Diego, but they are a little bit of a haul. It’s about a good eight-hour drive, I think, to San Diego. But there is a ton of stuff. You can hit Tahoe in just a few hours. You can hit, go up north and see Oregon. You can see so many things, really within just a couple of hours or quick flight. So, [unclear 0:01:22] to wherever Vegas is nice quick 45-minute flight.
Jonny Dunning: 1:27 Yeah. I’ve done a little bit of traveling around the area. And I was just stunned how you can be in like a massive city in the morning and then just complete wilderness in the afternoon. Pretty amazing.
Dana Small: 1:37 Yeah, I’d say I’m close to out in the wilderness. And I am only about 25 miles away. So go for...
Jonny Dunning: 1:43 Excellent stuff. So we got some topics that we could look into discuss today around services, procurement, and kind of looking at strategy versus tactics. But before we get into that, would you be able to give a little bit of background on what you do now and what your kind of journey through the industry has been?
Dana Small: 2:00 Yeah, sure. So I’ll start at the beginning. I have actually a biology undergrad. And I worked in a lab for a few years and found out that was not the place for me. Quality control can be very mundane and repetitive. So you’re looking for one of those jobs, you want to follow an SOP every day. That’s the job for you. But it wasn’t for me. And so I ended up going back and getting my MBA, an executive MBA, like full-time while I still was working full time. And at that point, I started networking. And I ended up moving into a finance role into financial planning analysis. And I’ve always been in because of the biology background right in pharmaceuticals. So I started my career at Eli Lilly. I’ve been to Amgen Galia, now at BioMarin. So I’ve got a pretty long enough history in the pharma space. But once I moved from finance, I actually moved out to Amgen from Lilly. And I did it for a couple of years. But I moved over to the sales and marketing team pretty quickly to support them and spent the majority of my time there. And after being an FPNA for a while, you can see how great you can affect things on the back end with accruals and reporting and earnings per share and move pushing and pulling expenses from that side, but I really wanted to learn how to influence from the front end. Like, it’s great that you can kind of report out from finance on the back end, but it’s kind of after everything’s done, and you’re just fixing things. And so I moved into the sourcing organization. I’m still supporting sales and marketing, because I still loved my business partners that I had at Amgen. But interestingly enough, I did some sales and marketing, but I also did consulting with my main category. So that was, I don’t know at the time, I think it was like $67 million worth of [unclear 0:03:58]. It was a chunk of change for management consulting specifically. But from there, I’ve kind of expanded out. I took the move I went over to Gilly ad and really focused on agencies and that kind of focus within commercial. I was there for a couple years and then the opportunity came out at the BioMarin and I have been here now almost five years. So I’ve been doing sourcing. This makes me feel old. But I’ve done at leads about 10 years, pharmaceuticals 20, Finance about 15. So I’ve got a really interesting kind of well-rounded background moving from finance right into strategic sourcing. But right now what I’m doing, I have all commercial and I also have a good portion of professional services, which includes consulting and other service categories. And basically it’s a global role. And we’re a small team. We’re a team of two. But we get things done. And we have to do things in a manner that’s really efficient, really effective and really good for BioMarin. Because we’re growing. We’re a smaller company. But we’re projecting to be 5 billion more in spend, I think, in five years was the goal. We’re expecting to expand. But at the same time, we do have initiatives that say, let’s stay kind of lean and mean and be efficient, and not just go on like a hiring spree and not do anything too crazy. So that we’re doing initiative is called “Fit for growth”. And I think the sourcing function really is there to help aid people and being fit for growth and getting every penny out of that [unclear 0:05:50]. And getting the right agreements in place and making sure we have the right long term partnerships in place, so that when we do kind of grow up and become a little bit of a bigger [or] mid-size biotech, that we have everything in place right for our structure and sourcing and contracts.
Jonny Dunning: 6:11 Really interesting. So I guess looking at your background, funnily enough, I studied biology university as well and fairly quickly decided that that wasn’t really for me. Do you think...? I mean, obviously, being come from a scientific background, I’m assuming you’re just naturally quite analytical.
Dana Small: 6:32 Yeah, I mean, you think about it... I mean, I’m sure, obviously, if you haven’t biology undergrad, you had to do research papers, and there’s very much a method. Not a method to the madness, but it’s very clear and calculated. Like coming up with a hypothesis, looking through the data, doing the analysis afterwards, seeing testing whether or not your theory is correct or incorrect. And so I do think I’ve always been kind of science and numbers focused. So I do think that does help in kind of the sourcing to background to be able to really analyze the data and figure out, “Hey, where do we need the most help or support and looking at external market data, internal market data, the whole picture of the ecosystem of what’s really going on.”
Jonny Dunning: 7:18 I guess, it kind of ties into our overarching topic today of strategic versus tactical, in the sense that you’re talking about your own company, you’re a small team, you’ve got to be super-efficient, you’re going to have to use automation, you’re going to have to use smart technology where you can, because otherwise, you’re just going to spend your whole time being transactional and engaged in tactical activities. Whereas obviously, if you’ve got analytical capability, and that’s massively useful to be able to deliver that to the business. And for me, that’s one of the key areas where the power lies with procurement in an organization. I mean, just the amount of data you have coming up running past you.
Dana Small: 7:58 Yeah, it’s interesting. I don’t think a lot of business partners realize [that] we have access and visibility into everything globally. So when I was in FPNA and I supported commercial, I could see like headcount expenses, I could see everything on the PNL for commercial, for the business units I supported. But when you’re in strategic sourcing, you have access to the entire company, the entire amount of spend. You may not have as much detail around that spend far as like headcount and things of that sort, but it really does allow you to have access to data to be able to make the right strategic decisions. So if you’re taking a look and saying, “Hey, we’re spending 50 million on agencies globally.” But 45 of that’s US, 5 is EU and you start breaking things down, it really helps you to come up with the best long term strategy and long term partnership by having that data. And I think it’s really key to our jobs to be able to be strategic in a sense. Without that, how can you make the right decisions?
Jonny Dunning: 9:03 Yeah, I totally agree. And also, without that, then procurement as a function are undervalued by the rest of the business in the C suite. Because if procurement are just seen as transactional or tactical, then there’s not that willingness to bringing that kind of passage of information through to the C suite so much. Whereas if it is truly strategic, you got some seriously valuable information at your fingertips. And I think the other thing that I always find really interesting about this, from a kind of overall business strategy point of view is, you can see what’s going on inside the business, you can see what’s going on outside the business when you’re analyzing the market looking at supply chains and suppliers, but also you’re getting feedback from suppliers as well, which I think is really interesting, particularly when you’re dealing with professional services and consulting and things like that, where these companies are taking a real kind of confidential inside look at businesses, and their feedback in theory could be extremely useful.
Dana Small: 10:03 Yeah, so it’s interesting. I always see myself as not only to support the business partner internally, but also externally. So having the ability to get feedback from multiple clients globally, I can then consolidate and be that one-point person to say to the consulting firm or whoever it is, “Hey, I’m hearing across the organization, different things, let’s sit down and have a conversation about it. This is the feedback we have so that we can grow the partnership. We can make things work.” But it really as a two-way street. So if we can give that information, but a lot of times, we don’t get it back in return. And sometimes we get it and drove. So it really depends on the supplier and how much they want to share. And then how much sharing we can do in return to be able to really help that relationship kind of grow. But we are, to me, in my opinion, that point person, that is that kind of third party intermediary between the business and the suppliers. And it’s an interesting place to be, because you have to almost go to back for the supplier sometimes. Internally, when you’re like, “Listen, we can’t cut costs anymore. We can’t have them... You know, this is nonprofit.” And same thing with the business partners. At the end of the day, I have to do what’s right for my business and making sure we’re getting quality costs right all at a good level, but it’s really kind of these conflicting things that you really have to balance, and getting feedback from both sides. Sometimes, it feels a lot like counseling sessions when we have quarterly business reviews.
Jonny Dunning: 11:42 And when you look at things like those quarterly business reviews, how reliant is that on the ability to collect data? Because if you’re having a QPR... You know, in a lot of cases, it can sometimes be lip service in some companies, some organizations, because there’s just not enough information. It is like, “We said: we do a QPR. We’ll do it.” Is everyone okay? Yes, we’re okay. It’s a kind of, there’s not that much weight to it. But I guess when you’ve got real data, actually, you can see what’s happening in flight and make some real inferences.
Dana Small: 12:15 Yeah. So when you can get... Whether it’s a technology involved or something as simple as survey, you can get a lot of really good data. The problem is, once again, people hates giving you data or feedback. So if you can get the information, it is extremely valuable. If you can almost force the function and just say, “I have a five-minute questionnaire, just finish this.” And we’ll be able to have a better conversation with the supplier at the end of the day. Because to your point earlier, a lot of times it’s lip service. It’s just fluffy. This is what we did. And this is how great we were and we saved you this money. There’s none of the true kind of meat or data to it saying, “Alright. Great. But we think you guys are lacking in this area.” And you think, we’re lacking in this area, and then we can share that and figure out what’s the next best step so that we can resolve these issues. So maybe we have accounting problems and you need help with that as a supplier, or internally maybe we’re having issues getting things in a timely manner. Either way, having that data, whether they fill out a survey or whatever it is, having the ability to have that information can make a huge difference to just getting things out in the open and getting them resolved pretty quickly. It’s really interesting. You think, “Gosh, it’s so simple. They’re telling me X. And they’re telling me Y. Why aren’t they just doing whatever it needs?” A lot of times, just they don’t want to have that communication breakdown. They want to keep that relationship. And so I think strategic sourcing can play a great role in having that third party intermediary relationship to kind of work things out for both people.
Jonny Dunning: 13:52 Exactly. And just ask you good questions on both sides and actually make data driven inferences and comments based on what’s actually happening. I mean, I think, personally, I believe that in services procurement, because it is much more difficult to measure, there is an inherent problem with people knowing what’s going on, knowing what their spend relates to, and understanding value against that, which is the kind of the ultimate panacea. But when you look at bigger suppliers and bigger projects, obviously, that’s easier. It’s kind of smaller number of big things. But when you look at tail spend, when you look at that long tail of smaller suppliers, which may be where there’s huge value, but it’s also generally where there’s even less data and it’s just far more difficult to manage. That’s a pretty difficult area to get on top of really.
Dana Small: 14:52 Yeah, tail spend is one of those areas that becomes sort of the bane of your existence. It’s like you’re always... You’re on cat and mouse game. You catch up with them, and then all sudden, suppliers are popping up. You’re constantly trying to kind of get ahold of them and rein them in. But I will say, a lot of the times, there is a good business case for the tail spend, where you can say - at least in pharmaceuticals - “Hey, they have a very specific skill set around hematology, oncology.” We really need an agency or we really need a consulting firm that can help us and who has the background and has seen this disease state before. And so we need them just for this one project. And so there’s a business case for that tailspin in some source. A lot of times there isn’t, but you could argue it both ways. Like, there are certain times where it’s manageable, but I don’t think you could ever get, from my perspective, ever kind of really truly get rid of tail spend, just for those reasons, at least within the pharma industry.
Jonny Dunning: 15:57 Yeah, I totally agree. And I think it would be potentially a real negative to actually get rid of tail spend. It’s how businesses bring smaller suppliers in that may grow to be much bigger suppliers. I’m sure, during the pandemic, there are tailspin suppliers that have grown to be hugely strategic partners for lots of organizations, particularly in the pharmaceutical and healthcare industry.
Dana Small: 16:21 Yeah, it’s interesting. You always want to try to consolidate and move in with your biggest suppliers so that you can achieve economies of scale, best negotiation leverage. But there are times where the... The pandemic has kind of thrown a wrench in things and, things have started moving in a different direction, so some of our smaller suppliers are areas, like virtual meetings, where before we kind of did some, but now it’s like, everything’s virtual meetings. And so we’ve had to RFP things. And it’s the categories just exploded. So some of those smaller suppliers who were doing virtual meetings were on the front end of that. It really did take a bigger presence versus some of the more in person meetings. So that whole area has shifted. But I agree that some of the smaller suppliers in areas where I think, maybe we’re just delving into, now have just exploded, and now we’re trying to learn and grow with them, especially with the small, diverse suppliers. It’s very important for us to try to bring those in and make sure we’re fair.
Jonny Dunning: 17:32 Yeah, absolutely. And you know, it’s fair, but it also makes good business sense to work with suppliers that are delivering you value. And some of these small suppliers might be absolutely critical when they’re needed, but they don’t really have much visibility, because it’s just very difficult. If people are running a manual process for salesmen, it’s almost impossible to stay on top of it. I mean, from our point of view, we’re very focused on tail spend around with the automation side of things of what we do around managing services, procurement, free technology. And if you can automate that area, you’re cutting out things like rogue spend, you’re reducing the kind of misclassification risk of kind of body shopping and effectively headcount being hidden within that services supply chain. But I think, it can be easily overlooked if you can actually bring that tail spend into a system and actually get visibility of it. The beauty of that visibility is being able to see what you’ve got access to. Because there’s probably some really, really good suppliers in there. As you say, they may be able to grow, they may be extremely diverse and fit in really well with the ethics and the purpose of your wider organization, which is something that I think is becoming more and more important.
Dana Small: 18:51 Yeah, I think, they say with the millennials and even Gen Z that they really want to work for companies that do good and are sustainable and care about other people and diversity, and [are] really including people. And I think with that generational shift, it’s not just about consolidating and find this biggest supplier, [unclear 0:19:15] do what we can do. It’s, “Hey, let’s find new innovative techniques and ideas.” And one of the ways we can do is by leveraging small diverse suppliers. And I think it’s a good shift to have with a younger workforce coming in, that we can really leverage these smaller businesses who may have something amazing, we just don’t know yet. I love personally to be on the front end of technology. And so I’ve implemented some small solutions like early on, probably five years ago. “To book” was one of them. And now it’s amazing to see what that company has really turned into. It was just so tiny and there’s like three people or four people working there. And now it’s 20 or 30 staff and it’s grown. If you can see, I think the vision was some of the smaller suppliers, you can really use that to your advantage. And I think the great part about that is when you do use these smaller suppliers, you’re able to give your input. So part of that process is they’re like, “Okay. You’re one of our first customers, give us feedback, give us information. What would you do? How would you do it?” I helped them and provided the mark ups. Listen, I would sketch this, this way. And I would do this that way. You really can influence those suppliers and their product and what they’re doing to help support your business to help support that innovation, so it’s tailored to your needs. And I think a lot of people when they think of sourcing, they don’t always think innovation, because it’s always at the top of the pyramid and the last thing to think about. But if you can do that from the bottom up, you have much more of an impact, and you can really shape how they support your business and how they innovate and do great things for other businesses too.
Jonny Dunning: 20:59 Yeah, I think that’s a great point. And it kind of leads on to one of the other points that I wanted to bring up for discussion, which was around problem solving with suppliers. In the sense that effectively, when you’re talking about innovation there, for example, there’s this value, but there’s potentially more to be had than what you’re getting, if you can be open to working with these suppliers, whether it’s a business manager with a requirement that saying, “You know what, you’re the specialist in hematology. Can you help me shape this requirement?” Going out to three or four different suppliers; getting different bids; all who might be approaching it in a different way, but might bring that kind of overall statement of work or work order together in a really meaningful way. But it’s also this concept of innovation, which, if you’re not taking care of these suppliers, and you’re not really building a relationship with them, that’s a lot harder.
Dana Small: 21:50 Yeah, and I also think [that] a lot of the larger companies, because they have the buying power and the leverage, they tend to tell their suppliers what they’re going to do and how they’re going to do it, which I don’t always think is kind of the best method to go about things. I just forgot where I was going with that.
Jonny Dunning: 22:12 It kind of kills the innovation, doesn’t it?
Dana Small: 22:15 That’s exactly. This exactly is my point for it. You’re just telling people what to do and how to do it. So what innovation are you going to have? How are you going to grow? And is that really a partnership? When we say in strategic sourcing, or at least I do say: we want long term partnerships, we want to be strategic in nature, we want to think things through. How can you allow those people to innovate and grow if you’re...? You know, whoever it is spending 2 billion telling them, “Hey, here’s your margin. Here’s this. We’re gonna pay you three months later. We’re gonna do this. You’re gonna do that.” I mean, that really can stifle relationship. How creative and how much of a partnership can you really have when it’s a one-way street effectively?
Jonny Dunning: 22:59 Yeah, you just imagine those QBRs, where it’s like, supply being hammered and hammered and hammered and hammered. And it’s like, “What are your three innovation points? Let’s get creative.” And everybody is like being crushed to the floor. It doesn’t really work.
Dana Small: 23:13 Yeah! No, it doesn’t [work] at all. And then you’re not really motivating people to want to innovate to help support your system. You’re just doing it to get the best margin or leverage. And to me, that’s not a good business decision, if you think about it. Yes, you’re being able to maintain margins, but at what cost. And if the cost is innovation to something that could potentially launch you into a new market or could expedite the production process, then you’re really doing yourself a disservice by crushing these suppliers and not allowing them to innovate, not allowing them to feel like they’re part of the process, and have a say so and what they’re doing.
Jonny Dunning: 23:54 Yeah, I think, just to touch on another thing that you said earlier, just in terms of talking about alignment of values with your supply chain, do you ever see instances where the supply chains actually kind of putting that back on to companies where suppliers are actually saying, “Well, you know what, I know we’re being paid here. But actually, we want to work with clients that echo our values.” Do you think that’s something that we like to see more in the marketplace? Because they’re clearly going to be serving the needs of their own overall business philosophy, and also the people that work for them as well?
Dana Small: 24:31 Yeah, I think a lot of the times, businesses, at least in the pharma industry, who support or who use that vertical, typically have the same mindset and want to help grow and support other people and patients and their lives. So I don’t see it as much from the supply side pushing us. I really see it from us pushing on to them like, “Hey, this is our patient need and our patient population. This is what we have to do.” But again, most of the time, they’re already coming to the table knowing when they’re supporting pharmaceutical. They’re making a drug that could save somebody’s life. And so it’s a little bit different than getting a widget or making, you know, whatever it is an airplane. So I think there’s a different mindset with those suppliers approaching us. Do they push kind of what we have on us? Not really. At least from my side, I see it more of us pushing onto them, like, “We have to!” This is our imperative. This is our business driver. Either get on board or working to keep charging ahead. But I do think it would be interesting to see the supply side, at least in pharma, if they were able to push like, “This is our mantra. This is what we’re doing. Can you support it? And see where that go?” I think it’d be a hard sell in pharma, but I think in other industries, it definitely could work, where it’s like, “Hey, we want to be eco sustainable. We’re happy to do business with your Nike, but we want you to use green products. So we want you to do this.” And it is a partnership. So as much as us as a business, who’s paying the supplier, can say, “Hey, we want to be ecofriendly. Here are our goals. So should our suppliers back to us.” They have goals too. Let’s work together as a partnership, so we both can achieve them. It’s a lot easier if you guys are working together than it is working against each other.
Jonny Dunning: 26:24 Yeah, I guess that echoes with things like diversity and inclusion, in the sense that, within your organization to a certain extent, you can control where the priorities are, and make diversity inclusion a priority. But also understanding where that sits within your supply base and having visibility of that, as you say, within that kind of long tail of smaller suppliers, there may be some really diverse suppliers in there. I always think of diversity with the kind of the fairness aspect of it. And then there’s just the pure value of having different people from different backgrounds and different organizational structures and different experiences, to add to the overall effort of what you’re trying to achieve. But it’s quite hard to actually report on that. Unless you can clearly see your supply chain... I mean, lots of organizations will have criteria around, for example, diversity in their supply chain. And I think, in the US, you’re doing a lot better job of this than in Europe, for example, in terms of like women owned businesses, minority owned businesses, etc. Diverse businesses, I think, they get more attention and more weighting. But I think Europe is trying to catch up with that. But you still got to be able to see them and report on them.
Dana Small: 27:46 Yeah, it’s really driven, I have to say, by the government and then requiring the companies that work with them or sell it to them. Let’s say, “Hey, you need to have a goal for diversity. We’re in a sense forcing you. You have to not only report out to us in a year, but you have to give us your plan for the upcoming year to tell us what you’re going to do to try to write the fairness aspect include diverse suppliers. Maybe it’s an RFP, whatever it is. But also to kind of grow and expand these businesses.” Because to your point, with different backgrounds, different upbringings and different places where you’ve lived, you’re going to have different ideas than the same five guys who went to college who’re on the board of directors. You’re just going to have a different viewpoint from your upbringing, from the life you lived. And I think there’s an inherent value to that that a lot of people don’t see. And I think that’s why the government pushes the reporting and for you to come up with this plan. I think the banking industry also, financial industry also has some government requirements, akin to that, but I think we’re better at it, because we’re forced to be, not necessarily because we’re proactive about it, but we have to be right. And I think, it’s a good thing. I think, it’s stemmed from a long line back in the 60s, when originally the government was trying to make equal opportunity and all those great things for women owned and small businesses and diverse businesses. But I think it’s that push from our own government and the reporting. So make it fair. That pushes us as companies to really have that transparency. And even into secondary suppliers, so say, maybe you’re talking about headcount or FTP support consulting. Maybe for outside FTP, who are we contracting with? Where’s that second tier? And are those people diverse? Because we can report out on that and claim that too, as like, “Hey, these are diverse suppliers that are being hired. They’re second into the supply chain, but it’s second tier.” And we still can use those people in that sense, even though we have maybe a consolidating agency or umbrella company that gets them all together for us to use.
Jonny Dunning: 30:04 Yeah, I mean, ultimately, you’re still getting the benefit of that kind of cognitive diversity. And by virtue of you working with the tier one suppliers, you’re helping them, you’re helping their supply chain, you’re supporting diverse business generally. But I think in terms of, again coming back to the reporting aspects of it, particularly within the tail spend, a lot of stuff can fly under the radar, where somebody, buying manager might have quite tight restrictions on headcount, but they might have quite a big capacity for consulting spend, for example, professional services spend. They might just almost happen kind of directly. I think there are huge potentials for savings to be made in that area in terms of ensuring that you get a competitive process, making sure that procurement can actually put it through a proper process. But then there’s the potential missed opportunity of diverse or highly specialist suppliers that might be sitting within supply chain of some organizations already, where they’re just not able to be aware of them at the moment. And again, it’s kind of fairness in enabling suppliers of all different types, but it’s also giving everyone a kind of a fair go at it by making them visible within the organization, which is again, where I think that automation and visibility comes in.
Dana Small: 31:24 Yeah, I think it’s an interesting area when you think about tail spend and impact and hiding headcount. I think, no matter where I’ve been - you’re right - it just happens. It just so happens that they have the budgets, but they don’t have the headcount. And a lot of organizations almost force people to do it. We were only allowed a certain amount of headcount, but won’t give you $2 million, what do you think they’re going to do if they’re short staffed? I mean, you’re kind of creating the problem in itself. It’s fine and it’s fair that you can have this temporary workforce, but at the same time, then you got to manage them, then you’ve got a sourcing person making sure you’re getting fair rates. And if you are using consultants or management consultants, you’re not paying $1,000 an hour for partner principal and you’re kind of keeping things under wraps, and that you’re able to do so in a strategic manner. So hey, if this is going to be long term, are we doing it effectively and with the right partners to have the headcount at right place?
Jonny Dunning: 32:32 Yeah. And there’s other things that can come into play around that from a regulatory point of view. So the UK, at the moment, the kind of equivalent of 1099 versus W2 into something whether the law has changed in the UK, it’s a regulation called IR35. And basically it’s the difference between someone being employed or self-employed. And so within the contingent workforce, there’s clearly a major problem to be solved there. For companies where they’ve got contractors that have been working for them for like, 10 years, they’ve got a badge, they’re using a company computer. They’re all over the company’s Facebook page with a drink in hand.
Dana Small: 33:11 They have the corner office and take vacation at the same time you do.
Jonny Dunning: 33:15 Exactly. Yeah, they’ve got a team of 50. So that’s clearly a problem. But then when you actually start looking into, for example, the extended supply chain on the services side, that can also be a problem, because where people are getting around headcount restrictions. As you say, sometimes the company policies and the way that it’s structured in terms of spend allowance sign off, it does sometimes push people down that route. Well, then guess what, they’re still gonna potentially just be hiring people or working for staffing agencies, but it’s going to be wrapped up as services delivered maybe under a statement of work or just services procurement. So that’s certainly been a major factor in the UK recently, where companies are having to address that and be clear on that.
Dana Small: 34:19 Sorry, we’re having the first camp day. I think... It’s okay. I texted Amela’s mum. Okay. You want to hug. Look here, I’ll give you a hug come here.
Jonny Dunning: 34:34 [inaudible 34:33]
Dana Small: 34:37 She’s only five and so it’s the first year for summer camp. But I don’t think it was what we all thought. It was gonna be... It’s okay, honey. Just because I don’t think like it was ballet camp. So it was supposed to be dance camp. They’re not doing a lot of dancing. Like, “Why are you making kites? Why are you ...? What is going on.” It’s more of a camp and maybe they’re a little bit too young, so I don’t know. But I think even her friends having issues with it, her mom said. So maybe, it’s just the age or maybe, it’s just the camp.
Jonny Dunning: 35:27 So, yeah, just trying to loop back into where we were with. Yeah, just looking at that kind of... I guess it’s really a co-employment issue. Yes. I mean, it’s not, I mean, California.
Dana Small: 35:41 Yeah, we have it too. We’re only allowed to be I think a contractor for two years. Otherwise it has that co-employment issue. So you really have to be careful about if you bring the contractor on how long you can bring them on, especially if they are filling in like backfilling, maybe it’s maternity leave or somebody left for a role. So they’re just doing it, until you can find somebody and then all of a sudden you love them. You want to turn them into a headcount. But a lot of times, you just can’t because the way the company structured things, and a lot of times, I think, it makes sense because that contingent workforce, you want to be able to kind of hire and fire as your business fluctuates. So if demand surges, you want to upscale; if it goes down, you got to get rid of people quickly. And it’s much easier to do with a contingent workforce than it is with headcount. And so I understand why companies make that decision. But in turn, it always ends up driving them to then spend a lot of their money or a lot of their outside expenses, with staffing firms and other people who sometimes you don’t know what you’re going to get and who end up being in that tail spend. It drives that. So it’s almost like you’re a chicken with your head cut off running around trying to rein it in. It’s because of what you’ve created from the top down and the rules, then how you want to do things.
Jonny Dunning: 37:11 Yeah. And thing is, it’s about using the kind of resource channel effectively. So permanent headcount is an effective resource channel for the right things. But as you say, for scaling up, scaling down, short term projects, short term requirements, contingent workforce can be extremely effective. But also, so can outsourcing the work on an outcome basis. The thing that I find interesting is where you see a lot of frustration in the market, where particularly from procurements point of view, contingent workforce, it’s hard to see the value that’s coming out of it. Because if you’ve just got, as I say, bums on seats, where people are just working on the kind of always they’ll never never, they’re just there, they’re working, they’re putting in. You know, what’s the objective? Where are they? Where are the milestones? What’s gonna actually happen. Now, if it’s done in the right way, of course, it’s the ideal resource for the right type of work. But there’s also a very pragmatic way of getting things done, where you are using a statement of work, where you are putting deliverables in place. But I guess the business has got to be organized enough first for buying managers to be able to really specify what they need to deliver and to tie that into overall objectives, which some companies may be very good at.
Dana Small: 38:27 Yeah, I think the services category, it’s not just some companies, I think, most categories or most companies struggle with services and finding their value, especially when it comes to consultants in terms. And a lot of times, because they need to do things quickly, they will say, “We just need to get somebody.” Like you said a bum in the seat. So let’s do it. So the Statement of Work is literally... Joe Schmo who’s going to be here for the next year, project management support. And that’s all you have. And as a procurement person, you’re like, “Okay. But what are they doing? What are the milestones? What are we going to see? What does good look like with this person? At the end of the one-year contract or two-year contract, what’s good and what’s bad and how do we detect it?” It’s almost like you’re having to do HR as a company to these other people to make sure that you’re getting the value out of them. But if you don’t set it up in the beginning, you’re never going to see that. And for procurement, you’re really going to struggle with it, because I think, it’s just one of those areas that it’s really hard to kind of get under grasp, and that everybody has a little bit of a different opinion on, and it can tend to be emotional. Because it’s people, you’re buying, in a sense, selling people’s time. And people and who they are and so people get very attached to their teams or people get very attached to contractors. And company’s being able to do that clear and effectively, I think, most of them struggle with. I don’t know that anybody’s got the greatest handle on it. I’m sure there’s some better than others, but I definitely think it’s an area most companies struggle with. But if at least if you have a big enough sourcing team to help, you can at least try to get that statement of work from, “Hey, it’s Joe. He’s going to be here for six months. Hey, Joe has to produce whatever milestones. We expect him to have three projects finished by end of Q3.” And things of that sort that are a little bit more tactical and granular in nature, but at least you can track and manage and understand what that person resource is doing. And are they clearly effective or not? And do we need to continue with having them in that role?
Jonny Dunning: 40:49 Yeah, and particularly when you get into the kind of co-employment side of it, it’s about a supplier delivering a service. And certainly with regards to the UK legislation, there has to be right of substitution, where it doesn’t matter whether it’s Johnny or Susie or Dave doing the work, the work has to be done. And it’s been specified and it’s been laid out. So if companies can get that first bit right and they can capture the information... If you can capture on a granular level, which is, for us, it’s our mission in life to basically capture the value of services procurement. And the kind of top level procurement systems are very, very good at what they do, but they’re not really designed to capture that granular level where you’re dealing with milestones. And actually, when you go into the delivery phase and you’re saying, “What’s actually being done?” But all of the data, the procurement can have around services. If you capturing that granular information, you know what, even at a simple level, you know what was agreed to be done. Was it done on time to budget? How much scope creep was there? And then you’ve got the qualitative aspects? Did they deliver satisfaction to the business stakeholder? How was their communication? Did they meet our sustainability supplier standards or whatever it might be? If you can capture that information, then suddenly, you’ve got data that does pertain to value. And it does pertain to comparative analysis between suppliers in a service as well. Whereas otherwise, it’s very difficult because around goods and materials, it’s quite easy to say, “These 200 red widgets, I’ve got a catalog here, I’ve got different vendors, they’ve got...” It might be even Amazon, for example. It’s pretty easy to compare. You can compare price. But one of the things that I’d be interested to get your take on is, when you look at the consulting and professional services world, a lot of people are just working from right cards. But that’s not really the whole picture, is it? Because your right card could be cheaper for consultancy A versus consultancy B, but they take three times as long and they do a bad job. It is quite complex.
Dana Small: 43:00 Yeah. And into your point about data, the devil is always in the details. A lot of times, the suppliers don’t want to provide that level of data to you or that level of detail or partner with you. Because that’s how they make their margins. So you find, especially when it comes to consulting or anytime you have people who are highly paid, that a lot of times you could get a million-dollar scope of work. And it’ll be like, “Oh, consulting for x project.” And you’re like, “But it’s a million dollars. What are you guys doing?” And then not providing that level of granularity in that level of data, it hampers you as sourcing, because then how do you go back and negotiate and say, “No, this isn’t right. We can do it by trying to implement a timecard.” But to your point, it’s like a balloon. You squeeze it, “Hey, guess what, rates just dropped in half.” Well, guess what, now my hours just tripled. So they’re going to make up for it someplace. And I think that I’m not wanting to provide that level of detail. I think, its inherent, just maybe in that industry for consulting, that they know that’s where the power is. The power is in with the data. And if you have the data, if you have the information, if you have the market research, it’s easier for you to go and approach them and negotiate with them effectively. If you don’t have that information, if you don’t know what resources they have on that million-dollar project, how could you ever go back and say, “I think it should be half a million.” How can you say the staffing plan is too heavily weighted towards partner hours or towards the analyst hours? You can’t! And so sourcing really benefits from having that level of clarity and data. And I think suppliers who are smart enough - and consultants always are - know that’s the game. The game is whoever has the data, whoever has information has the knowledge and is able to really even out that relationship and without that data, you have no buying power. You really don’t have a foot to stand on when it comes to sitting at the negotiating table. So, I think for a sourcing perspective, data is so important for that reason. And that’s why upfront getting that information is necessary and making sure the business understands why like, “Yes, I understand we need to do this quickly. But this is going to help us in the long run. Having this information and this data is going to help us understand.” Maybe consulting firm A is cheaper via their rate card, but they’re constantly every, scope of work, scope creep. Everyone ends up doubling in size. They’re under scoping things. So, it may look great from the get go and procurement be like, “Yes, we did a great job negotiating.” But at the end of the day, if every single scope ends up doubling or has scope creep, then you’re really doing yourself a disservice. Because then, you’re having a harder time managing on end versus on the front end and getting that information.
Jonny Dunning: 45:57 Yeah, exactly. And if it’s a million-dollar project, it could turn out to be a $2 million project. But if you capturing even the basics of strategy review, there’s going to be a report delivered, and it’s to make X happen or to work towards X within our strategy. Even if that information is really captured effectively, then it can be measured against. It just has to be quantified in some way that allows you to see, “Is the project on track? Is it off track?” Is it going over scope, maybe that’s actually the company’s fault, or may not actually nobody’s fault. For example, the way we work with customers to capture things like change requests, that makes a huge difference. Because a lot of the time a project will be... A statement work will be created. Generally, companies are pretty good at having some sort of contracts in place. It might not be standardized. And in the tail spend, it starts getting a bit tenuous. But then what happens to that? It’s a statement of work, that gets stuck in a shared drive somewhere. And it may or may not have milestones associated with it, which may or may not have changed during the duration of the project. There may or may not have been measured against, but when it comes to it, procurement or just left to have to go back and actually retrospectively dig out the contract, read through it, which takes a huge amount of time trying to unpick all this information. Whereas if you can capture that systematically, and you can approve it systematically, even if it’s basic, you’re getting an idea of, “What was originally agreed? Did it get done? Did they could do a good job?” If it needs to be more, great! I think that hopefully suppliers will start to embrace that, because I totally know what you’re talking about with regards to this kind of veil of secrecy that some particularly consulting suppliers enjoy in the market at the moment. But I feel like COVID has changed that. I feel like COVID has put businesses in a position where they’re like “Joe, what being the budget is not good enough anymore.” We need to know what we’re getting for this money. But also it plays into the kind of cost versus value conversation, because if a chief financial officer is coming to you and saying, “You’ve got to slash Ben by 10% next year, because we’re cutting costs.” That might be the right thing to do. But if you can show the value of what you’re buying, for example, in services procurement, then that CFO might be saying, “This is driving a 5x return on the bottom line. We should be spending more.” I think COVID possibly has really changed some of the attitudes to that. Do you see that being something that could change?
Dana Small: 48:29 I definitely think procurements been around a while, sourcing has been around a while, and COVID is definitely expedited a lot of things that maybe were kind of in the background that we’re gonna playing with. We had to do. It was a forced function COVID became this huge force function of, but I think, in that time in 10 years, services... When you’re trying to figure out what is the value, that’s the hardest part of the job. We’re a [unclear 0:49:00]. You know what it is. You know what you’re buying. You can test quality. You can test these things. They can be within certain limits. But understanding the quality that you’re getting for your people... You’re right. If you need to... Maybe you do need... You’re going to 5x return. Maybe you do need to increase spending here and not cut 10%. But finding and being able to report out that data to say it’s giving us X is always the struggle. That struggle with services is it’s so hard to come up with, data or whatever it is to explain, this is why this is so important. And this is why we should. It is okay we went from a million-dollar scope to 4 million because we’ve asked them to do X, Y and Z. But unfortunately as procurement, we have to let your way go back to the contract. Go back. Why is this going from 1 million to 4 million? Like what went wrong here? And a lot of times, it is the business partner saying, “Oh yeah, can you also do this?” Okay. Well, there’s another change or “Oh, yeah, this is great. But okay, here’s another thing.” [I have] seeing things go from 1 million to 4 million in a year. And you’re like, “What happened here?” And it just explodes. And there’s no control over it too. So I think COVID, though, has forced the function of like, “What’s valuable? And how much are we getting out of it?” Because if you think about office space, it’s like, “How valuable is office space now?” And I think a lot of companies are taking a look at, “Okay. We don’t have to be fully remote, but we can be partially remote and get rid of a lot of our costs.” So just certain things like that, I think, it’s definitely made a huge turn on, “Do we really need this? And what is the value we’re getting out of it?” It really can drive that type of thought process. And that: “Hey, do we really need it? We haven’t needed it for year? Do we need it now? And if we do, what is the value and how do you track and measure to make sure you’re getting the value that you need out of that contract, out of that person or service that you’re hiring?”
Jonny Dunning: 51:08 Yeah, I agree. I think you’re absolutely right when you talk about measuring value being the hardest thing. And it’s the holy grail really, when it comes to services for human and understanding what’s your return on investment. And I think there’s certain things that are absolutely doable now and that is being able to comparatively assess suppliers. Because if you do capture information on every project within technology, for example, you’ll allow that automation to do the kind of bits that should be automated not take away from what procurement can do. So move the responsibilities of procurement people from transacting to more strategic, more analytical. Then you can look at on a project by project basis: “Did what was asked to be done, get done? Was it done on time, on budget, scope creep? What were the quality vectors against that?” If you can see that, then you can make a judgment of how well a supplier is delivering. And you can look at your supply chain, maybe across categories or in comparative analysis before you procure something in a particular area. That’s really, really powerful. I think when it comes down to the responsibility of the individual business and when it comes to these consulting projects, what did they do to the bottom line? That is really difficult to measure. But the more that companies can get towards that, the more effective they’re going to be. Because it’s forcing business stakeholders, and it’s forcing it right up the chain for people to say, “What’s the strategy? Where are we going? What are we looking to do? How does that break down? And what are the component parts on a granular level, that component things that need to be done to get us to that objective? And what does that mean from a financial perspective?” And when you’re doing really top level business planning, I’m sure you’ve come up with, where you’re planning out far into the future, and you’re like, “This is getting pretty tenuous here with proxies and finger in the air and all that stuff.” But when you spend time with the good management consultancies, and you see how they do stuff like that, there is always value in it. There is always value in that kind of forward planning. And you have to use experience and inferences and the data that you have to try and extrapolate. So it’s never going to be an exact science, because you’re trying to kind of predict the future to a certain extent. If a piece of strategy comes off, what’s that going to mean in terms of how that affects the market, etc. But I think the more companies are actually looking to actively address that. The greater opportunity there is there to realize the value and then focusing on those areas that are really delivering it.
Dana Small: 53:40 Yeah, I think it’s interesting. When you think what do consultants do at the end of the day, you could say their output, sometimes for $4 million, I get a PowerPoint slide deck. You could say that is the value they’re providing. That said, which in the deck is what you want to measure? Did we implement those things? Did we do those things? Did we actually listen? Or did we pay for a million dollars to get lip service for me consultant to tell us what we already know and put it on paper? Because a lot of the times, that’s what I’ve seen. And if they can’t help you implement, I think, sometimes that stuff, but at the end of the day, just saying, “Hey, I got this PowerPoint deck.” That’s not enough, I think to really be able to measure and capture the value of what they’re doing and what they can bring with a lot of their expertise. But I think your point is valid. It is that if we can standardize and track and trace to some point of what they were supposed to be doing versus what ended up happening, that there is some value you can provide like, “Hey, the consultant is doing more than just a PowerPoint deck.” You can go about and have a good kind of supplier relationship management piece where you can see the value that they’re providing. It’s tough, especially, in the services category, because truly, sometimes it is just a PowerPoint deck. But I think if you are able to utilize the technology to be able to manage it effectively, then you can somewhat get your arms around it and least make sure you’re getting the value for what you need from your management consultants.
Jonny Dunning: 55:21 Yeah, I mean, even just what they said they deliver. And my theory is that it’s got to be good for them as well. Because it must be hugely frustrating for consulting firms who get brought in to put together a really good better strategy work, which the output of that could be, on the face of it, a PowerPoint slide deck, but behind the scenes has been hours of workshops, teams being brought in, sitting on steering committees and all this sort of stuff. But it must be hugely frustrating when the business doesn’t execute on that. And they don’t implement it. And like you say, sometimes they’ll deliver it and they’re off; sometimes they’ll try and help implement, but there’s certain things that people delivering that consultancy advice can control, and there’s certain things that they can’t. And the responsibility is split. And so that’s where businesses have to do the hard yards around understanding value in. So rather than just saying, we spent 2 million with Deloitte, for example, it will be a question of we spent 2 million with Deloitte to deliver a strategic report around entry into X market. And then the business can say, “Okay. Well, that was what they were doing. Did we go into that market?” They recommended that we did. Did we do it? Actually, we did. And you know, what that’s delivered massive value. So I think it’s just the more information, the better. And I appreciate with these kind of hard to pin down type, the hard to put into quantitative metrics, but you can still capture data. And if you capture data, then analytical people, such as yourself, can really use that. And I think that’s the future of procurement, from my point of view, I believe. And that real strategic value rather than just tactical value.
Dana Small: 57:05 Yeah. And I think it’s part of the evolution from procurement to strategic sourcing. In the past, we were just buyers, and we were very executional to this new thought that we should really be strategic, and we should really be the liaison and be partners, and what value can we provide. But I do find it very hard to say on the back end, most of us are so busy with the front end, and the sourcing and the coming up with strategy, the tracking and measuring at the end sometimes gets lost. And there’s this great graph that shows, this is what happens to your contract if you measure it, this is how much it actually gets here too, and this is how much value you lose if you don’t track and measure. You know, what happens after it gets put in place, because most of the time, people just kind of move on to the next thing. And we’re constantly, “Hey, new RFP, new this. If we’re not focused on making sure what we did got implemented like a consultant, then where is the value, how do we know what we got out of it. And I think there’s so many times where people implement great things, great intentions with the contract, and then at the end, they don’t come to fruition and you just don’t see the value out of them because either they didn’t implement them the right way, or they didn’t implement that at all, or to your point like, “Hey, did we go into this market?” Well, no, because X, Y, and Z. At least you’re able to make an informed decision. So, maybe, it was good ROI on the project overall. But us being able to not just be buyers to think strategically, you really do need as much information you can get, because analytically minded people can take that and cut it and slice it and dice at five different ways to say, “Okay, if you look at from this perspective, we could figure out something here. And if you look at it slice the other way from an industry’s perspective, you can do it here.” You can do a lot more with just buying something and just the transactional procurement, then you could without that data.
Jonny Dunning: 59:15 Yeah, I totally agree. And it kind of comes back to what you said at the beginning around. It’s important what happens at the beginning. Its important about understanding what’s agreed. Because only when you understand what’s been agreed, and it’s clearly visible, and procurement are allowed to have input on that and be aware of that, then assessment can be made at the end of it. So you can’t try and do that right at the end of a project. And I think that’s unfortunately the uncomfortable position that procurement get put in. And a lot of the time, when it’s just a question of, we’re thinking about engaging supplier X. Have they done a good job in the last 12 months? Procurement then go around and our stakeholders, if they’ve forgotten about it, they’ve moved on. It’s not really documented. They’ve got to try and think back. So I think that’s gonna change. I think it’s got to change. And I think the technology will play a big part in that because it has to, because you just got to make things efficient. Otherwise, trying to do it manually, it’s just not going to happen, which is incredibly... Where a lot of organizations, where most organizations, like you said, very few organizations have got services procurement under control in terms of understanding what they’re getting for their money. So I think it’s a huge area of opportunities. So I think it’s exciting times ahead on that side of things. But listen, it’s been really, really interesting chatting to you. [We] covered some great points there. I love some of your examples. And one last thing I wanted to kind of mention before we wrap things up is, you’ve just started a podcast yourself, I believe.
Dana Small: 1:00:44 I have. Yeah. It’s called MarPro, marketing procurement podcast. And I was actually approached by rusty popper, who is my co-host on it. And he’s got the Why marketing podcasts. And he said, “This is really... Is there anybody in the space? Is there anybody or anything...?” And I was like, “I blog, but that’s about it.” So yeah, it’s interesting, because it’s a very small niche. In the market, there are not a lot of people that obviously are the target audience. I think. I try to expand it for all procurement people. But yeah, the podcast, it’s been interesting being on the other side, so to speak, being the one, getting to ask the questions and do those things. But it’s been fun. I think you can learn a lot and grow a lot by pushing yourself to do things. Like stepping out of my comfort zone to do more interviews and to do this podcast with somebody. And yeah, it’s been very entertaining to try to get it together with a marketer. And all the times we’ve clashed over, I think it took us a month to come up with us both agreeing on the logo and agreeing on the name. I mean, that alone was a couple of months in the process. But yeah, it’s been interesting. We’ve had some great people on there. And I think there’s a lot to learn from either marketing procurement, which is basically, to me, most of the time services procurement, because you have advertising agencies, media, things of that sort. So I think a lot of the things that you do in advertising can be the same thing you do with consultants, professional services, because at the end of the day, you’re buying people’s time. At the end of the day, you can break down an hourly rate into salary, overhead and profit. I mean, things are black and white when it comes to that. And that’s, I think, kind of what I love about it.
Jonny Dunning: 1:02:36 Yeah, I think it’s really cool. I actually think the fact that it’s really niche is great. Because you can really go to some depth. I like to say when it’s a procurement professional and a marketing professional, you’re gonna have totally different outlooks and it’s gonna make for really interesting conversations. And so I’ll definitely be keeping an eye on that. But best of luck with it all. I think it’s really great and cool to see what you guys are doing.
Dana Small: 1:02:59 Yeah, we’re trying to bridge the gap between the two versus going to fisticuffs because marketing procurement have a very tenuous past relationships.
Jonny Dunning: 1:03:09 I do remember seeing the bridge the gap, Mind the Gap on some of the classroom. But listen, thank you so much for joining me. I really enjoyed our conversation. I really appreciate you taking the time, particularly early in the morning. And yeah, I want to wish you all the best with everything, the podcast included, and hopefully we can catch up again soon.
Dana Small: 1:03:31 Yeah, definitely. Thanks for having me on. I really appreciate it. And thanks for dealing with my little one. Even though that we tried to go super early so they wouldn’t get up. And of course, one of them wakes up and always it never fails.
Jonny Dunning: 1:03:47 No problem. Mine arrived back from school partway through our podcast, but luckily, my headphones managed to cancel out. So it’s always a risk. But you know what, it’s just the way it is these days, isn’t it?
Dana Small: 1:04:01 People who have gotten used to it. I think unfortunately, I’ve still not gotten used to it. Because for me, it’s like, “Oh no, my kids coming in the background.” But a lot of times people, I think, have been more acceptable to like, “Oh, you’ve got a kid. Let’s see your kid.” It humanizes business in a sense. When sometimes being in office, you’re not gonna be like, “Hey, here’s my three-year-old.”
Jonny Dunning: 1:04:25 I think you just got to go with it. One of the best ones for me was a video call where in the background, it was really loud snoring, and I’m almost positive [that] it was dog snoring.
Dana Small: 1:04:37 That’s awesome.
Jonny Dunning: 1:04:38 But I didn’t say anything.
Dana Small: 1:04:41 That’s awesome. I love it.
Jonny Dunning: 1:04:43 Excellent. Well, thank you so much, Dana. I really appreciate your time. Great to chat to you. And yeah, hopefully catch up with you again soon.
Dana Small: 1:04:49 Great. Thanks, Jonny.