The evolution of services – performance vs. outcomes

Drawing on first hand experiences of starting and scaling successful service procurement programs from within the strategic sourcing function.

With Lawrence Kane, SIG Sourcing Supernova Hall of Fame Member, Head of Procurement and ProcureCon EPIC Award Winner

00:11:37- The history of disruption within outsourcing

00:20:04 - The growth in outsourcing

00:27:38 - Is Industry progressing with time-based vs outcome-based contracting?

00:33:27 - Focusing on your strengths

00:41:01 - Impact sourcing for innovation

00:50:38 - The evolution of the procurement function

00:58:32 - Procurement maturity

01:03:50 - Cost savings or adding value

Episode Highlights

Transcript

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00;00;00;24 - 00;00;10;05

Jonny Dunning

okay, cool. So first podcast recording of 2025. And it gives me great pleasure to welcome Lawrence Kane to the podcast. Welcome, Lawrence. How are you?

00;00;10;08 - 00;00;12;09

Lawrence Kane

I'm doing great. Thanks for having me.

00;00;12;12 - 00;00;40;14

Jonny Dunning

Pleasure. So you are the head of procurement at a leading diversified financial services company, and you also have the, the, you have some impressive accolades alongside that, including SIG sourcing Supernova Hall of Fame member, which I'm glad I managed to say that alright in one go without my, false teeth falling out. You're the bestselling author of 30 books, and you're also a ProcureCon epic award winner.

00;00;40;16 - 00;01;01;18

Jonny Dunning

So some pretty cool stuff that you've been going on there. But basically, all things aside, you are procurement expert, and that's, we're here to talk about procurement, specifically services procurement. Yeah. So yeah, thanks very much for joining me. The the topic is going to delve into today that really wanted to kind of draw on your expertise and experience on basically all around services procurement.

00;01;01;18 - 00;01;25;29

Jonny Dunning

And that is the broader the broader definition of services. And actually looking at the evolution of services, which I know you've got some really interesting insights on, and then also looking at the kind of performance versus outcomes and that side of those services engagements. So some great stuff to delve into. But before we do as I said, you've got some releasing accolades.

00;01;26;01 - 00;01;46;22

Jonny Dunning

You've worked in some really interesting areas. Would you just be able to just give a little bit of background on what you've done in the industry and also within within organizations, but also the stuff you've done externally with regards to, authoring these books and, what's led you to getting these awards and, and getting to this point in time?

00;01;46;24 - 00;02;07;21

Lawrence Kane

Sure. Sort of the short version is, we all kind of have something that we're good at, and most people, it takes them a long time to figure it out. So in my case, I've never had the kind of unique brain chemistry. I'm one of those people who could see the big picture and the details simultaneously. And that's about 3 to 5% of the population.

00;02;07;21 - 00;02;48;15

Lawrence Kane

And depending on which study you read, it's actually about, 18.5, almost 19% of people to go into procurement. So, I, you know, I kind of like to, to joke, say that, you know, I was preordained to become a procurement person. But I didn't know it. So I did a lot of I started in aerospace defense, and I did a lot of, procurement adjacent things, like auditing, an overhead claim for compliance with FAR law, which is federal acquisition regulations in United States, UK as something similar, and then going on and doing some new airplane development programs where I was involved, more from a support perspective

00;02;48;18 - 00;03;15;16

Lawrence Kane

and negotiating big deal things like engines, which is a third of the cost of an airframe roughly in just trying to sell. And, and from there I ended up, the company that I worked for did a giant merger and the, new company, about half of it was fully insourced. Half of it was fully outsourced when it came to it, all of it infrastructure and all of the applications.

00;03;15;19 - 00;03;38;22

Lawrence Kane

And so they brought me in to do this benchmark of this gigantic contract we'd inherited with the merger. And, I saved several hundred million dollars in the process, but also discovered the need for sourcing strategy. And they're like, oh, great, you're right. We need one. Go make it like, oh, okay. So I, I did. In fact, there's a book called Multi Sourcing by Linda Cohn from Gartner.

00;03;38;24 - 00;04;00;17

Lawrence Kane

And that was were the unnamed case study in there. So that was the first successful multi sourcing effort in a fortune 50 size company. Maybe in the fortune 500. It's one of those if you're a Star Wars fan, there's a famous Han Solo quote. Never tell me the odds. I never asked the question of has anybody ever done this before?

00;04;00;19 - 00;04;22;22

Lawrence Kane

If I had have, we probably wouldn't have been success fall. But because I never asked, like, oh, well, that sounds like a great idea. Managed to do it and again, save hundreds of millions of dollars. And in aerospace and defense. Just for reference, typically the highest profit margin you ever get a single digits, right? So every penny you save is a penny of profit.

00;04;22;22 - 00;04;42;28

Lawrence Kane

So it's a big deal. So did this, giant, deal that, you know, created the sourcing strategy, implemented sourcing strategy, got everything running there like, well, you know, we would never allow a supplier to come in with a sales team and negotiate a deal and throw it to the wall to an account team to run it.

00;04;43;05 - 00;05;19;15

Lawrence Kane

But we just did that to ourselves. Maybe we should have an organization that, like, runs this stuff. And so I was promoted at three levels of management to create what was eventually became the global sourcing and vendor management function at the company, and did a bunch of, you know, best practice stuff, you know, spoke at Gartner conferences and Forrester and SIG AOP, ICM, whatever ProcureCon and just, you know, had good experiences and and like to learn from other people and share what I had and people like, oh, this is kind of a thought leader.

00;05;19;15 - 00;05;39;24

Lawrence Kane

And I ended up doing like, you know, keynotes in front of 5000 people kind of stuff. And, eventually that led to the awards, like a ProcureCon Epic award, which is a lifetime achievement award for, for, indirect procurement. The, the SIG Hall of Fame. There's, IOP has something called the OPBOK which is the outsourcing professional body of knowledge.

00;05;39;24 - 00;06;02;05

Lawrence Kane

It's what they do their certification against. And I wrote three the ten chapters. I should probably say rewrote because, you know, it was a and I didn't do the original one, but I did the most recent one they have out, help to, several, programs. There's SIG as a certification, certified sourcing professional, and several others.

00;06;02;05 - 00;06;25;21

Lawrence Kane

I helped write, do this courses and, work as faculty from time to time. Fact. That's where this little pin comes from. The. Yeah. But anyway, a long history of learning cool stuff, sharing cool stuff, getting rewarded for cool stuff, mentoring and developing, you know, talent in the industry. And so kind of that's where that came from.

00;06;25;23 - 00;06;55;02

Lawrence Kane

I'm also the, the coauthor of The Contract Professional Playbook with Jeanette Nyden, who's a world class, contracts attorney. I've done, you know, all kinds of, you know, like a, third party risk management program. This goes through, the third party risk institute, things like that. So, you know, just a lot of stuff where I take this ability to see the the big picture and the details solve problems that other people can't, because they can't even see what the issue is.

00;06;55;02 - 00;07;06;27

Lawrence Kane

Right. And, and then teach other people what I discovered. So that's kind of the you know, what, you know, it's it's like 37 years of background in a minute or two.

00;07;07;04 - 00;07;24;27

Jonny Dunning

Condensed. Yeah. No, that's a great background. And it was actually Jeanette who introduced us originally. And yeah, obviously, I know she, she really enjoyed that process of working on, working on that. Was it more than one book? She said she really enjoyed that whole process of coauthoring with you.

00;07;25;00 - 00;07;49;10

Lawrence Kane

Yeah, we did one book together and, three courses. So there, like, you know. Yeah, e-learning program kind of things. And I think at some point we'll probably do another book, but, you know, we're both too busy right now, by the way, in the intro, you said I'm offer 30 books. I'm actually the author of 31, 30 of which are published the next one's coming out, the beginning of next month, I think.

00;07;49;13 - 00;07;56;22

Jonny Dunning

Brilliant. And what's the best way for people in the procurement function and in the industry to find out about it?

00;07;56;25 - 00;08;14;02

Lawrence Kane

Well, most of what I've written is actually not related to sourcing and procurement. Although I do have, you know, co-wrote with Jeanette. I do have a leadership book I wrote. And so I've done some, work, relevant things, also some fiction. And most of it is nothing to do with what I do for the job.

00;08;14;05 - 00;08;35;20

Lawrence Kane

But, if anybody wants to find the stuff I wrote. I am Lawrence Kane, the author, not Lawrence Kane, the Zodiac killer suspect. And so if you go, same name, different middle initial. So if you go on Amazon, because, like, you know, that's the source of everything in the world. It's Lawrence A Kane.

00;08;35;20 - 00;08;44;15

Lawrence Kane

And just Google that or whatever you call Amazon's version of googling something. And look at my author page and you can find everything from there. That's the easiest way to find.

00;08;44;15 - 00;08;58;27

Jonny Dunning

Any, cool, excellent stuff. So, lots of lots of different things you're involved with, with the authoring, with the kind of like fiction and stuff like that. Is any of that does any of it have kind of historical elements to it?

00;08;59;00 - 00;09;20;26

Lawrence Kane

Yeah. Some of it I mean, I am so for example, the the main fiction book that I wrote, and I co-write almost everything because I find that, I am, I'm better as a part of a team that I am individual each. And when it comes to creative endeavors. Right. So I do lots of stuff with teams.

00;09;20;29 - 00;09;43;23

Lawrence Kane

So the, like the, the fiction one, was actually like, featured in Times Square and a big billboard, one bunch of awards up. It's called Uma champions seven dojo. And it's I think about like Karate Kid or Cobra Kai, that sort of thing a little more realistic. So that particular one, it's all it's martial arts related.

00;09;43;25 - 00;10;04;12

Lawrence Kane

Obviously from, from the title, but, but it's a, the kind of neat thing about that story is, is everybody in there is based on a real person, which and all the locations and everything are accurate, which gives it kind of this error of, of credibility that you don't have in a lot of fiction.

00;10;04;14 - 00;10;22;04

Lawrence Kane

Nobody there is an actual like they're amalgamations of people and nobody's, you know, directly a person, but they're, but like the incidents, like, there's a, you know, it's an example. It's a fight that happens in a, in a convenience store. That's a real fight. You know, different people.

00;10;22;07 - 00;10;23;10

Jonny Dunning

Think that.

00;10;23;13 - 00;10;45;22

Lawrence Kane

That actual thing actually happened. And so, you know, so there's a lot of stuff like that where we tried to take that kind of, error of realism and apply it in a fiction sense. That makes it a fun story, but not make it too extreme. Like, you know, there's things that that a lot of fiction you do that, or read that it just takes it too far.

00;10;45;22 - 00;11;01;06

Lawrence Kane

And you, you, there's this kind of, you get caught in the story and it kind of flows like watching a movie. Unless something happens, it pulls you out of the story, and we try to be really careful to not do anything pulls you out of the story. Which is why, you know, when a whole bunch of awards and whatnot.

00;11;01;08 - 00;11;32;15

Jonny Dunning

Yeah, yeah. Great. And I imagine with anything like that, with any kind of writing endeavor, there's quite a lot of research involved. Now, the reason I ask about the historical side of it was the point I wanted to come on to you first was just sourcing in general on the kind of the origin of that and the backstory in the history because, well, and we I know we've spoken about this briefly before, but I just wanted to go into that in more detail, I think be very interesting for, for for those in the audience who, were interested in that sort of thing, I do think it's, it's a story that doesn't get told

00;11;32;15 - 00;11;37;18

Jonny Dunning

very often or it doesn't get told by very many people. But I think the reason so.

00;11;37;21 - 00;11;58;07

Lawrence Kane

So if you, if, if you talk about, outsourcing, right, every company does it. And there's a lot of ways you do it, right. It could be contract labor, it could be buying parts, it could be buying services, whatever. So think about it. Is a is a long term relationship with a specialized third party services provider.

00;11;58;09 - 00;12;21;26

Lawrence Kane

And it's a performance based kind of relationship. Right. So maybe your your got a service desk that you're using or maybe you've got software that you're buying or whatever it is. Right. You've got some kind of long term relationship with a provider that is doing something for you. It's not like a software skew. Maybe it's like application development and maintenance service, that kind of thing.

00;12;22;03 - 00;12;46;06

Lawrence Kane

Right? So that's typically what you would consider outsourcing. And a lot of people thought about outsourcing is this thing that came up in like, you know, the 80s or 90s, and it was all about offshoring jobs to India, to do labor arbitrage or whatever. Offshoring is a location, right? It's not a service delivery model. Yeah. But that aside, outsourcing is not new.

00;12;46;07 - 00;13;10;01

Lawrence Kane

We've been doing it for literally hundreds of years. And the first actual services agreement that meets the definition of outsourcing from an industry standard that was, that was done that I'm aware of was in 1860. So not 1980, 1860.

00;13;10;03 - 00;13;11;10

Jonny Dunning

Wow.

00;13;11;13 - 00;13;40;20

Lawrence Kane

And what that was is Pony Express. Right. So the government outsourced the delivery of mail and payroll and other services like that, to Pony Express. Now, it's interesting because, you know, today we have, disruptive technologies that impact sourcing. So for example, you know, used to do traditional telephony and then, you know, VoIP came along and you would you could, you know, run your phone over your network.

00;13;40;20 - 00;14;02;13

Lawrence Kane

Right? That was very disruptive. And in fact, my, my previous company that I worked at at one time was the six largest telco in the United States. It was a massive competitive advantage. They saved millions of dollars every year, making these long distance calls to the operating 48 states in 112 countries, it made sense to to have the big five, which is like, you know, AT&T, right?

00;14;02;16 - 00;14;25;27

Lawrence Kane

Well, then, you know, the, in source that then that technology matured, they outsourced it. Then VoIP came along. This is disruption. They in sourced it. That technology matured. They outsourced it. Right. Well that's a modern thing. But if you go back to 1860, what do you think killed Pony Express?

00;14;25;29 - 00;14;29;02

Jonny Dunning

In sourcing?

00;14;29;04 - 00;14;31;10

Lawrence Kane

Well, no, it's disruptive technology. Right.

00;14;31;10 - 00;14;36;23

Jonny Dunning

So through technology you did that. They telegraph. They did that. They did sourcing. You know.

00;14;36;24 - 00;15;04;10

Lawrence Kane

It wasn't really in sourcing because, it was it was more so that that company fell apart because of the telegraph service. So you didn't have to deliver mail. You could, you know, do Morse code right over it, over telegraph. So the it wasn't really an end source to outsource thing. It was more of a need to not need.

00;15;04;11 - 00;15;25;11

Lawrence Kane

Right. So now there was a a different set of, contracts and or, service delivery mechanisms for the Telegraph. But you didn't have, you know, the iconic thing of the Old West is the Pony Express rider. Right? And yet that was only that. Only existed for a couple of years.

00;15;25;14 - 00;15;30;12

Jonny Dunning

So what was the organizational structure behind the telegraph system was that.

00;15;30;13 - 00;15;55;17

Lawrence Kane

Well, it was it was a weird distributed thing. Right. So basically you think about like the, the, the post office effectively was, so they had people that were either hired by the town or by the, by the federal government who ran each of those individual offices. It was kind of a weird thing where some of it was, was, federal government thing and someone was a local thing.

00;15;55;23 - 00;16;17;19

Lawrence Kane

Remember the size of the of the country, right? You know, we were talking thousands of miles, right? It's like 3000 miles or whatever the number actually is, you know, from one side to the other. So, you know, you could have horse rider doing that whole thing in like 8 to 10 days or whatever, or you could instantly or close to instantly, you know, how, you know, speed of electrons, right?

00;16;17;26 - 00;16;47;11

Lawrence Kane

Have communication from one spot to another as long as they had the wire. So that's what happened was the disruptive technology kind of broke the company. And then it sort of devolved into this amalgam of different companies or individuals or whatever that that ran that stuff. So it was just a weird structure. But, you know, you went from a, traditional outsourcing kind of, of agreement to something else.

00;16;47;11 - 00;16;48;15

Lawrence Kane

I don't know what you'd call it.

00;16;48;20 - 00;17;05;04

Jonny Dunning

Yeah, I was a bit of a late for me to call it insourcing, but I was just kind of following the lead that you'd said, which is basically, yeah, you get an outsourced situation, you get disruptive technology, it gets in source, and then eventually it matures and then gets outsourced, and then you get more disruptive technology. So I think it's an interesting pattern.

00;17;05;06 - 00;17;26;27

Lawrence Kane

It could sometimes go from outsource to outsourced with disruptive technology or or you know, it's not always the same pattern, but the point about disruptive technologies you can break a sourcing deal always happens, right. So you may have to renegotiate the contract. You may have to go to a different supplier. You may have to go pull the technology back in-house.

00;17;26;29 - 00;17;51;10

Lawrence Kane

It all depends. So, you know, the company I worked for, in our space defense, part of the reason that they would insource stuff when it was new technology is, you know, this is a company who shot down a ballistic missile with a with a ground based laser, right? They do cutting edge technology. They the, like my technical mentors, the guy who coined the term augmented reality in 1987.

00;17;51;10 - 00;18;17;28

Lawrence Kane

So you think of like Google Glass and HoloLens and all that? Yeah, that's that's quaint. Right? These guys were literally invented the term augmented reality and had, technology in the hands of the warfighter in 1989. So, you know, when you have that level of engineering acumen and these just super genius people, you don't have to necessarily buy stuff from people.

00;18;18;04 - 00;18;40;13

Lawrence Kane

If you're a normal company. And, you know, AI comes along, right? You're not going to build your own AI maybe, I doubt you would. You might train the model yourself. Right. But you're probably going to buy the AI foundational technology from somebody. It's. Yes. You know, OpenAI is whatever it is, right? Somebody is going to host that for you.

00;18;40;16 - 00;18;56;10

Lawrence Kane

And if you're big enough, you'll you'll have your own model that you'll train, but you're not going to create the technology. Well, the guys I used to work for, a lot of the technology that people see today was invented, you know, in a DARPA agreement, classified program, you know, 20 years ago that you didn't even know it existed.

00;18;56;10 - 00;19;24;07

Lawrence Kane

Right? So so that's where, you know, that whole in source outsource thing. It sort of depends on how big and capable you are to actually in source stuff. And so, you know, some companies can, some can't. But disruptive technology will change the model irrespective whether it's in source to outsource or supplier one to, supplier to or break up a big, you know, contract like I did with the multi sourcing thing.

00;19;24;11 - 00;19;40;03

Lawrence Kane

Break up a big, you know, gigantic deal into a bunch of smaller deals or whatever it is. Right. Something will change. And it's more often than not technology that drives the change, not the contract or the relationship with or itself, although that can as well.

00;19;40;05 - 00;20;04;20

Jonny Dunning

And so when you talk about the Pony Express being that first example, what do you see as how how does that lead into the modern world we deal with now where outsourcing is such a common thing and you get these cycles of disruptive technology, you know, insourcing, pushing to outsourcing and maybe cycles like that or like you say, the different parts.

00;20;04;27 - 00;20;19;22

Jonny Dunning

How that's a great first example. And that's from a very long time ago. What do you see is the applications, if we look at kind of like post-World War Two, how do you see that in terms of that growth of of outsourcing growth.

00;20;19;28 - 00;20;20;08

Lawrence Kane

Sure.

00;20;20;12 - 00;20;21;28

Jonny Dunning

So provision.

00;20;22;00 - 00;20;41;09

Lawrence Kane

Yeah. If you think about the economy, right, the economy grows and you get innovation when you specialize. So like you go you know pre you know agrarian society right. You might have ran your farm, did your hunting fishing whatever. You know occasionally you'd go, you know, Pony Express days, right. You, you go into town for the things you couldn't do yourself.

00;20;41;11 - 00;21;03;00

Lawrence Kane

And so you'd always buy stuff. But it was small stuff. You know, you buy a cloth, but you make your own clothes with it. You know, you buy the sewing machine to make it worth. Right? Whatever. Well, as as you get more technological and you get more specialized, then you, you find that there's things you're good at, your core competencies.

00;21;03;03 - 00;21;21;22

Lawrence Kane

And I'm referring to you as a company, not as an individual. And there's things that you're just not good at. So, you know, they call it context, typically. So the core things you need to do that gives you a business advantage in selling your products or services, whatever it is that you do as a company, the context of somebody else is better at it.

00;21;21;22 - 00;21;45;12

Lawrence Kane

So, for example, you know, again, my previous company, way back in ancient history, we used to buy PCs, Back up. I'll go even further back. So pre-merger, if you were an engineer, you could have a pile of parts delivered to your desk, and you can make a custom designed, PC just for you, whatever you wanted, which is very customer centric, but completely unsustainable, right?

00;21;45;13 - 00;21;47;16

Jonny Dunning

I bet they love it.

00;21;47;18 - 00;22;16;27

Lawrence Kane

Oh, they loved it. Yeah, they absolutely loved. And the other engineers. Right. So they like to do this. But the problem was that wasn't good use of people's time. And if something broke they're all different. You can fix it. So the first, big thing that we bought was PCs from Dell. Well, over time, one of the guys that worked for me was was in a, QBR or quarterly business review and happened to have a hallway conversation with Michael Dell and said, sorry, you guys want to be when you grow up as a company anyway?

00;22;16;28 - 00;22;33;25

Lawrence Kane

Well, I want to be IBM, I think. Well, what do you mean by that? Well, you know, they're data services. And so, you know, we just build PCs right now. But if we build them, we can support them. We do service desk. We do like, you know, there's a bunch of things that are ancillary to that that we have the specialized knowledge about.

00;22;33;28 - 00;22;56;24

Lawrence Kane

And so, that company, we actually had them bid against, like, you know, IBM and HP and, you know, the usual suspects, CSC back then, whoever and, Dell actually won the services contract to support the hardware that they're already giving us and that expand and expand and expand it. So basically became like a desktop as a service.

00;22;56;24 - 00;23;25;26

Lawrence Kane

And you put in, you know, the, the service desk and all that. And the idea was if you buy the computer and you buy the support service separately, there's, a big opportunity sub optimize. If you make that a combined service and you have like a refresh rate of, say, four years, they're going to give you the quality of device that's going to last that four years, or else they're going to end up having a higher cost of supporting the devices where their laptop service center or a call center or whatever it is.

00;23;25;26 - 00;23;52;16

Lawrence Kane

Right. And so you incentive vice by the right parts and pieces being combined together, you incentivize having a good holistic well running program because why why do you outsource this stuff? What's too expensive to do to build yourself even if you have the capability, you know, a team full of rocket scientists. Yes, they can do build their own stuff, but it gets a make sense or better, better off building the rockets or the missiles or the airplanes or whatever.

00;23;52;16 - 00;24;23;02

Lawrence Kane

Right. And so, what it does is it takes your context, gives it to a company who that's their core competency. They do it better, faster, cheaper, more reliably, whatever, than you do. And so there's a there's a win win there. But you set the deal up in a way that's going to be sustainable over time. And that particular contract I think we we negotiated that like 1999 and last I heard,I don't work there anymore.

00;24;23;02 - 00;24;48;24

Lawrence Kane

But, you know, a couple three years ago when I left three years ago, when I left, that contract was still in place. Well, no, it had been, you know, it had morphed over time rated statements to work had been adjusted. You know, things that, you know, there was technological, change obviously over that long period of time, but because it was a managed service, it was, you know, hardware, software services combined and done in a in a smart way.

00;24;48;28 - 00;25;10;00

Lawrence Kane

That contract lasted 20 years. And now typically and outsourcing deal is, you know, 5 to 7, maybe ten years. But the point is if you set it up right, it can last for a really long time. And so when I talk to non procurement people, I say, look, you know, if you're going to you're hungry, you don't feel like cooking.

00;25;10;00 - 00;25;24;28

Lawrence Kane

You go out to dinner I order my steak. That's my statement of work. Medium rare. That's my SLA. If the if the restaurant provides what I wanted, I pay them. Maybe I give them a nice tip. I have a nice dinner. If they burn my steak, I send it back and they fix it and so on. That. Right.

00;25;25;00 - 00;25;44;06

Lawrence Kane

That's a pretty good that's that's like outsourcing. I mean, except for the time frame. Right. It's a pretty good way of buying things because they're the expert. They're going to get it just right. You only pay for it if you get what you wanted. If, on the other hand, I hire a private chef and private chef, Burns my steak, now I have to not only buy a new steak, I have to pay the chef to cook it again.

00;25;44;09 - 00;26;06;05

Lawrence Kane

Right. That's not as effective of what you're doing it. And so, you know, if I'm not a world class chef and I want to go, you know, get that wonderful steak dinner, you know, I'm better off going to the restaurant in most instances. Right. And so that's kind of the same philosophy, just as a bigger services deal that's combining a bunch of stuff together.

00;26;06;05 - 00;26;06;28

Lawrence Kane

Right. So make sense.

00;26;06;29 - 00;26;35;24

Jonny Dunning

Yeah, I it's a really good example actually. I've never that's a I've never heard that example, that kind of metaphor. But description of to to outline services and to, to position it that way. I think it's really good actually. And, and it, it never ceases to amaze me how people are quite short sighted sometimes where they just that knee jerk reaction to the idea of outsourcing something is just that it's more expensive than hiring people or hiring contractors.

00;26;35;26 - 00;26;54;19

Jonny Dunning

And it's just it's just a different way of doing things. The risk, the liability. They all say the responsibility sits in different places. You're buying a different thing. And also going on to that kind of outcome based scenario. You are buying an outcome. You're buying a, as you say, the statement of work is that you've ordered a steak.

00;26;54;22 - 00;27;12;01

Jonny Dunning

The SLA is that you wanted it medium rare, and everything else that comes with it is the kind of ancillaries that go around that. Right. But you are guaranteed that whereas actually, you know, the other side of it is if someone says to you, yeah, I'm going to, I'm going to cook you a steak and they take three days to do it, and you thought you've hired that was a contract.

00;27;12;01 - 00;27;15;03

Jonny Dunning

And I take three days to do it. That's probably less effective. But you know.

00;27;15;03 - 00;27;38;26

Lawrence Kane

Right. You're paying for effort, right? If you hire a contractor, you're paying for effort. Sometimes that's good, but you're you're not buying a deliverable. You're buying somebody time. And so you don't have that guarantee that they're actually going to deliver anything that's acceptable to you. And if they don't, you keep paying until they do. Right.

00;27;38;29 - 00;28;07;24

Jonny Dunning

And what's your what's your view on the way the industry as a whole? Is progressing or not progressing between this idea of time based contracting and outcome based contracting, do you think that it's something that's becoming more necessary, more popular, or do you think it's, one of those kind of, you know, cyclical type things?

00;28;07;27 - 00;28;36;05

Lawrence Kane

So I think it depends on how strategic you are. So if you really look at, what we're talking about with the statement of work and the SLA, that's really performance based contracting, outcome based contracting is actually slightly different than that. So a performance based contract is a, you know, managed services or performance agreement or whatever, where you get a statement of work in an SLA outcome based contract is actually something that affects the company's, bottom line, I guess is a simple way to say it.

00;28;36;05 - 00;29;10;13

Lawrence Kane

So, for example, an outcome could be 20% increase in market share, an outcome could be, you know, $1 billion in more revenue outcome could be, you know, the ability to, go virtual and sell a dozen different sites that you were finding are underutilized. Right? So outcome tends to actually be the higher level thing that the company, the buying company would recognize as, as business impact as opposed to performance, which is less strategic than that.

00;29;10;13 - 00;29;29;23

Lawrence Kane

So the reason I separate that is when you talk about like vested deals and outcome based contracts, they they tend to be, managed differently because it's almost like a joint venture, as opposed to something that's a traditional outsourcing kind of agreement. So you're okay.

00;29;29;25 - 00;29;38;12

Jonny Dunning

I was I was just going to say the difference between an outcome and an output. Yes, might seem subtle, but it's very significant.

00;29;38;14 - 00;30;05;22

Lawrence Kane

Right? Right. And an output and an SLA that's like what normal outsourcing usually is. So I work today, we have third party administrators and we have companies that actually drive revenue for us, that like kind of sell our products or sell products for us or we co-develop or whatever like that. So that kind of thing does happen in a lot of industries.

00;30;05;25 - 00;30;29;03

Lawrence Kane

But largely most companies are just buying stuff, right? It's, it's performance based contract or they're buying an output of some kind and, and you know, again, everybody does it right. You can't do everything yourself. You can't build your own PCs and support them and do it in a way that's that's going to really make economic sense for you.

00;30;29;03 - 00;30;57;18

Lawrence Kane

Unless you happen to be a company that that's your they you make PCs. Right. And he's Dell is the example. But there's a ton of them. So the point is everybody buys stuff. A lot of that's technology, like your network or your telephony or your mobile phones or, you know, whatever that is. Your applications and so really, when you look at the evolution and what are you doing, it all gets down to what is your business model, what is it that you deliver?

00;30;57;23 - 00;31;22;01

Lawrence Kane

If you're a manufacturing company, you might be different than if you're a financial services or, or if you're, you know, construction or you're, you know, whatever your company is that's going to change the model of what you buy and what you do yourself. It all gets down to what is it that gives you that advantage in the marketplace, your core process knowledge that turns into something that's an outcome for your corporation or your company.

00;31;22;02 - 00;31;45;23

Lawrence Kane

Right. Versus the things that are, I'll call them non value but necessary. And the reason I say non value but necessary is because an end customer isn't willing to pay for it. So for example I go buy a car and you know if you're going to design and build a car you need a bunch of software, you need a bunch of engineering, you need a bunch of of, you know, modeling.

00;31;45;23 - 00;32;11;22

Lawrence Kane

You need, you know, safety test, you need a bunch of stuff that use technology to design and build, you know, like a program, life cycle management software, ERP software, you know, all these things that you do to design the car, to get the parts to run your factory. Right? I am not going to pay extra for my, you know, Honda Accord because Honda happens to have a better ERP system than Toyota, right?

00;32;11;29 - 00;32;36;07

Lawrence Kane

I don't care, it's necessary. If you don't have it in your system, you can't manufacture stuff because you own where the heck your parts are, right or even what your parts are. But I don't care. As a customer of the car, whether your ERP system is, you know, whatever Oracle or SAP or like, who cares, right? All I care about is does the car have all the parts in it that I need or does it work?

00;32;36;07 - 00;33;00;16

Lawrence Kane

And is it fun to drive and whatever. Right. So that's what I mean by non evaluative but necessary because from a from a customer perspective is not adding value. But it's absolutely necessary to deliver the product or service that I want to buy that does add value. And so the smart companies will take all that non value that had been necessary stuff that they can find a better economic kind of deal.

00;33;00;18 - 00;33;23;09

Lawrence Kane

That assures business continuity and you know service delivery and all those things you know quality cost, service delivery etc., etc. from a kind of a TCO perspective, they'll take that stuff and they'll find a supplier or supplier ecosystem to deliver it for them so they can focus on the stuff that their customers actually care about, which is, you know, a cool design car that gets certain fuel economy.

00;33;23;11 - 00;33;27;24

Lawrence Kane

It's fun to drive. It's whatever, whatever, whatever it.

00;33;27;26 - 00;33;42;16

Jonny Dunning

Yeah. I think that's a really poignant, is a poignant point to bring up that focus on what you're good at, you know, play to your strengths. But focus. Focus is the business is so important, and you can't be.

00;33;42;16 - 00;34;23;18

Lawrence Kane

Good at everything. It's just not possible anymore. That's why I said earlier specialization is what leads to innovation. So you're going to be really good at something that differentiates you in the marketplace. Don't let anybody else do that for you, or you're going to undermine the value of your company. Right. But if you take all the stuff that you're not so good at, somebody else is good at, and and you do it right, and you and you've got the maturity to, to manage those contracts correctly, you can build a supplier ecosystem that's a competitive advantage that makes you, more or, you know, desirable in the marketplace from a customer perspective.

00;34;23;21 - 00;34;54;29

Jonny Dunning

Yeah. And it's also building that services supply chain to expand your organization's capacity and capability beyond the core staff that are employed by that organization, and just the levels of flexibility that can be leveraged from that, you know, can be hugely advantageous when it's done correctly. And that's why I always think to myself, with services procurement, I always feel like it's the biggest thing that isn't a thing in procurement, in the sense of the world doesn't really think in terms of, of most of the procurement.

00;34;54;29 - 00;35;17;19

Jonny Dunning

Well, just thinking in terms of this is how we buy goods, materials and this is how we buy services. And the different things. It's categories. Right. But I always think to myself, the procurement professionals that can make buying essential services, these critical services business needs, they can make it easier, faster and more compliant for that for their people within their organization.

00;35;17;21 - 00;35;25;05

Jonny Dunning

They're going to be a hero, because that is going to have a significant impact on how that business performs and how it competes in the market.

00;35;25;08 - 00;35;50;24

Lawrence Kane

Yeah, absolutely. And, you know, you look at, the you know, again, it kind of depends on what sort of business you're in. But the most, you know, if you look at the fortune 500 companies, all of them have some kind of strategic procurement, global sourcing, vendor management type functions. Right? They may not call it that. They don't all have supply chain because some of them aren't manufacturers.

00;35;50;24 - 00;36;19;29

Lawrence Kane

Right. Yeah. But they all have a group that runs those contracts that they need to stay in business. In fact, there was a study I read a few years ago, and probably to get the exact percentage wrong, but I think it was, something like if a startup company begins with a CPO or equivalent, you know, head of procurement, they had a 43% better chance of still being in business five years later.

00;36;20;01 - 00;36;20;22

Jonny Dunning

Wow.

00;36;20;25 - 00;36;42;22

Lawrence Kane

Yeah. And again, I that's directionally correct. I may be misremembering the exact number, but 43 sticks in my head. But the reason for it is because most startups just do stuff randomly buy stuff randomly, have too many suppliers, and when they start to scale, it all falls apart. And then they bring in a procurement professional who goes and fixes all of it.

00;36;42;25 - 00;37;04;02

Lawrence Kane

And so you've wasted a bunch of time and money. And one of the benefits of a startup is agility. And if you set yourself up so that you can scale quickly and you've got the right model, you have a better chance of success because you're not growing on a scalable supplier ecosystem as opposed to a bunch of Cluj of contracts and whatnot that that don't work together holistically.

00;37;04;02 - 00;37;31;06

Lawrence Kane

So it's sort of a, you know, one plus one plus one equals three or 5 or 27 because you're not multiplying. You get one plus one plus one equals negative six. Right. And that's no, no good. So you got to go back and reset everything. And there's a cost to changing these contracts. And sometimes especially when you when you've got people who don't understand our business, you know, you can end up with contracts that are auto renewing or that there's a massive termination fee.

00;37;31;06 - 00;37;56;27

Lawrence Kane

Or, you know, you could I mean, there's just so many downsides to not having a well designed set of contracts and aspire ecosystem that actually Inter operates effectively that people don't think about. And so, you know, you get these little companies that have, you know, hosting with they sure Google and AWS. And so they're you know they're not these are no economies of scale from a interoperability perspective.

00;37;56;27 - 00;38;19;03

Lawrence Kane

And they're IT infrastructure. It's not going to work very well. They get different applications hosting. And they have these massive costs of moving data around between these systems. Because remember they're that infrastructure and platform as a service companies. You know it's like Hotel California right. Once you once you come in you're never leaving because they're going to make the cost of, of moving that data catastrophic to you.

00;38;19;06 - 00;38;39;14

Lawrence Kane

And so you get, you know, just silly stuff like that where you get these it people making a decision that makes sense. Stovepipe nobody's looking at holistically. And all of a sudden you try to you try to grow and the cost of running is it just destroys you. Right. And it's not that it's not necessarily good. It's architecture.

00;38;39;21 - 00;38;48;12

Lawrence Kane

It's that isn't it? Architecture is only looking at the technology and not the impact on the business, business continuity, TCO, etc., etc., etc..

00;38;48;14 - 00;39;00;04

Jonny Dunning

And ultimately those aren't particularly great relationships. Whereas what you were talking about earlier with Dell, you were talking about that contract duration being like 20 years or whatever it was.

00;39;00;07 - 00;39;10;13

Lawrence Kane

Was the issue was multiple contracts that were renewed, just to be fair, right? Yeah. I mean, yeah, but the first contract was five years, but they kept getting renewed because they were doing a great job.

00;39;10;15 - 00;39;21;12

Jonny Dunning

And that's the relationship is a 20 years supply relationship. That's fantastic. That's good. Business is good. Business model is great business for the the organizations following that and getting a good service from them.

00;39;21;12 - 00;39;53;16

Lawrence Kane

So this by the way, one of the cool things that came out of that was, in in my previous company at the time, I'd have no idea what is today, but at the time it cost $80,000 to become a supplier. Just just to be able to get connected up, do the administration and send an invoice. And so one of the things that Dell did was they brought in small disadvantaged businesses, you know, diverse suppliers, and mentored them and paid the connections and whatnot and built it into the way they did their service delivery.

00;39;53;23 - 00;40;25;13

Lawrence Kane

So we're actually able to do the right thing, you know, for, for, you know, I'll call it the betterment of humanity kind of stuff. By, by supporting diverse businesses in a model that made a lot of sense. And so, you know, the, the ability for these small businesses to sell to this gigantic I think we're like a fortune 20 company at the time when that first started, you know, they couldn't do it, but they could through this strategic supplier who leaned in and stepped up and did the right thing.

00;40;25;16 - 00;40;47;00

Lawrence Kane

And it turned out, you know, again, it's a one plus one equals five sort of thing, right? You're you're you're really compounding the benefit. So that's another reason why some of these, you know, if you have a really good sourcing relationship, it's not necessarily just your supplier. It's their supplier ecosystem too. And they can sometimes do things that can really, you know, benefit you.

00;40;47;00 - 00;41;01;06

Lawrence Kane

And in the case of aerospace and defense, not only is it, you know, doing the right thing to use diverse suppliers, but you get SDB credits when you're bidding on government work. And so it actually helps you earn revenue. So there's a win win win win win thing going on there. Right?

00;41;01;08 - 00;41;26;04

Jonny Dunning

100% of absolutely seeing that in practice just in terms of facilitating even just like, you know, small small businesses or diverse businesses or whatever is facilitating that into the supply chain. You get those aggregated benefits, particularly around things like government contracts. Right. It's it's it's a it's a real clever way to do it. And it's besides kind of doing for the good is, the good of humanity to a certain extent.

00;41;26;04 - 00;41;43;24

Jonny Dunning

But it's also taking the, the logjam away. The for the end, for the end customer is a major disadvantage for them because if they can't engage those sometimes those smaller, all those different thinking businesses, they just don't have that agility. They they lose out on that innovation.

00;41;43;26 - 00;42;01;21

Lawrence Kane

Yeah. Some people call that impact sourcing. And so, you know, it's a you know, I give you an example. So there's a company that I worked with. It's a veteran and minority owned business. And what they did is they had combat veterans from this is way back in the day. This is mostly from the first Gulf War.

00;42;01;23 - 00;42;25;20

Lawrence Kane

Folks who were, mobility impaired and, you know, lost a leg or whatever it was. Right. But they're they're smart people. They were hardworking people. They wanted to have meaningful work, but they couldn't commute. Very well. Right. And so this company, hired a bunch of these folks, and originally what they did was, call center kind of work.

00;42;25;22 - 00;42;37;20

Lawrence Kane

And, you know, you've got you've got folks who are distributed across the country and whatever, you know, where they happen to live, but they're connected with a network and, you know, processes and tools of this company, you know, and,

00;42;37;22 - 00;42;38;04

Jonny Dunning

It's.

00;42;38;04 - 00;43;03;18

Lawrence Kane

One of those things this is like, you know, way, way pre-pandemic and remote work wasn't kind of normal. Right? But, because I was working in aerospace defense, there were certain requirements around, secure location for doing portions of the work, and I much so I, I couldn't use that supplier, but I introduced them to one of the other suppliers in my, my supplier ecosystem and said, hey, these guys got a great model.

00;43;03;18 - 00;43;23;29

Lawrence Kane

It's giving, you know, jobs and dignity and meaning to these combat veterans who to done great things for the country. And, you know, maybe there's some maybe you guys can work together and, you know, a couple of the of the different suppliers that I had were like, yeah, we could use them for a part of our not for you guys, but for other customers.

00;43;24;02 - 00;43;49;01

Lawrence Kane

And, you know, again, it happened to do with, with, you know, the way the, the restrictions were around where work could be performed because some of this work was, you know, like, like classified and like, you can't do that in somebody's living room, but, or, you know, proprietary or, you know, critical technical information or things like that, which you just can't, you know, you have to protect certain ways.

00;43;49;03 - 00;44;05;24

Lawrence Kane

But other companies that didn't do that sort of stuff, or they didn't have the need for that kind of stuff. And you could you can be more flexible. They were able to do it. So, you know, it's a lot of, creative problem solving that can go with that as well if you have a good relationship with your supplier ecosystem.

00;44;05;27 - 00;44;27;24

Lawrence Kane

Plus they can also bring to you like, hey, you guys are doing this thing and like the world's moved on. We don't do it that way anymore for most of our other clients. Maybe should consider, you know, a change that's actually going to be beneficial for you. Right? And going back to that whole, you know, technology changing so quickly nowadays and, you know, well, business models change.

00;44;27;27 - 00;44;53;18

Lawrence Kane

There's a lot of things that change. Right. And so, you know, the the ability to have those really long term contracts, which, you know, again, to be clear, was multiple short contracts, but renewals, and urn, the work well, one of the ways people do that is you have let's say you've got like a two year deal that automatically renews if certain SLA or whatever or met or certain targets are met, and it could be continuously renewing.

00;44;53;21 - 00;45;15;00

Lawrence Kane

So you keep doing a great job, you keep earning more work or whatever, right? There's creative ways to do that. But part of what happens that allows those things to keep going long term is the supplier isn't just doing what you're telling them to do. They're saying, hey, I've got this idea, let's talk. And so it's dynamic. It's not static.

00;45;15;02 - 00;45;29;16

Lawrence Kane

And that's again where where, you know, if you're buying effort, you're hiring people directly, you're hiring contractors. Whatever it is, you're not going to get that dynamic problem solving. You're just going to get I'm going to do whatever you tell me to do.

00;45;29;19 - 00;45;51;11

Jonny Dunning

And that's the value of great procurement, really, isn't it? I think it it leads me on to another point that be interesting to discuss, which is just that kind of the evolution of the procurement function, the the differences that exist within different organizations in terms of how that procurement function is set up. And just that kind of lack of standardization.

00;45;51;17 - 00;46;14;17

Jonny Dunning

I mean, as I procuretech provider, as we are you know, we're providing technology into, into procurement teams to help them solve problems for their, their own customers within their organizations, for our specific around buying services. But when I go to, for example, digital procurement world DPW, the event that is the I think is in New York as well now, but was previously always in Amsterdam.

00;46;14;20 - 00;46;38;27

Jonny Dunning

You know, if you talk to any of the vendors there, they'll tell you it's really difficult to sell into procurement, but partly because of the lack of standardization. And it's not, you know, even if you got a if someone's got a really suitable offering, it's very difficult for them to be able to target the people. That probably is relevant to because procurement teams are so wildly different, even in similar looking organizations.

00;46;38;27 - 00;47;09;06

Jonny Dunning

It's not like the marketing function where, you know, like the marketing technology is very sector is very mature. It's very large. And but marketing functions are relatively standardized across organizations. When you when you were talking at the beginning of a conversation about the work you were doing that ended up with you basically forming that sourcing department, that, that, that was that sounded like almost like you were really the beginning of any sophisticated procurement in that organization and really had.

00;47;09;09 - 00;47;11;16

Lawrence Kane

Purchasing prior to that.

00;47;11;18 - 00;47;18;07

Jonny Dunning

So purchasing is more the kind of like the operational getting it done, isn't it? Correct. Right. But TJX right. Yeah.

00;47;18;08 - 00;47;21;02

Lawrence Kane

They did not have strategic sourcing. Yeah. Yeah. Exactly.

00;47;21;05 - 00;47;24;20

Jonny Dunning

So to that but that's not that long ago.

00;47;24;23 - 00;47;28;01

Lawrence Kane

Well that was that was a while ago.

00;47;28;03 - 00;47;41;03

Jonny Dunning

Even if it's 20 even if it's 20 years ago. Yeah. You know 25 years ago something like that. What we're driving at is that I still think there's a ways to go for procurement as a function to really.

00;47;41;03 - 00;47;41;11

Lawrence Kane

Yeah.

00;47;41;11 - 00;47;47;23

Jonny Dunning

I agree evolve to evolve to the level that some other functions are. And I think that's right. It's not a bad thing. That's an exciting thing.

00;47;47;25 - 00;48;18;18

Lawrence Kane

Well it is but I think there's a couple of foundational challenges. Right. So so procurement typically doesn't have money for you know, technology. Right. It's kind of like the Calworks kids have no shoes sort of thing. So a really strategic procurement department will do things like, they will take some of the cost savings they generate and repurpose it back to being able to invest in what's needed to move up the value chain.

00;48;18;18 - 00;48;42;07

Lawrence Kane

Right. Because you can only go so far with people in process. And then you have to start adding on tools and data or you just can't do it. So for example, in my team last year, I have a limited contract lifecycle management system. If you look at most capability maturity models, if it's a five stage model to get past stage three, if it's a four stage model, get past stage two, you have to have a CLM system.

00;48;42;09 - 00;49;06;12

Lawrence Kane

Most, fortune 500 companies. Well, you know, I, I would say less than half of the fortune 500 companies actually have one that's efficiently, being utilized. I mean, like, you know, due to institutionalized contract playbooks and things like that. Right? So it's not that folks don't have them or that's not a capability, but but not everybody does.

00;49;06;12 - 00;49;34;21

Lawrence Kane

And that's something that's just foundational to being, you know, territory moving up the value chain and doing the best you can as a, as a strategic procurement team for your enterprise. And that's just one of many tools, right? My point is that it's hard to get the tools and the people who do do it strategically, like the business case I built when I went to the CFO way, you know, the response was, well, there's no such thing as a no brainer business case, but this is about as close as I've seen, right?

00;49;34;21 - 00;49;55;17

Lawrence Kane

And so I was able to get a bunch of money from other people when ad money to organization, which took it from other priorities and gave it to me. So, you know, if you're strategic, if you can, you know, talk like a business person, if you can, you know, really sell internally, you can get those investments.

00;49;55;25 - 00;50;17;14

Lawrence Kane

So in a lot of ways, it's not even the structure of the team or what their charter is. It's who's leading it. And do they have efficient, effective relationships with the people that have the money? Right. Because you're budgeting in, you know, it is always going to have budget to go play with new play with and test new technologies and buy more stuff.

00;50;17;16 - 00;50;37;27

Lawrence Kane

Right? At least in most companies, your budget in in procurement is going to be to run and maintain, right? It's usually not to to grow unless you do a business case and get specific additional I'll call it non-recurring funds. Right. To make those investments.

00;50;38;00 - 00;51;00;09

Jonny Dunning

Yeah. I mean, when you look at the when you look at the structure of procurement teams and you look at the way that, for example, procurement qualifications, how where they come from and how they're standardized or not and how they're managed. What do you see as. Do you have any particular views on the evolution of procurement as a function?

00;51;00;09 - 00;51;25;22

Jonny Dunning

And do you think it will become standardized? Because just, just add some context to that. Sometimes you'll see stuff that you might assume sits within procurement, but it sits within operations or, you know, it sits in a completely different area. Whereas I feel like the relevance and importance of procurement is being more recognized now. But but but I don't quite I can't I don't really have enough.

00;51;25;25 - 00;51;30;00

Jonny Dunning

Personally, I don't have enough knowledge. Yeah. To see where that's going to go to.

00;51;30;03 - 00;51;58;01

Lawrence Kane

Yeah. So I yeah. So I have a network of about 67 or something like that, either CPOs, heads of procurement equivalent kind of folks. Right. So I talk to a lot of fairly senior people, and the impression I get is that, after the pandemic or during the pandemic, folks in the C-suite finally realize that we don't just buy stuff, right, that there's actually this foundational skill set that's needed.

00;51;58;03 - 00;52;29;23

Lawrence Kane

And that's enterprise enabling. But not every organization, is structured in a way that leverages that. So what I mean is, cpos oftentimes are not a member of the C-suite. They actually report to a CFO or CIO or whatever. Right. And it's different between direct and indirect. So direct. Meaning like, you know, manufacturing kind of stuff, you know, you're, you're buying parts or whatever that go on to a product that you sell it versus indirect being, you know, things like it.

00;52;29;27 - 00;52;55;26

Lawrence Kane

And marketing and finance and HR and stuff like that. You need to finance company like like I am, you know, a lot of the, a lot of the, a lot, even if you're a finance company, the, the products or services sell, use technology. And so there are revenue generating things, but you buy it like it's indirect because it happens to be it or services or whatever.

00;52;55;26 - 00;53;26;25

Lawrence Kane

Right. So on the direct side, typically their, their supply chain organization is really worried about, you know, parts and services, are parts, I should say, and assemblies and components or stuff like that being a certain place, a certain time, a certain quality. Right? So it's a very, kind of old school, you know, orchestrate the parts so they get where they need to be when they need to be.

00;53;26;25 - 00;53;57;21

Lawrence Kane

So you can build something, the more strategic they are, in that area is a little different than when you're talking sort of the indirect side. The indirect side tends to be where you're doing these services deals, you know, outsourcing, you know, Vestey kind of deals, stuff like that. That's really enterprise enabling. And, so, you know, one of them is value added and necessary, but it's tactical.

00;53;57;24 - 00;54;20;17

Lawrence Kane

The other one is more strategic. Check if that makes sense. You know, there are strategic components to direct. Don't get me wrong a like business continuity, like making sure the rights, you know, like you look at Nike right in the way they design their stuff, their strategic suppliers actually not only help them design their, their, clothing or shoes or whatever it is that they're, that they're selling.

00;54;20;19 - 00;54;42;24

Lawrence Kane

But they actually are part of like their, their C-suite or at least used to be anyway. The I don't know, the current CPO, but the CPO, a while ago, those strategic suppliers were in like, C-suite meetings with the CEO and stuff, figuring out, okay, like, how do we do this thing? So, you know, that that shoe that the technology that, like, weaves it in one thing.

00;54;42;24 - 00;55;09;14

Lawrence Kane

There's no seams. That was invented by one of their suppliers. You know, so not saying direct isn't isn't strategic. It certainly can be. But the, part of how, you know, the, the, the sort of level of, of a procurement organization is who do they report to and what's their charter. Right. So the sort of the tactical, you know, procure, pay operational stuff.

00;55;09;17 - 00;55;27;08

Lawrence Kane

And then there's sort of these, you know, sort of strategic sourcing and, you know, kind of business enabling stuff. So if you're if you're buying things that are generating revenue, if you are, having a seat at the table is, you know, kind of a trusted advisor sort of role where you're helping with business strategy and that sort of thing.

00;55;27;11 - 00;55;48;15

Lawrence Kane

It's very different than if you're just sort of doing, the, you know, keep the lights on running, maintain, make sure you don't run out of, you know, whatever it is you need kind of stuff. Right. And so, you know, it's kind of a long way of saying it's it's not just what you call the team, but how they're structured, who to report to and sort of what their ability to influence is.

00;55;48;17 - 00;56;16;11

Lawrence Kane

And the more as a as a procurement professional you can influence the business, the more value you can create, because supplier can come in and give you something super innovative that you can't take advantage of, because you can't convince the C-suite that it's the right thing to do. Classic example, Boeing Employees Credit Union. So it's a, credit union in the US, you know, got hundreds of thousands of customers.

00;56;16;11 - 00;56;37;05

Lawrence Kane

It started kind of with Boeing employees and then relatives and whatnot. Anybody can join in now. Well, they were offered, online banking and, ATMs and stuff like that back in like the very, very early 80s. One of the first companies that was actually offered that by a supplier. They were one of the last adopters of it.

00;56;37;07 - 00;57;00;07

Lawrence Kane

So way after, you know, other, banks and financial institutions. And the reason was their business model was about customer intimacy. And so the the CEO and the CIO at the time said, hey, there's this really cool thing. And it allows, you know, our, our clients to have access to their money, you know, from when they like, when they go shopping in the grocery store.

00;57;00;09 - 00;57;26;19

Lawrence Kane

And, and the C-suite is like, why would we do that? We've had relationships with these customers for 2 or 3 generations. They come in, they have lunch with their personal banker. We have cup of coffee, you know, building all these relationships. Why on earth would we want this technology? It makes no sense at all, right? And they can't sell it because they couldn't convince the C-suite that the business model of customer intimacy could still be be done, remotely.

00;57;26;21 - 00;57;48;22

Lawrence Kane

And obviously every banking institution does online stuff. Now, and it has for years. Right. But, you know, they had a chance to be one of the first adopters, and instead they were one of the last adopters, because procurement didn't have either the seat at the table or didn't have the ability to influence the C-suite. So even though this great idea, they couldn't pull it off, right?

00;57;48;25 - 00;58;17;08

Lawrence Kane

And it was a supplier driven innovation thing that disrupted the entire industry, shifted from brick and mortar banking to, you know, online and ATMs and all that stuff. And it was transformational. The industry we know in retrospect they should have been an early adopter, but they weren't. Right. So think about the modern example of if you're a procurement team sees this really cool thing from a supplier or whatever it is, can you sell it to the C-suite?

00;58;17;10 - 00;58;32;09

Lawrence Kane

Because you can demonstrate you understand the business as well as as any business leader does, and you can see the value in it, and you can see the risk issues and opportunities. And you know, when it's something that's worth that, that, attention and conversation.

00;58;32;11 - 00;59;04;25

Jonny Dunning

Yeah, that's really interesting. I think what I always the way I always kind of assess procurement maturity is like is the how. Well is the procurement function connected to the goals of the business? What's that? What's that interface like between or what's that? How do the drivers line up between procurements. Understand. So the business goals, the values and the drivers of the business and how the procurement team are operating?

00;59;05;02 - 00;59;18;29

Jonny Dunning

Because if they're operating in a disconnected manner, they don't understand the business through through maybe no fault of their own. Yeah. And they're not. Then they don't have that level of integration. And it's an immature process. It's an immature function.

00;59;18;29 - 00;59;40;00

Lawrence Kane

Oh yeah. Yeah. Absolutely. Yeah. If you think about, you know, going from, from kind of ad hoc to order taker to contributor to trusted advisor. So the four stage model. So and I have to like you can't be a trusted advisor if you not only don't you have to have procurement functional excellence people process tools data right. Technology you have to have that.

00;59;40;03 - 01;00;01;20

Lawrence Kane

But you also have to have a relationship with the C-suite and an understanding of how the company makes money. And, you know, the ability to I mean, for example, when I was in aerospace and defense, having to work in, process systems division for a while, which is the engine right nacelle, Apu, it's the you know, like I said, it's about a third of the cost of the airplane.

01;00;01;24 - 01;00;32;29

Lawrence Kane

Important stuff. Right. And so, so customers, like actual airline executives would come in and they get a tour of the factory that would show, hey, here's your engine, blah, blah, right? That was normally done by an engineering operations person, or somebody that was sort of factory, you know, an engineer that worked with the factory. And when they couldn't find somebody, though, they got me because I happen to know every single part where it came from, what it costs.

01;00;33;01 - 01;01;03;22

Lawrence Kane

You know what? It did all this stuff, like, I, you know, I wasn't an engineer, I wasn't a mechanic. But by having this, this procurement role, I knew all the parts and pieces and what they were and what they cost and where they came from and how they worked and all that stuff. Right. And I could go in and do those factory tours with, you know, like I did one for the head of or the use I had, that was his title.

01;01;03;25 - 01;01;25;11

Lawrence Kane

I can't remember the channel. He was the chief operations or something like that for, Japan Airlines. So, you know, I gave a tour of, like, you know, here's your engines in this for this, you know, and blah, blah, blah. And, you know, through the translator, everything was really cool is neat experience. But the reason was because they actually understood the business, because I thought it was like, it's my job if I'm going to go, you know, do this stuff.

01;01;25;11 - 01;01;42;15

Lawrence Kane

And I happened to be in, in a finance role working with the purchasing people to. So I wasn't the guy buying it, and we didn't have strategic sourcing and procurement at that time was really, really a long time ago. But I was part of like negotiating those engine programs or engine, contracts and whatnot. Right. Yeah.

01;01;42;17 - 01;02;04;06

Lawrence Kane

And, I just felt like I have to know what all of this stuff is in order to do my job. Well. And because of that, you know, one of the things I got to do was go take you know, customer executives through the factory and show off their stuff what was being built. And, I wasn't really thinking of it is, you know, kind of being a trusted advisor right over the term.

01;02;04;06 - 01;02;39;18

Lawrence Kane

Hadn't really read that and heard that term at the time, but that's kind of what I was doing. Right. So even though I wasn't really in charge, you know, I was it was a lower level role at the time. I was able to do things that other people couldn't because I just really did my homework. Well, if you extend that when you are more in charge that doing the homework, understanding the business model, all that, and having that same kind of relationship thing, now you can go to the business and go, hey, I've got this cool idea and you know, you're you might not be running a P&L which you can influence a

01;02;39;19 - 01;02;41;05

Lawrence Kane

P&L, right?

01;02;41;07 - 01;03;17;23

Jonny Dunning

Yeah. And it's also, it's an interesting side of procurement that I, I quite often see pop up, particularly in quite sophisticated procurement organizations, which is the idea that procurement, all the kind of helping the business make money as well, whether it's be getting involved in bids and looking at supply chain capabilities when they're going into bids, which obviously is a hugely important thing in areas like aerospace and defense, or actually just understanding the business enough to be able to, whether it's passing on insights from suppliers that you're working with or seeing what's going on elsewhere in the market or whatever.

01;03;17;25 - 01;03;21;28

Jonny Dunning

But to to to help the sales side of the business, which I find really fascinating.

01;03;21;28 - 01;03;43;06

Lawrence Kane

Right. Yeah. And that's something that's that's huge because, you know, we're experts in buying stuff, buying and selling not same. But we are but you know, but we do understand things that can help our teams that are on the sell side. And oftentimes, that connection isn't there. Right? The the salespeople don't really talk to procurement and vice versa.

01;03;43;09 - 01;03;50;24

Lawrence Kane

And you're absolutely right. We should because there's a lot of synergy there. And again, it's kind of that one plus one equals three thing.

01;03;50;27 - 01;04;23;12

Jonny Dunning

Yeah. Yeah. So it brings me on to another point, which is the whole cost cost driver cost versus risk versus efficiency versus business. Ultimately, someone said to me recently what procurement should be trying to do is drive business value. And that has many different facets. But for a lot of organizations, particularly when they're less mature, it's just there's a very binary measurement of cost saving, particularly at the point of up to the point of contract.

01;04;23;12 - 01;04;47;07

Jonny Dunning

And then it kind of goes away. What why do you think this seems to be variation depending on the type of category that you're dealing with? And it's something that you term to me in the past as well, Jonny. It depends whether they're business enabling or not. What's your view on that kind of variation in terms of the importance, the perceived importance of cost within different categories?

01;04;47;09 - 01;05;18;25

Lawrence Kane

Yeah. So it's absolutely critical that you, you know, what gets measured gets done. Right. And you have to align procurement metrics with the right thing for the company. So some projects it's access to capability or speed to market or wherever. I think it's a revenue generating, you know, thing where buying or whatever. If I, negotiating the best possible cost for a revenue generating thing and it takes me three months longer to get done, I've lost three months of revenue.

01;05;18;26 - 01;05;38;23

Lawrence Kane

That's stupid. Right? So every, one of the things I like to do is you have a list of, you know, 5 to 10 success criteria, depending on what you're doing and how complicated it is. And you work with the business partner, you say, okay, what are the priorities? Tell me the priority of this. Sometimes cost savings is a big deal.

01;05;38;25 - 01;05;59;15

Lawrence Kane

You know, and and that's what you need. And you're getting aerospace and defense, single digit profit margins typically, you know, cost really matters, right? But they might not be the only thing. It could be quality. It could be, you know, service. It could be access to capability. It could be speed market, whatever. If you know what success looks like, then you can be aligned and you can get the right outcome.

01;05;59;15 - 01;06;19;28

Lawrence Kane

Otherwise I can I can negotiate an awesome contract that exactly does not solve your unmet business need and harm the company and my career and you as my business partner and whatever. Right. So so you got to know what success looks like. And it's not going to be the same for everything that you do. There will always be commodity stuff.

01;06;19;28 - 01;06;44;29

Lawrence Kane

That cost is a big deal. And so cost saving, cost avoidance, you know, those are important. But usually it's value creation. Or maybe I should say for many things it's value creation. And so what is value? How do you define it. How do you measure it? You know, there's I was talking to, one of the procurement people at Amazon, and probably this is before AWS.

01;06;44;29 - 01;07;00;19

Lawrence Kane

It was a long time ago, I don't know, like 10 or 12 years ago, something like that. And we were talking about terms and conditions, and I said, you know what? There is these ones that really matter to us. And, you know, what about you guys anyway? I don't care. Like, like, how can you not care about terms and conditions?

01;07;00;19 - 01;07;23;07

Lawrence Kane

And he goes, son, this is this is I think I'm remembering this exactly the way he said it. Son. I have more money than God. What the hell do I care about? Risk. Okay, this was Amazon back then. I mean, nowadays they do because they actually sell it, right? But back then. Okay, I get it. I've never talked to a company that they care about risk before.

01;07;23;07 - 01;07;46;18

Lawrence Kane

But you know, back then, at least that's what he told me, right? Yeah. That's a very different perspective than aerospace defense, which is a massively risk averse company. I mean, you should be, right. You're making you're making airplanes or helicopters or things that you never want to blow up, or missile systems or nukes or whatever, the things you always want to blow up and you better get it right, you know?

01;07;46;18 - 01;08;17;16

Lawrence Kane

And so, you know, it's a very, very risk averse industry as opposed to, you know, Amazon at least pre before they started selling, you know, infrastructure platforms as a service. You know, they were all about growth. They just didn't care about risk. Right. And they had tons of profit. I mean I, I knew a guy I kind of stopped knowing but that, there's a guy who's a acquaintance of mine who was like employee number 38 or something like that.

01;08;17;18 - 01;08;35;26

Lawrence Kane

I mean, very early on. And he's got a house that was designed by Frank Lloyd Wright, and he's got a, like, a $300 million yacht. I mean, yeah, money wasn't an object back then, you know? I mean, because if you're paying people that much, you gotta be making a heck of a lot of profit, right? I imagine nowadays the profit margin probably isn't that high.

01;08;35;28 - 01;08;42;19

Lawrence Kane

But, you know, if you're, if you're an IT or a tech company, profit margins tend to be 30, 40, 50%. Right.

01;08;42;22 - 01;09;00;20

Jonny Dunning

It's not I would say that some of the, some of the banks, some of the banks even take that approach, which you, you, you know, in terms of some of the, some of the services side of things where in terms of cost savings, they just they're not really bothered risk. They are it's so, so kind of the opposite, the opposite to that approach.

01;09;00;20 - 01;09;04;27

Jonny Dunning

But but cost they just yeah they're not really bothered about saving cost I think.

01;09;04;27 - 01;09;23;19

Lawrence Kane

But that gets down to what's important to the company. Right. What's your business model. What matters because it's you know, you might be right, depending on who the company is. Right. Or you might be all you care about is monitoring risk. You really don't care what something costs, and you're willing to pay extra to have less risk, right, in other kinds of companies or industries.

01;09;23;24 - 01;09;46;04

Lawrence Kane

Ya. So you got to know what that success looks like and have that alignment from a business strategy to, let's say you're buying it, you know, business strategy to IT, strategy to IT ecosystem to, you know, specific thing you're buying. And how does all that fit together? And how do you make sure you're doing the right thing, where you plugging in a service that's consistent and aligned with all of that stuff?

01;09;46;04 - 01;09;47;11

Lawrence Kane

Right.

01;09;47;13 - 01;10;24;09

Jonny Dunning

So that perfectly brings us to to round things up with the last point I wanted to cover, which which kind of pulls everything together really, which is looking at that concept of value and, and supplier value and just really looking at how organizations can actually prioritize for that to be their their outcome. What's your view on that in terms of the steps they can take, the things that the things and people and processes and technology that needs to be in place to do, to actually prioritize getting the best possible value from their suppliers.

01;10;24;11 - 01;10;48;00

Lawrence Kane

Sure. So, you know, part of that. So if you look at like people process stuff, right, you either need to be a requirement of people to actually go to procurement, or you have to be so good at your job that they want to. Right? Because if you don't, if you don't have that, you don't have anything, but then you got all you have to have people who are capable, you know, like, I give you a trusted advisor and have a seat at the table, but you have nothing intelligent to say.

01;10;48;07 - 01;11;23;21

Lawrence Kane

You're not gonna have very many conversations, right? It's going to, you know, it's going to stop pretty quick. So you got to have the process and alignment to the business so that you can have the right conversations and the people who have the knowledge, skill and ability to have them. You also need to have tools and data so that you can make informed recommendations or decisions because, you know, if you have, for example, really bad spend analytics and you don't have good category plans because you can't get the data, well, you can guess about stuff, but you're not going to be right because you don't have the information needed to to make it happen.

01;11;23;24 - 01;11;43;26

Lawrence Kane

Right. So you got to have that people process tools, data, alignment to the business and understand, like you don't necessarily have to, you know, like the example for when I was doing, you know, building engines. Right? I'm not a mechanic. I'm not an engineer. I couldn't, you know, you put me down there and, you know, hand me a set of tools and say, build this engine.

01;11;43;28 - 01;12;04;25

Lawrence Kane

Yeah. That's not going to happen. Or you're not going to want to buy it if I'm the guy that built it. Right. But I understood it. And so you don't necessarily have to do the work, but you have to understand the work. You have to understand the business model. You have to understand how does your company differentiate itself, make money, etc., and how does your supplier ecosystem enable that?

01;12;04;27 - 01;12;26;05

Lawrence Kane

And make sure going back to that whole core context thing, right, make sure you're only buying the stuff that you should buy. A lot of companies let their core process knowledge drift off into their suppliers, and all of a sudden like, well, now, you know, because, you know, it's starting to make a shortsighted decision. And how do you maintain your competitive advantage?

01;12;26;11 - 01;12;59;29

Lawrence Kane

If a supplier who could either be terminated tomorrow or quit or go out of business or whatever, own stuff that you need to be successful. So make sure you're out sourcing the right things in sourcing the right things, you're doing a strategic way that furthers the business goals and objectives of the enterprise that you've got, the relationships with the decision makers, and you've got the, you know, the data to be able to provide good business cases and other, you know, enabling, artifacts to have those conversations.

01;12;59;29 - 01;13;02;12

Lawrence Kane

Right? Because you can't just go wave your arms. You have to.

01;13;02;15 - 01;13;05;22

Jonny Dunning

Yeah, you got to evidence 100%.

01;13;05;25 - 01;13;08;16

Lawrence Kane

Yeah. Evidence. And I love that term. Yeah. Exactly.

01;13;08;18 - 01;13;26;21

Jonny Dunning

Yeah. The and you know what? That's that's a nice point to come to a conclusion on in the sense that what that really comes back to. Well, to a certain extent, what it comes back to is one of the things you said at the beginning, which is when you were talking about outsourcing and the growth of outsourcing, focus on what you're good at.

01;13;26;23 - 01;13;45;23

Jonny Dunning

Don't. But yeah, you know, leverage, leverage the benefits in those areas where it makes most sense. Don't try and compete with the things that you're good at doing internally. Or like you say, let that knowledge slip out of the company. But but there's no point in trying to spin your wheels doing things that are not the most effective use of your time.

01;13;45;26 - 01;14;06;15

Lawrence Kane

Yeah, I totally agree. And part of that is the what, not the how, right? The, because the technology will keep changing as we talked about earlier. So the how you do stuff is probably going to evolve fairly frequently, maybe even very, very rapidly. You know, like you're looking at AI, Gen-AI, things like that. The what you do still matters, right?

01;14;06;15 - 01;14;31;22

Lawrence Kane

So, you know, you can have, AI doing something for you as an example. But if you don't know enough to validate that it's doing it correctly, you're in a lot of trouble. Races, not just hallucinations that are problem. It's you get an answer that you're certain of because the machine told you that that is precisely incorrect. And that happens all the time.

01;14;31;24 - 01;14;49;23

Lawrence Kane

And so you have to have the expertise to be a good buyer of services. When you're in in procurement, you also have to have the expertise to be a good user of whatever it is that you buy. In this case, when we in it probably not. Or, you know, if it's an actuarial model in finance or whatever. Right.

01;14;49;26 - 01;15;06;00

Lawrence Kane

Not so procurement people doing that. But the point is, you know, if you go, oh, I no longer need to do this thing, I'm just going to have, you know, it, do it for me. It's like Warren. Well, wait a minute. How do you know if it's wrong? Right. And there's regulation, too. I mean, I work for an insurance company.

01;15;06;03 - 01;15;28;06

Lawrence Kane

You can't make a claim decision with AI without human involved in the loop. It's illegal, at least in the United States. So, you know, there's there's a lot of, complexity to this stuff. And we in procurement can really add a lot of value, simply by drawing the dots for, for folks and saying, hey, I can buy this stuff for you.

01;15;28;06 - 01;15;46;19

Lawrence Kane

Great. But here are some things you need to think about and and remediate or retain in order to be able to be a good steward of whatever this thing is that I just bought for you. And, you know, it's kind of the, you know, you you go back in time to cavemen and, you know, give them a lighter.

01;15;46;19 - 01;15;55;11

Lawrence Kane

Okay. Well, fire is easier now, but let's like, teach how to where, how and where to build the fire if something bad's going to happen, right?

01;15;55;13 - 01;16;17;28

Jonny Dunning

Yeah, absolutely brilliant stuff. Listen, thank you so much there. It's a really appreciate it. There's some great insights in there. And I think tied in with what you're saying about that approach of understanding what you're buying. And linking it into business value is this concept of procurement being effectively connected up with the, with the strategic objectives of the business?

01;16;17;28 - 01;16;37;22

Jonny Dunning

So, yeah, I think that all comes together really nicely. And, really enjoyed our chat. I will definitely be looking you up on Amazon and, checking out, checking out your, your work in that area on the authoring side. Thanks. And the one thing I'll also say to other people is you do sometimes you do sometimes get involved in the LinkedIn side.

01;16;37;22 - 01;16;44;03

Jonny Dunning

I've noticed, you know, time to time, so, so obviously, people can find you there as well. But yeah.

01;16;44;05 - 01;17;03;13

Lawrence Kane

Actually, if you want to connect on LinkedIn, you know, feel free to reach out. You know, if you're just in the books, like Stadium Amazon, I mean, the one that's most directly relevant to our conversation is Contract professionals Playbook, which I will say, it's kind of like a law textbook. So it is not the it's not the fun, exciting story.

01;17;03;15 - 01;17;14;23

Lawrence Kane

Those of us in procurement will find a ton of value in it. If you've got friends who are, say, in marketing and they're having trouble sleeping, it would be great as a is, you know, put them to sleep. But for us it's actually useful stuff.

01;17;14;28 - 01;17;30;03

Jonny Dunning

Well, you know what I'd say that, you know, the combination of you and you, that you could bring that sort of thing to life really well, on a note is that is that is mentioned on your LinkedIn profile so people can find people can get an idea of that. But yeah, it's been really interesting chat. Thank you very much for joining me.

01;17;30;06 - 01;17;34;27

Jonny Dunning

And yeah, I think there's some interesting points there to ponder. Thank you.

01;17;34;29 - 01;17;51;03

Lawrence Kane

Thanks, Johnny. Always appreciate the opportunity to talk about this stuff. As you tell I, you know, I love sourcing procurement. It's it's, you know, for us here in the business, it's awesome. And, you know, it's, it's something that that we really can make a big difference for the organizations work for if we do.

01;17;51;03 - 01;17;51;24

Lawrence Kane

Right?

01;17;51;26 - 01;18;08;17

Jonny Dunning

Yeah. And and it's brilliant to get the message out there. And I think there needs to be more dialog and, more openness. And, and I appreciate the way that you approach that, because I think it's really useful for other people to be able to to hear those insights and, and take advantage of, of the experience and knowledge that, that people like you have got.

01;18;08;17 - 01;18;10;23

Jonny Dunning

So, yeah, very much appreciated. Thank you very much.