Client Insights, Managing Consultant, IBM Center for Applied Insights
This is my third post in our series about research into changing sourcing strategy and execution. My first post looked at how leaders are taking a broader and more strategic view of sourcing relationships. In the second, I looked at the dramatic financial impact of sourcing decision-making (2x the revenue growth and 5x the gross profit growth compared to their peers!). Here, I’ll explore top business priorities and partner capabilities Enterprise Innovators are looking at to structure, scope, and govern these shifting sourcing relationships.
Priorities are shifting and capabilities must adapt to match
Enterprise Innovators include enterprises which put a greater focus on innovation and sourcing for a broad set of capabilities. Agility and market responsiveness are key differentiators. If they are going to get the rapid innovation and growth they seek, they need specific capabilities from their chosen partners.
Enterprise Innovators are looking for providers that can help them wherever they want to go:
- Geographic specific experience and expertise
- Proven physical and IT infrastructure
- Flexible, integrated supply chains
- Creative approaches to existing channels
- Proactive ideas for new technology
Enterprise Innovators are experimenting with new business models along the way, trying to learn quickly and driving new ideas to results. If partners cannot respond, they may be left behind.
As I’ve said, these leaders are seeking a different kind of provider, in truth, a different type of relationship. To accomplish their business objectives, they recognize the need to alter the way they structure and manage their long-term alliances. Key facets of this change is outcome visibility, a focus on transformation (not just moving capabilities), and keeping all players involved in governance.
How can we see success?
Historically, service level agreements have focused on operational or cost-centric measures like system availability or cost per service desk call. But new leaders are aligning measurements with business priorities. In the financial services sector, that might mean driving uptake in mobile banking; in the telco industry, it might be lowering subscriber acquisition cost or increasing up- and cross-sell rates; or for a retailer, it might involve meeting an aggressive roll-out schedule for expansion into a new market. This shift in thinking gives rise to new vendor valuation models – ones that can help assess a provider’s contribution to broader business objectives beyond cost reduction.
Must everything change?
Enterprise Innovators are sourcing to get capabilities they need to innovate on a broad scale. So there’s a transformative bent to their sourcing relationships. Their contracts are more likely to be vertically integrated – they may include business process, applications and technology infrastructure – to enable more holistic change.
Enterprise Innovators are more likely to engage partners for specific industry or functional expertise which they can leverage to transform the roles of their employees. If their aim is marketing innovation and they’re sourcing analytics capabilities, they want their partner to do more than just provide a basic service – they want help reshaping how the marketing function works – to drive beyond understanding customer segments to understanding individual customers, from describing what’s happening to predicting what’s next.
Can we just work together?
Enterprise Innovators are pushing faster toward enterprise-wide governance. Because they’re focused on results, they recognize the need for input and collaboration across all the business units and providers involved. If the goal is accelerating the launch of new products and services, then marketing, manufacturing, distribution and sales may all need a voice in related services sourcing decisions.
This post concludes my three part series on sourcing market shifts. Want to continue the conversation? To learn more, visit our page and download the whitepaper!