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Category Management, Domain vs. Sourcing Expertise

by Ted Weyn, Managing Partner

What is more valuable to a sourcing/procurement organization, Category Managers with strong sourcing expertise, or individuals with strong domain (direct experience and knowledge from the category/industry that they manage) expertise?

As we continue to work with organizations in both procurement transformation and category management outsourcing, we are seeing an Category Management Outsourcingincreased desire to have category managers who come from the industry for the category in which they will be assigned to manage.  There seems to be an accelerated value creation and a decreased learning curve for these “domain experts”.  The “hire a thief to catch a thief” approach seems to be returning great dividends for companies who are recruiting and deploying such resources.

Question: “Would it take me longer to teach an industry expert sourcing or a sourcing expert a specific industry”?

In certain indirect services categories we are seeing companies hiring travel industry experts to manage the travel category; hiring print services professionals from Xerox, Canon and others to manage print services; etc.  The value comes when the “expert” intimately understanding the suppliers business formulas and profit areas and can leverage the knowledge in a meaningful and balanced way to the suppliers. This is not about gaining supplier cost elements so a company can “squeeze” the supplier on price. It’s also about providing insight as to how best to achieve savings given the suppliers cost and margin structures; how to managed suppliers needs based on intrinsic value; what KPI’s to consider, what value is the company to the supplier, and how to make the relationships more strategic.

Another value of the domain expert is in the difficult to manage and impact categories like legal and marketing.  These require longer term approaches for procurement to penetrate effectively but can have accelerated results when the industry domain expert is brought to the equation.  We’ve all  experience the “leper syndrome” of departmental heads screaming down the hallways when procurement calls a meeting to discuss their expenditures with them.  Visions of budget cuts and lost supplier relationships makes the entire department breakout in a cold sweat.  This is a big exercise in change management for procurement but if executed properly and in delivering industry domain informed resources, can identify areas of value creation before anyone calls for an expenditure review meeting.

Invest in the department. Lend them your expertise as a resource for a limited time. Allow them to become a trusted adviser.  You’ll be amazed what the department will share with you and your team if they know you’re there to help them get more for less or more for the same. The best case studies in marketing, legal, call center, and other tough departments are where procurement brought value first, savings second.

Ironically, the same thing the sales people who are calling you each day are trying to do in becoming a “trusted advisor” is the same things you need to do to the lines of business to get them to afford you the opportunity to help them.  Maybe the consumer needs to learn from the supplier.

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Tags: category management, category managers, domain expert, domain experts, indirect procurement, indirect services, industry expert, management outsourcing, procurement consulting services, procurement organization, procurement services, procurement transformation, services professionals, strategic procurement, travel category, travel industry experts,

12 Comments »

  1. An interesting question Ted…I would suggest an equal helping of skills from both sides of the fence to adequately fulfill stakeholder expectations.
    In order to complete the end to end engagement across any category sourcing & management event, the individual / team would be required to demonstrate subject matter knowledge through the following tasks:

    ~ Outline & explain the business planning process.
    ~ Confirm how the process can be used to identify business projects & activities.
    ~ Analise spend and identify key business units for each category.
    ~ Identify business unit strategies,plans & objectives.
    ~ Create & sell a compelling event to stakeholders to obtain their support.
    ~ Undertake a high level review of category (PESTLE).
    ~ Provide a benefits analysis (qualitative / quantitative).
    ~ Define synergies between sub-category taxonomy.
    ~ Summarize findings / issues & present to regularly to stakeholders.
    ~ Work through findings with stakeholders & agree priority projects.
    ~ Create a category wave plan & obtain stakeholder approval.
    ~ Confirm acceptability from stakeholders of category strategy & target savings.
    ~ Develop a resource plan complete with project plan & objectives.

    In summary a Category Manager is required to demonstrate SME capabilities in both Strategic Sourcing & Category Taxonomy if they are to create the compelling event that will ultimately take their stakeholders on a positive journey. The absence of any of the above skills may well compromise the integrity & credibility of both individual and team.

    Comment by Asley Collins (Australia) — July 27, 2010 @ 10:12 am

  2. Ashley,

    Great insight. The items you list are great action items for any category manager to measure against. However, let me push the point a little further through this analogy.

    For those of us who ever played sports, we’ve had numerous coaches in our lives. Question: Were the coaches who had played the game at a high level more credible and more valuable to you than those that didn’t?

    Now, I understand that this a balance of Art and Science, but when I played Lacrosse at a collegiate level our coach was a football coach who never played the game. While he was a good coach and led us to two consecutive championship seasons, he wasn’t as credible to the team as the leaders on the team who had played the game. Especially those who transferred in from stronger level schools.

    I have a medical systems client who is always looking for trainers on their system. The challenge for them recruiting is that they need software trainers with clinical experience. Why? Because Doctors and Nurses walk out of the training if the individual telling them what to do hasn’t ever done it before.

    So, if I were tasked to build a procurement group tasked to gain results from indirect services especially, I would look to domain experts for sure, first. Then, to your point Ashley, support them with a strong sourcing and procurement practice methodology.

    Comment by Ted Weyn — July 27, 2010 @ 10:47 am

  3. Hi Ted,
    The answer to your question is that you need an industry specialized procurement person to perform a top procurement department / function.
    In the past you could see an experienced Technical Manager becoming Head of Procurement (See Kraft for ex) because some companies realized that in order to get the best value for money without compromising the efficiency of Ops you needed someone in Procurement that could understand the specific and sometimes very functional raw material.
    Time is changing and you start seeing procurement industry specialized born professional that approach the market already with the basic knowledge of Procurement and the specific industry. Europe is leading this change back from the education system up to the employment market. The double degrees allow people to gain the basic skills to be for example a procurement person specialized in a particular industry.
    These cross functional Procurement professional will lead the future of this function…

    Comment by Frederico A. Bettini (Australia) — July 27, 2010 @ 10:50 am

  4. Frederico,

    Do you think a double degree of academics, let’s say business and agriculture, can be or is better than hiring a individual who has worked in the industry and teach them sourcing? What I love about the book, What They Don’t Teach You at Harvard Business School, by Mark H. McCormack, really demonstrates that experience tends to be more valuable than academia…

    Just my opinion.

    Comment by Ted Weyn — July 27, 2010 @ 11:01 am

  5. Ted,

    Here are a few of my thoughts:

    1) Your sports analogy is an interesting one. I coach wrestling, and I think I’m pretty good at it (If having successful “students” is a measurement of your success). That said, I am a good wrestler, and have done it for a long time, but I never achieved the level of success that I should have. I have coached with and learned from EXCELLENT wrestlers. Some of them are great coaches, others are great wrestlers, but cannot translate what they know. Finding someone who can simplify what they know to a few steps or principles tends to work best (so taking what is complicated and translating it to the audience is probably most important). With wrestling, the higher the level you are at, the more important it is to have a coach who achieved more than you have. That is not to say that a really smart individual, that is a scientist or studier of the game, can’t really help someone achieve.

    2) I’m not a big believer in academics or degrees or certifications being a good judge of what someone will achieve. You need someone that wants to learn, continues to grow as an individual, and has a passion for customer care if you want an excellent Procurement/Supply Chain performer. Just knowing what button to push is never enough, you have to understand the application, the potential outcomes, and be ready to make adjustments on the fly.

    3) Lastly, expertise itself is a funny thing. I find that most Procurement/Sourcing experts understand markets well, but companies and individuals poorly. Knowing what drives the sales person (quarter or year end, increased compensation for a selling one item vs another, being good at selling one type of good or service vs another) and the companies that you are considering, may be more important than understanding the domain itself.

    I fear that we push people to be highly specialized because we are getting lazy. It is easy to say I want them to have these 3 or 4 letters after their name, or this specific degree, or that amount of “time in”, than it is to look for someone who is smart, has certain attributes, is adaptable, and truly understands customer care/service.

    Comment by Michael Kubik — July 27, 2010 @ 5:19 pm

  6. Michael,

    So, if I can summarize:

    1) It has to be a balance of experience and knowledge that provides the best category manager. Not all good athletes are good coaches and not all good coaches were good athletes…

    2) Attitude over Diploma wins every time.

    3) Know your client or the constituents you serve. Invest time and resources in understanding their needs. Seek to understand before being understood.

    I get it. I agree.

    Comment by Ted Weyn — July 27, 2010 @ 5:25 pm

  7. Ted,

    You raise an interesting question, and it’s a choice that procurement leaders often have to make in the hiring process.

    In my experience, I’ve found that the most successful category managers have strong domain experience and expertise. Purchasing experience is helpful, but it’s more important to have critical thinking, negotiation and communications skills than years of traditional purchasing.

    Domain expertise gives credibility with the internal clients, and with vendors. It helps the category manager earn a “seat at the table” with internal stakeholders; and it discourages suppliers from “trying to pull the wool” over procurement’s eyes.

    But, I’ve found that domain experience by itself, is still only part of the equation. Category managers must have excellent analytical skills, and critical thinking ability. They must be able to find solutions, create compromises, and then implement and communicate.

    Just my thoughts ….

    Comment by Canda Rozier — July 28, 2010 @ 11:00 am

  8. Canda,

    Thanks for weighing in!! We appreciate your experience and insights. Sounds like much of the feedback from the conversation is supportive of a balanced approach to the hiring of a category manager, however, clearly domain expertise in the hiring of the individual has clear benefits on a 360 degree basis.

    Comment by Ted Weyn — July 28, 2010 @ 2:23 pm

  9. I think both ways are necessary but it depends what the strategy and focus the company intends to hire.
    Maybe the company has somebody that works on SCM with academics skills but needs an experienced employee to full their needs.

    Comment by Fabricio Batista — July 28, 2010 @ 2:25 pm

  10. Not sure if I gave the wrong impression here…
    I am not denying the value of experience; I actually think the experience is a MUST to be a good Category Manager. The procurement function evolution is getting more and more cross functional, this is the reason why I think that a cross education is the first right step to become a successful procurement professional.
    Ted, I have seen talents coming from the street and talents coming from Harvard…..

    Comment by Federico A. Bettini (Australia) — July 28, 2010 @ 2:26 pm

  11. Federico,

    As Canada Rozier, former CPO with First Data, weighed in above, it sound like much of the feedback from the conversation is supportive of a balanced approach to the hiring of a category managers

    And it seems that all believe that domain expertise in the hiring of the individual has clear benefits on a 360 degree basis.”

    Great dialogue…

    Comment by Ted Weyn — July 28, 2010 @ 2:38 pm

  12. A fair analogy Ted…I have played sport & been managed by individuals that emanate from entirely different backgrounds to those which they have become responsible.
    I have seen both succeed & fail for differing reasons.
    Good luck with the hunt for those with the right blend of skills to satisfy your clients needs.
    Regards
    Ashley

    Comment by Ashley Collins (Australia) — July 28, 2010 @ 2:52 pm

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