Clyde Dornier is a familiar and hugely respected figure within the global sourcing and procurement community, having served as CPO for both Visa and the Freeman Companies. We got together with Clyde at April's SIG Summit in Orlando, Florida, to get his thoughts on the key trends driving change within procurement globally - and to ask him to design the perfect organisation...
Outsource: Clyde, let’s begin as usual with some background. Can you tell us a little about yourself?
Clyde Dornier: I’ve been out in the world of work for about 30 years. I started my career in the military; I worked in the food industry for a number of years; I worked for various consulting companies for a number of years. I left consulting in 2012 and became the CPO for Visa; then in 2015 moved to become CPO for the Freeman Companies, the largest provider of trade shows and exposition services in the world. In both cases I was brought in as a transformation change agent to improve capabilities; now, the Freeman Companies have decided to move back to a decentralised model, so there’s no need for a Chief Procurement Officer, so I’m currently out looking for the next big thing…
O: We’re here at the SIG Summit - and of course you’re a long-time friend of SIG….
CD: I am! I’ve been affiliated with SIG for probably six years now.
O: Over that time – and indeed during your while career prior to that – you’ve developed a strong perspective on outsourcing which might differ from many of those being discussed here at the Summit. Can you explain why this is?
CD: Certainly. For me, outsourcing is an outcome. I believe that outsourcing is a type of transaction that gets executed and that the fundamentals associated with an outsourcing transaction are no different from those associated with any other contract that gets developed; and I believe that if you find the set of practices that work for your organisation, and the set of talent that’s able to think strategically as well as practically – and if you provide them with the right tools and the right information, the right structure and the right guidance, you generate the same outcomes regardless of whether you’re outsourcing a thousand people and $100m of spend to Bangalore, or finding someone to come and mow the grass.
Now, obviously the impact to the organisation is dramatically different – dramatically different – and so the outsourcing contract has much more complexity and much higher visibility. But the fundamentals are the same. They’re part of a process and an operating model that can not only be designed, but measured, monitored, and its outcomes can be made to be consistent regardless of what you’re buying.
My background’s in the army, and I’ll use an army analogy: there’s no difference in buying beans and bullets. You buy them exactly the same way – and the same way they’ve been bought for a thousand years. What’s changed in our business is the technology and the people associated with trying to execute those transactions. People and technology, and the sophistication of both of those, have driven our industry and our discipline to look different from how it might have looked to someone doing our job three, four, five generations ago. But I guarantee you that someone who was good at what we do a century ago would come up to speed very quickly on what we do now; they’d recognise what we’re doing.
O: Let’s go back to mowing the lawn – if we look at facilities management (one of the earliest activities to which the outsourcing model was applied), you’re right, conceptually there’s not much of a leap. The question that comes to mind immediately then is, are we in danger of overcomplicating matters? Have we made outsourcing too complex, too professionalised, too deep, and missed what should actually be an elegant simplicity?
CD: I think in some cases we’ve applied controls and processes for things that don’t require that level of sophistication. Most procurement organisations fail because they attempt to implement a one-size-fits-all model. If outsourcing is the most complicated thing that they do, they apply many of the same controls to something much less complicated. I believe that as leaders we have to be able to scale the levels of complexity with the levels of complexity of the deal. I think, yes, as a discipline we’ve made our business more complicated than it needs to be; by the same token I believe that the people who are really really good at what we do have figured out that there is a continuum of complexity that’s related to the levels of complexity and risk in a given deal, and they’ve figured out how to scale along that continuum the robustness of the processes necessary to match that complexity.
O: If we look at that continuum, at one end now we may have something as apparently simple as an off-the-shelf cloud deal, where the only negotiation really is on price, and at the other we still have the huge multi-geography, multi-function, multiple subcontractor deals. Do we need different kinds of professionals working along different parts of that continuum? Or is it still possible to be an effective sourcing professional with visibility over all of that?
CD: I believe that from a pure sourcing standpoint, a true sourcing professional can work along that spectrum. Practically speaking, though, it makes more sense to have subject matter experts in the particular commodity – in this case complex outsourcing, or SaaS – someone who has an understanding of that marketplace and also possesses sourcing skill. Absent that, someone who is very good at the sourcing process and who can think things through from a sourcing standpoint and in accordance with what’s best for the business, what’s the best way to acquire something, can be complemented with a subject matter expert or multiple experts who can then support the deal as a team, versus a single sourcing professional.
I can tell you that in the past we actually filled some of our commodity manager positions with salespeople who were working in the field, who were doing IT hardware and software sales, and SaaS; we hired them because it was easier to take someone who was an expert in the marketplace and teach them how to be a sourcing professional than it was to find somebody who was expert in the sourcing process and an expert in the niche marketplace. That was like trying to find a purple squirrel… If you can’t find that, then you focus on the best way to solve that problem, whether by teaming, or training and development, or whatever. The fact of the matter is that good sourcing professionals are generally just pretty smart people who have a good well-rounded background – and if you get those all-round athletes you can teach them the sourcing process pretty quickly. It’s not rocket science. You don’t have to have a physics degree to be good at sourcing – though it helps! – as long as you’re a smart person who can figure things out and can gain expertise in a particular market.
O: What about the role of the sourcing advisor in that? Do you need to retain internally those subject matter experts, if the number of deals that you’re doing in any given 12-month period might not be particularly high? Is that not a set of work that could and should be taken up by the advisory community?
CD: Absolutely it is. It doesn’t make sense for many companies to invest to create the intellectual capital internally for the number of deals that they’re doing. Interestingly enough the advisory community is fantastic in a lot of different industries, not just outsourcing: telecoms is a great example of that, as is marketing. You can use outside advisors to augment the knowledge that you have – and in that case the difference in the structure is: the sourcing professional, who manages the sourcing process and who ensures we’re doing the best for the company; the advisor, who brings market expertise; and the business customer, who brings less market expertise but an understanding of the requirements. Those three entities get together, along with anyone else who needs to augment that group – legal, finance etc – and they then form that brain trust. In that sense, there’s a tremendous amount of value that the advisor community brings across a broad spectrum of categories.
O: Do you think the advisory community are effectively focussed on delivering that value? Or is there an opportunity there which isn’t fully being taken up?
CD: I haven’t yet met anyone from an advisory firm who I felt was malicious or negligently doing something they shouldn’t be doing. However as a sourcing professional you have to be as careful of advisors as of anyone else: we have a saying here, “don’t take advice from your insurance agent!”, and the same principle applies. The buyer has to be aware and has to use multiple sources of data to validate what the advisor’s telling them, to ensure that they really are getting the right story. Advisory firms are like any other firm, and advisors are like the rest of us: we’re only as good as the due diligence that we do, and the education that we proactively go out and get about a particular market. As sourcing professionals and as business users who are trying to leverage the sourcing process to fulfil a specific need, we have to be diligent about making sure that the advisors are doing the job and bringing the expertise that we expect. And, again, most of the advisors that I know do the best job with that.
O: Let’s look at this SIG Summit specifically. What have been the most interesting topics you’ve heard raised thus far?
CD: For me coming to SIG is a reaffirmation that sourcing and procurement work if the fundamentals are applied and if we think about the world as I described it earlier from a sourcing standpoint. I think there are several things this time round that have particularly interested me. One, there have been a lot more companies facing transformation than I would have expected; I’ve been in several sessions where over half of the people indicated that they were going through some form of transformation (and often major transformation). It surprises me that that’s the case. I wonder if it’s due to changes to technology, or to talent – the Millennial effect, perhaps.
The second thing is the chasm between what I describe as the haves and have-nots: those who get it, and do it well, are thinking about the world in dramatically different ways from those who don’t. I’ve said this in other forums: for years I believed there was a convergence where the haves and have-nots were coming together, but I now believe that that’s not the case. I believe they’re on much more divergent paths, and that the folks who get it are starting to increase the rate of learning and performance at a faster pace – and I think the folks who don’t get it are racing to the bottom faster than they were in the past.
And then I think a third thing I’ve got out of this – and this is based on personal experiences of the past five years – I think most of us who attend SIG Summits share a frustration that senior executives (CEOs in particular) don’t understand the value we provide, and are still stuck in the paradigm of “Go get me money! And go save me money so I can do something else!” – and the reality is that if we do all the things I said earlier – right people, right controls, right process, right systems, right behaviour, right thought processes – the money falls out of the sky! You don’t even have to use it as a measure because there’s so much of it! And I think we’ve done, and continue to do, a poor job of educating senior executives about what we really ought to be doing to drive value versus the perception for generations that we were the guys who negotiated and beat up the supplier to save money. It just doesn’t work anymore.
O: So: imagine you’re given a huge sum of money – hundreds of billions – and are told to go and build yourself a Fortune 50 company. What does your sourcing function look like? You can design it however you want, in whatever way makes most sense to you: what it is?
CD: Do I have to have a sourcing organisation?
CD: OK, so I would take as much money as possible and invest it in the things that add value: product, research, market strategy, all those things that would drive value and turn our hundreds of billions into more hundreds of billions. I would take everything that’s not value-added and I would go and find the best people in the market who could do it for me, and I would form long-term, strong partnering relationships with them and the right kind of teaming and partnering approach to ensure that they would drive value. In the case of sourcing, I would go and find somebody who’s really, really good on the sourcing side; I would also go find someone really good on the transactional side. I see sourcing as working horizontally, and taking a holistic view of how the world should work. Transaction processing from a P2P standpoint is very narrow but super-deep and hyperfocussed on the accuracy of the information. If the information’s good it creates a virtuous cycle where sourcing performance is improved, and there’s a positive impact upon the behaviour of suppliers and employees, which translates into better processes and better information – and thus again and again. I would not invest in reinventing anything on my own; I’d work out ways to optimise it on the front end to grow the organisation.
O: That’s a great piece of evangelising for outsourcing! Do you have a Chief Vendor Management Officer role in mind? If you’re going out to suppliers to do all that work for you, what’s the governance structure?
CD: There have to be two different dimensions to the governance structure. One is strategic, to ensure we have the right mix of partners doing the right things to support the business not only today but based on what we think the future is going to look like. The second is operational, to make sure someone is minding the store. I absolutely think that as part of this hypothetical organisation you’d have to have people in place minding those relationships – and here’s why I think that’s a retained function: the management of those suppliers becomes a core competency in an organisation that doesn’t have all that organically. If you have all that organically, that becomes the role of the Chief Operating Officer to ensure that those functions are all working together; so you’re replacing an internal function that would exist if you grew it organically with a different kind of internal organisation – but the value that would exist in both of those is comparable.