Originally published by Proxima, Ian Ingram writes...
Growth is back on the agenda. Actually, in an increasingly lumpy economy, for many businesses it never went away, despite the vicissitudes of national and regional economies. (“Vicissitudes”? Well, the UK grew robustly in Q4 2014, then posted its slowest GDP gains for three years in Q1 2015…) And with the ongoing prevalence of risk in many markets, we’re in a period where organisations want to expand, but just don’t seem ready to invest, spend and grow in the way that macroeconomic data suggests they should.
In other words, there’s tension in the system. We should be growing. But we’re worried about doing so.
It is still true that a rising tide lifts all boats though. GDP growth might not exactly be setting the world on fire here in the UK, but some fascinating M&A activity (forecasts are for 8% more activity in H1, year-on-year) and even some radical structural changes are creating a sense of real opportunity for many businesses. Quite apart from anything else, everyone is global now. So if growth in one market stutters, you can be sure there will be growth somewhere else to take up the slack.
So while it’s important not to gloss over the “risk” mentioned above – seriously, the world remains a dark and frightening place full of uncertainty – it seems perverse to issue a warning about the perils of individual companies growing.
But, there’s a reason that more companies go bust during an upturn than a recession. Once companies start to get busy, once they’re growing revenues and undertaking more activity, they scale up everything. And if “everything” includes problems like poor cash flow management or lax controls, they’re building up monsters easily capable of bringing them down. Big new order? Great. Sudden over-exposure of a third party manufacturer? Not so great...
That is particularly true of procurement. It’s a bit clichéd to talk about how every process has to become a “platform” if it’s to scale properly. But in the case of procurement, that’s spot on. If your procurement function is a set of contracts or negotiations; even if it’s a set of rules around particular product categories - and especially if it’s a set of processes for sourcing and signing off external purchases - it’s just going to get horribly complex and bloated as you grow.
If it’s a mindset, a set of behaviours, or a conceptual objective? That’s got limitless capacity to support all sorts of growth and innovation.