Tomorrow, I am moderating the monthly member call for the LinkedIn Strategic Sourcing & Procurement group. This month’s topic is KPIs. So please join us if you have KPI questions or insights, or if you’d just like to hear your peers engaged in a lively discussion of the subject.

The details: [Read more →]

The glory days of the Private Equity (PE) world are certainly not over but they are changing. Firms today are struggling to attract new investments and to manage the portfolio companies they own.

The days of the quick buy and sell are long gone. The PE firms today are faced with attempting to figure out how to build value not through financial engineering but old fashion efficiencies and growth. Today’s economy has made most companies focus on the way they operate and gain efficiencies in buying, selling and managing cash flows. Sounds pretty basic but today those principals are the driving factors in where the portfolio companies need to be. With cash inflows slowing the firms are forced to make difficult decisions on where to invest the capital. The portfolio companies may not have the resources to go it alone.

The larger PE firms are beginning to look at how they can leverage [Read more →]

Last week, we shared key findings from a Saugatuck-BusinessWeek study of more than 400 C-level executives pointing toward economic recovery in the coming year. The study, Shifting C-Level Business Priorities as the Recovery Take Hold,  found that top execs surveyed have traded in their recent cost-cutting myopia for a focus on increasing sales and revenues, penetrating new markets, and capturing market share.

Yet, businesses will take a more measured approach toward profitable growth. The study unveiled four key strategies and investments top execs (CEOs, CFOs, COOs, CIOs, CMOs) have planned for the coming year:

1. Target projects that can improve visibility into cash flow and improve working capital management. With credit still hard to come by, CEOs and CFOs are looking to “finance growth through internally generated cash flow” and alternative financing options rather than more traditional 3rd-party financing. Some examples of ways to improve cash flow in today’s tight credit environment: e-invoicing, discount management, and supply chain or receivables financing.
2. Focus on low-cost, high-impact mini-projects. This jibes with my own conversations with a CPO from the hospitality industry just last week who said, “we’re only looking at investments with quick payback; typically within months.” Some quick-hit suggestions include cutting supply chain costs through improved strategic sourcing and online bidding as well as revenue acceleration through improved contract management.
3. Consider variable or operational IT investments. The study found that more businesses are looking to shift more IT investments from a CAPEX to more variable, subscription models in order to speed projects and maintain more agility in the business. A CIO at a professional services firm indicated: “My internal customers want quick and measurable results, with long deployment or capital expenses…we’re getting more involved in SaaS and Cloud solutions.”
4. Be careful not to cut to the bone. A renewed focus on business agility means not only protecting against a double-dip recession but being able to ramp up quickly in advance of growing demand. Researchers advise not to cut too deep into staff or infrastructure. Union Pacific Railway is one company that learned this the hard way during the last recession. This go around, UP put many workers on a paid furlough, using the downturn to retrain and enhance skills — all so it could ramp up quickly when freight demand picked up. Other companies have augmented internal skills and expertise with those of external consultancies and solution providers who could help them achieve short-term goals and expand capacity without taking on fixed costs.

The Saugatuck-BusinessWeek study is a clear sign that businesses are confident we are entering a period of economic growth — albeit slow growth. It also signals that chief execs are taking more calculated approaches toward growth; thanks in large part to still-tight credit markets and uncertainty about Europe’s rebound. Focus in the near-term will remain on measured and profitable growth and a laser focus on cash flow and working capital management.

For more insights in the research findings, get a complimentary copy of the study here.

For months now, economic prognosticators have been sending mixed signals on the potential global economic recovery. Recent stock market volatility has only added to this uncertainty. Yet, a new Saugatuck-BusinessWeek study of more than 400 global C-level executives  shows clear signs that most businesses are optimistic about economic growth.

The study, Shifting C-Level Business Priorities as the Recovery Takes Hold, boldly states that “…we are solidly entering a new business cycle: expansion after the tough 2008/2009 meltdown.” This conclusion was fueled by the majority of CEOs, CFOs, COOs, CIOs, and CMOs surveyed who have made “Sales/Revenue Growth” and “Reaching New Customers” their companies’ top priorities, followed closely by “Increasing Market Share.”

Such sentiment is in stark contrast to the past two years when “decrease operational expense” — including cutting headcount — was job #1 for most top executives. Yet, there is evidence that most businesses are still cost-conscious, as execs kept “Increase Profit Margins” among their top priorities (see below figure).

Despite the generally optimistic report, researchers careful to point out that, while “growing C-level confidence and commitment that [they] can again drive the top line,” there are nuances to the recovery:

• Global GDP is expected to climb 3.1% this year and another 3.3% in 2011, reversing two years of decline.
• The rebound will be led by Asia and Latin America, fueled by hyper domestic demand and growing exports.
• The US economy has entered a phase of sustainable — albeit tempered — growth, with hiring and housing both expected to rise. Growth in the States will be fueled by continued business investments in industrial equipment and technology, predominantly to replace or upgrade outdated software or IT equipment.
• Unfortunately, Europe lags the rest of the global economy, with current growth supported by inventory replacement and government stimulus.

Upshot: While it’s not full-steam ahead, C-level execs are cautiously optimistic about the recovery. They will be looking to make calculated investments and strategies to drive profitable growth. We will examine the key strategies C-level execs have planned for growth in a future post. In the interim, access a complimentary copy of the Saugatuck-BusinessWeek study here.

Over on the International Association of Commercial Contract Management (IACCM) blog Commitment Matters, negotiation and contracts guru Tim Cummins shares some interesting research into the (im)maturity of buyer-supplier collaboration. According to a recent IACCM study, 46% of respondents feel that buyer-seller relationships are more mutually beneficial and collaborative than they were 24 months ago.

While that’s an improvement than in the past, Tim rightfully points out that collaboration is often more lip service than a committed initiative. And tough economic periods, like the one we just went through (are still in?) strain even those most committed to real buyer-seller collaboration.

Yet, my experience suggests that the post goes off base when it attempts to draw a correlation that broad use of online sourcing and spend management tools is responsible for poor buyer-seller collaboration. On the contrary, online sourcing tools actually improve buyer-seller collaboration for three key (if not more) reasons:

1. Online sourcing tools bring a transparency and openness to negotiations that is often lacking from offline negotiations.
2. Leading online sourcing tools enable greater buyer-seller collaboration during the negotiation process, often times allowing suppliers to provide alternative bundles, delivery schedules, or product or process innovation recommendations that can enhance the value of the good or service being purchased and take cost out of the system — without negatively impacting the supplier’s profit margins. Over on Ariba Exchange, my colleague, David Morel, does a great job of illustrating how online sourcing tools improve buyer-seller collaboration during the negotiation process.
   
3. Finally, we must be careful not to confuse the negotiation with the relationship. Such online tools speed sourcing cycles 50%-70%, giving buyers and sellers more time to focus on collaboration and relationship management. (In fact, we’re seeing far greater demand for our supplier collaboration and management solutions from those companies with online sourcing tools than those without.)

Bottomline: Buyers and sellers certainly need to put more commitment into their collaboration oaths. But online negotiation tools and collaboration can not only peacefully co-exist but actually can enhance one another.