Magic vs. Logic: How do you make decisions?

Humans are irrational. Did you know that 1 in 8 British men think they could take a point off Serena Williams if playing their best tennis? And more than 40% of Americans describe themselves as superstitious. We “knock on wood”, avoid walking under ladders, cross our fingers, and make wishes at 11:11.

A vast number of us are afraid of dogs, but statically only 1 in 10 million of us will die from a dog bite? Are you afraid of your bed? Maybe you should be; you have a 1 in 700k chance of dying from bed-related accidents.

But, what does this have to do with Procurement? Well, we are human and we are irrational, and we should expect our stakeholders to be the same, even though we work in a profession that has spent the last three decades using logic as our core tool.

Now think about transformation. According to McKinsey research, 70% of digital transformations fail, meaning only 1 in 4 succeeds. Transformation failure could kill your procurement function’s reputation. So really, should we be more afraid of dogs or digital?

We all need digital, not everybody needs to get a dog.

Expecting our stakeholders to be rational may be pretty irrational after all

Recent fMRI (Functional magnetic resonance imaging) studies have looked deeply into how the brain operates and responds to certain sensory triggers. To cut a long short the body of evidence gathered through this neurological research suggests that most decisions are subconsciously made by “magic” (perception factors) more so than logic (analytical factors).

Now in procurement, we use our toolset to reduce subjectivity and drive logical outcomes. But this prompts a few key observations:

1. When trying to build engagement are we wasting a lot of time by relying on policy, process, and logic-based argument alone
2. Should we be questioning the role of the conventional RFP and cognitive automation in delivering lasting collaborative and innovative relationships in services
3. Where technology is not forcing the logical answer (e.g. transformation) are stakeholders and customers driven more by the subconscious (how they feel) rather than what they are told.

Perhaps this is less relevant for tactical procurement, but as we seek to become more strategic, we see to take strategic decisions and create strategic relationships for the long term or create growth-orientated ecosystems based on trust. Culture is key.

Is logic enough? The research suggests not, but what do you think? Did you make big life decisions like your choice of partner, or buying your forever home by ignoring the heart and using strict evaluation criteria?

At the heart of it, we are all human. Human at home and human at work.

How do your stakeholders really feel?

As a centralized function, Procurement is at the heart of a lot of decisions, its reach touches almost every department and every person in an organization. But how often (beyond a standard customer satisfaction survey) do you get feedback from stakeholders about how they feel? What is going on in their minds whilst you are talking through the numbers or presenting the deck?

We wanted to know. Is procurement delighting? Or is it just delivering?

And the results are in…

We look for some organizations that Proxima hasn’t worked with, where there was a new CPO seeking to drive a change. We then asked for customers of procurement, not procurement professionals, to tell us what they thought about the services they had received in the past (as a baseline);

In a world where we talk about value a lot in the profession, are our functions, people and approaches really set up to go the extra mile and deliver value as defined by our customers?

Do we really know our customers and how we can delight them? In a wide-scale transformation how can we avoid alienating and distancing our people, function, and processes from our customers?

What are the things that a transformation might need to focus on? Key takeaways for us?

• Perception – We want to create functions that are easy to deal with, speed things up, and tell customers things they don’t know, but what our customers feel about working with us is, unfortunately, the opposite.
• Engagement – Procurement customers felt ok. There seemed to be some “delivery” but not much “delight” going on. Are we hiring people who can, or teaching those we have to listen and invest time in their customer’s objectives and needs?
• Reputation – Procurement has the best reputation in sourcing. Moving into transactions or up into strategy and collaboration and our value prop seems to fall away. As CPO’s we are possibly held back by our reputations.

These are interesting when you consider digital transformation. In many cases, the first stages of digital could actually dumb the (human) function down by reducing the level of human interaction and making technology the star performer. CPO’s have to act fast to move up the value chain into more strategic activities where the need for human interaction and creativity increases, not decreases. That’s where customer-centricity is critical – understanding problems, opportunities and how to make a difference.

Customer-Centric doesn’t just mean doing what customers want

So, what do we do next? We ask our customers what they want from Procurement and we listen, right? Not completely. Because as Henry Ford famously said: If we ask our customers what they want, they’ll say faster horses.

Don’t ignore, but if you ask your customers, you might only hear something like “get me the same stuff, just a little bit cheaper”, “oh and maybe get it to me faster”, “oh and I’d love more reporting”. More data! But what problem does that solve? Does that get a marketer more leads or just cheaper pens? Does that give a CIO the most innovative technology suppliers or just a few dollars off per seat on their license agreements? To truly deliver great, innovative solutions, you have to understand your customer and their goals. Ask what keeps them up at night, not what Procurement can deliver.

As a leader, you have to push them out of this mindset and open them up to the idea of a disruptive function that does more than just delivers. It truly delights.