Hackett were presenting their capability maturity model for procurement yesterday at eWorld. It is designed to address the questions: “What is the future of procurement?” and “How will the value proposition of procurement effectiveness evolve?”
Hackett’s model shares a lot with the CMM models already widely used in IT (in that it has the same name and also has five stages of increasing maturity). Though it also leans on the Maslow hierarchy of needs in that each of the 5 levels is not a replacement for the previous level but builds on the previous level in the hierarchy. The levels are:
1. Supply Assurance (“Right goods and services at the right time at the right place”)
2. Price (“Right goods and services AND at the right price”)
3. TCO (“Shift from lowest price to lowest Total Cost of Ownership”)
4. Demand Management (“Reduce demand activity, complexity immediacy and variability”)
5. Value Management (“Increase business value derived from spend rather than just reducing total cost/spend”)
Level 1 is about processing POs
Levels 2 and 3 incorporate strategic sourcing
Levels 4 and 5 are something completely new and different for many procurement departments.
What I particularly like about this model is that it makes clear how, as procurement moves up the value chain, it moves from being one focussed just on Supply Management (levels 1 to 3) toward Customer Management (levels 4 and 5). If level 1 is about processing purchase orders and levels 2 and 3 are about strategic sourcing then levels 4 and 5 are a massive paradigm shift in how procurement relates to the business.
This gives an interesting path for procurement professionals but also presents a challenge and a dilemma. The skills and mindset needed to succeed at levels 4 and 5 are likely to be massively different to those needed to succeed in levels 1, 2 and 3. It may well be a new breed of leaders who elevates procurement to the heights of levels 4 and 5.
Incidentally, this presentation was billed as the “unveiling” of Hackett’s Procurement CMM model. I spoke to them after the presentation and asked how much of this info would be public domain and how much would be private for their clients only. The answer wasn’t that clear. They seem to be still trying to figure out how to market it widely whilst also retaining control of generating revenue from the information. For example the paper they were giving out at the event has written all over it: “For Current Members of Executive Advisory Programs Only”. However they were giving this document out freely at the eWorld event. I do hope they take the step of putting more of this model into the public domain to encourage more rapid take-up of their model.