Nothing holds more potential for both benefit and loss than the shiny new tool or application. Whether it is software, hardware or that great new circular saw you are craving at Home Depot, there is moment in time when you need to decide if the Shiny and New thing in front of you is a toy or a real asset.
While we might be inclined to think this is a rather straight forward ROI assessment of benefit vs cost, the history of poorly spent dollars on large scale projects as well as failed corporate aquisitions by very smart people suggests that this is a non-trivial issue. Procurement decisions are not just about dollars and cents, but influenced by existing technology or skill sets , the theatre of internal politics and a variety of other variables.
I would propose that one of the challenges in procurement is that a proper procurement decision is a complex decision, but is often treated as a rather uncomplex decision based on a few variables that are relevent within a narrow context.
There is a tendency to assess the balance between the cost and distinct benefits that a new product accrues directly to the aquiring department or unit. There may be different ways of viewing benefit and cost, but it is often focused on the benefit or cost accrued to a specific department.
In reality, benefit and cost from a decision in one unit is likely to have positive and negative impacts on other business units. In addition, there are other factors other than cost and predicted benefit that may be important but overlooked with a simple cost benefit assessment.
In short, we often seem to make decisions based on a few variables that seem good for a member, but are bad for the membership.
One of the most visible places we see this challenge is in the IT procurement space. Many technology purchases are made in a vacuum to service a specific need with precious little thinking about how the technology fits into existing and planned IT architecture for a corporation, university or government.
Two levels of abstraction
I would like to suggest that the simplest way to address this challenge is to take your current level of assessment and abstract out two levels.
- If you are buying a new car, shift your assessment from yourself to friends and family and then to your community. If your new car makes sense on all levels, then it's a go.
- If your are purchasing a new ERP platform, shift your assessment from your business unit, to your department and then to your company. If it make sense on all levels, then it's a go.
- If your are buying a new fleet of Boeing airplanes, shift your assessment from your company, to your country to your continent. If it makes sense on all levels, then it's a go.
Think about one of your latest purchases, and then shift out two levels of abstraction and share with me if your decision would have been any different?