The Whole is More than the Parts

Guest blog by David Howie, Ph.D., Senior Advisor, Global Financial Services Advisory Services Practice, TPI 

A few weeks ago Shawn McCray wrote in this space about what he called "Frankenstein Sourcing", in which a number of separate sourcing models are used within the same company or even the same business unit without any attempt at alignment.

Unfortunately, this monster is all too prevalent. The danger is not so much that it leads to immediate disaster. If that were true such sourcing would not be so common. On the contrary, each of these sourcing relationships can appear to be quite successful, particularly within the short horizon that is too often the concern of managers (and the timeframe for incentive schemes).

The problem is rather that by focusing on discrete chunks of sourcing, the greater benefits of a more coordinated approach are squandered. Further, while often initially delivering results, this approach easily leads to a dysfunctional operating model that locks in existing inefficiencies without addressing the root causes of poor performance or the future needs of the business. Five years down the line the company can end up with such a complex and inflexible operating model that it is effectively unable to respond to changes in the market or threats from newer or more nimble competitors.

The solution? A strategic approach to sourcing that connects a company's operational base to its business aspirations. This is easier said than done, of course. Sourcing decisions are often made narrowly, in response to local conditions or as a quick-fix reaction to the next set of business targets. So coordination across the business is critical, as is the freedom to take a longer-term view and to focus on future flexibility as well as, rather than solely, on immediate cost savings. Ultimate success – as with so many large projects – depends on building a genuine mandate for change among senior executives.