I recently came across a theory developed by the US economist and marketing expert Theodore Levitt (credited with, among other things, coining the term “globalisation”).
“People don't want to buy a quarter-inch drill,” he is said to have said. “They want a quarter-inch hole.”
In essence, people aren’t really buying products. They are hiring them to accomplish a task. Levitt believed businesses (for which you can interpret suppliers) often focus on trying to sell products customers don’t want, rather than working out what customers want to achieve.
I haven’t ever seen Levitt’s theory applied to and examined by the procurement profession, but I think it needs some careful consideration.
Most of the professional buyers’ time is occupied purchasing products on behalf of somebody else. It follows that it should be up to the buyer to work out what the internal stakeholder wants to accomplish. This should be a key element of demand management anyway - and a good way of working out if the internal customer really knows what they are trying to accomplish with the purchase in the first place.
When you write your request for proposal are you trying to buy a specific product to achieve the desired result, or do you want your potential vendors to come up with an idea (let’s not even get into the issue of suppliers who want to sell products as “solutions”)? Conventional wisdom might suggest asking your suppliers to come up with an idea might provide greater innovation, but is your specification sufficiently flexible to allow this? It might not be the buyer’s fault, but the influence of the internal customer that affects this.
Vendors too have a part to play in this process. Do they genuinely want to sell you something that will fulfil your task? Or are they simply desperate to sell you anything, and trying to fit their square product into your round specification?
And have you worked out the true value of what you are buying? Have you calculated the value and cost of the quarter-inch hole to your business, or are you basing your judgment on thinking “we don’t want to go above X price, so we’ll batter the supplier down until we get to where we want to be”?
All of these aspects speak to the heart of good buying – but when you are being buffeted by the conflicting demands of the internal customer, finance department and ravenous suppliers – is it even possible to take all this into consideration?
Answers on a postcard (or at the bottom of this blog) please.