10 March 2014 | Stephen Ashcroft
Facebook’s acquisition of WhatsApp for a reported $19 billion (£11.3 billion) shows how procurement can get involved in high-risk high value projects, such as IT systems and major capital expenditure.
Here are three points to inform your thinking:
• Cost, price and value. The acquisition price of $19 billion has very little to do with cost because WhatsApp employs about 55 people and charges 69p in the UK for an annual service – it’s free for the first year. As a result, Facebook, it would appear, is going to work very hard to prove that discounted cash flow and return on capital employed. I acknowledge the decision-makers on major projects may be very wrong, so what can procurement’s involvement in similar big, game-changing specialist expenditures bring of value? Early buyer involvement is the aspiration for many, as long as you’ve got something to offer the project. What can you bring? Business case challenge? Risk management? Supply market knowledge?
• Sources of innovation. Suppliers and contractors position their proposition in many ways such as, cost efficient, quality compliant or even aligned with your CSR aspirations. For example, WhatsApp is a ‘disruptive service’ that is a proprietary, cross-platform instant messaging subscription service for smartphones. From a stakeholder point of view they are less concerned by ISO9001, BS8903 or cost models and other related, worthy processes. They want competitive advantage; they want solutions. And innovation may be found in massive global consultancies (knowledge garden anyone?) and also in SMEs, social enterprises and start-ups. What stakeholders want is innovation and procurement's approach to supplier intelligence and market knowledge is key to engagement with stakeholders.
• Starting relationships. The growth of WhatsApp is a superb illustration of the appetite for engendering fast and effective relationships ('being social' as is the phrase de jour). Connecting with your stakeholders face-to-face or online - and building your community is key to engagement for procurement. When I started out in business I worked in the contracts department of a large defence contractor, there was one word processor with one female operator, and 200 men. We each wrote out the contracts for typing. Postal letters, emails, business telephone conversations, texting are going the same antiquated way for your younger stakeholders. This whole concept of communication online and the associated platforms like Facebook, Twitter, WhatsApp, and even LinkedIn, is where you want to start building your relationships with stakeholders - on their mobile phone. Your stakeholders are looking at their screens, just as you are reading this blog.
What value are you bringing to your stakeholders?
☛ Stephen Ashcroft is a specialist in procurement risk at Brian Farrington