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For this week's piece our management consultancy columnist Mick James spoke with the COO of sourcing and procurement consultancy Efficio, Alex Klein.
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He discovered it's possible for a niche firm to build up a presence in the UK, Germany, the US and beyond – thriving on work that used to be the domain of the larger firms…
Procurement: the hot topic in consultancy
Throughout the 1990s, procurement was something of a hot topic in consultancy. The attraction of driving significant savings to the bottom line without incurring the pain of head-count reduction or major IT investments proved a very attractive value proposition, with all the large consulting houses developing an offering in this arena.
But has the trend run its course? Not according to Alex Klein, COO of sourcing and procurement consultancy Efficio. Efficio was formed in 2000 by a core group of supply chain specialists from A.T. Kearney and Gemini Consulting. The goal was to create a specialist firm that combined the credibility of a large consultancy firm with the depth of expertise and delivery focus of a niche player.
“We found that sourcing was maturing as a market and that when we went for pitches, the ‘big firm model’ — using large teams of relatively junior generalists, day rate-based pricing, limited category depth —wasn’t working any more,” says Klein.
At the same time, the big firms took their eye off the ball when it came to sourcing and supply chain consultancy…choosing instead to pursue business process outsourcing as a primary business proposition in this area.
“These days, the big firms are focused on multi-year deals that drive tens or even hundreds of millions in revenue,” says Klein. “Many clients have told us that they feel that the big firms will pitch for a strategic sourcing engagement, but will in reality have their sights set much higher, typically on a procurement outsourcing deal or a large-scale systems implementation programme. This works in our favour, because we don’t have a broader agenda…we want to deliver on the piece of work at hand, and we don’t have an army of IT consultants coming in our wake. This also helps when it comes to providing advice on e-procurement… again, we’re independent. In a way, we’re bringing the concept of the ‘trusted adviser’ back to the procurement space.”
However, says Klein, while clients felt disenfranchised and to some degree abandoned by the big firms, they nevertheless miss the caliber and professionalism of the “blue chip” consultants.
“CPOs and Procurement Directors still wanted to engage people they’d be happy to have representing their interests to stakeholder around the business…people that could be trusted to get the job done in a professional manner without embarrassing them by being insensitive to change issues”. So when the founders of Efficio launched the firm, they were determined not to lose their blue chip credentials and ethos.
“We’re very proud of that and we really didn’t want to change it,” he says. “We wanted to continue working for large, multi-national organizations, because it’s in those settings that our people’s change management experience really makes a difference. Also, the economics of sourcing are such that we can give large companies a much better return on their consulting investment”.
To maintain their level of professionalism, Efficio is very careful when recruiting. They set the bar high, looking for people who are expert in sourcing and supply chain consultancy, who have a number of years’ experience gained at one of the leading global consulting firms, and who have outstanding educational backgrounds. “Our people need to have strong procurement technical skills…but where we really add value is in problem solving and change management…and those are the skills we look for in a recruit”, says Klein.
Efficio now has 49 people with offices in the UK and Germany, and a team that’s growing its presence in the US.
“We don’t have offices all over the globe, but with 16 nationalities we have a very international team, and most of our people can work anywhere in the world,” says Klein. “We used to be paranoid that clients would insist on their consulting partner having a physical office in every one of the client’s locations — but in reality, clients are much more mature than that now…they know that what counts is the caliber of the 5 or 10 key people on the team, not the list of global office locations in the marketing brochure.”
Efficio’s teams habitually work throughout Europe and the USA. Right now, the firm even has a 3-person team working on a project that covers South Africa, Egypt, Nigera and Turkey.
“International business is key to us, and we are planning to open more offices in the long run”, says Klein, “but we have done some massive projects with teams based in multiple locations in parallel.”
As procurement has developed so Efficio has looked at taking procurement to more strategic levels. As companies become less and less vertically integrated, and not only manufacturing but also design activities are increasingly outsourced, procurement must become more sophisticated.
“This will ultimately require a radical move away from what was once termed ‘procurement’ – purchasing over the next twenty years is going to be about managing complex external supply chains. Where procurement today is often viewed as primarily a cost reduction lever, in future it will be a critical value lever…working with suppliers to add value to the end product, or even to create the end product”
“Put simply, the things businesses buy are getting more and more complex. We’ve gone from buying components to sourcing entire assemblies and even finished end products like TVs or PCs,” says Klein. “The value in the external supply chain is getting bigger and bigger.”
As procurement goes deeper into the business this means there is an even greater need for consultancy skills.
“What’s critical in procurement is that you can work internally and get stakeholders on board,” says Klein. “The biggest part is the change management piece. Procurement is not just about negotiating with suppliers…it’s about bringing a wide range of often senior stakeholders together in order to successfully execute a major business change…and that’s not easy”.
Klein says Efficio is now on a “major push” for growth, which has manifested itself through an aggressive marketing programme including a fundamental re-branding of the firm, and, more importantly, through the appointment of a number of sourcing “heavy weights” at Vice President level. The procurement story continues…
“Just a couple of years ago, we were concerned that procurement as a focus for consultants might be dead…but it seems to have come back with a vengeance”, he says.
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All views expressed in this article are those of Mick James and do not necessarily reflect the views of Top-Consultant.com and Consultant-News.com.
Contact Mick with your views or suggestions at:
[email protected]
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