“In the past we bought beautiful solutions… And then we needed to work out what to use them for.”
This line, or a similar variation, is one that many of us have heard uttered from the mouths of CEOs and CTOs in relation to procurement. Procurement has become an area which has become a specialisation of its own, with individuals and sometimes whole departments dedicated to it. This is a reflection on a market that has dramatically changed with increasing complexity. There are ever-greater demands and time pressures, whilst there are more unexpected dependencies and uncertainty to deal with. This can translate into long delays and indecision, affecting a whole organisation’s agility.
I mused this over on a conference call with Mirko Kleiner. Among many other initiatives that include international speaking, Agile Enterprise Coaching, certified Scrum@Scale training, Mirko is one of, if not THE thought leader in Lean-Agile Procurement. Mirko began his career as a developer, and he says that coming across different cultures such as people from Russia and India in the distributed teams that he worked in was the best thing that could have happened to him. His cross-culture interest and appreciation of how people in different parts of the world can learn from each other echoes our own.
Mirko found himself moving into Agile coaching and management positions and this included him getting involved in the pre-sales processes at the software engineering company that he was at. He was in uncomfortable and painful situations that were contradictory to the Agile thinking that was natural to him. The sales process involved agreeing scope, cost and timelines up front. Decision making required detailed planning and took months to complete. The development teams were frustrated by having to give estimates based on what would turn out to be incomplete information to win the sale, lots of effort for no return. Specifications would later be produced with escalating complexity and yet the team were held to their original estimates. An Agile approach to contracts (such as those I discussed in a previous blog) and a mindset of “just start” did not seem to be option when working with the sort of big corporations that Mirko was involved with at the time.
As an Agile Coach, Mirko was asked to help in procurement. He saw similar issues there. He looked at what was causing the most pain, and asked himself what was the minimum that needed to be done to make things better.
This led Mirko to come up with a thought experiment. “What if we have just 1 day to decide on a complex sourcing case?” he said. “Out of this powerful question I developed the Lean Procurement Canvas and Lean-Agile Procurement, a similar disruption for procurement as the Business Model Canvas and Lean Startup used to be for Business Development.”
Mirko talked me through the main sections of the Lean Procurement Canvas. Defining the “why” is a starting point, the “True North” section used to define a prioritised list of business goals and desired outcomes that an initiative is aiming to achieve. The “what” sections gets people thinking about the customer perspective; defining real customers through personas – these are real end customers not internal stakeholders. It is important to define customer needs, required timings, constraints and what are the existing or future alternatives available to customers to solve their problem.
Next is the “how”, a high level definition of the required services that are needed. This is not about defining solutions. Included in this discussion are all options including other suppliers and consequences if nothing is done. Costs and how rewards are distributed are also included. The “Unique Selling Proposition” section includes discussions on future propositions, including consideration for support and warranty. Traditionally, some vendors may offer SLA packages such as “Platinum Service”, or “Gold Service,” without it really being clear on what these actually mean. A discussion around the Lean Procurement Canvas allows the client to define what they want and then negotiate with vendors on a price to provide a service to meet these desires.
Finally, the “who” is discussed. How vendor and client need to work together to achieve success.
Mirko told me that the Lean Procurement Canvas is just a tool to focus conversations. It is not intended to replace other tools. Discussions around the canvas can lead to the creation of high level roadmaps, user story maps, the identification of value streams, key milestones and their conditions. More important than the tools are the conversations that take place. Mirko walked me through the process.
The first step is to identify all of the people on the customer side that need to be involved with the vendor. The team must be empowered to make the procurement decisions while being given clearly defined boundaries, however it is not just about identifying the decision makers. People such as those that will need to work in partnership with the vendor and those that will be impacted should be included.
Based on the defined business goals, a first pass of filling in the Lean Procurement Canvas is done by this group in collaboration, with any supplementary material also being prepared. Then invitations are sent to potential vendor partners to take part in the Big Room Day. The vendors are not given up-front information at this stage, instead they are asked to bring with them all of the people needed to deliver and their key decision makers. They are expected to have the right expertise and ready to answer any questions on the day.
Big Room Day(s)
All potential partners are either gathered together, or attend one-by-one. Sessions may run in parallel when multiple vendors attend a Big Room Day at the same time. Client and vendor co-develop the Lean Procurement Canvas and any appropriate additions such as user story maps and proof of concepts.
The Big Room day should include discussions such as agreeing responsibilities, warranty, intellectual property rights etc. It allows fast reaction. For example, in one session Mirko was facilitating, a tricky issue regarding software licensing came up. Rather than compete with each other, the vendors in attendance were asked to come together to come up with a proposal for a way ahead.
Building relationships between client and vendor is as important as the content being produced. Both sides should get a feel for what it would be like working with each other. They need to build a mutual understanding, a trust in the other’s competency, and a level of comfort working with one another.
The result of the Big Room Day should be a procurement decision and an Agile contract. This a working agreement between the client and the selected vendor, not a commitment to fixed scope and timescales. The process is focused on “Product” thinking, not “Project” thinking, with details of features of the product emerging through feedback cycles. The Lean Procurement Canvas is an evolving artefact like Definitions of Done and Product Backlogs; they will change as more is learned. It becomes the key instrument for Agile partner management.
In Mirko’s experience, Big Room Days typically take 2-days, though he has experience of completing them in as little as 5-hours. Of great value, working software in the form of the PoC is often already available for review. The product development team are all together and in theory can take the PoC and continue work on the product straight from the Big Room Day.
If there is indecision in which vendor is the best fit, and all are in agreement, there is nothing to stop work starting with more than one partner and a final decision made later – this is often cheaper and less disruptive than switching partner. Vendors would be paid for their time all the way back to participation in the Big Room Day. It is a win-win situation for all; vendors get income for their efforts and are not left waiting for long periods for customer decisions on whether to engage with them.
Lean-Agile Procurement is a simple process but it is not easy. Mirko’s keys to success include having the right people in the Big Room Day. This may include a broad range of people from customer representatives, operations, legal, governance, security, subject matter experts and developers. It requires strong facilitation skills and people trained in running these sessions. Corporate politics can impede progress, in Mirko’s experience one of the biggest barriers is for people to leave their silos and give up their traditional bases of power. He encourages use of tools such as Delegation Poker and Delegation Board from Management 3.0 to help with this mind-shift. Mirko told me the story of a particular board member who wanted to retain the responsibility for all major decisions, yet refused to take the Product Owner role as he “wouldn’t have enough time.” Such scenarios are nothing new to many of us involved in Agile adoptions and limit the chances of success. Using the Lean-Agile Procurement approach is no different; without the right buy-in and commitment, it won’t work.
People’s availability is another common issue. The working agreements mentioned earlier would include clauses for availability and dedication to the initiative. Ideally, this would at around 80% availability, but as Mirko told me, a minimum of 40% is enough to at least get started. Anything less does not work. Mirko showed me a diagram that represented a real-world implementation using Lean-Agile Procurement at CKW Group. Here, the typical lead time for procurement was 6-months, with Lean-Agile Procurement, this was reduced to 5-weeks.
The green bars represent the active working days on the procurement. Imagine the reduction in lead time should people be fully dedicated! Mirko and I discussed how such analysis can spark a conversation on wholesale agility. Instead of having a conversation about implementing the mechanics of Scrum, we can talk about focus, limiting work in progress, increasing flow efficiency, reducing wait times and lead times. In other words, talking about “being Agile” rather than “doing Agile”. And this is in the context of spawning agility across the whole business ecosystem, not just at a team or organisation level, but across the whole supply chain.
Mirko has seen Lean-Agile Procurement used to assess existing relationships as well as for procurement of new partnerships. He has seen its use make visible issues that may well have stayed hidden, for example continued use of suppliers that was completely unnecessary as services existed in-house. In partnership with CKW Group, Mirko’s company Flowdays won the award for Best Procurement Consultancy project at the 2018 CIPS Supply Management Awards. Phil Thomas, Head of Global Sourcing at Barclays is quoted as saying about Lean-Agile Procurement, “This is a game changer.” Lean-Agile Procurement is already making waves beyond the Agile community.
But this is just the beginning. Mirko developed the Lean-Agile procurement process and the Lean Procurement Canvas out of a single thought experiment. Taking a Lean Startup approach, he has iteratively built it up using Build-Measure-Learn feedback cycles. It continues to evolve and has stayed open source and freely available for anybody to use. Further into the future, Mirko envisages a world of organisations of “Teams-of-Teams” where companies are made up of fully empowered teams instead of functional departments. These teams are able to make all of their own decisions including procurement, and make them fast. It is an exciting glimpse into a possible future that Lean-Agile Procurement and other Agile methods can bring us.
Many thanks to Mirko for taking the time to share his story of with me. For more on the Lean Agile Procurement process, see https://www.lean-agile-procurement.com