The Procurement Problem

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“When something is free, you’re the product.”

–     My friend, David Hawkins, a wildly successful serial entrepreneur

It came to him as a commentary on the status of over-the-air radio broadcasting — the field where I cut my teeth and learned much of what I still use.

This little tidbit, though, goes well beyond vertical market wisdom.

The prevalence of procurement, or procurement led processes is a short, rutted, ugly road to nowhere good.  The desire to get everything negotiated down to no cost or negligible cost is simply not in anyone’s best interest.  Smart companies want profitable providers, smart providers want loyal clients — and “free” doesn’t play in to either equation.

“Now, wait a second,” you might be thinking, “free can buy a lot of my loyalty…”  Except that no, it can’t.  Loyalty doesn’t factor in to the long term if there is no exchange of value.  The person who insists on “free” will jump at the next “free-plus” deal, and never look back.  The provider that pretends to give something for “free” is either covering the cost elsewhere or is on a short path to extinction (or an ownership change — see the ludicrous “eyeball valuations” in the tech space…).

Are there things that should be negotiated as commodities, where procurement mindset might serve the entire chain?  I suppose so.  When the product is truly a commodity, but even then, what about the provider’s willingness to stand behind that commodity?  If my stainless steel lock washers and nuts and bolts fail, will the buyer want “free” or will they want someone to fix the problem?  When the buyer makes a mistake, orders too much or too little of a “commodity,” will they want “free” or will they want someone who’s incentivized (paid) to first understand and then participate in a fair, fast joint solution?

Products get bought and sold.  And if we’re the product — that feels wrong, doesn’t it?


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