SupplyManagement.com Questions about "Procurement and Social Media"

December 12, 2010 Dennis D. McDonald

In the November 25, 2010 online edition of SupplyManagement.com I was quoted by journalist Nick Martindale in his article titled Work and Play: Social networking tools are helping buyers to research suppliers and markets, raise their profiles and keep in touch with vendors. As background, here is the entire question and answer series that Nick and I engaged in via email; Nick supplied the questions, I supplied the answers:

Q: Can public and private sector procurement departments make effective use of social media technologies?

A: Some of this depends on what you mean by “social media.” Some people have a knee-jerk negative reaction to the term “Facebook” and “Twitter” but may be much more inclined to work with internal networks they know can be secured and firewalled or which are highly specialized. Listening and monitoring what others are talking about on public as well as membership networks, blogs, and discussion forums are something one can easily do when it comes to commercial or industry networks, and that would be the first level of engagement for someone involved in procurement. The next level up has to do with specific procurements and that’s where social media, networking, and collaboration technologies can have a big impact. First, just interacting rapidly during the early stages of procurement when requirements and related documentation are being formalized provides an opportunity for both formal and informal information exchange that can benefit both buyer and seller. Once the procurement and legal documentation are nailed down we move into a different stage where exchange of information becomes much more structured and to some extent restricted. Even there, though, the efficiency benefits of collaborative technologies and social media can come into play. For example, just taking the strictly internal deliberations among different groups in a government agency into account can suggest a number of efficiency-inducing initiatives whereby meetings could be shortened or done away with, or where documents could be shared and revised from a single location rather than emailed around. There the benefits of collaboration and sharing can become very concrete by reducing repetitive and wasteful messaging, misunderstanding, and re-do’s.

Q: Would you envisage this being predominantly an internal focus – so within the procurement team itself – or external, in promoting procurement to the wider business?

A: As suggested above I think it’s both. The problem is that large or bureaucratic organizations take time to adjust to the easy give and take that social media support. This can be threatening to a large organization where hierarchy and departmentalization lead to siloed communications.

Q: Is there also the potential to build a supplier network? Could you have a situation where RFPs are pushed out to potential bidders, perhaps, or used to conduct relationships with outsourced providers?

A: That’s the way it’s done now. The question is whether you can increase the likelihood of finding out about a potential opportunity if you’re a vendor by using social media, and if you’re a buyer, whether you can increase the likelihood of learning about potential vendors by using social media. In both cases, both parties — vendor and buyer — have to be using social media to generate the possibility of relationships forming in advance to provide the platform for meaningful connections to be made. In my experience this likelihood of both using vendor and buyer using social media varies greatly by market.

Q: Is social media merely the facilitator here rather than the end in itself? In other words, isn’t this kind of information-sharing and communication something procurement departments should be doing anyway

A: That’s a good point. I’m working on a collaboration metrics strategy for a large international financial institution right now and it’s clear that some collaboration, as facilitated by social media, can be very task- or process-specific, while other types of collaboration are more “background” oriented. The metrics associated with the first type are more concrete and that’s not unrelated to the similar phenomenon where, in corporate IT budgeting, it’s frequently easier to cost-justify application development that can be linked explicitly to cost reduction or revenue. Making it easier for people within an organization to communicate and discover skills and common interests is also valuable but is much more difficult to document.

Q: What kind of platforms best lend themselves to this kind of usage? Are we talking about the likes of Facebook, Twitter or LinkedIn or more specific business networking sites such as Jive or Yammer?

A: I am convinced that all such platforms can be useful. I am also becoming more convinced, after many years as an IT management consultant where system integration was always sought after, that benefits from use of collaboration systems don’t necessarily require settling on only one platform. Partly because this is because in the social media world people vote with their feet. Yes there’s always some inefficiency due to system incompatibilities, but I’m not as convinced as I was a decade ago that the costs of system integration and standardization are always worthwhile in cases where business processes change rapidly.

Q: What are potential drawbacks to using social media in this manner? Is there a risk that the wrong kind of information could be put out to a wider audience, for example? Or could it end up being incredibly time-consuming, both in policing who can belong to such networks and dealing with requests from potential suppliers?

A: Yes information can leak out to the wrong people. I certainly have nothing against paying attention to security standards and firewall restrictions but keep in mind where most security breaches occur — it’s usually the people, not the technology. You have to trust your people and make sure they understand what they can talk about and what they can’t talk about. But that has always been the case.

Q: Would this need to be a top-down driven approach, so led by the CPO rather than something that develops from an internal community of buyers?

A: Social media adoption is frequently driven from bottom to top or from the middle out. People use public systems, they see how easy and smooth they are to use, and then they wonder why their clunky corporate systems can’t be just as friendly. I can see where a top down approach would work but only if the “top” actually uses the system in a serious way.

Q: How do you see this developing in the next few years? Could we see a time when social media plays a prominent role in procurement?

A: It will become prominent only if it can be demonstrated that its use helps do things better, faster, and cheaper all along the way. I believe that is possible but a major barrier is that old dogs have to learn new tricks, and this gets us back into change management and management leadership. It could be that it is relatively easy to get people to use social media and social networking to make internal communication easier, but when you then mix that with making major changes to business processes and policy — which may be required in some procurement situations — you see resistance.

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