We are all fascinated when we read headlines about organizations that have been able to save costs and become more efficient in record time while expanding their market share or product portfolio.
Everyone is fascinated when reading headlines about organizations that have been able to save costs and become more efficient in record time while also expanding their market share or product portfolio. The traditional success case of Toyota in 1989 with the introduction of the Lexus brand was a unique breakthrough in the premium vehicle segment. Through a well-designed strategy, Toyota successfully competed with BMW and Mercedes-Benz (while also continuing to compete in the economy segment) and became an iconic reference in the introduction of various global cost reduction, operational efficiency, and proper management of own and supplier resources strategies that continue to represent a high standard to this day. According to a 2018 PR Newswire report, Toyota is among the top five luxury vehicle manufacturers after Audi, BMW, and Daimler.
However, is this model extrapolatable to any organization? Can you really increase savings while having a commercial strategy of opening new markets?
It is well known that all strategic management involves the adoption of a series of decisions and actions that result in the formulation of plans designed to achieve the objectives of organizations. These decisions are usually made at a high level, require a large amount of resources, affect the sustainability of the organization (thus, by definition, are oriented towards the long term), and require a detailed consideration of the different external environments, but especially, these decisions practically affect all business areas due to the organizational hierarchy of the same. That is, it is practically impossible to design a strategic plan accepting the hypothesis that the organizational unit in question works independently.
This fundamental characteristic of the different strategic decisions is what gives rise to the need for alignment of the various strategic plans of all the units that make up the organization from its initial formulation stage (and in turn, the actions and tasks that derive from them) to maximize the chances of success or rather, to greatly reduce the risk of failure.
In the specific case of strategic procurement management, the purpose is to transform the purchasing function into a strategic partner of the organization at all levels, not only by aligning with the corporate strategy and the different business units but also by participating and setting the requirements for successive global strategies as an excellent unit value creator. With this purpose in mind, a procurement strategy based on achieving greater savings must be designed with extreme caution if, at the same time, an expansionist commercial strategy is implemented, such as diversifying the product portfolio or hyper-growth to quickly capture markets, as both approaches would be antagonistic by definition.
Toyota aligned both strategies by adopting innovative plans that maximized product quality (being a key value perceived by the customer in the premium car segment) and process efficiency (a lever for drastic reduction of production costs and delivery times). Both levers were key to unifying the vision of both strategies and therefore ensuring their success. An approach based on a high-level program and project management methodology can be excellent for carrying out effective alignment of strategies at various organizational levels. Likewise, an adequate change management and leadership of multidisciplinary teams are more than necessary levers for achieving optimal results.
In conclusion, the alignment of different strategies in an organization is a necessary approach from the very formulation of the same to ensure success in achieving the objectives set by them. In the specific case of strategic procurement management, it represents a key driver for the transformation of procurement into a strategic partner at all organizational levels and a lever for maximizing value far beyond traditional cost reduction.