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Step into the transformative world of negotiation with our latest webinar, “From Muskets to Maestro: Negotiation Evolution”. Dive deep into the journey from primitive bargaining to refined negotiation tactics, mirroring the leap from raw firepower to the elegance of a maestro’s touch.
This month, LavenirAI’s Clive R Heal and Bill Michels are thrilled to host the distinguished Iain C McKenna, the powerhouse behind Sourcing Solved. With nearly two decades of industry experience and a roster of collaborations with giants like Amazon, Rolls-Royce, and SAP, Iain’s insights are nothing short of enlightening. Not just a seasoned procurement maven, Iain’s voice resonates through the ‘Procurement in 5 minutes’ podcast, offering bite-sized industry wisdom.
Be part of this dynamic discussion, where old-world tactics merge with new-age strategies, crafting the future of negotiation. Dive into expert-led conversations and draw from the well of knowledge shared by industry stalwarts.
Read the transcript here
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For joining us today.
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Clive R Heal: Welcome, everyone. Thank you for joining us today. We have a great guest today, Ian Mckenna. I’m going to hand over to Bill in a second to introduce him. Today we’re going to be talking about muskets to Maestro, the evolution of negotiation.
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Clive R Heal: Interesting topic Bill.
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Bill Michels: Alright. And I’m Bill Michaels, and I’m with. I’m the chief commercial officer with Lavenir Ian, do you want to introduce yourself?
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Iain C McKenna: Yeah, I’m in Camp Campbell Mckenna? I
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Iain C McKenna: hope people have heard of me. Maybe not. So I run an organization called Souls and Solved. I’ve been in the procurement Space Day, and I say it just over 19 years, so long time, and I’ve seen negotiation go from the the Boyer room, where
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Iain C McKenna: it was literally putting on an iron fist at thumping that table to try and get the lowest price possible and the quickest lead time. Now things have changed right. Industry’s changed. We had Covid many changes in the marketplace.
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Iain C McKenna: the introduction of AI and we are. We’re really relying on data now to help us make those strategic decisions. So I’ve seen a seismic shift in how procurement and how the business world negotiates on. On a day to day basis.
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Bill Michels: So yeah. And and II certainly have started from the beginning of time and seen the changes I mean in in my day. The the thing you got fired for was not having enough material, and, you know, like 7 7 carbon copies of things going all over the business. And so let me ask you guys a question. So you know.
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Bill Michels: we. We’ve seen this transition from really, really, just transactional, tactical procurement all the way through to now, where we have. So it’s a strategic imperative of the business. How we gotten here.
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Bill Michels: Why don’t why don’t we start with you, Ian?
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Iain C McKenna: So good question. There’s a long answer and a short answer. So go with a short one. Right? If you think about how the evolution of of procurement itself, which really really changed, is obviously the industry, the marketplace. Many things that that have happened in the industry. Covid, you know, was and
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you name it. But I think really, it comes down to to data.
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Iain C McKenna: I’ve been able to make more informed decisions with when we’ve got more information at fingertips, right? So from where it used to be of, okay, so here is a supplier, a supplier. B supplier A and B are very similar. The similar size companies they offer a similar pod product, so it just boils down to price for us.
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Iain C McKenna: But now, as we look at the evolution we’re starting to see well, supplier. A has got half of their fleet as carbon neutral, their electric, their ev vehicles. They do a lot of due diligence into their their supply network. They delve down from tier one down to tier 5.
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Iain C McKenna: They are looking at slavery in the supply chain. They are looking at abundance of things that are really important for my business and my stakeholders and my shareholders. So I’m going to go with them.
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Iain C McKenna: That’s how it’s changed because
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Iain C McKenna: the world has changed. What we want has changed. We’re starting to become more caring and more aware and more empathetic.
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Iain C McKenna: And as that’s happened, I think negotiation as a whole has really started to change.
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Clive R Heal: They’re just building on that Ian. I think obviously he’s got more complex, right. I mean, as Bill was saying earlier, and in the article that he recently published, it was a lot of it was about. You know, the the quality price delivery, you know the 5 rights sort of thing.
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Clive R Heal: but the whole topic has got much more
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Clive R Heal: rolled in terms to the point. So we have
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Clive R Heal: into the negotiations what we’re being asked to do by the business. And so it’s made a much more complicated negotiation. There’s not one thing necessarily that you’re out there to negotiate. There’s multiple requirements that you’re trying trying to cover. And I think that’s that’s one of the complexities. I think the other come. The other opportunity or complexity
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Clive R Heal: is that there’s a lot more information and data out there. Now, you know, we can go into a negotiation having a really detailed cost breakdown of the suppliers process. They’re in their cost competitors, situation, and so on. What’s happening in the marketplace. And so that that, in a way, is more exciting because we’ve got all of this data that we can.
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Clive R Heal: we can leverage and potentially utilize in our negotiation, but of course it makes it more complicated, and it requires more, more upfront work as well. And and so that for me is part of the of the challenge that we have right now.
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Bill Michels: The the next question I have is kind of of an interesting one. I’m I’m kind of getting interested in getting your perspective. But you know, for forever and ever. The expectation on purchasing was cost and cost improvement. All right. We gotta get cost improvement. We’ve got to drive prices down price price Price and some management teams are still focused on Price. But now, all of a sudden, what we’re realizing is that value is creeping in
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Bill Michels: and value and constraints. And he and you know gas, gas, green, greenhouse gases, and everything are all all an impact. So how do? How do purchasing teams? That are are constricted by price negotiations change to value?
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Iain C McKenna: Whew! That’s
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Iain C McKenna: that’s hard. It’s really hard.
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Iain C McKenna: because. you know, you’re on a bus that’s going in one direction, right? And it’s really hard to change the direction of that bus.
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Iain C McKenna: I think. Really, where purchasing changes. Well, I’d say more procurement than purchasing is really, I think the reporting right line makes a significant difference.
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Iain C McKenna: because if you look at, for example, if you report into the CEO done a really interesting podcast with Elville, and we talked about reporting line.
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Iain C McKenna: And if you report into the CEO, you have more leverage.
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Iain C McKenna: and they’ll be looking at really important aspects of the business. For example, yeah. Esg slaver in the supply chain. Looking at, you know, carbon footprint, all these really important things that procurement will be able to influence. But then, you know, in certain companies you look at the the Cfo and you look operational. Then
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Iain C McKenna: the dynamics change. So I think, for procurement professionals to look at value. I think it really depends on what leverage they have and what authority they have, and what breathing space they have.
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Iain C McKenna: But I think looking at value really depends on who’s driving the bus to give them that level of flexibility they need to be able to to negotiate and look at true value.
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Iain C McKenna: Clive’s a great thing
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Bill Michels: quiet.
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Clive R Heal: Yeah. I think one of the challenges is the cost, you know price, particularly something you can measure right? You can measure the dollars, the euros, the pounds right? And so that makes it quantitative. I think the challenge is when you start to negotiate non
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Clive R Heal: financial elements like, how view, how is the risk being reduced in the supply chain? It’s much harder to qualification on it. And so
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Clive R Heal: yeah, it’s harder to to justify what you’ve delivered or what the targets that you’re going for, because what was the target? And so the ability to be able to put metrics, I think on the value you bring
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Clive R Heal: is a challenge that we need to overcome in terms of like, okay, so you reduce the risk and quantify how you reduce the risk in the supply chain. You know you’ve helped. You’ve helped them help drive security supply. But tell me how you’ve done that. And so so that makes it awkward in a way. And as as Ian mentioned, you know, if the Cfo is very dollar pound euro focused. And that’s that’s their, that’s their metric. That’s what they play with every day. So
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Clive R Heal: so that’s that’s part of the part of the issue. I think we need to look, though, in negotiations at how can you get more more value? What are the opportunities for increased value from your negotiation be? I always think that
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Clive R Heal: the negotiation is a fantastic opportunity to to bring new value to, to fruition, to find it, to, to maybe co-create it, to actually get it, and in and embed it in the future in the future deal that you that you create with that with that company, and and it’s almost like.
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Clive R Heal: and not quite, but almost like an infinite table of opportunity. And how do you? How do we make sure that people are negotiating and not just looking at the price and the you know, some of the the basics. But looking for those new opportunities because it’s an opportunity, and and negotiation is an opportunity in my mind.
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Bill Michels: and in some cases you get you give up on on price to get more value, and it’s gotta be part of your your whole negotiation planning process. Now, I wanna make sure that the audience knows that we’ll answer questions at any time during the during the program, the next that. Well, I’ve done a lot of research on on the on the life cycle of the Cpo. And what I’ve come up with. It’s probably 4.3 to 4.6 years.
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Bill Michels: and I asked myself, Why is that? And what I see is that if you are totally focused on price the first year you come in as a Cpo. You got a good opportunity. Everybody responds this. So you’ve kind of you kinda hit the supply chain for margin, and then you gotta do it again, cause management says, Oh, you did that. Do it next year, and then increase the the the savings a little bit. So you have to work harder. And if you don’t have a longer term, thought
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strategy. By year 3, you’re running out ideas. And if you haven’t gotten your team together. So you can only track margins so long. So how how do you? How do you build a team that’s gonna deliver value, negotiate the right things and and continue the stream of savings over time.
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Clive R Heal: I think a lot of that really depends.
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Iain C McKenna: So sorry, Clive, when you go
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Bill Michels: bye. Ian.
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Clive R Heal: yeah. So there was an interesting study done by Dob doblin, which actually showed the where value is is secured and where it’s obtained. And one of the challenges was that
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Clive R Heal: people keep looking in the same place for value, and you know are surprised when it’s all gone right. Well, you looked there last year. Don’t look there again. You might get a bit more, but you gotta keep looking at, you know. Lift up a new rock and create something new. The a rock you haven’t lifted up before, or try something different. That
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Clive R Heal: that’s where you know the creativity comes into negotiation.
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Bill Michels: Ian. What? What? What do you think about that.
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Iain C McKenna: I think I can’t. You know I agree with them that with Clive, that we need to stop looking at the in the same place, but we also need to think that value isn’t necessarily about cost.
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Iain C McKenna: So say, for example, you have a new supply chain, your vehicle, your supply chain takes X amount of time. Your suppliers
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Iain C McKenna: product takes X amount of time to get to you right. And there’s just no leverage on cost. But say, for example, they can halve their delivery time.
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Iain C McKenna: That’s value, but it doesn’t necessarily have straightaway a numerical value
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Iain C McKenna: visually, but it does from a shortness of getting a product to you, because the shorter time it gets to you, the more product you can sell. Right? So. But there’s also the side of you’ve got to look at shareholders.
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Iain C McKenna: The CEO is going to be looking at shareholders and saying, Well, I want to start looking at our carbon footprint. I want to start looking at
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Iain C McKenna: the social aspect of our of our business. So what are we doing for social initiatives? What are we doing here? So I think procurement is changing, and it’s becoming less of a cost reduction. Can a purely cost
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Iain C McKenna: center to becoming more like a business advisory function where we’re helping the company obviously buy smarter and better, but having a broader understanding of what the business is doing, how we need to change what we need to put in place to change.
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Iain C McKenna: And then how do we change the suppliers that are actually fully aligned with a new objectives? And I think that’s where we seem to forget that value isn’t necessarily all about cost. And and also we forget it’s about relationships, right? Cause you might buy a product for X price.
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Iain C McKenna: But the person who you’re dealing with on a day to day basis may leave.
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Iain C McKenna: and then the new person that replaces him is
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Iain C McKenna: isn’t particularly efficient. So then, that cost that saving you made actually becomes a loss, because the service level that you’re getting from that supplier has dropped by 50%. So they’re not as proactive. So I think we also need to think about the relationship side of things when we’re thinking about value. And when I say relationships, I mean relationships with suppliers, but also with internal stakeholders.
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Bill Michels: Yup.
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Clive R Heal: well, you know, in in the early days got an interesting story that I wanted to share, though. Got an interesting story I wanted to share. I actually worked in in sales for 4 years, and when I was working in sales that the customer that got the best was not the biggest in terms of revenue in terms of turnover, and they weren’t the
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Clive R Heal: the customer with the biggest profit margin, and that really intrigued me in terms of well, why do we give this company everything? Why are they our customer of choice? Right? Because they’re not the biggest, and they’re not the most profitable.
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And it turned out, I think there were 2 things. And actually, I remember asking the sales head of sales the question, right? Yeah, why are we? Why do we give everything to this particular? I won’t name the company. But why do we give everything to this particular
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Clive R Heal: company? And and he, he explained to me, and it was really informative, like, I know they’re not our biggest, and no, they’re not the most profitable in terms of the margin. But
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Clive R Heal: look at this situation right? We supply them with. It was pigments, right
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Clive R Heal: for plastics and pay. We supply them with pigments. So yeah, on the back of the truck. You can see the and the drums pigment going out with the invoice and the money coming back.
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Clive R Heal: how did you?
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Clive R Heal: But, hey, that’s right. There is great insights in terms of what we should be doing in R&D. What should be in our pipeline. We had a big quality problem. They came and helped us with some of their quality. People solve the quality problem, and then we helped them with with one of their business processes as well.
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Clive R Heal: So the the the true value of the relationship was not the truck with the product going to them and the money coming back? It was way. More than that, it was us getting insights in terms of what we should be working on for R&D for new products, that the customer, this customer was telling us all this information. You need to work on this. You need to work on this, and they help to solve a big quality problem we had in our plant one year. And so because of that.
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Clive R Heal: they became our customer choice. So so there’s this hidden value in a relationship between a buyer and a supplier. That isn’t just what’s on the truck and the and the dollars coming back. It’s actually there’s more to it. And I think that’s a great message for procurement like, how can we become customer choice and really become customer choice? And what does that mean? Right?
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Bill Michels: Yeah. I mean, I was gonna write book once called The Best Customers get the Best ideas, and I got that from the automotive industry where you know, the Us. Domestic automotive companies were really horrible to supplier here on year 5% Lopez came in, ripped up all the contracts, and then I had a chance to work in the Japanese, where everything is collaborated, and you know there is no problem that’s that’s on your own. You’re not on your own. It’s not you to get the costs. It’s all.
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So you know, III think you’re absolutely right on that. The quote one of the things I wanna follow up with on Ian is, you know, we have a shift toward environmentally and ethically. based
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Bill Michels: suppliers and and processes and policies. How do we negotiate those things?
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Iain C McKenna: That’s that’s really hard. I think it’s it’s very much about
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Iain C McKenna: we need to be doing site visits. We need to be doing a lot more due diligence into our supplier base, right? And there’s a huge well known. Car manufacturer! I won’t drop any names who have done due diligence straight down into tier. 5 suppliers.
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Iain C McKenna: And that’s done. Site visits. It’s looking into their supply chain. It’s looking at their fleet. It’s looking at carbon footprint. It’s looking at what they do from a social an initiative perspective. So what do they give them back to? Locally, regionally, globally. And it’s it’s really pain a picture of their overall suppliers at straight down to Tier 5.
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Iain C McKenna: That’s how you can really make a difference. It’s understanding your supply is looking beyond the product who supplies them?
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Iain C McKenna: How are their suppliers treated? Are they ethically sourcing the product? And if you look at, for example, lithium, lithium, iron? But batteries. They come from the Republica Congo.
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Iain C McKenna: And
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Iain C McKenna: about, I think it’s about 80% of the
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Iain C McKenna: part of the lithium iron battery is sourced from Republic of Congo, and that has got, you know, young children working in these atheist mines.
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Iain C McKenna: So we need to be looking at that. And we need to be understanding it. And we need to be boycotting.
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Iain C McKenna: These are Tc and mines, not because they are not part of the global conglom global companies. It’s because they are promoting child labour. But if procurement are not doing their due diligence, and they’re not looking at suppliers beyond price points and getting the product to them on time, and all of these important things that go on the balance sheet.
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Iain C McKenna: That’s really where procurement can make that value, and then they can make a quantitative decision whether they want to deal with that supplier.
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Iain C McKenna: That’s where things are going. That’s what we should be looking at from an Esg perspective. Because cobalt is, you know, predominantly, the majority of that is coming from the Republic of Congo, and
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Iain C McKenna: you know, I think from an ethical standpoint, we need we should be doing a lot more.
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Bill Michels: II agree. And and I think even our skill set has to change, because now we’ve got people that are negotiating carbon credits and you know you, you have to learn about what is a carbon credit. How do you use it? How do you transfer it across the supply chain to meet your your goals, and and those are all brand new things. So I think, that’s really that’s really. And I and II am amazed at the people that
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you know the in their in their annual report. There we we do. We we check out our suppliers when when you look at him. And so what was the last thing? Did there? What do you do in terms of any breach of ethics? How do you manage? You know, and they don’t. They don’t really have that behind them, and they haven’t been there, especially since the pandemic. There’s not been a lot of travel. So you what we’re seeing, not seeing
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Bill Michels: the face to face reactions that we used to have. And I think that makes a big difference in in the supply relationship as well. I think you know, building that relationship, looking looking each other in the eye, outlining our goals and making sure we understand. How we’re businesses are mutually aligned is a part of the negotiation process. And I think that’s critical.
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Clive R Heal: Yeah, II agree. I also thank you. When, before we go in, Bill, you mentioned it, and Ian mentioned that you both talk you. But you both talk there about collaboration and relationships. And I think that is an important shift that we’re seeing as well. Then, you know, there is in our the relationship in Srm. And how do you build those relationships, and I think that is a whole new dimension. Now to negotiations about.
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Clive R Heal: you come by, how you connect, how you build trust.
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and how you collaborate with suppliers.
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Iain C McKenna: Yes, I agree, because, as you rightly said beforehand, Clive.
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Iain C McKenna: if if you really hammer somebody down on price, then why would they want to help you innovate.
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Iain C McKenna: Why would they want to
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Iain C McKenna: help you with innovating a particular product? Why would they give you information about the supply marketplace, or why would they give you information about competitors that they might have heard in the grapevine? It’s just not going to happen. So I think we need to be thinking way beyond just pure cost and savings. And, as you rightly said, it is about building long-term, long-standing relationships. Where there’s there’s real mutual trust there.
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Bill Michels: It’s interesting since since. Well, since we’re in the AI business, and we see, you know, AI bots and things like that running around. People ask, what’s what’s the future? My job? And and I keep telling them that for the strategic purchasing side. We are never, ever gonna not require human interaction in the negotiation process. And if you look at I one utility I work with
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Bill Michels: they’re responsible for disposing nuclear waste, which is like a hundred year contract, right? And it takes some years to to negotiate that contract. II think that what one of the things that’s gonna happen is there? There’s no doubt that transactions will go away, and people that are tactical and transactional. That part of the business won’t be there. But there’s also a part that says you’re architecting your supply chain when you select the supplier and go
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Bill Michels: negotiate with the supplier. You’re building the chain, and you have to be thinking about that as a strategy. And strategically, you’ve got to get a supply chain, that is, gonna be a competing supply chain cause we’re seeing competing supply chains, and yours has to be aligned on the business side, I think, and that’s part of the negotiation, too, is, where does it fit in the supply chain? How is value transferred across the supply chain? How is cost transfer? And then how do we manage the whole supply chain? So
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our job is moving away from a single unit of negotiation to really managing part of a chain and negotiating collaboration with the chain. That’s my view. I don’t know how other people think
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Clive R Heal: you could think of the chain as your value creation engine in a way, right? So your your value is coming from that from that chain. So how do you? So that? And Ian was talking about 5 tiers down the chain. The further you get back, you know, the more you can influence and manage the opportunity and the value from that that chain.
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Iain C McKenna: yeah, like, look, I couldn’t agree more. I think nothing’s going to happen without relationships, right
00:23:58.150 –> 00:24:23.520
Iain C McKenna: and to be strategic. First of all, it’s how do you approach things? And if you go in guns blazing, it’s never going to happen. I’m a big believer in going where a blank sheet of paper and understand what your stakeholder’s needs are. Don’t look so. Don’t look at at things from a silo perspective. Look at it collaboratively, understand what the stakeholders need and want, and then start to build.
00:24:23.520 –> 00:24:40.749
Iain C McKenna: you know from that rather than going in with your own hidden agenda, and it’s understanding everybody’s point of view where the business is going straight from the top straight down to the the factory floor, and then you start to get a more broader aspect of
00:24:40.830 –> 00:24:42.469
Iain C McKenna: where do we go from here?
00:24:42.720 –> 00:25:03.589
Iain C McKenna: And the strategy that we’ve got? Now, for example, on the category management side. What worked 3 years ago doesn’t work anymore. So we need to be consistently changing, improving. And what doesn’t work, cut it out, move on, and start to do something completely different. That’s kind of how we should be evolving. That’s how negotiations evolved.
00:25:03.600 –> 00:25:08.090
Iain C McKenna: And that’s what we need to be continually doing and through procurement.
00:25:09.680 –> 00:25:17.499
Bill Michels: So so a lot of companies are all talking about, we’re gonna go. Digital what does what does digital mean in in terms of negotiation?
00:25:19.250 –> 00:25:23.880
Iain C McKenna: I guess it depends on what you look at it and what company it is.
00:25:23.940 –> 00:25:28.230
Iain C McKenna: Some companies view digital as having the ability to
00:25:28.260 –> 00:25:34.830
Iain C McKenna: to scan a document and email it right? Or who have moved away from from fax.
00:25:34.850 –> 00:25:39.299
Iain C McKenna: So I think digitalization means different things to different people.
00:25:39.940 –> 00:26:06.920
Iain C McKenna: If you think about full digitalization. Then, you know, for example, there’s a huge logistics company. I know that probably automated about 85 to 90% of their transactional tasks for procurement, and that frees them up to look at. As you rightly, said, Bill, the strategic aspects. So looking at your supply relationships, looking at the strategic relationships with stakeholders.
00:26:06.990 –> 00:26:16.770
Iain C McKenna: build in better relationships with your suppliers to help them innovate looking at your Esg all of these great things. But
00:26:16.780 –> 00:26:23.579
Iain C McKenna: if you’re not fully automated or you’re not fully digitalised. I mean, how many man errors
00:26:23.620 –> 00:26:37.130
Iain C McKenna: does it take to, you know, process invoices to change, invoices, to look at multiple contracts? All these things take absorb so much. The procurement’s time.
00:26:37.460 –> 00:26:45.159
Iain C McKenna: That’s where I think is fully being digitized is when all of these mundane
00:26:47.150 –> 00:26:59.330
Iain C McKenna: tasks that absorb so much of our time are taken out of our day to day lives. We can focus in on the really important things. That’s digitalization. But, as I said beforehand
00:26:59.430 –> 00:27:02.970
Iain C McKenna: digitalization from people I’ve spoken to across the globe
00:27:03.100 –> 00:27:06.899
Iain C McKenna: really does mean different things to different companies.
00:27:07.290 –> 00:27:09.380
Bill Michels: I agree. 5.
00:27:09.550 –> 00:27:12.519
I think. I think, Bill, we’re we’re obviously seeing
00:27:13.650 –> 00:27:19.299
Clive R Heal: technology coming in on the negotiation front in terms of, you know, some of the negotiation bots
00:27:19.680 –> 00:27:21.379
Clive R Heal: access to more
00:27:21.420 –> 00:27:30.530
Clive R Heal: data which actually gives you more insights. And I think the future is going to be, for procurement is going to be the race to insights.
00:27:30.540 –> 00:27:36.970
Clive R Heal: It’s gonna be who can leverage the data first to see where the opportunities are.
00:27:38.670 –> 00:27:55.379
Clive R Heal: Get to them advantage through your collaboration and your negotiation. So so yeah, we’re gonna see the battle of the algorithms who’s who’s got the best algorithms to get those first day insights that they can then potentially leverage with as as well. So
00:27:55.410 –> 00:27:59.559
Clive R Heal: competitive advantage will get shorter and shorter, I’m sure, yet
00:27:59.620 –> 00:28:01.950
Clive R Heal: on the others on the Flip side.
00:28:02.060 –> 00:28:14.030
Clive R Heal: Procurement now have got the opportunity to really bring innovation and new value to the business. You know where we. I think we’ve been let out the box. And quite frankly, the technology is being.
00:28:14.120 –> 00:28:28.209
Clive R Heal: Now get out of the box and do multiple things. There’s what we couldn’t do before. So the you know, people been using AI for negotiation strategy, and you know they might all get the same sort of strategy.
00:28:29.140 –> 00:28:29.890
Clive R Heal: Because
00:28:30.770 –> 00:28:41.000
Clive R Heal: how do you? How do you creatively use the technology to get more insights to get those? Get those opportunities? And I would go back to the earlier point.
00:28:41.040 –> 00:28:47.070
Clive R Heal: suppliers are basically a collection of human beings working together.
00:28:47.230 –> 00:29:17.099
Clive R Heal: And so it’s, how do you influence those human but and being in their technology to get to get value, to negotiate better, better value, and so never don’t lose sight of the human part in the negotiation process. You’ve got technology now partnering with the human beings. And it’s that is that it’s that collaboration and how each is using the other to to work. It’s a symbiotic opportunity that we got now from technology with people
00:29:18.280 –> 00:29:42.230
Bill Michels: makes sense. You know, as as we look at the we’re, we’re all talking about building strategies. I’m I’m amazed that you know our a lot of a lot of companies that I visited as a consultant. We’re really looking at, you know. The, they’ve moved their strategy from a, you know, short term, one year medium term, 2 years long term, 3 years to quarter by quarter earnings, and
00:29:42.230 –> 00:29:54.619
Bill Michels: and have really focused on on the short term. So how how do we keep our our strategy in play? And how do we keep a dynamic strategy moving and and build negotiation plans from that strategy that are effective.
00:29:58.140 –> 00:29:59.080
Iain C McKenna: Clive.
00:30:00.840 –> 00:30:06.200
Iain C McKenna: I’m going to ponder on this because it’s quite a
00:30:07.150 –> 00:30:08.340
Iain C McKenna: I
00:30:10.380 –> 00:30:19.139
Iain C McKenna: I think I agree. It’s it’s an evolving thing right? In strategy. I don’t think you should have longer term strategies, because.
00:30:19.800 –> 00:30:25.730
Iain C McKenna: you know, let’s think about a strategy you had in place. Pre-covid right?
00:30:25.890 –> 00:30:33.920
Iain C McKenna: How do you think that worked out? Not particularly well, right. And now it’s a
00:30:35.650 –> 00:30:40.330
Iain C McKenna: the marketplace has changed right. Everything’s flipped 360,
00:30:40.560 –> 00:30:47.110
Iain C McKenna: but kind of going back to the negotiation side. I think negotiation strategies have changed
00:30:47.140 –> 00:30:58.730
Iain C McKenna: dramatically. And I agree with Clive says that you know we’ve got computers. We’ve all got computers right. And I think technology is like having a computer.
00:30:58.770 –> 00:31:03.440
Iain C McKenna: And E, I’s like having a computer. So we all use it differently.
00:31:03.450 –> 00:31:10.520
Iain C McKenna: but the end of the day we use it to become more productive and and give us more insights.
00:31:10.840 –> 00:31:30.420
Iain C McKenna: So when we’re going into negotiation, AI is our computer right? Our computer side of our brain helps us do things quickly and make calculated decisions. But when we go into a negotiation process, it’s about understanding the other human beings
00:31:30.420 –> 00:31:45.510
Iain C McKenna: business. But we don’t necessarily understand the human being. So we need to start to learn those other people, and we should shouldn’t go in with preconceived ideas, we should be going in and actively listening. So
00:31:46.000 –> 00:31:50.720
Iain C McKenna: one thing that we forget and procurement while a lot of companies do is
00:31:51.450 –> 00:31:54.900
Iain C McKenna: I’m a global footsie, 100 company.
00:31:54.970 –> 00:32:01.929
Iain C McKenna: And I’ve got a supplier who is maybe got 400 500 employees right?
00:32:02.490 –> 00:32:10.810
Iain C McKenna: And I’m going in. And I’m saying, I want a better deal. Is that fair that we are gonna end? And we’re
00:32:11.270 –> 00:32:37.829
Iain C McKenna: putting significant financial pressure on this supplier who have got staff to pay who have got overheads to pay just like ours, but less money in the bank. I think we need to go in, and we need to be a lot more pragmatic. This is where AI and technology can really help us. But stripping it all back, we’re too human beings having a conversation. So we need to give the people the mutual respect that we would expect ourselves
00:32:37.880 –> 00:32:41.810
Iain C McKenna: and move away from that archaic. You know
00:32:42.530 –> 00:32:50.129
Iain C McKenna: Jurassic. Way of negotiating, and I think things are definitely definitely changing
00:32:51.160 –> 00:32:54.280
Iain C McKenna: one. I have witnessed only recently
00:32:54.730 –> 00:33:06.129
Iain C McKenna: that Jurassic mindset, and as a supplier I just walked away because who wants to work with a company like that. We also need to remember
00:33:06.220 –> 00:33:10.739
Iain C McKenna: good news travels quickly. Bad news travels like hellfire.
00:33:10.820 –> 00:33:13.660
Iain C McKenna: So suppliers talk to each other.
00:33:13.710 –> 00:33:16.070
Iain C McKenna: So what will happen after you
00:33:16.980 –> 00:33:22.980
Iain C McKenna: take 2% here, 12% here, you’re going to run out of suppliers. What then?
00:33:23.930 –> 00:33:35.209
Iain C McKenna: You’ve dug your hole right? So this is why we need to be a lot more pragmatic and not go in with a hidden agenda and use insights and data to our advantage.
00:33:35.780 –> 00:33:50.630
Clive R Heal: Bill, you’ve got a phrase, use the bill used the phrase recently, if you fail to plan, you plan to fail, which I actually think is a really really good saying, because there’s a there’s something there for everybody in procurement.
00:33:51.320 –> 00:34:18.929
Clive R Heal: and and I’ve been amazed as well. Sometimes the number of suppliers that have come in, and they know more about my business than I do, and it’s like, how does he know that? How does she know that? Well, because she’s she’s she’ll tell me. Well, I was. I visited your plant last week in Madrid, or I visited your plant. They’re like, Oh, my gosh! I’ve never been there myself, and and she knows more about my business than I do is like. It’s it’s staggering sometimes, anyway. Sorry, Bill.
00:34:18.929 –> 00:34:26.090
Bill Michels: Well in the frame and putting that in in the right framework. What when you think about negotiation? Right? The act itself
00:34:26.090 –> 00:34:51.070
Bill Michels: is the is the smallest part of the of the process. Right? It might last. An hour might last a day might last a month, but the biggest part of the process. So if you think of it as a sports team you’ve got, you’ve got the sports team practicing every day. They’re looking at films. They’re looking at everything for a 45 min or 50 min game, right? So you know, there’s no difference in negotiation. The more time and energy you put into it.
00:34:51.070 –> 00:35:15.519
the better off you are. And and I’m I’m drawn to a person I worked with early in my career as a consultant, and this girl wanted to do everything right. And so she had a glass company come in for a 6% increase. She had more data than that than that company. And they left and said, We’ll come back to you. And that did. They were saying, Well, energies up, and she says, No, no, look at the Mc. Price of gases down. Look at the efficiency and your furnaces up!
00:35:15.520 –> 00:35:20.950
Bill Michels: And it went on and on for 6 months, and at the end of the day they sell one tenth of 1%,
00:35:21.000 –> 00:35:40.829
Bill Michels: because every time they came in she had the data to kinda make it make it not so. And yeah, I never, never forget what she did, and it was great. So I think. I think you know, if you think about the process, and you think about the actual negotiation itself, that’s the smallest part of the process, the lowest amount of time.
00:35:40.830 –> 00:36:01.750
Bill Michels: Most amount of time should be put into the planning, understanding data gathering, you know, influencing, conditioning process. All of that is critical. I’m hoping we get some audience questions to to end up the next next 5 5 min or so. So I’m encouraging the audience to ask any question they want. You’ve got the you’ve got us
00:36:02.650 –> 00:36:30.700
Bill Michels: here, but we’ll we’ll we’ll say then is, you know, how do? How do we? How do we keep learning all these things that we have to know carbon credits. II I’m a I’m a fan of total cost of ownership. II can’t tell you how many times people have had the wrong impression by going on price and missing the big value because they’re looking at. They don’t have the total cost of ownership, or what happens to the total product through its lifecycle, whether it’s a good or a service any any comments on on
00:36:30.890 –> 00:36:32.610
Bill Michels: things that I’ve just said
00:36:33.690 –> 00:36:36.490
Iain C McKenna: from from Isa, from the audience.
00:36:38.050 –> 00:36:48.089
Iain C McKenna: I think you have to be in control of your own destiny. Right?
00:36:48.120 –> 00:36:58.580
Iain C McKenna: And you have to look at the the whole picture rather than just looking at things, as you rightly said, from a cost perspective. So you have to look at
00:36:58.960 –> 00:37:01.779
Iain C McKenna: the bigger picture you have to look at
00:37:02.080 –> 00:37:15.439
Iain C McKenna: the supplier. You have to look at the Esg as well from the total cost of ownership as well. You have to really break it down. I don’t think it’s a very simple decision making process. I think there’s a lot of planning involved. But
00:37:15.930 –> 00:37:20.749
Iain C McKenna: you know, if you’re going to own it, understand it, prepare and
00:37:20.810 –> 00:37:22.030
Iain C McKenna: and execute.
00:37:23.650 –> 00:37:31.479
Clive R Heal: I agree. And I think and think I think a big thing, Bill, is that we need to be thinking about boys, is the whole psychology of
00:37:31.600 –> 00:37:47.340
Clive R Heal: what is happening in a negotiation? Right? So it’s like as as Ian said, I mean, you have 2 or more people trying to influence each other and trying to create something together. And and and you can go in with a a Yeah, I’m gonna
00:37:47.560 –> 00:37:55.949
Clive R Heal: take 20% out of this and and push the guy into the ground, or I’m gonna try and cocreate value together. A mutual value gration.
00:37:56.080 –> 00:38:03.829
Clive R Heal: And I think that we forget. It’s a person or persons on the other side that we’re talking to, and we’re trying to
00:38:04.170 –> 00:38:24.829
Clive R Heal: get an outcome that’s of value to our business. That doesn’t mean to say it has to be to the detriment of their business. But how do you create value for for both organizations is and and there’s people. And Ian is really hot on this. I know in terms of you know, you really gotta understand the person, the people and you know where they’re coming from.
00:38:24.870 –> 00:38:27.050
It’s that human empathy part.
00:38:27.090 –> 00:38:29.239
Iain C McKenna: Well, yeah, it’s it’s it’s
00:38:29.260 –> 00:38:57.840
Iain C McKenna: you got different types of negotiation, right? You’ve got your hard nodes, person. You’ve got your empathetic individual. You’ve got your analytical individual. Everybody’s got their own personal style of negotiating, I think. Probably one of the the the biggest obstacles for any negotiation process is actually not agreeing on the on the deal itself. It’s the commercial legal agreement that happens afterwards that just prolongs
00:38:58.020 –> 00:39:13.030
Iain C McKenna: so much time because there’s clauses and solicitors get involved. And you know, lawyers, and and one week turns out to 2 weeks. But it really just boils down to, as Bell says, preparation preparation.
00:39:13.340 –> 00:39:31.739
Iain C McKenna: He sat down in front of someone and said, Look, I know what the the cost price is for this product per unit. I know what the supply chain cost is. I know where it comes from. I know the source. I know how much people get paid in this country. I know the overall cost.
00:39:32.360 –> 00:39:46.570
Iain C McKenna: And look, I think this is a fair percentage. What do you think? And they say, well, you know, we’ve got overheads. We’ve got this. and I think it comes to a point, and we’ve got to say, Okay, well, look, I need to give them something.
00:39:47.270 –> 00:40:03.489
Iain C McKenna: But there’s room there for value and innovation, and they’re an important person. So I want them to help me influence my stakeholders, but also help me innovate. But if we really hammer people down so hard.
00:40:05.280 –> 00:40:15.400
Iain C McKenna: There’s no innovation. Forget it. You’re just gonna have a transactional relationship. I think I think one thing I would say is, one way Ian is is is the
00:40:16.210 –> 00:40:32.430
Clive R Heal: the negotiation is not the 1 h when you’re sat down together. The negotiation is the ongoing journey that you have with that supplier, and that includes the emails and the phone calls and the other meetings as well. Right? That’s all part of the
00:40:33.200 –> 00:41:00.079
Clive R Heal: relationship together. Yes, I agree. There’s a point where you sit down for an hour a day, a week and do the negotiation. But the reality is, there’s influencing, going on both ways all the time, and it’s like, how do you manage that that journey, that influencing journey? So that when actually the day comes or the week comes sitting together, you know, there’s already a lot happen to get to that to get to that point. And I know, Bill, this is a thing for you in terms of
00:41:00.080 –> 00:41:03.749
Clive R Heal: conditioning messages and so on.
00:41:03.840 –> 00:41:24.180
Bill Michels: Yeah, III think I think people have to really start thinking what’s what’s in their bag of tricks, and they’ve got to go with not one single option. Right? Single options gonna kill you. You really need a lot of options to throw out scenarios and things to try and get it. You need to know whether it’s gonna be a strategic negotiation or tactical one
00:41:24.180 –> 00:41:49.069
that definitely different. And I gotta comment on the the lawyers and solicitors. But what what should be in your package when you go is you have an objective. But you also need to discuss innovation, change investment batna long the longer term. How do you? How do you manage this over the longer term? Maybe. Maybe. Maybe your tooling stop big enough. Or maybe you wanna change something, or maybe the company’s gonna make an investment.
00:41:49.070 –> 00:41:59.170
And as part, and they can involve you in it the tactical versus strategic strategic is very principle. Based and tactical is is just, you know, getting the deal done. And
00:41:59.280 –> 00:42:14.800
Bill Michels: I can tell you that I’ve I’ve done. Both lawyers hate strategic negotiations. What the lawyers do is they give you remedies. They assume that your relationship gonna fail, and everything in the contract is a remedy for failure.
00:42:14.800 –> 00:42:38.709
Bill Michels: It’s not a remedy for success. So if you’re gonna do a strategic negotiation, you’re gonna create a bunch of principles that identify success. And so I think if you don’t have a batna, you don’t have an an option. Another option. You go in with a single option. You’re not gonna do as well. If you have multiple options, what if I do this? What if I do that? Can we do this? Can we do that. How do we get innovation? How do we do change what you know? How do we drive things?
00:42:38.710 –> 00:42:52.279
Bill Michels: And and by doing that, I think you know you’ll you’ll have a better deal when you’re all done so let me let me say we just have a few more minutes left, so why don’t we all wrap up? Why don’t you guys wrap up with your final thoughts on this?
00:42:53.090 –> 00:42:54.830
Bill Michels: Ian? Why don’t you go first?
00:42:55.410 –> 00:43:00.940
Iain C McKenna: Take your time. prepare. understand and
00:43:01.280 –> 00:43:04.530
Iain C McKenna: always be actively listening.
00:43:05.840 –> 00:43:09.139
Iain C McKenna: That’s what I my recommendation to everyone who will be
00:43:10.700 –> 00:43:11.500
Bill Michels: 5.
00:43:12.830 –> 00:43:21.079
Yeah, I think that’s actually really guty. And my! My sum up would be a negotiation is a fantastic opportunity.
00:43:21.150 –> 00:43:24.789
Clive R Heal: You gotta put the timing up front. You’ve gotta prepare for it.
00:43:24.800 –> 00:43:44.940
Clive R Heal: You gotta be willing to explore new opportunities and and push in different directions and realize that it’s ultimately people that you’re negotiating with. And so it’s, how do you? How do you build that commercial intimacy and trust with them such that they they’re they’re willing to to work with you.
00:43:45.280 –> 00:44:01.279
Clive R Heal: II do think that the the price negotiation is a downward spiral, whereas a great negotiation is an upward opportunity for value creation together. And if you see it from that perspective, then you know you
00:44:01.290 –> 00:44:29.829
Clive R Heal: Or you got more opportunities. I think we’re seeing a shift bill from the the muskets that we talked about to much more about orchestration. The the the Maestro, the orchestration of the whole process and the relationship. And I think what we’re seeing is that can open up a huge window of opportunities for us. Negotiation is a portal to opportunity. Right? How do you go through that and co-create value together?
00:44:29.970 –> 00:44:38.529
Bill Michels: And my my final thoughts are for those people that say I’ve got too many things to do. I’ve got too much, too too much on my plate. I can’t take the time to do this.
00:44:38.530 –> 00:45:02.890
Bill Michels: I would say, pick the important ones, the ones that will bring you the highest value and and work on on the important ones, the the transactional tactical ones. They’re not gonna help you much, but you know, whenever I went into a place I would always for the first year we take on the quick wins easy to do things. And then, while we’re doing that over the next year or year and a half, we’d be planning, how do we tackle the really really difficult strategic ones.
00:45:02.890 –> 00:45:18.539
Bill Michels: And I think, you know, saying, I don’t have time is really not a good excuse. Prioritize what you are working on prioritize, which ones are, gonna bring you the value, and then, go forward with those. And we have no audience questions. So Clive, do you wanna wrap us up.
00:45:18.560 –> 00:45:20.699
Bill Michels: maybe talk a little bit about lavender.
00:45:22.880 –> 00:45:37.180
Clive R Heal: Well, just thank you. Everybody apologist for the Internet connection here. But thank you. Everyone for joining us. Thank you, Ian, our expert, for joining us today. Great to have you joining us today. Bill, thanks, as always for coordinating and moderating, and thanks, particularly for
00:45:37.180 –> 00:45:54.159
Clive R Heal: quite a lot of people who’ve been joining and listening into us chatting today about what is a really core competency for procurement, a really important topic, and it’s where the ve rubber hits the road. When you sit down and negotiate and create that value together. So it’s an opportunity. Let’s grasp that opportunity.
00:45:54.160 –> 00:46:08.550
Clive R Heal: We’ll be on a month from now with another expert talking about a different topic and feel free to join us. You’re welcome to join us and obviously reach out to Bill and myself. If you have any questions. Thanks again to Ian, have a great day. Everyone take care.