Buying B2B services is very different from buying physical goods and, therefore, requires a different approach. Goods are tangible – you can touch them, test them and quality approve before they are shipped. So, with the right due diligence in place, there is a high degree of certainty in terms of what you get when you buy. For services, however, the person or team delivering the service are integral parts of the solution, rather than separate from it.
The customer is often an integral part of the solution too. Specifying exactly what you want is also more challenging. Those are some of the reasons why uncertainty in terms of the outcomes and benefits of the service is much higher than for goods. So, one of the key challenges when buying services is to manage this uncertainty. I have procured various types of services over the past two decades and have found that paying close attention to six key areas is critical when buying services.
1. Clear requirements
Unclarity about the requirements is very common when it comes to buying services. This can range from stakeholders experiencing a problem without any idea of what the solution should be, to fuzziness about the tangible outcomes that are required of the service. It stands to reason that if you cannot clearly articulate your needs, you are extremely unlikely to have them met. So, it’s Procurement’s role to act as a catalyst to bring about the necessary clarity.
One way of doing that is showing stakeholders what the future could look like. At an energy company I advised, stakeholders knew they urgently needed to do something to improve management and storage of millions of documents, but had no idea what that solution could look like. To show them what types of services were realistic and feasible, I informally consulted the supply market. This quickly brought a few options to light, including high-level cost implications. Based on that insight, requirements were clarified and a high-quality Request for Proposal (RFP) issued.
2. Value journeys
Understanding the entire value journey, the bought-in service is supposed to form part of, is crucial to clarify how the service will contribute to enhancing value. It’s also important in terms of identifying any risks associated with underperformance. This is about seeing the full picture, including implications for total costs. Which pain points will the service address?
At a pharma company I advised, the procurement of a service to access scientific information had implications across the company from R&D to Sales. There were multiple intersecting value journeys and the service had different kinds of impacts in each of them. This makes buying services a complex undertaking with many, sometimes conflicting, factors to consider. But having a good overview of the relevant value journeys is a good start.
3. Relationships
Because both service provider and stakeholder are integral parts in delivering an optimal solution, the relationship is of utmost importance. The risk of relationship breakdown can be reduced by assessing compatibility between stakeholder preferences and service provider’s way of working. Are cultures compatible? Is the service provider someone the stakeholder can see themselves building a deeper business relationship with?
When buying management consulting, in particular, the relationship between supplier and stakeholders is paramount. As consultants work so closely with stakeholders, the service simply doesn’t work if the relationship doesn’t work. Two companies I worked with had to introduce intervention projects led by separate consultancies when cracks started to appear in projects led by the original consulting firms. This is expensive and the risk of that happen can be mitigated by paying close attention to, and investing in, the relationship from the outset.
4. Quality
Quality is more challenging to define and measure for a service than for a physical product. Perceptions of quality differ and there is always a degree of uncertainty whether the service is going to live up to quality expectations. This uncertainty needs to be managed. The way to do it is to define upfront with stakeholders and suppliers what quality means and how it should be measured.
It is important this is a joint exercise. By having an open and meaningful dialogue about what quality means, how to track it and how to improve, both parties will be better positioned to commit to the same goals.
At a large pharma company, I worked with the stakeholder and the supplier jointly developed a scoring system to improve the quality of custom written web content. We deliberately collaborated with the supplier, rather than unilaterally imposing Key Performance Indicators and SLAs. It was an opportunity to leverage their insights and expertise to ensure they felt listened to. This, in turn, created commitment that resulted in a 30% increase in quality scores over a 3-month period.
Holding the supplier accountable in this way throughout delivery is an essential aspect of ensuring continuous quality of the service. Depending on the nature of the service, a pilot may also be appropriate to “experience” quality before committing fully.
5. Transparency
How the service provider operates can often be opaque, but it pays to get as much clarity as possible. On an outsourcing deal I was involved in, we agreed to share benefits emerging from continuous improvement initiatives. This was only possible because we were able to convince the supplier to be open about the operational details of how the service was to be delivered. Transparency in general gives more confidence that the supplier is able to meet your needs today and in the future.
6. Portability
You don’t want to be locked in to one particular supplier just because it would be too difficult and painful to take the business elsewhere. This is something that needs to be considered even before the service contract is entered into. Depending on the context, a higher degree of portability may be obtained by ensuring the supplier uses open standards and generally ensure the service is delivered in a way that would be easy for an alternative supplier to pick up. On a project I led in the pharma industry portability, transparency and continuous improvement were some of the key elements we ensured were part of the deal.
Focusing on these 6 areas will stand you in good stead when procuring services in a B2B context. Services differ, of course, so the exact approach would need to be adapted to the context in question. However, at a high level, these principles are applicable.
Have a browse through our FREE guide on how to buy translation services, as many of the approaches discussed are generally applicable across services procurement.
