The (Un)Intelligent Client

I have been involved in an increasing number of discussions recently concerning the future of the client/supplier interface, especially in respect of the nature of the so-called ‘Intelligent Client’ role. The recent perceived wisdom has it that suppliers need and depend upon their customers having a fully functional and engaged ‘intelligent client’ function if they themselves are to be successful. Quite what the nature of this ‘intelligence’ is (beyond selecting ‘them’ as suppliers that is, of course) I am not entirely sure, though. And there are now some cracks appearing in the logic of this argument as well.

The story being told by some suppliers has now subtly changed. As they have expanded their global reach and deepened their skill sets and capabilities, it is increasingly common to hear them complain that they need closer engagement with the core business directly, and also need to be entrusted with more and more of the ‘smart’ high value work such as portfolio strategy and performance management. They also expect to fully deploy their information systems so that they control all of the data of the extended operational chain and can provide ‘seamless’ and comprehensive reporting. Otherwise, so the argument goes, they are being restricted to the commodity work so how can they be expected to really make a difference and innovate? Taken to its logical conclusion this leaves the ‘end-user’ or internal corporate real estate role as little more than a governance and contract management function, with perhaps a bit of core business relationship management and interface thrown in for really sensitive work early on in it’s gestation. But in this scenario it is clear to see why the ‘end-user’ corporate real estate function as we know it today could disappear altogether and be replaced by a ‘procurement-plus’ function, increasingly referred to as strategic sourcing. After all this is already happening in many other back office business service areas through business process outsourcing.

The alternative and natural reaction to this is to maintain control (including the key information) and all of the important high-value ‘smart’ work within the ‘end-user’ internal team. In so doing though, suppliers may be correct in claiming that they are being restricted to all the low value, low margin commodity work… so don’t blame them that nothing surprising or new is forthcoming. And can any individual ‘end-user’ team really compete with the capability of a sophisticated supplier for whom such expertise is core business?

Which of the two routes therefore leads to the best sustained performance from the enterprise’s perspective?

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3 Comments

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3 responses to “The (Un)Intelligent Client

  1. Hi Barry, good blog as usual. I had too much to say in response to post here, so I blogged it myself: http://occupiersjournal.com/lead-function-intelligent-client-or-strategic-sourcing/
    regards, Paul

  2. Neil Usher

    Trust needs to be earned, and that process has barely begun. Until this time, the more intelligent the client, the better.

  3. Sven Pole

    Barry, as always, your comments are thought provoking. That said, it seems that you are taking a narrow view of the issue to make a point about the nature of service providers and their desire to gain market share. Clearly the question of what defines an ‘Intelligent Client’ issue is much larger – as evidenced by the comments on your future forum – and warrants further debate.

    You point to two ends of a spectrum in your piece. Either a CRE department self-performs the high value work, or embraces outsourcing and ends up serving largely in a governance and contract management function. In reality, however, there are many other points across this spectrum.

    On the one end of the bell shaped curve that is the market today, there are some early adopters who are experimenting with highly-leveraged outsourced models, and on the other there are laggards who still self-perform a majority of the overall CRE supply chain. But clearly, the overwhelming majority lay somewhere in between, where many have found great success in levering the supply chain and by embracing outsourcing as a way to get economies of scale and scope. There is little doubt, that across the entire spectrum there lays opportunity for further refinement and innovation.

    If the industry does continue to evolve toward greater outsourcing, even to the ‘procurement plus’ model you mention that other back office business functions are adopting through BPO, so what? Isn’t that the natural evolution of the market at work? Don’t markets in the long run tend to prove real value – in this case above and beyond what the internal model offers today? Isn’t it in the underlying firm’s best interest to select the optimal model – irrespective of whether it is an internal or external delivery model? Is there something sacred about an internal CRE department? Is the firm that selects a business process outsourcing (“BPO”) model (un)intelligent or rather likely seeking better value?

    My view of the characteristics on an ‘Intelligent Client’ comes from working across hundreds of Corporate Real Estate (“CRE”) departments, both as consultant and service provider. First, I don’t think it has anything to do with the degree to which the client outsources. Instead it can perhaps best be characterized by where they are on the spectrum of being a ‘high-‘ or ‘low-functioning’ organization.

    Most of the ‘high-functioning’ client CRE organizations that I have observed tend to have similar characteristics:

    • Clear Objectives – They are clear about their objectives and understand how they directly align and impact the underlying value proposition of their firm.
    • Path to Progress – They also clearly understand where they need to go and how to get there.
    o Able to objectively decide upon their highest and best use is in the context of those objectives – and by extension the highest and best use of the supporting supply chain (e.g. Moore’s ‘Core versus Context’) – and what functions to outsource.
    o Realistic in assessment of firm’s and their department’s relative capability maturity and pace that progress can be realized.
    o Able to create the business case and marshal resources of their firm and the supply chain to drive required change.
    • Work Well in an Ecosystem – Understand and thrive operating in an ecosystem (end user business units, CRE, and supply chain) that must remain healthy (yes, means profits within the supply chain).
    • Work Well with People – Delivering CRE services well depends upon hiring, motivating, and retaining talent.
    o The client has a role in this, not just within their CRE department, but also by establishing a “culture” that allows the supply chain to succeed in managing their human resources as well.
    o The culture tends to have strong aspects of trust, fairness, cold objectivity, open/frequent communication, clarity of roles/accountability, mutual respect, elements of a meritocracy, and tolerate occasional failures in pursuit of improvements – where the best litmus test is whether people enjoy working within the broader Client organization.
    • Remain Flexible and Improve – Across all industries business circumstances change – it seems at an every accelerating. Tolerating ambiguity, adapting to change, building flexibility into programs/tools/processes, are becoming an increasingly important attributes of successful teams.
    • Deliver Real Value – Tied to understanding the firm’s broader objectives, these client CRE departments constantly focus, adjust, and communicate their real value proposition to the firm. Most have transcended from order taker, to advisor to the front line business units and senior management team.
    • No Bias – A key characteristic carried by Senior Management is that they are willing to utilize whatever delivery model provides the best value to their firm – self performance or full BPO, or something in between.

    To answer your question about what offers the “best sustained” performance, I don’t believe that either alternative you raise necessarily does, nor are they a good indicator of an ‘intelligent client’. The most successful CRE departments I have seen have a blended supply-chain approach. One that is right for their industry, their overall internal capabilities, and the pace of change they and their firms are facing.

    Instead those organizations focus on creating a healthy, ‘high-functioning’ organization and eco-system that fosters success, innovation, and a highly positive impact to the company they are service. They may elect to adopt a BPO model in the future, but they do so because the business case justifies the change and they are willing to bring that decision to their firm and department.

    As a service provider, I would rather work for a client that values my work and where we can collaborate in a highly-functioning environment, irrespective of how much they outsource, as I know I can deliver “sustained” value to that client and in doing so better serve their interests and my own.

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