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443 Little Collins Street
Melbourne, 3000

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+61 3 9034 6140

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Suite 4, Level 4
443 Little Collins Street
Melbourne, 3000

Phone

+61 3 9034 6140

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Sourcing

Deciding how to pay for it

Build or buy in?

It’s often assumed that once the capability needed for project decision-making has been decided, it should be built in house. And while there are advantages to having that capability in house, there are underlying strategic questions that need to be addressed namely, which elements of that capability should be in-house, and why? After all there are four key dimensions and 20 sub-dimensions, and a conscious decision ought to be made about each.

There are three key roles in sourcing

To answer that question, it’s important to understand the threeroles in the delivery of a service, owner, expert, and provider.

The owner is responsible for the long-term stewardship of the capability, be that a physical asset, or an information asset such as a database for example. And is responsible for designing management strategy, acquisition, and disposal. The primary role is decision-making around capital allocation, e.g., enhancement, remediation, acquisition, or disposal.

The provider is responsible for delivering the capability and maintaining it to the standard determined by the owner. It is an efficiency game.

The expert has the skills necessary to perform the service or deliver the capability, stewards the intellectual property around service provision. It is an information management game primarily.

There are many sourcing models

For example, the monopoly model keeps all three roles in-house and is often assumed to be the desired approach. But monopoly service providers have big disadvantages in most situations, so this model should be challenged.

There are other models such as “dumb owner” where most of the service is outsourced, but investment decision-making for example is kept in-house, or “dumb provider” where the thinking and expertise are kept in house and the provider just complies with instructions. There are other models, each with advantages and disadvantages depending on the organisational context.

Deciding where expertise should be located is key

What determines the shape of most sourcing models is the location of expertise. Moving the location of expertise reshapes the capability delivery model.

With the monopoly model, expertise is key in house, but is not subject to market challenge. The “dumb” owner model has expertise completely outsourced, leaving the owner largely in the dark on service provision management. The “dumb provider” model keeps expertise in house, but cuts off feedback from service delivery, so eroding expertise in the long run.

We help you work through where expertise should be located for each of the 20 sub dimensions and so design the shape of the capability sourcing model.

Traditional approach to sourcing

For those with traditional procurement processes, we assist with gathering requirements, drafting expressions of interest, market testing, RFP drafting, supplier selection and negotiation, and implementation planning.However, while such an approach to sourcing is thorough, deliberate, and painstaking, it is not without risk.  

A pragmatic alternative

A significant risk is that the design work takes so long and becomes so complex that the environment shifts, the solution when finally agreed no longer fits the businesses’ needs, so causing re-work and further delay. The opportunity cost of seeking the perfect solution before acting is rarely considered and is a significant risk.

We recommend a pragmatic approach to mitigating this risk. We use the Sein diagnostic at the beginnning of the engagement to identify high-level requirements, and identify a third-party system that's a good enough match to allow you to move forward.

By satisficing or taking what’s good enough we mittigate deal the opportunity cost of perfectionism, help crystalise business needs, and clear up remaining some noise around design. Gaps between the start up version of capability and more mature versions can be built out with agile.

In practical terms, the design phase can be completed in as little as four to six weeks from formal kick-off. 10-12 weeks later, a good enough PMO can be up and running meeting roughly 80% of your needs with pre-populated templates, standard management reporting and embedding good project management practice.

You'll learn where the real gaps are, then create a backlog of improvements to be prioritised and delivered in short sprints. This means that capability delivery is front- loaded and the trap of perfectionism is avoided.

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