The Deep Dive into Bimodal Procurement
What is Bimodal procurement?
"Bimodal procurement" is the top search suggested by Google Search for this blog.
Apparently, people are looking for something that barely exists. There are such significant concepts as Bimodal IT and Adaptive sourcing.
The mixture of these two possibly created hybrid notions of "bimodal procurement" or "bimodal sourcing." Yet, we can provide the following definition aligned with the principles of bimodal IT.
Bimodal procurement assumes two operating modes - one suited for the business-as-usual (BAU) and another for new requirements, e.g., innovation.
BAU mode is based on stability, quality, and cost-efficiency. Innovation mode is based on speed, agility, and business value.
We'll now provide in-depth research on bimodal and multimodal sourcing and procurement concepts. We'll also propose a hybrid sourcing strategy that practices our theoretical definitions.
Spoiler: If you'd read this till the end, you will find that bimodal procurement exists.
Bimodal IT operating model by Gartner.
In fact, "bimodal" refers to the new IT operating model, which assumes separate business-oriented and traditional IT delivery modes.
Gartner made the concept public to a broad IT audience in its CIO agenda in late December 2013. Since then, it has become a hot topic with as many haters as proponents.
Gartner defines it as "the practice of managing two separate but coherent work styles: one focused on predictability, the other on exploration." We explained earlier our vision of bimodal IT in this post.
For procurement professionals, it is essential to understand that some IT functions operate in a stable planned environment where TCO (Total Cost of Ownership) prevails. However, other functions require Speed and efficiency, i.e., agility, to access innovation.
Perhaps, that was the reason for IT to become T&I - Technology and Innovation. The new name perfectly characterizes the bimodal nature of operations.
Two-speed IT by IBM
In 2015, IBM suggested a somewhat similar concept - the Two-speed IT. It is an application-centric view of the IT delivery model.
Mobile applications blend the digital user (past purchase history, user preferences, and so forth) with the real-time user (where they are, who they are with, and who is speaking about them).
The notion of Two Speed IT is a way for businesses to support these types of engaging applications.
One part, the Steady Speed, delivers enterprise-strength IT services. The other part,
Fast Speed takes advantage of new digital business opportunities.
However, success comes only through joining these two speeds with a "meets in the middle" approach, based upon controlled, appropriate real-time access to
core systems and the movement of digital assets to the
edge for use in Fast Speed initiatives.
Sourcing attributes of Bimodal IT (Bimodal procurement or sourcing)
Gartner suggests that each mode of Bimodal IT has specific sourcing attributes, namely
- mode 1 (reliability) assumes concluding long-term deals with Enterprise suppliers;
- mode 2 (agility) takes short-term deals with small new vendors.
Perhaps, that's why the notion of "bimodal procurement" appeared.
Loopholes in the concept of bimodal procurement
The underlying concept of bimodal IT has been extensively criticized since its inception in 2013.
This criticism has been mostly related to maintaining" organization silos" and creating new silos instead of facilitating business transformation by combining Business and IT.
Dividing IT organizations into fast and, therefore, "cool" (digital IT) and slow and thus "uncool" (traditional IT) can create tension between the IT teams who work in these different speed modes.
Two conflicting functions within IT would make the external alignment with the Business highly complicated, if not impossible.
The complexity of IT and business alignment in bimodal IT
The importance of alignment between the Business and IT relies on the following hypothesis: those organizations that successfully align their business strategy with their IT strategy will outperform those that do not.
In other words, alignment leads to the more focused and strategic use of IT, leading to increased performance.
When Bimodal IT appeared, it was described as a concept that narrowed the gap between IT and the enterprise's demands. In other words, it's been dictated by the need to align and integrate IT with the Business.
Such integration looks exceptionally complex, requiring different alignment modes between Traditional IT, Digital IT, and the Business.
All of the above equally applies to procurement.
Indeed, we need to align our strategy with the Business. In their integration endeavors, we should follow IT to become a part of the emerging digital transformation agenda.
But how would we avoid being victims of bimodal IT conflict?
The core of bimodal IT misalignment
As mentioned above, life is not as easy as modes 1 and 2, enterprise suppliers and small vendors, or agile and waterfall. Many other dimensions need to be accounted for.
The product evolution lifecycle requires different types of actors in each stage.
The ideation and prototyping require Pioneers, production needs Settlers, and commoditization depends on Town Planners.
The problem with bimodal (i.e., only pioneers and town planners) structure is the lack of a middle component (the settlers.)
It performs an essential function in ensuring that work is taken from the pioneers and turned into mature products. Then the town planners can turn this into industrialized commodities or utility services.
Procurement needs to master many roles.
What are the repercussions of the above problems and their potential overhauls for procurement? We need to assign and rehearse different roles in the product development lifecycle.
We're great Town Planners already. No problem with that. But we cannot be that one-trick pony forever.
We may let the Business become Pioneers with or without procurement support. This depends on our ability to help the Business with ultra-fast decisions. If we cannot, we better step aside.
They should run RFIs, hackathons, innovation labs, etc. Small budgets, weak governance, relational contracts delivering prototypes or pre-commercial products.
To put an innovative product into production, we should become Settlers.
This is where the Business and IT will require our SRM toolkit, risk management, and commercial acumen. We must learn to nurture tiny sprouts of great ideas until they become products.
Gartner pace layering
We just touched upon two distinct operating modes of IT (or T&I.) However, another dimension of complexity represents different types of technology systems.
Pace layers by Stewart Brand
In his book "How Buildings Learn: What's Happen After They Are Built" (1994), Stewart Brand mentioned that buildings are composed of several layers of change, each developing at its own pace.
Later, he extended the same logic to civilizations having different layers - nature, culture, governance, infrastructure, commerce, and fashion. Manner demonstrates the quickest pace of development, unlike nature.
"Consider the differently paced components to be layers. Each layer is functionally different from the others and operates somewhat independently, but each layer influences and responds to the layers closest to it in a way that makes the whole system resilient."
Brand noted that all durable, dynamic systems have this structure, making them adaptable and robust.
Gartner's realization of a pace-layered strategy
Gartner suggested the following classification:- Systems of Record – these systems enable an organization's core capabilities and run mission-critical business processes. Usually, these are Commercial Off-the-Shelf (COTS) products with minimum or no customization (e.g., ERP, CRM, Data Warehouse, MDM (Master Data Management), HR systems.) These systems could be further differentiated by application areas, i.e.,
- Finance (SAP)
- Customer (Salesforce)
- HR (Workday)
- IT (ServiceNow)
- Operations (Maximo.)
- Systems of Differentiation – applications in this layer represent the processes that make an organization unique and typically are not accommodated out of the box by vendor-provided Systems of Record platforms. These systems are highly customizable. (Examples: BI (Business Intelligence) and reporting, customer service, e-commerce.)
- Systems of Innovation – These applications represent new ideas and technologies, which are rapidly developed and then manually deployed and tested. Such systems satisfy ad-hoc business requirements and employ consumer-grade technologies. (Examples: digital sales channels, social platform selling, customer experience, mobile e-commerce, merchandising.)
As per Gartner, Bimodal IT and Pace-layered strategy are complementary.
Adaptive sourcing
At last, we reached the concept of adaptive sourcing.The notion of "adaptivity."
Adaptivity is often equated with agility, but they are not the same.
Both agility and adaptivity focus on responding to and dealing with uncertainty and environmental changes.
However, they do so in different manners. Originating from evolutionary theory, adaptivity was initially applied to examine organizations' natural environment. Thus, adaption theories speak of "fitting" with changing and new environments and "learning" from that.
Our view of Adaptive Sourcing
"The one-size-fits-all sourcing strategy is no longer appropriate for an IT organization that will increasingly be asked to be accountable for end-to-end production services, which will, of necessity, be based on a hybrid IT approach."
Now we can explain this Gartner's statement with the help of a bimodal (hybrid) IT approach and many dimensions of IT sourcing, e.g., categories, end-users, and product lifecycle actors.
Gartner suggested three sourcing modes - Innovate, Differentiate, and Run. These marry perfectly with the Pace-layered application strategy and three product lifecycle roles (Pioneers, Settlers, Town Planners.)
Therefore, we will present the following custom view of Adaptive sourcing.
The ability to fit in a changing environment is a prerequisite for survival. Therefore, adaptive sourcing is not a fancy procurement term but a recipe for further developing IT sourcing capabilities.
Adaptive sourcing by Forrester
Interestingly, the Adaptive sourcing concept is nothing new. Gartner proposed it in 2014.
Their rival Forrester came up with the definition of the same in 2006! However, the modality of their concept has been tied to the technology adoption cycle - Innovation, Early adoption, Dependency, Maturation, and Sunset.
Forrester's business model is clear and logical but somewhat complicated. For example, the choice of a sourcing scenario could be ambiguous.
Hybrid IT sourcing strategy: a practical application of "bimodal procurement."
The table below suggests the practical use of "bimodal procurement," i.e., Bimodal IT and Adaptive Sourcing flavored with the Pace-layered application strategy - in the form of the hybrid sourcing strategy.
3D Dynamic procurement model
To work on this further, we propose the following 3D dynamic procurement model.
"Innovate," "Differentiate," and "Run" axes form three planes, where we can place three critical procurement deliverables – Value, Relationships, and Processes/Systems.
Usually, the value is achieved by improving existing practices (Run) and developing unconventional ones (Innovate.)
Processes and systems require differentiation (e.g., for different user groups) and innovation for further development.
Relationships must be maintained (Run) and differentiated (e.g., supplier segmentation.)
We formed this simple model and may use it to visualize our strategy.
Let's assume that the triangle has a constant area, so you cannot simply enlarge it, and, e.g., each upward movement of any of its points results in different moves of other points (including downward ones.)
It is suggested to fix at least one point of the triangle, as having all three moving issues would increase the dynamism to the uncontrolled state, where each move creates sudden changes across the model.
In the times of Industry 4.0, innovation cannot stop, and the constant search for new efficiencies and values through operational improvement (Run.)
Therefore, you would likely stabilize (fix) the differentiation. Otherwise, further relationship improvement would happen at the cost of extreme customization of processes and systems.
We can fix the point on the Innovate ax and view the changes on two other axes.
For example, we're to increase innovation. In that case, the triangle starts moving downwards on the Run ax, and the value element related to operations (Run) could deteriorate while the innovation value increases. Relationships with critical suppliers could also suffer, as you'd start putting more effort into developing their startup rivalry.
Vice versa, too much emphasis on improving existing operations would result in an upward motion on Run ax and degrading innovations.
We propose this model as a possible visualization of multiple dimensions of procurement and their dependencies.
It is suggested to fix at least one point of the triangle, as having all three moving issues would increase the dynamism to the uncontrolled state, where each move creates sudden changes across the model.
In the times of Industry 4.0, innovation cannot stop, and the constant search for new efficiencies and values through operational improvement (Run.)
We can fix the point on the Innovate ax and view the changes on two other axes.
Vice versa, too much emphasis on improving existing operations would result in an upward motion on Run ax and degrading innovations.
We propose this model as a possible visualization of multiple dimensions of procurement and their dependencies.
Bimodal procurement example.
In fact, bimodal procurement exists in practice, but it's not called so explicitly.
We came across the Asian Development Bank guidance note on procurement. It includes special considerations for IT systems.
"A4.4 Run procurement is suitable for standard off-the-shelf procurement of hardware, software, and services. However, when the requirement is large enough and repeatable, and there is a benefit to operational standardization, e.g., laptops, smartphones, printers, and productivity applications, such as word processing or spreadsheets, the requirements should be incorporated into long-term supply agreements.
A4.15 IT procurement for innovation must be flexible, iterative, and adaptive.
It should not be treated as a linear process. If it is, the chances of failure during
implementation are higher than success."
Therefore, you're free to embrace Adaptive sourcing in the shape and form suitable for your organization. Any step in this direction means the accelerated time to market for specific spending categories, i.e., the early stage of procurement agility.
Procurement 4.0 is multimodal, adaptive, and pace-layered
Bimodal procurement is the simplified version of adaptive sourcing.
Procurement needs to be multimodal, adaptive, and pace-layered to recognize the differences in requirements, end-users, sourcing methods, and suppliers.
Procurement 4.0 doesn't accept the one-size-fits-all approach. Instead, multimodality allows adjusting to our business's ever-changing competitive and technological environment.
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