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Feb 2, 2024

The internal analysis as the foundation for holistic category strategies


Do you remember the last time you took the wrong ramp onto the highway and how it made you feel? Most people instantly know that they took a wrong turn and hope that the next exit is not too far off. Unfortunately, our brain doesn’t experience the same stress when taking the wrong turn in developing category strategies. Category strategies in Procurement are a methodical approach for defining the best way to buy goods or services for their business. Done right, they help companies align business requirements with market realities to leverage market opportunities and mitigate risks. Done wrong, they might lead us down the wrong road.

Now, the process of managing a category strategically never really stops. Category strategies require regular updates and ongoing monitoring as changes in internal demands or external market factors might render a perfectly fine category strategy suddenly unfit for the future. This nature of the category strategy development & management process is the reason why consultancies frequently use flywheels, infinity loops, or circles to display it. And yet, it does start somewhere. And the first turn is defining the direction of travel.

Business requirements as guiding light for holistic category strategies

The first step in Cirtuo’s strategy creation process is the internal analysis phase, which we refer to as ‘business requirements’ in guided category strategy creation due to its unparalleled importance. It helps Procurement to take stock of organizational needs, goals, and challenges through a structured analysis and lays the foundation for the subsequent review of external market opportunities & challenges before the ‘strategizing phase’.

Not surprisingly, this initial step is critical for developing business-centric strategies that deliver tangible business value and that stakeholders want to comply with. Failing to understand the true nature of the current and future business requirements & objectives means that the subsequent external analysis and the derived value levers are based on incorrect information. Based on the strategic criticality of a category the implications could be dire for the organization.

5 steps for performing an internal analysis that captures business requirements

To ensure all available internal information is collected and reviewed, a structured approach to ‘analyzing business requirements’ is required. The review needs to establish the scope of the category, review the historic spending profile of the organization, and capture & prioritize the qualitative business requirements. The key steps involved in performing the internal analysis include:

1) Define the scope of the strategy – The very first step for developing a category strategy is defining the scope it should cover. The scope is the combination of the product(s) or commodity codes in question and the geography to which the strategy should apply. By precisely specifying the scope, we automatically define what is ‘out of scope’. This ensures the collection of data remains focused and enables clear communication and alignment between impacted teams. This is important as business needs and market realities can differ vastly between regions, countries, or BUs.

2) Spend analysis – Once the scope is defined, the next step is understanding the historical spending data and patterns. The data can be sliced by region or country, business unit, supplier, order value and frequency, or other dimensions. This basic analysis will help us understand if there is an opportunity the strategy can address. It will also give us clear guidance on who in the business is spending money on this category and therefore has a vested interest in the strategy.

3) Stakeholder mapping & mobilization – Based on these insights, a thorough mapping of stakeholders is required. It is important to gain a clear understanding of who the relevant stakeholders are, how much influence they have on procurement decisions, and how much impact our decisions may have on them. The stakeholders can be mapped on a 2-by-2 matrix that can help us understand how closely they should be involved. As many functions might not be accustomed to the strategy development process, identifying, and winning a senior sponsor for the strategy from outside of Procurement, preferably from the function most affected by the strategy, is highly recommended.

4) Establish a cross-functional team – To ensure a holistic perspective on the category, its products or services, business opportunity, etc., establishing a cross-functional team for developing the category strategy is vital. Procurement should never work in isolation but always involve relevant stakeholders.
A cross-functional team can consist of members from R&D, Marketing, Sales, Operations, Finance, Legal, etc. based on the nature of the category. It is important to ensure a broad representation of perspectives as it gives credibility to the process and outcome. Based on the scope, the geographical representation of key markets needs to be ensured as well.

5) Capture & align business requirements – Category strategies are intended to steer spending strategically by aligning internal requirements and objectives with external market realities and opportunities. RAQSCI is a proven framework for capturing business requirements, which covers a broad set of dimensions that help define the expectations of the business towards the external market and suppliers. The dimensions should be weighted, and individual requirements clearly separated between needs (must haves) and wants (nice to haves).

As different parts of the business may have different requirements, it is important to create alignment around the requirements and understand the differences. This way, a nuanced response to differing requirements can be developed.
Cirtuo has enhanced RAQSCI to GRAQSCIED in line with today’s business expectations. We have dedicated a separate blog to aligning business requirements due to its importance for the strategy development process.

Cirtuo Guided Strategy Creation: business requirements at the core of category strategy development

Cirtuo is on a mission to make category strategies actionable by putting business requirements at the core of category strategy development. Guided Strategy Creation™ Pro’s enhanced ‘strategy highway’ and user guidance help category managers quickly and effortlessly define the scope for category strategies, analyze spend, and identify & map relevant stakeholders. Category managers can then collect, weigh, and align business requirements according to Cirtuo’s GRAQSCIED model within the solution to reflect the strategic objectives of stakeholders and the company.

During the ‘strategizing phase’ of developing holistic category strategies, Cirtuo offers AI-powered recommendations on value levers and evaluates their strategic fit with the captured business requirements. This enables Procurement to demonstrate a clear line of sight with business strategies and to have fact-based discussions on how their category strategy pays in on business objectives.

Cirtuo Guided Strategy Creation: business requirements at the core of category strategy development

Helping Procurement align with business strategies is in the DNA of Cirtuo. We have developed the Strategy Alignment Matrix (SAM) and GRAQSCIED to ensure a consistent line of sight between procurement and business strategies. That is why business requirements are at the beginning of the Guided Strategy Creation Process and why we embedded requirements and strategy alignment functionalities throughout the process. With Cirtuo, every category manager can deliver actionable category strategies that are strategically aligned with business priorities and that maximize value beyond savings.

Learn more about developing actionable category strategies in our deep dive blog explaining the external market analysis.

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