Sourcing

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The need to achieve more with less through sourcing...

Public sector service delivery faces an unprecedented need for transformation as services are commissioned in an increasingly connected and distributed economy, and, as service users increasingly want to co-create the services they consume. Current financial pressures will likely preclude major investment in service transformation (despite ring-fencing of some budgets) and thus there is an urgent need to ‘achieve more with less’ without compromising key health outcomes. There are opportunities to further capitalise on best modern practice already available in other sectors – a process that the health service has already begun. The key is to develop a clear and coherent sourcing strategy – a way of exploring how different service delivery models (in-house, shared services, joint ventures, outsource and hybrids) can best be combined across different providers (such as public private and third sector) to optimally deliver a set of strategic outcomes.

Strategy and Sourcing make ‘Commissioning’...

“Sourcing” is defined as the identification, evaluation and implementation of the most effective delivery models for securing strategic objectives. It does not replace business strategy but sits alongside it. Business strategy defines the what - the outcomes an organisation is trying to achieve. Sourcing defines the how – the mechanisms an organisation will use to deliver those outcomes.

Taken together, commissioning can be viewed as the sum of a clear business strategy and sourcing strategy.

Sourcing as a sub-set of commissioning

 

Characteristics of transformational sourcing models...

Sourcing aims to explore options for service delivery – alternative ways of achieving the outcomes – with no presumption as to which approach might be best. These alternatives are typically characterised by:

  • Less prescriptive service delivery models that look to match service capabilities to the outcomes required rather than be constrained by existing organisational silos/boundaries
  • Clear accountability models that link back to outcomes, rather than organisational loyalties
  • A partner-centric approach – working throughout the delivery chain as joint participants in or commissioners of delivery.

Start by understanding the drivers for change...

As with any strategy process, the key to success is to identify and understand the drivers for change for a given organisation. Whilst, no doubt, these will include cost efficiencies, others are likely to be rooted in the business strategy and vision – for example, in the health outcomes the organisation is trying to achieve on behalf of government and the people it serves. Examples of these drivers from across the public sector include: 



  • Efficiency savings
  • Performance improvement
  • Improving quality and customer service excellence
  • Rising user expectations
  • Transformational change
  • Better management of the market
  • Responding to regulatory frameworks
  • Securing (or avoiding) capital investment

  • Freeing strategic management capacity
  • Access to capacity/expertise
  • Focus on core activities
  • Rationalisation of existing contracts
  • Future proofing and improved resilience
  • Place-shaping and regeneration
  • Delivering positive social outcomes

 

These specific drivers will inform the business case, help determine the selected approach and form the foundation for the whole transformation programme. Unless they are real and compelling, the programme is unlikely to get beyond the implementation phase. Once these outcomes and drivers are clear, the options for transformed delivery can be considered.

Developing a Sourcing Strategy – ‘measure twice, cut once’...

Organisations often rush in and under-resource the development of the sourcing strategy phase in eagerness to get on with something (for example, solution design and market engagement). A good sourcing strategy should comprise three key components:

1.       A consideration of the options. There are a number of ways of filtering down a candidate set of processes or functions to potential delivery options.  The exact filters used will vary from situation to situation.  Once some potential options have been identified there is still detailed work to be done to explore the feasibility of the approach:

 

 

Use of filters to analyse options

2.       The business case. Developing the business case requires a good understanding of the organisation’s present position as well as the financial implications of possible options. The business case produced at this stage can be tested both politically and managerially before discussing the possibilities externally. This business case will change following informal discussions with providers (where involved); but it is too early to treat early cost estimates as anything more than indicative at this stage. (It is, however, worthwhile letting providers know any de minimis savings required as a “right to play”. This will encourage them to look more closely at the potential savings they could deliver.)

 3.       Active stakeholder management. Developing the mandate for change requires not only a sound business case but also clear stakeholder consensus. It is critical, therefore, that key stakeholders are engaged early and then involved regularly in the change programme as part of a formal – and active - stakeholder management plan. This should start during the creation of the sourcing strategy. Failure to manage stakeholders adequately is the single biggest factor in transformation programmes being aborted prior to contract.

Developing the sourcing strategy is the opportunity to do the detailed planning and thinking required to minimise the risk, time to value, cost, management distraction and emotion for the rest of the programme, thereby maximising the chances of success. Hence the maxim – ‘measure twice, cut once’ – time invested in developing the sourcing strategy can ensure a smoother, faster and less costly route to the desired savings.

If you would like to discuss your sourcing strategy,

please contact - info@ideasown.co.uk

 www.ideasown.co.uk

 

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