The power of knowledge
A negotiation process is usually an unfair process. This needs to end. Everyone is entitled to a fair price and to achieve this, it is important to work with transparent data and to have an open and honest conversation.
As a young procurement professional, I looked up to the often experienced account managers on the other end of the table. Their authority came from their years of experience within a certain market. And me? Despite the fact I just started, I was full of self-confidence and sure that I was able to fool the salesmen I spoke with. However, my years of experience taught me that sellers have a way better hand than buyers and that it is every sellers trained competence to make you pay an unfair price and feel awesome about it.
But experience and the power of knowledge do have their positive sides. For example, I found out that many salesmen are quite superficial when conversations reach other topics than the market they operate in. But I couldn’t get my head around the fact that the authority they radiate would only come from their experience. But then it hit me. The answer is knowledge. Knowledge of who is working in which place, what company is taking over other companies and what company is taken over, knowledge of the product range, knowledge of the motives of people and companies, but on top of everything the wealth of knowledge and information about prices, margins and the relationship between these two. Are you interested in gaining some knowledge and following a procurement course? Here are 7 recommended procurement courses.
Magic, family and other annoying words
“You know what is in our industry?” followed by a reassuring smile, “once you work in this industry, you’ll probably never leave. People work here for a long time. It’s a small world and this works like an addiction, a kind of magic.” Or worse: family. I myself had a different personality. The moment that I was almost a part of the family, I switched to another industry. I went from bathrooms to dairy and from dairy to office supplies and from office supplies to books. With every switch, I had to leave my treasure chest behind.
But eventually, every migration also gave me something in return. I discovered that there are – regardless of the differences per industry – mainly parallels. There seem to be universal laws, which occur over and over again: the balance of power, the timing of the negotiation and above all: the distribution of knowledge.
As a buyer I found out that I started every negotiation with a huge backlog of information. The selling party has an image of their cost structure and margin profile which makes it possible for him/her to push exactly the right buttons.
Meanwhile, it is no exception for a buyer to step into a negotiation with no more than the (proposed) previous prices and sometimes an image of similar products in combination with some googling about commodities. I was already better at this last part than the average buyer. This was because I had been using Buynamics (to follow commodity prices) for years. This tool was owned by Jan-Paul Plieger (my previous procurement colleague, friend and nowadays companion). His tool supported me, but I kept having the following dialogues:
“I noticed that the price of aluminum dropped, so I would also like my purchase price to decline.”
“Yeah, you are totally right, but the product also has a strip of rubber in it. Look, here! And I’m sad to say that the price of energy in Germany (our main location of production) has been increasing enormously. I think something is going on there with ‘die Grünen und Schweinsteiger’. Actually you should be very satisfied with the current price I’m offering you. Moreover, if I’m comparing this price with the price other customers pay, I’m putting my job on the line. It is my irresponsible decision and I hope they won’t find out about it at the office.. With your shitty volume, this is the best deal you can get anywhere. I must say, you’re a most competent buyer and I respect that very much. You know what I can do for you? I will fix this price for you, for the next six months. At least, you’ll have nothing to worry about for the time being. Come here, time for a firm handshake and a nice hug.”
After another of these tiring negotiations with a ten to zero information back log, it was enough. On a rainy Sunday afternoon, I scribbled a model on paper of which I knew it would solve the problem once and for all. Inspired by what Jan Valkhof once taught me and powered by the fury from years of procurement frustration.
And the name is: The price is.. No, we’ll call it What’s The Price
It’s august 2014 and I’m grabbing a bite with Jan-Paul to test the idea. And yes, he’s annoyed within five minutes: “shit, shit, shit why in god’s name haven’t I thought of this idea myself?!” That same night, Jan-Paul challenges me to make immediate progress and to start a company together. WTP internation BV is born with the vision that everyone is entitled to a fair price. In short: WTP has to launch January 1st 2015. Let’s get to work.
Jan-Paul knows Nico Bontenbal and Nico builds systems. In the beginning Nico sent us some IT invoices which were quite high and since we are professional buyers, we immediately asked him to stop doing this and join us. Nico joins us and the rest is history. The frustration has made way for a lot of fun. This is probably the first time I can say that the work I’m doing truly feels like an addiction or even like magic. Not because of my job, but because of my profession.
WTP is growing fast, our customers are saving money using WTP, we currently present our tool at different locations for about ten times a week, we have a new release every month, we currently offer 15 people a job, we’re looking for our fifth developer, US companies have shown interest and we are still a completely independent company.