Entrepreneurship in Purchasing: Reinventing the Function
Alvin J. Williams, Ph.D.
Alvin J. Williams, Ph.D., Chair and Professor of Marketing University of Southern Mississippi, Hattiesburg, MS 39406-5091, 601/266-4634.
81st Annual International Conference Proceedings - 1996 - Chicago, IL
The presentation focuses on how to move supply management groups toward an entrepreneurial unit. Entrepreneurship offers the advantages of innovation, risk-taking, learning, and focused effort to attain systemwide goals. Specific strategies for creating entrepreneurial supply teams are offered.
Purchasing in all organizations is at the crossroads. At this juncture, purchasing professionals are searching for viable alternatives to propel them in an ever-increasing world of global competition. Alternative conceptualizations of what purchasers do are being formulated and assessed. In addition, different modes of purchasing practice are being subjected to experimentation and analysis. The current paper is an attempt to offer a plausible perspective from which to view and practice purchasing in a dynamic, nontransaction-based era.
In particular, the paper focuses on the prospects of using entrepreneurship as an alternative model to enhance purchasing performance in the future. Various points of view are a significant element of vibrant and dynamic fields such as purchasing. Thus, entrepreneurship offers promise for assisting purchasing in fulfilling its latent potential in organizations.
Nature and Dimensions of Corporate Entrepreneurship. Entrepreneurship is a multidimensional term with numerous definitions. A useful view of entrepreneurship for this paper is that of "the process of creating value by bringing together a unique package of resources to exploit an opportunity" (Stevenson, Roberts, & Grousbeck, 1989). An alternative view of the concept is "the process by which firms notice opportunities and act by creatively organizing transactions between factors of production to create surplus value" (Jones and Butler, 1992). Both perspectives embody the current and future challenges of purchasing and supply management. The process of creating value within the context of the purchasing environment involves:
- Delineating opportunities;
- Developing the business concept;
- Resource acquisition;
- Adroit implementation of the concept;
- Managing and harvesting the venture.
In a survey of purchasing professionals, Morris and Calantone (1991) asked respondents to identify traits of the entrepreneurial person and the entrepreneurial organization. Drive, an action orientation, self-confidence, creativity, and persistence were the predominant personal traits highlighted. The key traits of an entrepreneurial organization were: strong leadership at the top, willingness to pursue risks, hands-on management, closeness to the customer, and aggressiveness in the marketplace.
Each of the above descriptions seem to signal that entrepreneurs spot and identify needs and opportunities. They have a keen sense of timing, purpose, and awareness. This sharpened focus allows for the development of an internal environmental milieu that encourages calculated risk-taking, innovation, mistakes, and minimizes the costs associated with failure. The supply management organization of the future must embrace these concepts in an attempt to enhance performance with fewer resources and heightened expectations.
After entrepreneurs identify opportunities, they develop and nurture the concept. Potential supporters and allies are cultivated to build a core base or foundation from which to propel the idea forward. An integral part of this process is the talent to garner the necessary resources to accomplish the task. These resources may include time, money, and talent. Selling significant others in the organization is part of the entrepreneurial effort.
Implementation of the concept or idea demands additional skills and competencies. Entrepreneurs have to guide, direct, and coordinate projects to ensure proper development. Ultimately, the full range of management expertise is required to move the effort forward and to finally reap the benefits of the undertaking.
Entrepreneurship has meaning and value in purchasing both at the individual and functional levels. Purchasing is evolving from a period where individual dominance is rewarded and toward an era that reinforces group performance as the key to attaining organizational goals. In fact, an article by Reich (1987) suggested that " collective entrepreneurial teams must replace the lone entrepreneurial hero if the United States is to remain competitive in the world economy." This observation is particularly telling as it relates to the purchasing function. It is a call for action on the part of purchasing professionals to move in the direction of integrating culturally the values associated with entrepreneurship. Purchasing has to attract those that can think individually and independently, but perform well in group and team contexts.
Morris, Avila, and Allen (1993) engaged in research to determine the extent to which individualism was a factor in explaining entrepreneurial behavior in modern organizations. They contrasted individualism with collectivism as a characteristic of an organization's culture. Individualism was viewed as a self-orientation that emphasized self-sufficiency and control with a focus on individual goals. Collectivism involves subordination of individual interests to the goals of the group or team, with an emphasis on cooperation and group harmony. The results indicated that the highest levels of entrepreneurship occurred with a balanced amount of consideration given to the needs of the individual and the collective. This reinforces the need for purchasing and materials management to structure an environment conducive to both individual and group levels of participation, development, and reward. Innovation and risk-taking are the hallmarks of committed and dynamic purchasing organizations in an era of change. The encouragement of both individual and group performance is an integral part of sustained success in competitive purchasing environments.
Blending Entrepreneurship and Purchasing Challenges. Purchasing challenges are numerous and diverse. Some of the more significant demands on purchasing include:
- Greater emphasis on value creation and enhancement;
- Heightened levels of cost-consciousness;
- Cycle time management;
- Process mapping;
- Supplier base reduction;
- Integrated supply chains;
- Interfunctional teams; and
- Greater strategic focus.
A common theme in purchasing circles is the idea of adding value to the organization. What actions can purchasing engage in that might add some semblance of value or utility creation? In increasingly competitive situations, purchasers have to search diligently for ways to make both small and large contributions to efficiency and effectiveness. Seeking these opportunities requires various aspects of the entrepreneurial spirit. If purchasers take ownership in the future of the function in the organization, genuine results ensue.
At the core of purchasing challenges is that of reducing total costs and increasing the level of cost-consciousness in the organization. Other elements of this stream of cost concerns include cycle time management, process mapping, supplier base reduction, and outsourcing. Each of these offer different but related routes to reducing costs. Some degree of entrepreneurship is essential for purchasers to perform effectively in all areas of cost-cutting.
Some of the more far-reaching challenges are developing and managing integrated supply chains, fostering interfunctional teams, and directing purchasing's strategic focus. Each of these requires a special degree of entrepreneurial expertise to enjoy sustained success.
Incorporating the values of entrepreneurship into the culture of the purchasing organization can yield substantive dividends in the long run. This perspective has considerable promise as a means to focus purchasing professionals on value creation and delivery in turbulent competitive environments. According to Slater and Narver (1995), "a market orientation, complemented by an entrepreneurial drive, provides the cultural foundation for organizational learning." Organizational learning is inherently related to performance. Thus, entrepreneurship provides a model of individual, functional, and organizational management that is integrative, fluid, and oriented toward strategic, performance-based outcomes.
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- Morris, Michael H. and Roger J. Calantone. "Redefining the Purchasing Function: An Entrepreneurial Perspective." International Journal of Purchasing and Materials Management, 27(4) Fall 1991: 2-9.
- Morris, Michael H., Ramon A. Avila, and Jeffrey Allen. "Individualism and the Modern Corporation: Implications for Innovation and Entrepreneurship." Journal of Management, 19(3) 1993: 595-612.
- Reich, R.B. "Entrepreneurship Reconsidered: The Team As Hero." Harvard Business Review, 65 (May-June, 1985): 73-84.
- Slater, Stanley F. and John C. Narver. "Market Orientation and the Learning Organization." Journal of Marketing, 59,(July 1995): 63-74.
- Stevenson, H., M.J. Roberts, and D.E. Grousbeck. New Business Ventures and the Entrepreneur. Homewood, IL: Irwin Publishing Company, 1989.