Activity 24
Opportunity analysis and quick wins

Figure 4.9 Opportunity analysis

Source: adapted from George (2003)

Overview

Opportunity analysis is a common feature of strategic planning. A number of 2 x 2 matrices have been developed by procurement consultants over the years to fit into the category management process. Most are thought to have been derived from Six Sigma’s ‘PICK chart’, a visual tool for organising ideas and prioritising them.

At the heart of this decision tool is the equation between potential yield and effort. Therefore, in order to manage resources effectively, it is useful to apply the technique at the outset of the category management planning process, as well as during the development of the category strategy as various options arise. This way, focus will be given to those opportunities that can deliver the most benefit.

Elements

The criteria for an opportunity analysis matrix based upon the PICK principle are as follows:

• The y axis plots the impact of the opportunity. In procurement terms, this is likely to relate to cost reduction, improved quality, added value and so on.
• The x axis plots the ease of implementation. The complexity of the organisation, stakeholder willingness, skills, governance and so on will need to be considered when positioning the opportunity in line with these variables.

The four key elements of the matrix are as follows:

1. 1 P (possible) – These opportunities are often termed ‘low-hanging fruit’ or ‘quick wins’. The effort to implement these is low, but the impact is also low. These should only be implemented after everything in the I quadrant.
2. 2 I (implement) – These opportunities are also referred to as ‘priorities’ or ‘musts’ and should be implemented at the earliest opportunity, as they will have a high impact and require low effort.
3. 3 C (challenge) – These opportunities are sometimes known as ‘back burners’ or ‘slow burns’. They should be considered for implementation after everything in the I quadrant, but only if a thorough assessment of the prevailing organisational climate proves positive. The impact is high, but the effort is also high.
4. 4 K (kill) – These opportunities are frequently labelled to illustrate the action (i.e. ‘eliminate’, ‘avoid’ and ‘don’t bother’). They should be ‘killed’, or not implemented. The effort to do so is high, and the impact is low.

So what?

The output of the category management process should be tangible benefits to the business. Reviewing the impact of each identified opportunity in light of organisational influences can help deliver the most relevant category project within existing limitations.

The original PICK method denotes a sequence of events, and this can help the category manager plan and schedule available resources into project ‘waves’ of activity (i.e. Wave 1, Wave 2). Only opportunities that are regarded as implementable with a high level of return should be tackled first, as the business is more likely to buy in and engage accordingly.

However, some academics posit that reaping the rewards of less impactful ‘quick wins’ in the early stages of a change programme can foster immediate sponsorship and collaboration. In practical terms, it may be that these projects can deliver benefits way in advance of the larger, more complex, strategic ones. Therefore, scheduling of category team activity will need to be carefully assessed and resourced so that there is a balance between procurement and business objectives.

Category management application

• Supports an objective decision-making process
• Is a quick way of identifying category priorities
• Helps focus attention on opportunities that can deliver the most benefit
• Supports effective resource management
• Is a useful decision-making tool that can be applied throughout the category management process

Limitations

While opportunity analysis is a good visual tool for aiding a decision-making process, it is criticised for providing only a ‘high-level’ perspective. The current academic view is that detail relating to impact and implementation is often missed – or deliberately hidden in the case of potential issues – and inflated in terms of benefits. Thus, an unrepresentative picture of a situation can be presented.

Category managers should bear in mind that there are several ways in which the axes of the matrix can be portrayed and interpreted. Some have argued that the matrix might fare better if risk was included, while others have highlighted that the ‘benefits’ axis is relatively superficial and that there are far more sophisticated financial-appraisal techniques available.

When evaluating options, theorists Johnson et al. (2014) refer to three tests of suitability, acceptability and feasibility that could be considered more robust. Nevertheless, the power of the opportunity matrix comes from its simplicity, and hence this is why it has become a popular practice within category workshops.

Template

The following template can be used to chart various ideas, options and strategies on a PICK matrix and prioritise these for implementation:

• Template 24: Opportunity matrix