The Value of Collaboration #5: Using purposeful communities to optimize spend

Finding & fixing holes at work In some cases, collective efficiency is about specific kinds of cost reductions - printing, mobile bills, service costs. But sometimes it can be about a general technique you can apply to a wide array of costs.

This post describes how purposeful communities can make improvements that could easily be in the 10s of millions.

The problem

As a firm gets larger, there’s usually more distance between the people who pay for things and the people who use those things. That’s certainly true for personal consumption (printing, etc) and previous posts described ways to reduce that kind of spend.

But the problem is even bigger when it relates to consumption at the team level or at the departmental or firm level. The cost of that server or database license, for example, is something that individuals don’t think about or have much control over. They just order it to get their job done. (The government mechanic doesn’t want to spend extra for a hammer, but he has no idea how to procure a cheaper one.)

To control costs, firms typically focus on policies, contracts, governance processes, and vendor management groups. While these approaches can be useful, they typically don’t leverage the knowledge of people actually using the products and services. Now, it’s easier than ever to do that.

The solution

One way to bridge the gap between a firm's consumers and payers is to organize communities around specific kinds of work. Then, you influence people in the communities to look for ways they can eliminate waste or otherwise get more value for money the firm spends related to the work they do.

Two specific kinds of communities include role-based communities of practice and vendor communities. For example, an IT department would have communities organized around specific roles such as developers, testers, and project managers. As a natural part of doing the work - e.g., posting questions, sharing lessons - community members can expose process deficiencies and work out better ways of optimizing the use of shared resources.

Another way to organize communities would be to connect people who use the products or services of a particular vendor. Far too often, it’s the vendor who knows more about how their products are being used inside the firm and they’re motivated to increase revenue, not reduce costs. So if Oracle, say, is one of your top providers, you’d want to identify and connect your top users of Oracle products and have them actively participate in troubleshooting, shaping standards, and evaluating the need for new products and services.

There's a wide variety of ways communities can find value. (Nick Milton identified “17 value delivery mechanisms for Communities of Practice”, from solving problems to collaborating on purchasing to exchanging equipment to coaching.) You can think of these communities acting as centers of excellence for every role or vendor. Except these aren’t distinct groups, separated from the work and formed by appointment. Instead, they’re made up of people deeply embedded in the work and formed by those with the most to contribute.

What’s it worth?

The benefits will range wildly from the intangible to the incredible. At Shell, for example, their communities of practice helped avoid drilling “dry wells” and saved the company in excess of $100 million.

Examples I’ve seen firsthand include a case in which started with a post in a testing community about the acquisition of expensive software. The subsequent discussion prompted members to form a working group which came up with a better licensing arrangement and saved several million dollars. In other cases, teams avoided spending hundreds of thousands on new equipment because experts in the community solved performance problems shared online.

Like the Shell example, hard dollar savings in a few communities could add up quickly with even a few wins. Large firms can easily spend more than $50 million with major vendors like Oracle, IBM, and HP. And so connecting the experts in your firm who are most familiar with how those vendor offerings are used can make it possible to find your own "dry wells".

In addition to the big wins, we also see many, many small improvements with harder-to-quantify benefits. Things like faster access to expertise by new joiners, shorter problem resolution times, and incremental process improvements.

In one case, for example, a community member posted a simple complaint about poor response times from a 3rd party service provider. The post received 2500 views and comments from dozens of teams sharing their own stories of waste and frustration. That made the problem and its consequences so visible that management announced changes to the vendor engagement.

When management announced the change in the community, their post received over 4000 views and dozens of comments like “thank you for making us more productive”. How much did we save by improving the productivity of dozens of teams and turning their frustration into gratitude?

Why doesn’t everyone do it?

Etienne Wenger, who’s the intellectual father of communities of practice, wrote in Harvard Business Review in 2000 about the 3 reasons why they aren’t more prevalent.

“The first is that although communities of practice have been around for a long time—for centuries, in fact—the term has just recently entered the business vernacular. The second is that only several dozen forward-thinking companies have taken the leap of “installing” or nurturing them. The third reason is that it’s not particularly easy to build and sustain communities of practice or to integrate them with the rest of an organization. The organic, spontaneous, and informal nature of communities of practice makes them resistant to supervision and interference.”

That last reason is the one we’ve struggled with the most. Communities aren’t so much about systems as they’re about people. People need recognition, role models, support, and much more to maintain the structure and vitality found in successful communities. And so we've found it difficult to build and sustain role-based and vendor communities.

But they're worth it.