Think, Simulate, Procure: The High ROI of Thought Experiments
Mastering Mental Models to be the best at Procurement
Mental Models could dramatically improve your approach to Procurement. I’ve been writing about them here, and you should check these outs once you’ve finished reading this.
The Mental Model I want to focus on here is the “Thought Experiment”.
Thought experiments are a classic tool used by many great thinkers. They enable us to explore impossible situations and predict their implications and outcomes. Mastering thought experiments can help you confront difficult questions and anticipate (and prevent) problems. - Farnham Street
Imagine building up a skill so powerful that you could explore numerous scenarios and come up with ways to prevent something terrible from happening, say a supplier who was going to be late delivering that vital component to you, or you improve a scenario, such as visualising a suppliers position in a negotiation and already have 3 responses lined up that you can rely on.
I studied law for 4 years, and my undergrad and post-grad degrees were a constant Thought Experiment. It’s partly why I love law so much. But it’s just as applicable within the Procurement field.
The Benefits of Thought Experiments
Curiosity is essential in Procurement, and the highest-achieving procurement professionals all have it. Thought Experiments let us unleash that curiosity as we investigate weird, wonderful, mundane possibilities and make ideas we’ve come across as our own.
I recall preparing for some of the most significant negotiations for 7, 8 and 9-figure deals in this way.
With the available information, I’d figure out everything that could happen, from the worst-case scenarios to the best-case scenarios.
This is how I created a £6m saving for one of my clients.I wrote about that here.
I saved a business £6m and it meant nothing
I saved one business £760k. That’s what’s on my CV - at least it was when CVs were still a thing. Or it might have been £6m in reality. More on that in a moment. This was a big saving and the original £760k saving was a conservative estimate. It looked like we might need to pay a supplier £4m for their wares. My calculations, based on the data, the specifi…
I focused on everything I could see that was going wrong and projected a timeline to the end of the project. One that I would never see as I had told myself I would only do a year with this client as I wanted to explore other areas.
What I saw, 12 months after my projected leave date, if we kept course with the chosen supplier, was a late delivery due to the specification not being reached, which would already be a reduced specification, which impacted the rest of the project, and a huge liquidated damages payment to our customer.
I visualised and thought about finding a new supplier to meet the spec and deliver on time. How would that look, what would I need to do to enable this, and how would I work this through with the current supplier with whom we were close to signing a contract?
It led me to take drastic actions fast, but I was 100% convinced it was the correct option.
I fear what would have happened if I wasn’t there, with my entire career’s credibility on the line, to make that call.
I fear what might have happened if I didn’t have this skill.
This skill has forced me to confront questions I did not have the answers to. For Thought Experiments should be challenging. You must look where others dare not. You must look to the most challenging areas and confront them. You adorn your armour, lift up your fiery sword, shield in hand, and confront the terrifying red-fiery dragon that guards the cave entrance where the hidden treasure is.
You confront the dragon time and time again. You get beat up until you win. Until you can see a path before you.
Okay - maybe not so dramatic, but that’s how I visualise this process.
Sometimes it’s fast and clean. Sometimes it will bounce around in your mind, and you’ll take an age to have that breakthrough.
But you will have some form of breakthrough that will likely assist you.
How to Visualise a Supplier Negotiation Using a Thought Experiment
My mind is visual. I see the world through imagery. Every thought I have is a visceral image that I can work on and interrogate.
I know that not everyone sees the world in this way.
But if you can harness visualisation, it might work a little like this.
We’re going to use a Supplier Negotiation as an example. And, of course, you can work on paper, on a digital whiteboard, or whatever makes you comfortable as you do this.
I’d say you want somewhere quiet to work on this. Noise-cancelling headphones are a life changer for this, and that’s why I’m always working with these on and listening to Hans Zimmer on Spotify.
How to conduct the Supplier Negotiation Thought Experiment
1. Define the Objective: Visualise: A clear whiteboard with your primary goal written at the centre: “Negotiate a 10% reduction in unit cost,” “Secure longer payment terms,” or “Obtain higher quality materials.”
2. Understand the Current Situation: Visualise: A two-column table. On the left, jot down facts about the current relationship with the supplier: purchase volumes, payment terms, delivery times, any existing challenges, etc. On the right, list desired changes or improvements.
3. Identify Key Stakeholders: Visualise: A mind map branching from the central objective. Label each branch with names or roles of those involved: procurement manager, supplier’s sales director, finance department, etc. Around each branch, note their potential concerns or motivations.
4. Anticipate the Supplier’s Position: Visualise: A seesaw or balance scale. On one side, place the supplier’s likely demands or concessions. On the other, place your company’s offerings or points of leverage. How do they weigh against each other? What’s the balance point?
5. Develop Potential Scenarios: Visualise: A branching path or flowchart. Start with the initial meeting and anticipate possible responses from the supplier to your propositions. For each response, plot out your counter-response and the supplier’s next potential move, creating a web of possibilities.
6. Rehearse Tough Questions: Visualise: A stage with two chairs facing each other, representing you and the supplier. In the spotlight, focus on challenging questions the supplier might ask. How would you respond to each?
7. Consider Concessions: Visualise: A negotiation table with various items (representing concessions) placed on it. Some items are closer to you, representing concessions you’re more willing to make, while others are further away, symbolising those you’d prefer to retain.
8. Assess Possible Outcomes: Visualise: Multiple doors at the end of a corridor. Each door has a label representing a different outcome: “Agreement reached,” “More discussions needed,” “Stalemate,” etc. Consider what leads to each door and the implications of walking through it.
9. Reflect on Emotional Aspects: Visualise: A heart and a brain. Both have strings attached like a marionette. Consider how emotions might play a role in negotiating for you and the supplier. How can you ensure the ‘brain’ remains in control?
10. Plan for Follow-up: Visualise: A series of dominoes. If the first domino (the negotiation meeting) falls as planned, how will it influence subsequent dominoes (follow-up meetings, contract signing, delivery schedules)?
Once you’ve visualised and mentally walked through each stage, you’ll have a comprehensive view of how the negotiation might proceed, potential challenges, and desired outcomes. This exercise sharpens the mind, ensures better preparedness, and instils confidence. Remember, the beauty of a thought experiment is its adaptability – you can run multiple scenarios and refine your strategy
accordingly.
Closing Thoughts
I’ve made this example a little cleaner and clearer than what happens in my brain. My mind often defaults to mind maps, and different strands rise from them in some 3D areas I can explore.
I actually carried out my greatest-ever Thought Experiment in University when I constructed a Mind Palace inspired by the Sherlock Holmes BBC Series, which enabled me to crush my exams and score a high percentage First in law.
I’ve battered my brain, testing these theories to the point that everything I do utilises them.
They are powerful.
They can help you.