How to realize above-average savings: Focus on leverage
Transcript
We help our clients achieve uncommon levels of outside spend reduction — saving 20 to 30% off baseline spend, roughly twice what most other procurement consultancies achieve.
Leaders often ask us: how exactly do you do this? There’s a misconception that it’s about being tough — tougher than others in negotiations. It actually comes down to leverage. Understanding leverage, enhancing it, and even creating leverage where a business might not think they have any.
The key to developing leverage is recognizing that most business leaders are risk-averse when it comes to switching suppliers. Understandably so. They don’t want to rock the boat. But they will systematically overestimate switching costs. Switching is hard, it can feel scary, and leaders tend not to explore alternatives or quantify what switching would actually involve.
Smart suppliers know this — and they capitalize on it.
We help clients understand their alternatives in a rigorous, quantitative way. We identify who the alternative suppliers are, what other options exist, and whether an in-house solution might make sense. Then we quantify the costs and benefits of each path.
It’s that level of preparation — truly understanding the economics and tradeoffs — that changes everything. The client knows exactly what it’s worth to stay with a supplier and how much they’re willing to pay to do so. Once you’ve done that work, negotiations are fundamentally different. Suppliers recognize it immediately, and suddenly there are far more options on the table than anyone thought possible.
That’s how a business achieves uncommon savings in outside spend reduction.
Mac joined Inside Consulting in 2016 and brings over 23 years of management consulting experience, including seven years with the Boston Consulting Group. His work spans financial services, B2B technology, and healthcare, with a focus on strategy development, organizational restructuring, and procurement optimization.
Mac is a West Point graduate with a degree in Quantitative Economics and holds an MBA with honors from the Wharton School. Prior to consulting, he served as a US Army Infantry Officer.