In a nutshell, what is a center of excellence?

As an organization grows it will often have common business functions that sit in many different operating units. For instance, it might have multiple teams that handle business analytics across the organization. If these individuals are siloed then this will invariably lead to using different technologies and methodologies being used across the organization.

What is a center of excellence?

A center of excellence (COE) is a team, a shared facility, or an entity that provides leadership, best practices, research, support, and/or training for a focus area. The focus area might be a technology such as Python, a business concept such as data analytics, a skill such as data visualization, or a broad area of a study such as spend analysis. Typically, leaders of an organization are responsible for the destination and managers are focused on the execution. A COE is responsible for discovering paths and improving existing ones that connect these things in the most efficient and effective manner possible. In their book Management of Portfolios, Stephen Jenner and Craig Kilford state that a COE can be viewed as a coordinating function which ensures that change initiates are delivered consistently and well, through standard processes and competent staff.

NOTE: Python is mentioned here because it is a common programming language used for cutting edge procurement analytics.

What does a center of excellence look like?

A typical COE brings together people from different disciplines and provides shared facilities/resources. For instance, you may have the heads of various procurement categories gather in a COE that focuses on implementing and maintaining best-in-class procurement. The responsibilities of this group would then be defined by its organizational objectives. For instance, it might provide training, best practices, and resources across the organization. In conjunction with this effort it would gather the data and learnings from the teams represented which will hopefully lead to a positive feedback loop. The ideal realization of a COE, as defined by Gartner, is that it should be “concentrating existing expertise and resources in a discipline or capability to attain and sustain world-class performance and value.”

What is the value proposition for a center of excellence?

A COE can drive innovation by ensuring that the knowledge gained across the organization through the parallel evolution of skills and capabilities (or the acquisition of these through M&A) is shared. Its important to note that a COE must be transparent and anchored in both the quantitative metrics of the business as well as the qualitative evolution of capabilities. Transparency and consistency will ultimately encourage members within the organization to measure and experiment together which will in turn accelerate the pace with which innovation and adoption occurs. Most importantly, a COE ensures that the organization is aligned around common business goals rather than individual departmental metrics.

What does a center of excellence look like as it relates to procurement and supply chain?

Typically the primary purpose of a procurement/supply chain COE is integration. Responsibilities may include designing, analyzing, implementing and monitoring new ways of doing business. This is accomplished through some combination of policy, process, technology, analytics/measurement and change management. Their focus is almost certainly on unlocking and sustaining potential rather than day-to-day tactical execution. If you are interested in understanding what a best-in-class procurement COE looks like, or deploying one within your organization, please contact Source One's subject matter expert Jennifer Ulrich to explore the topic further.