In 1983, Peter Kraljic – a consultant with McKinsey at the time – wrote one of supply chain management’s seminal works in the Harvard Business Review. The article, entitled Purchasing Must Become Supply Management, is still widely read and cited today. Kraljic’s article focuses on the discipline of purchasing/supply management, one of the key pillars of supply chain management, and illustrates why firms should think of this act as strategic instead of merely operational. The article was published at a time when supply chain globalization was really starting to take off, and at a time when dedicated research was being undertaken into the field.
40 years later, football is at a stage where supply chain management was back in 1983. Technological innovations, dedicated scientific research, globalization… these are all a part of professional football, and despite what many might prefer, they are here to stay. Similarly, professional clubs must be run like businesses not only to improve their on- and off-field performances, but also to maintain their relative levels compared to competitor clubs who are riding several waves of constant innovation – both on and off the field.
While philosophic concepts can and are used to further our understanding of football tactics, business research should be used to further our understanding of the business side of football clubs. Of course, many directors of clubs have business backgrounds and are already running their clubs exceptionally well and in line with best practices.
However, in this article, I want to use Kraljic’s work as a guide and inspiration for conceptualizing clubs’ business and vision in the transfer market – and expanding that to how they set up their recruitment team. While I hope any directors or executives reading the present article will take away some great nuggets of information, I’m aiming this more at a general audience. Thus, there are even more takeaways that a reader with a keen interest in or knowledge of the business of football can glean than the threads I weave here.
Kraljic’s article is littered with important information for purchasing managers, but when read through a lens of football we can see copious parallels. At the start, Kraljic offers several examples of current (in 1983) business cases. Many of these cases can be generalized to football today.
“One European office-equipment manufacturer began to rely more heavily on American and Japanese suppliers, … and require its divisions to add people with electronics and foreign language skills to their purchasing staffs.”
This quote illustrates the increased reliance on foreign sources that was sweeping across all companies in the 1980s. In football terms, it holds true as more and more teams – at all levels of the game – are looking further beyond their borders for players (where possible). Further, the company Kraljic mentions added capabilities to their company by targeting employees with specific skills.
Electronics and language can easily be conceptualized in football as data analysis, and, well, language/regional knowledge. For example, European clubs might start seeking out scouts and/or analysts who know the club’s league as well as the Japanese leagues and language to better cover (and create relationships with) clubs in Japan, one of the world’s fastest-growing markets for European football transfers. Beyond Kaoru Mitoma at Brighton, we can look at Celtic as a prime example of what scouting in Japan (and now South Korea) can do for a team. In fact, Celtic won a domestic treble through a backbone of J League players and manager Ange Postecoglou, who was signed largely because of his fantastic work in Japan.
“… Cabot also acquired a London-based trading company to supplement existing purchasing skills with special trading expertise and access to the London metals market.”
Related to the last part of the prior quote, Cabot (a chemical company) targeted specific hires that can supplement current knowledge within the firm by adding additional knowledge. If you play Football Manager, you likely do this too: hiring a scout with knowledge of the Baltics is a quicker way to increase your global scouting knowledge than sending a scout (or two) to the Baltics with no prior knowledge. The same goes for football in real life, and while this is likely happening at many clubs already, it’s vital to point out.
It is often be faster to hire someone with knowledge of a topic than to ask a current employee to gain knowledge on that same topic. Of course, many football clubs are limited in their finances so it’s not as simple as just hiring an extra staff member and work may need to be done to find an upgrade on a current staff member, much like how teams upgrade players on the pitch.
“U.S. auto manufacturers who customarily relied on domestic materials procurement are now reevaluating their supply schemes and broadening their scope of potential suppliers. … Predictions are that by 1990 the U.S. car industry will source 35% to 40% of its parts and components from abroad; 15 years ago it sourced only 5% from other countries.”
Again, this quote discusses the increased global reach of firms, in order to increase the scope of who they purchase from. This increases the ability for the firm to potentially source better products at lower prices. They will have more knowledge of the broader market as a whole. In football terms, think about how expensive it is to buy a player from the Netherlands versus buying a player of almost the exact same ability from Norway. It’s a sad reality that two identical players would be sold for different sums of money depending on where they are moving from – but it’s important for clubs to use that to their advantage if possible.
I’d like to present another example case on this point. If a club willingly limits themselves to purchasing players from a small region, say their country or a select few leagues, it limits the potential of the club to the potential of those players in their field of vision. If a Premier League team only bought players from the Premier League, La Liga, Ligue 1, Serie A, and the Bundesliga, they are naturally limiting themselves to a select talent pool. Despite these leagues being the best in the world, there are players in Argentina and Brazil, in Japan and South Korea, in Denmark and Belgium, and more, that might be better and cheaper than players in the 97 other clubs in the UEFA Big 5 leagues.
Similarly, if a Championship club limits themselves to buying former Premier League players, other Championship players, players from Scotland, and League One players, they will be left behind. Recently, the English Football Association loosened the rules on foreign player signings, allowing clubs to potentially sign a few players from anywhere in the world who do not meet current criteria for earning a work permit. So, if our Championship club still only signed players from their local region, they will miss out on the opportunity to sign a few talents from abroad who might even be better than the domestic players the club would have signed – and possibly cheaper too. Thus, the potential of the club is no longer limited to the potential ability of players from the UK, but expanded to include talents from quickly-developing nations like Thailand or Uzbekistan, or players from Europe who have yet to meet the work permit requirements.
“Instead of simply monitoring current developments, management must learn to make things happen to its own advantage. This calls for nothing less than a total change of perspective: from purchasing (an operating function) to supply management (a strategic one).”
Finally, Kraljic uses this quote to set the stage for his article, and I’ll do the same for mine. If a club simply follows what other clubs are doing, and potentially implements a select few ideas others have already implemented, they will fall behind. Why? Because they are always behind the wave of innovation. This goes for both high-level and low-level focal viewpoints. High-level being football as a whole, and low-level being the league the club is in. Being a methods follower instead of a methods innovator means that while you can reap the benefits of employing novel methods and replace your old, now-inefficient methods, the magnitude of these benefits you will incur is lesser than the magnitude of the clubs at the forefront of innovation. This goes for both the business side of football clubs and the tactical side.
For example, if you are the first and only club in your league to employ a specific tactical innovation, you will see a greater magnitude of benefit than the 5th club in the league that employs that tactical innovation. Why? Because teams will have a much easier time to figure out how to beat a tactic that has a much larger sample of games to analyze and a large diversity of players performing in that tactic. Similarly, if you are the first club to see the potential of buying high-talent players from East Asia, you will have access to the entire region’s talents early on and will likely pay less than all subsequent clubs, as East Asian teams will be able to start charging more for past success of their players in Europe. We can refer back to the Celtic example used earlier; Celtic were one of the first clubs, at least in the UK, to bring in lots of talent from Japan. They had their pick of players, and clubs who saw their success didn’t have the ability to sign Kyogo Furuhashi, Daizen Maeda, or Reo Hatate – let alone manager Ange Postecoglou who has since moved to Tottenham.
Kraljic ends the above quote with calling for a “change of perspective”, from operating to strategic. This is also something that owners and directors of football clubs should seek to do. Moving from simply operating your club and making standard transfers to having a fledged-out strategic view of your club is becoming increasingly vital to both short- and long-term success in every league around the world. While difficult to accept change (“we’ve been doing fine for decades, why change now?”), the footballing world is changing and clubs at the forefront of it will reap more benefits than those changing in the future.
Brentford and Brighton are two perfect English example for that idea. There are now two fewer spots in the Premier League for a lower-tier club to insert themselves into, because Brighton and Brentford were the innovators in English football. Their model has been proven to work (both in England and abroad). Other clubs already in the Premier League or just on the cusp of it are also revamping their structures, and more clubs are being purchased by wealthy investors each year and being set up with more modern infrastructure. There’s little time, if any, to ride the first swell of this particular innovation (in England, although there are countless footballing nations who have yet to see their Brentford or Brighton).
The image below is Kraljic’s conceptual diagram of four “stages of purchasing sophistication”. He uses this as a guide for how businesses can move from simply purchasing materials (the operational side of things) to how they can manage their entire supply process (the strategic side).
The key factors of Kraljic’s conceptualization are “complexity of sully market” and “importance of purchasing”. There are plenty of criteria that comprise each factor, and the unique mix of criteria for a specific firm will drive where they fall (or should fall) on the diagram. Essentially, the external and internal environment of a firm helps drive their stage of purchasing sophistication.
I present my football-specific conceptualization below.
The two factors I use are very similar to Kraljic’s.
Transfer Market Complexity is related to supply market complexity, as it should theoretically be the same. Criteria include, but are not limited to, the number of teams/players in a club’s desired knowledge area; transfer fees; visa restrictions; transfer competition (i.e., how many other teams might be vying for this player); and of course, much more.
A low transfer market complexity might entail a mostly-free-transfer domestic market with somewhat limited competition for signatures. The A-League Men is very close to this, in fact. Domestic transfers are forbidden, so many contracts are 1 or 2 years long, leading to a hot free transfer market. Relatively few foreign signings paired with relatively little international competition for player signatures (although that’s changing quickly) means I’d stick a general A-League Men club on the “low” side of this spectrum.
A high transfer market complexity might entail a highly competitive space where players are coveted by many other teams, and thus there is both hot competition for a signature and increased prices. If your club’s league also has work permits, strict foreign player quotas, or both, then the visa issue comes into play as well. The Premier League is already in this bucket. Add on top of that if a club wanted to have expansive global (or even continental) knowledge, and we’re on the high end of the spectrum.
Importance of Transfers is the second factor in my conceptualization. Here, I include criteria like the performance of the club’s academy; the club’s philosophy (are they a selling club? Or do they prefer to keep hold of talent?); the age philosophy the club has for transfers (do you mainly buy veterans to mentor your academy graduates? Do you mainly buy younger, hungrier players?); the funds available to you; and much more.
A low transfer importance could be teams who mainly buy players to fill general roles and squad depth, such as a team in League One who just care about staying up and performing well and don’t prioritize quick development. Players might be free transfers from clubs in League One or the Championship/League Two and fit a general need (“we need a striker”) instead of a specific role (“we need a striker who can hold the ball up, has a good passing range to ping to inverted wingers, and can score with both feet”).
A high transfer importance might entail the purchase of crucial players, such as a player (or players) who play a role that is so central to a team’s play. Think about Ederson’s move to Manchester City, where Guardiola’s tactics demanded a goalkeeper that was comfortable with the ball at their feet. Teams who don’t have a highly productive academy but who want to perform exceptionally well would also fit in here, as would clubs who might want to out-perform their limited wage budget and need to ensure that the purchases they make are the best bang for their buck out there.
These factors naturally lead to four “stages”, or categories, of transfer sophistication, to use Kraljic’s term. I have termed these – from I to IV – Squad Management, Transfer Management, Market Management, and Squad-Market Integration. Each stage has different focuses, decision makers, time horizons, and more, leading to unique setups that a club’s transfer strategy can exhibit. I would suggest we think about these as stages that a club voluntarily puts themselves into, rather than being grouped into a stage via external factors. Even if some aspects like work permit/visa restrictions are environmental factors, much of what determines a club’s position on this matrix is created by the club.
While the stages of transfer sophistication are numbered I, II, III, and IV, I don’t recommend thinking of them as linear and on a continuous scale. That is, a club in stage I does not need to get to stage IV by going from I to II to III and then to IV. They could simply move from I to IV (which would be drastic, however a small club taken over by a new owner could realistically make this jump). With that said, I think moving up or down 1 stage may be relatively “easier” or “doable” than moving 2 or 3 stages. It’s just not a requirement.
Within each stage, we can theorize on seven aspects of a club’s vision or transfer business and planning. These are: transfer focus, performance, typical sources, time horizon, player supply, decision maker, and scouting team. Some of these aspects will be the same or very similar in different stages, but I think the broad mix of these leads to a decent overall idea of a club’s general transfer/squad business.
Transfer Focus
We can think of this as the answer to a question, “what kind of players are we looking for?”. In low transfer importance environments, you might just be looking for general players or squad depth. Perhaps your academy does a great job at producing key players for your club’s tactic. Ajax might be a good representation of this specific aspect. They normally produce lots of players from their academy that play in their style, and so they may not need to make loads of transfers to fill their key roles.
On the other hand, if your club tends to buy very specific players with very unique skill sets, such as Manchester City, you would have a much different transfer focus. These clubs need players who aren’t just able to play, but are able to raise the level of the team.
Performance
Performance is related to transfer focus, and in this conceptualization, it is related to the relative level of player the club buys. If a club wants to replace a decent player with a decent player, they won’t place much importance here. They just need to make sure they know what they’re going to get in a player. However, the other side of that coin is a team who constantly seeks out player improvements, as in they are proactive in the market and don’t simply want to have a player who can perform, but one who can excel.
Typical Sources
Typical sources are where the club tends to look for players. Local, a small region, a wider region, a continent, and global are typical ways to think of this. Lower-league clubs likely cover their local area and maybe a small region, while larger clubs are naturally going to cover larger areas, with some exceptions (Athletic Club being a major one). It is likely rare for clubs to have a truly global network of knowledge, as Manchester City likely won’t be looking at Uzbekistan despite having a huge network, but Genk in Belgium might have as global of a network as City but look at Uzbekistan and not the Premier League. This aspect also includes any strong connections a club has with other clubs or regions, such as Brentford and Denmark, Burnley and Belgium since Kompany took over, STVV in Belgium and Japan, FC Nordsjælland and West Africa, and more.
Player Supply
Very much linked to a club’s typical sources, although with some differences. The number of countries or leagues that a club covers directly impacts their player supply, as does their pedigree. Barcelona will naturally have a much larger supply of possible players than a third-tier club recently bought by a billionaire who has set up a scouting network as extensive as Barcelona’s, for instance. Even if a club knew about 10,000 players, if only 2,000 of them are realistic signings, then their player supply is 2,000.
Time Horizon
A club’s time horizon is the rough time span that they are thinking of when buying players. This would naturally involve contract duration/age as well. Short-, medium-, and long-term orientations are possible, and they are what you might think they are. Short-term orientations would be signings focusing mainly on the “right now”. Clubs focus on just this upcoming season, or in January, only the current season (although most January signings in Europe are short-term orientation in nature).
Medium-term orientation involves a mix of players, but usually doesn’t consider more than 2 or so years in the future. Thinking about this season and next season only, for example. Using an example I used above, a lot of signings in the A-League Men are forced into the medium-term category, as players can’t transfer between A-League Men clubs (they can only move within the league when their contract is up) so they demand one- or two-year contracts. Naturally, it’s hard to have a true long-term vision when this is the environment! But some clubs do have that set up, don’t get me wrong (Central Coast Mariners are a prime example, and recently Wellington Phoenix too with their longer-duration contracts than most).
Long-term orientation is having a defined goal, and putting in work each season with not just the current season in mind, but also several years into the future. Chelsea has recently signed players to abnormally long contracts, showing their long-term orientation. Brighton have a long-term orientation as well, as they normally have replacement players in line before current starting players move. Whether they’re at the club currently, on loan, or they’re about to pull the trigger on a transfer, they have a specific vision and work towards their goal with their transfers.
Decision Maker
Decision Makers are who might be chiefly in charge of, or have the final say on, a player to transfer. Typical options would be the manager, head of recruitment, or sporting director/director of football – or a combination of these. In squad-market integration, stage IV, you should expect collaborative discussion and planning between the manage, the recruitment staff, and the sporting director (among others involved in scouting/transfers). Conversely, in stage I squad management, the manager might have the most input into what player(s) to sign. They could come into a club, often a club with a short-term orientation, and say “here are the players I want you to bring in”, and they might be players they have managed or managed against in the past.
Scouting Team
The final aspect is the scouting team. This includes both the makeup and size. Makeup of the team means if there are just “traditional” scouts, which are in-person scouts who find, watch, and judge players solely by eye. Clubs can also employ what I’ll simply deem “analysts”, which are data-driven scouts who might only use data to find, watch, and judge players, but who may also perform more traditional scouting duties. No club will have analysts without traditional scouts, as no matter how much data a club uses, they will still need to watch players live before purchasing.
There are many benefits to employing analysts. Clubs can cast a much larger net to find prospective players without sending scouts across the country/world aimlessly. Analysts can also objectively rank players to help reduce bias in the scouting process, and find patterns in players that could help make a decision. They are able to provide curated lists of names for traditional scouts to follow up on, and should be central to all decisions made.
Naturally, the more players a club wants knowledge on and the “better” they want their purchases to be (at any level), the larger their scouting team needs to be and it needs to include a mix of traditional scouts and analysts.
The image below gives a few basic (and subjectively determined) example clubs for each stage. Note that I limited myself to English Clubs, and especially, clubs that I know a bit about, so it is by no means exhaustive – just illustrative.
Stage I: Squad Management
An example of a stage I squad management club might be Cambridge United in League One. Cambridge seem to have a somewhat short-term orientation, focusing on each season as they come. Especially after winning promotion to League One a couple seasons ago, the main goal appears to be staying in League One. Transfers tend to fill relatively generic needs, which can be met by a wide range of players. The transfers usually need to be able to do a job in the team when they’re bought, and players typically come from Championship, League One, and League Two, with a few former Premier League academy players. Further, the majority of transfers are free transfers or small fees. This all leads to having a relatively low transfer importance and transfer market complexity.
Stage II: Transfer Management
An example of a stage II transfer management club might be Burnley, particularly since hiring Vincent Kompany last season in the Championship, the start of what seems to be a new era for them. They might have a medium-term vision, shown by their ability to hire Kompany in the Championship (who after his record at Anderlecht, could have moved to a team in the Champions League or even stay at Anderlecht) and bring in players like Josh Cullen, Lyle Foster, Vitinho and more. The club is mainly sourcing players from England and Belgium, making use of Kompany’s knowledge and connections, as well as countries around England. There’s also a mix between players who can perform in the team right away as well as some longer-term prospects. Overall, they show a low transfer market complexity but high transfer importance.
Stage III: Market Management
Tottenham up until this past summer might be a good example of a stage III market management club. There was not a long-term vision, with transfers more short-term in nature. They have a relatively large scouting/knowledge network and team, as well as plenty of competition which makes their transfer market complexity high. However, up until this past summer they very rarely purchased players from outside England or the other “big 5” UEFA leagues. Coupled with a relatively disconnected transfer strategy and on-field tactics, their transfer importance could be classified as low.
Stage IV: Squad-Market Integration
Perhaps the poster-club of the transfer market nowadays, Brighton & Hove Albion are the perfect example for stage IV squad-market integration. Their scouting team is large and deep, having possibly pioneered positional scouts, who focus not necessarily on a league or region like normal, but become true experts on a specific position so that they can purchase the most optimal player. They have shown their scouting network’s extent, signing players like Kaoru Mitoma from Japan and Moisés Caicedo from Ecuador and players from everywhere in between. There is an obvious long-term strategy and they sign players who can slot into their first team right away as well as players who they bring in to develop for the future. Further, they do have competition for players as well as visa restrictions in the UK. All of these illustrate a very high transfer importance and transfer market complexity.
Again, these examples are just the tip of the iceberg, as every club can be categorized into one of these stages. A fun exercise could be to see where your favorite team might fall and if you think that’s the best stage for them to be in given their current league and circumstances.
Additionally, I have to stress the importance of ensuring a club understands both what stage it is currently in and what stage they feel they should operate in. The way to ensure a club is performing to the best of its abilities is to have comprehensive understanding of the club’s current and expected situation. In order to do that, the club needs to exhibit the strategy that the owners/directors/board feel the club should pursue. Further, this needs to be communicated throughout the club so that everyone is conscious of the direction the club is going in.
It is also important to note that these stages are not static. Clubs can and do move between these stages over time. Sometimes this can be a drastic change, other times more gradual. The key is for decision-makers to understand where they are and where they want to be, and if those stages are different, they must work to change their operations to match their strategy.
We can now head back to Kraljic’s paper, as much of what he writes about how to best “strengthen the organization” can be paralleled in football. Excuse the long quote, but one of the most poignant parallels comes from his section on systems support.
“Too often the purchasing department receives information on the company’s business plans and objectives that is incomplete or improperly geared to the tasks and time horizons of strategic supply management. Purchasing executives are usually informed of major expansion and investment projects as well as month-to-month production requirements but often lack adequate operating information with a three- to six-month time horizon, which would provide early warning of short- to medium-term demand fluctuations. The purchasing department needs these data for negotiating prices, rescheduling supply quantities, and balancing raw material inventories in response to cyclical demand swings.”
Kraljic is calling out a fairly common problem even in today’s businesses, even beyond purchasing departments. The problem is a lack of communication and information sharing across different functional areas of a company. To put this quote into football terms, it’s akin to the directors and/or owners of a club having different visions and playing philosophies than the manager(s) they hire and the players they purchase. Lacking a cohesive philosophy between recruitment, on-field tactics, and top-level vision leads to problems.
An example of this could be Tottenham after Mauricio Pochettino left. Spurs went from being a well-run, well-oiled club with a clear playing style and club philosophy – and transfers that matched – to a club who went from Pochettino’s attacking play to José Mourinho’s defensive play to Nuno Espírito Santos’ relatively more attacking play to Antonio Conte’s defensive play… all in the span of a few seasons. The transfers weren’t much better, as they often lacked congruity with the manager’s tactics or the club’s (previous) vision, leading most fans and analysts to call Spurs a club with no vision.
There was a perceived lack of information sharing between key decision-makers and department heads at Spurs. They would sign long-term development wingers when there was an immediate need for center backs. They would sign depth players at fullback when there was an immediate need for midfield depth. They would sign attack-minded players and then the manager would ask them to play defensively. Even if clubs are sharing information, it’s vital for them to show this congruence throughout the club, or else on-pitch performance will almost always suffer, as was the case with Spurs.
In line with this discussion, Kraljic also noted that, “to meet the demands of the new supply strategy, the company must also upgrade the skills and experience it requires of key purchasing people”. It is crucial to hire proper staff to support and implement a club’s philosophy, both in the transfer market and on the pitch, as they’re intertwined. Beyond hiring scouts and analysts that know a particular region you’re interested in, as mentioned at the beginning, this means hiring staff who are highly qualified to implement the club’s philosophy. Whatever category (I, II, III, or IV in the diagram above) a club falls into, they need to hire staff that are appropriately qualified.
The biggest shortcoming in this area I see today is trying to implement a strategy falling into categories III or IV (Market Management or Squad-Market Integration) but hiring people who simply are not as qualified as they should be for the data analytic side of analysis/recruitment. Often this could be due to offering dismal salaries which might very well limit the number of highly-qualified applicants. For example, you’ll have a difficult time hiring a highly-trained data wizard who also knows football very well if you offer £35,000. While it might be a decent salary in the football world, it’s usually too low for people who have the requisite data knowledge already and are either making quite a bit more already or fielding job offers with a much higher salary. Thus, clubs can end up hiring the best person who applied, rather than the best person. They are then not well-equipped to carry out their chosen strategy and their performance in the transfer market and on the pitch will likely suffer as a result.
Overall, Peter Kraljic’s seminal work calling for changes and modernization within the discipline of purchasing can be viewed through the lens of football, leading to some important insights. There are many parallels to football’s transfer market, and it is becoming increasingly important to have a high-quality, efficient, and effective recruitment department in today’s world.
As we’ve seen, this does not mean every team should set up a Brighton-style model, or use a recent Burnley-style model. Teams must determine what strategy works best for their club (and their league/goals) and ensure that they implement that strategy. Failing to merge vision and strategy is a recipe for failure. In a game where the smallest margins can mean the difference of millions of dollars, or promotion/relegation, or qualifying for Europe, having a strategy and operating withing that strategy is vital.
Finally, after everything I’ve written here, I feel the need to leave you with one final Kraljic quote… and the quote that might be the most imperative to take to heart if you are a football executive or decision-maker reading this article:
“Top management should foster a constructive atmosphere and attitude among purchasing staff before undertaking any radical staff changes.”
Café Tactiques 