Initiation is about establishing a programme of work to effect the strategic shaping of the market. The skills, techniques and approaches of Programme Management will be applied - but these will not be described here, see the OGC website.  The dashboard provides a framework within which to gain an understanding of the factors affecting the market, what information is needed, as well as the policy and legislative framework in which the market operates.

A case will be developed for your market-shaping programme. It will set the scope, boundaries, aims and objectives for the market involvement. It is also about identifying key stakeholders, describing their roles in the programme and developing a communications strategy.

Detectives (and auditors!) are advised to "follow the money". Identifying the money flows will provide a useful insight about the market's function and behaviours.

Once a holistic appreciation of the market context is gained, develop a stakeholder strategy with a supporting communications strategy.

Apply the GEMS dashboard

One of the first steps to be taken is to apply the dashboard to determine whether a GEMS programme is appropriate. The initial exercise will address each of the dashboard parameters, to provide a basis for an assessment.

Policy context

Any attempt at market shaping will require a good understanding of the policy context of the market:

• Statutory framework with its obligations for the public sector - develop an understanding of the statutory framework in which you and your suppliers operate, to fully understand and appreciate the issues affecting the market and how they interact. It will also provide an insight into private sector behaviour and how to elicit a response appropriate to the direction you may wish to take in market shaping.
• Regulatory framework, if one exists, may add further issues for consideration - and the private sector may have self-regulation too.
• Various initiatives aimed at public, voluntary or private sector organisations - delivered with intent to influence the market being considered. These could be from several sources - International, EU, UK Parliament, UK departments and national assemblies.

It is important to understand how these various policies, initiatives and obligations interact to shape the market, so when looking at the construction market, OGC was involved in an initiative based approach. On the other hand the waste management market involved all three areas and hence was much more complex.

It could be useful to compare the policy framework in other countries, particularly where there is a healthy level of competition and capacity. By understanding what makes these markets work well, you can apply their lessons learned to your market.  For example, when developing a market for the Independent Sector Treatment Centres (ISTCs), the Department of Health examined the approaches of several countries to involve the private sector in public sector healthcare.

Other sources for further information on policies likely to affect the market include:

• The lead department for the market - e.g. DfES for education, DCLG for Local Authorities, Defra for environment.
• Prime Minster's Strategy Unit - works with government departments and external stakeholders on a broad range of domestic policy.
• Prime Minster's Delivery Unit - assesses delivery and provides performance management for key delivery areas.
• The Regional Development Agencies - established as strategic drivers of regional economic development in their region.
• The Regional Centres of Excellence - established to support the implementation of the National Procurement Strategy and the delivery of council efficiency targets.
• OGC web site links.

Stakeholder strategy

Strong stakeholder management skills are essential to the success of the market shaping activity.  A strategy should be developed to work with the key market players. To do this, establish a good understanding of their role and influence in the market, their aims and objectives, and their ability / desire to support your work.

Establishing a comprehensive stakeholder strategy with a supporting communications plan was critical for the waste management study, given the large number and range of interests of the stakeholders.

Information regarding major procurers and suppliers within the market may be obtained from a number of sources:

• The procurement function(s)  - they should be able to provide details of current suppliers, suppliers previously invited to tender, and other suppliers in the market. This is a starting point for widening knowledge of the market, their competitors, and related markets. 
• Other government departments - such as the Department for Trade and Industry (DTI), or public sector organisations operating in the same market, can be good sources of information and may deal with different suppliers in the same market. 
• OGC's Supplier Relations Division  - has knowledge and understanding of a number of key suppliers and markets to the public sector, including information on supplier strategies, existing public sector contracts and new bids, contract performance and issues, financial standing and resources.
• OGC Buying.Solutions - operates a number of catalogues and framework arrangements for various products and services; one or more of these may be relevant in the market being investigated.
• Trade associations / industry bodies (see Trade Association Forum). Most markets will have at least one industry body and reputable suppliers will usually belong to one or more of these. The Internet and specialist consultancy firms may help in identifying other sources of demand and/or other suppliers in the market. 
• The media and specialist press can provide additional sources of information.

Suppliers have other customers as well as the public sector. Hence it is important to assess the supply/demand profile created from within the private sector for your market.

Communications plan

Once you understand the spectrum of stakeholders associated with the market, develop a communications strategy and supporting plan. This will cover:

• The objectives of the communication strategy;
• The target audience of the programme;
• Communication proposals;
• Evaluation and feedback mechanisms; and
• Responsibilities within the team for the communications strategy.

Communication and consultation will play an integral part in ensuring the extent to which the recommendations of the research and analysis phases are implemented and, to some degree, their level of success. You must inform, energise and encourage programme partners and stakeholders in the goals, direction and progress of the programme.  Success requires high levels of engagement with all stakeholders - internal and external.

The more complex the demand side in terms of the number and nature of key stakeholders, the more difficult it will be to effect change. This will impact upon how stakeholder management is undertaken and the level of commitment required.

Making the case for market shaping

One key document from the initiation phase is your business case. This will set out the drivers, aims and objectives of the work, define the scope and boundaries of the work and identify measurements of success of the programme.

A GEMS programme will focus its activities on those areas that contribute to the key outcomes of:

• Increased competition; 
• A more responsive market; 
• Greater security of supply; and 
• Reduced dependency on a limited group of key suppliers.

Trigger

 The trigger for each of the OGC's three Kelly markets was different. However, the basis remains the same - it required a significant "event", for example, regulatory cost impact (Waste), imbalance of demand over supply (Construction) or a need to create a new market (Independent Sector Treatment Centres), which attracted the attention of the public sector decision makers. 

The trigger for becoming involved will have to be clearly explained with a good set of potential benefits identified.

Scope

The market shaping exercise will need a clear and agreed scope. The boundaries of the programme will be defined and will depend on the market being investigated.

You must also be clear about the nature of the market and your reasons for engaging with it. Is it:

• New / emerging? (e.g. the third market that OGC reviewed - Independent Sector Treatment Centres) - there is a need to directly encourage the development, from scratch or small beginnings, of a market. 
• Established? (e.g. the first market that OGC reviewed - Construction) - a well known and well defined market that you believe will benefit from a "prod" in the right direction to release additional value for money for the public sector.
• Evolving? (e.g. the second market that OGC reviewed - Waste Management) - a market not responding in the way required.
• Declining? - a perception that the market is tired and needs a boost to secure public sector value for money is maintained.

Agree boundaries and scope

In scoping the market, define the boundaries on the basis of the following key criteria:

• Market size - how large is the market (or parts of the market) and is the public sector a major purchaser? Consider limiting scope to those areas of the market where the public sector is a major purchaser, as influencing the market becomes more difficult if the public sector is seen as a smaller client. 
• Are there any variations in demand within the market, or within specific sectors, and what are their underlying causes? For example, in the waste market, demand was seen as relatively predictable, however, changes in EU legislation (for example, concerning landfill sites for hazardous waste, or, the need to increase recycling facilities over the short term, etc.), coupled with lack of information flow, could create spikes in demand which could catch local authorities and industry by surprise. Priority should be given to areas where demand is most unpredictable. 
• Are there supplier capacity issues within the market? Are there parts of the market where supplier interest is declining and what are the reasons for this? It may be necessary to look at similar markets further afield if suppliers are being attracted by more lucrative contracts on the continent or worldwide.     
• Are there parts of the market where bidding is constrained by available resources, leading to cherry picking of contracts by suppliers? Is there a lack of specialist knowledge?
• What is the level of competition and is there (as in the case of waste management) a supply chain in which some suppliers provide a completely integrated service (holistic waste management service), whilst others provide only one specific part of the service (for example, waste collection only)? This will have a bearing on the way data is collected and analysed. 
• Are there regional variations in demand? 
• What is the policy and legislative framework in which the market operates? 

Benefits realisation and measurement

This is a programme that will have both hard and soft objectives that are achievable over time and after the investment of resources. You will need to develop measurements that reflect short, medium and long-term benefits.

At the very least you will need to establish measures that reflect:

• Why you are entering the market;
• What you expect out of influencing the market;
• How the process will work; and
• What benefit profile is anticipated.

Reference: Business case management in OGC's Document Library.