02.4 / The future of Procurement is NOW, digital mastery is key for Procurement’s survival!
As I wrote in the previous “chapters”, we live in a disrupted world. Most of the disruptions are somehow linked to exponential technological progress and the role of Procurement in companies is becoming more and more critical in such a context. Technology can be seen as the “root cause” of such dramatic changes but it is also a key enabler to survive and thrive in such an environment.
I truly believe, and I am not the only one, that Procurement technology is a MUST and no longer an option. Yes, this is not a new topic (see quote below from 2014 on 1 component of Procurement tech.) but there are still challenges regarding adoption of Procurement solutions so it is worth stating it again!
“Failure to fully leverage an eSourcing tool in 2014 is unacceptable”
Before going into more details, a warning though… It is not because technology plays such a critical role that it should be the 1st and only focus of organizations wanting to thrive in our digital world. As I already stated people and processes come first. Technology alone solves nothing!
“The real driver for business transformation is a change in work processes, business processes or culture — in the way employees work and operate, rather than the technology per se.”
I keep the people & process topics for other posts and will only focus here on some key benefits Procurement can unlock through the use of technology.
Why does technology play such a critical role?
By nature digital technologies are very unique: ubiquitous (always on, cloud, and mobile…), real-time, holistic, and powerful (in terms of processing / calculation power). All of these characteristics are performance enablers for the organizations that are able to make the leap of fully leverage technology.
In a recent report (and there are many others), Accenture has clearly demonstrated and highlighted how Procurement “Digital Masters” (I took this term from “Leading Digital: Turning Technology into Business Transformation”) are performing, year over year, much better in terms of effectiveness and efficiency than less technology-enabled organizations.
One aspect that I want to highlight, and that is becoming (or should become) more and more a hot topic on CPOs and Procurement organizations’ agenda is AGILITY!
Technology and agility? WTF?
For long, technology has been seen as a necessary investment but also as a burden. In the past decades, companies have invested in expensive, heavy to implement/maintain/use systems. Think mainframe systems, MRPs / ERPs… Because of the size of the investments and because of the state of technology used, technology quickly became synonym with “rigidity”. Once you had something in place, you would not change it and worse people had to heavily change the way they were doing things to fit with the system’s features. But this is no longer true!
Technology is now everywhere and has evolved a lot and this changes everything! Technology is now an enabler of agility!
The concept of Enterprise 2.0 or E2.0 relies on enablement related to technology. Even if it has often been only looked at through the prism of “social networks” (company blogs, wikis, Facebook-like networks…), there is more to E2.0 than that. It is about connecting and about networks. Technology brings a lot of capabilities and agility in terms of connecting people. Not only internally; connecting with customers (Digital Marketing) and connecting with the whole supply-chain. This “connectivity” of strong and weak ties is not only a catalyzer of innovation but also a condition for more adaptability and agility in organizations.
Innovation is no longer in silos, it jumps from 1 market/domain to another. The same should apply to organizations & functions!
Technology is also an opportunity to revisit operating models (processes & organizations) because it makes what was previously impossible and/or costly now possible and affordable.
“After first unifying the company through strong IT systems for manufacturing, order processing, and supply chain, the company was on a good foundation for growth. This set the stage for a series of transformations.”
An example of that is related to predictive analytics and risk management. There are several solutions on the market that are dedicated to supply chain risks. Because we live in a disrupted world, embracing risk management is a key capability that Procurement organizations must have or must acquire ASAP.
In the video I shared in the 1st part of my posts, C. Lanng is right: “small, medium, and large companies are all at risk of seeing their business model destroyed…” Being able to identify, assess, manage, and react/adapt fast will be more and more a competitive advantage! Not only for risks related to business models but to any other types of risk or changes. In addition to these risks aspects, predictive analytics and “bug data” are about seeing into the future to anticipate as much as possible. This, among other things, applies to supply demand for narrow/niche/speculative markets (hedging is a critical technique and the more you know about the future, your demands, the market evolutions… the more efficient it can be).
Too good to be true?
Digital Masters can truly unlock tremendous benefits but becoming a Digital Master has a price and is therefore not so common.
“Digital Masters — companies that use digital technologies to drive significantly higher levels of profit, productivity, and performance — do exist, but they’re rare. […] Most firms fall short of digital mastery.”
To no surprise, becoming a Digital Master requires efforts. Like any transformation! But as I wrote in a previous article, there are clever ways to transform organizations…
In addition, digital transformation brings new challenges. Do not misunderstand my point, it is totally worth it.
Some of the challenges are related to using even more technology, especially technology that “integrates”. By connecting collaborators together, connecting them to other internal departments, to customers, to suppliers, you create a collaborative environment that fosters value creation and transparency. But, it also exposes you to new threats. Some of them are related to IT security (malware, hackers…) that may damage your capability to operate (the recent attack on Sony is 1 of many examples) and/or that may induce information leakage (personal information, sensitive business data,…). Such risks have to be understood and assessed but, for most, should not represent a NO GO.
Another kind of impact that Digital Transformation has is on people. Technology is becoming ubiquitous and more & more powerful. People have to keep up!
- Automation creates and destroy jobs at an incredible pace. Not only manual tasks, analytical tasks too; Artificial Intelligence (AI) is a technology that will tremendously change the business world in the near future! In Procurement, bid optimization and scenario management are two domains where AI is starting to be visible and it will go beyond that.
- Skills required to perform a job are slowly but steadily becoming more centered on data and data analysis. No wonder that Capgemini Consulting named a report they issued in 2013 the “talent gap”.
“There’s never been a better time to be a worker with special skills or the right education, because these people can use technology to create and capture value. However, there’s never been a worse time to be a worker with only ‘ordinary’ skills and abilities to offer, because computers, robots, and other digital technologies are acquiring these skills and abilities at an extraordinary rate.”
In Procurement, the “king negotiator” will soon become a dinosaur!
The “new buyer” will have to be a “synthesizer” as described by Thomas L. Friedman in “The World is Flat”. He will have to embrace technology without forgetting the people side of things. Procurement is a people function (clients / stakeholders, suppliers, other partner functions like FICO, R&D…).
Let’s keep that topic of the buyer of the future for some next posts! Stay tuned!
More information and links:
- “CPO Rising 2014: Convergence — Top Challenges in 2014”
- “Leading Digital: Turning Technology into Business Transformation” by George Westerman, Didier Bonnet, Andrew McAfee
- “The 2nd Machine Age” by Erik Brynjolfsson and Andrew McAfee
- “Procurement’s Next Frontier: The Future Will Give Rise to an Organization of One” by Accenture
- “The Digital Talent Gap: Developing Skills for Today’s Digital Organizations” by Capgemini Consulting
- More on strong ties and weak ties
- Previous parts: 1, 2, and 3