2017 Rewind- The Impact Of Blockchain On Procurement

As part of our 2017 Procurious rewind, we’re taking a look at the top blogs of the year. Blockchain was one of the hottest topics on the site this year. It’s time to brush up on your knowledge and understanding right here, right now! 

Blockchain technology will not only impact procurement and procurement professionals but is expected to be more pervasive in our business and personal lives than the internet itself. To put the enormity of impact on procurement and procurement professionals in perspective picture yourself twenty years ago trying to explain how the Internet is going to change things. Where would you even begin?

Like the Internet the Blockchain is a network. In the case of Blockchain comprised of decentralized “ ledgers”, many are referring to it as Internet 2 or more commonly the Internet of Value or Internet of Trust.

The benefits

The most important thing to understand is that Blockchain addresses many of the most critical problems we’ve encountered doing business on the internet.

1)  Security: Practically speaking the Blockchain is unhackable.

2)  Transactions are verified by network participants (consensus), eliminating the need for third-party intermediaries’ (banks) costly, time-consuming and predominantly manual settlement processes. In addition to slowing down our supply chains banks alone have estimated these processes are costing them more than $20 billion annually.

3)  Eliminating high transaction processing costs for high volume/low margin retailers who accept credit cards could significantly add to their bottom line.

4)  Once transactions are verified they are secure and immutable. (unchangeable)

5)  The immutability of the Blockchain means that supply chain provenance can be assured. This is particularly important for conflict minerals, pharmaceuticals, food and many other supply categories where provable chain of custody is critical.

6)  Payments can be made directly from buying entity to selling entity “ledgers” by-passing intermediaries (banks, brokerage, clearing houses, title companies, etc.)

7)  Payments can be automatically triggered based on the codified terms of “ Smart Contracts” stored in transaction blocks.

8)  Blockchain capabilities will change, if not eliminate the role of accounts payable and accounts receivable departments.

9)  Blockchain enables the concept of micro-units and micro-payments. It is estimated that approximately one -third of the world’s economic opportunity exists for products and services such as energy or digital rights where backend settlement costs currently constrain those markets.

10) It is also estimated that 25 per cent of the global population does not participate in the global economy because they have no bank accounts and/or credit cards. Without these tools they cannot participate in the Internet economy. The primary reason they do not have these economic tools is because they cannot prove their identities. Immutability of the Blockchain can enable these people.

What do I need to understand?

The capabilities I’ve outlined just scratch the surface on how Blockchain impact all of us. Aside from the aforementioned, as a procurement professional are several important things to understand.

1)  Blockchain is a much wider and more pervasive concept than Advanced Cognitive Systems, Big Data, Predictive Analytics, Robotics, 3-D Printing or even the Internet of Things. In fact these technologies will become infinitely more practical and secure because of Blockchain.

2)  Do not think of Blockchain and BitCoin, FinTech or Crypto Currencies as synonymous. They are not.

3)  Do not think that it will take 20 years to mature and be mainstream. The estimate is 5-7 years for full maturity.

4)  Do not assess progress by the US/Euro FinTech Community. While they were the first to recognise Blockchain’s inherent value and arguably have the most to gain by adopting it, they also have the biggest hurdles to overcome and could very well be last to cross the finish line.

5)  Don’t make the mistake of waiting to become knowledgeable about Blockchain; it is the most highly disruptive technology we’ve seen since the Internet and it won’t wait until you are ready for it.

Michael Shaw is CPO and Executive Board Member of Sourcing and Procurement Executives (ACSPE) and Chief Information Officer at Blockchain Executive.  This article was originally published on LinkedIn

2017 Rewind – IBM CPO: You’re Finished If You Think You’ve Finished

As part of our 2017 Procurious rewind, we’re taking a look at the top blogs of the year. This article features our interview with IBM’s CPO Bob Murphy, who believes there is nothing so important as professional development and human relationships.

The numbers are eye-watering. IBM CPO Bob Murphy looks after a $70 billion spend – $25 billion internally and $45 billion 3rd-party. The company has around 150,000 contracts across 17,000 suppliers, with its flagship cognitive technology, Watson, reading 900 million pages in multiple languages per second.

As we prepared for our interview with Murphy, it’s understandable, then, that we expected to find him entirely focused on data analytics, automation, AI and the other tech that’s rapidly impacting so many professions. We were wrong – what comes across loud and clear is that this is a charismatic, engaging leader where people and relationships matter.

Think 40 and other professional development

Talking to Bob, it becomes immediately clear that his personal commitment to professional development is enormous. “If you want to be a leader, you have to stay current and replenish your IQ through learning and new knowledge. Ultimately, talent development is about making sure you have excellent people to replace outgoing leadership – it’s also vital for driving innovation.”

IBM’s Think 40 program mandates a minimum of 40 hours per year of self-initiated professional development. For the procurement team, this means having the option to select from a range of internal and external courses (often online), including offerings from Six Sigma, Procurement Leaders and ISM. For Bob, it comes down to inquisitiveness and a love of continual learning.

“We look for logical, friendly, humble, smart and inquisitive people. Anyone with a rudimentary knowledge of supply management can be trained to become outstanding procurement leaders. Making people aware of what is possible is absolutely critical – most successful people around the world put aside time to regularly read and educate themselves. They’re inquisitive; they enquire after things.”

Two critical skills for future leaders in procurement

  1. Digital literacy

“Data”, says Murphy, “is omnipresent and omnipotent.” He stresses that leaders who want to thrive in the procurement profession need to develop an understanding of:

  • Data analytics – we can gather data but how do you use that data to gain insights?
  • Robotic processes – how can you automate tactical processes so human capital is used to the greatest effect?
  • Cognitive computing – understanding how to digitise a process end-to-end so it is interconnected and insightful.
  1. Relationship building

Murphy tells Procurious that while leaders need to be able to use technology to get the insights and knowledge they need, their main focus should be on developing their emotional intelligence (EQ) rather than their IQ. “You need to have the ability to talk to clients in a consultative manner. We have one mouth and two ears, and that’s how we ought to apportion our time in any discussion. When we’re talking, we’re not learning.”

How can you train someone to be adept at building relationships? “It’s about attitude, not aptitude”, says Murphy. Whether leadership is innate or taught, the results are the same. You need to be able to work collaboratively with your suppliers, show them what’s important to you and understand what’s important to them. “Your relationship-building skills will ultimately enable your suppliers to drive innovation. For example, we have 17,000 suppliers at IBM. I want each one to wake up every morning and think: ‘How can I make IBM better’?”

Have you got a cognitive journey map?

Where is your organisation headed with cognitive procurement technology? Where do you want to be? How will you use people, processes and technology to get there? What can we automate?

Murphy recommends that every procurement team should have a roadmap that lays out the strategy for its data, analytics and cognitive journey. “All CEOs need a vision for their cognitive journey, and every function needs one too.”

According to The Hackett Group’s 2017 Procurement Key Issues research, only 32 percent of procurement organisations currently have a formal digital strategy in place, and only 25 percent have the needed resources and competencies in place today.

In reality, we can’t all be first-movers. But even if your company isn’t yet ready to act on cognitive technology, CPOs will be rewarded for raising the question, thinking through the issues and putting the challenge on the Board’s agenda. Most importantly, there needs to be milestones and deliverables, as Murphy warns: “Strategy without execution is a daydream”.

To end on a gem of a quote from Murphy, he spoke about how the constantly evolving nature of technology means a never-ending journey. “’Journey’ is a good description, because it is never finished. Anyone who thinks it is finished, is finished.”