In the battle for capital, how does procurement ensure its cognitive projects come out on top?
At last month’s London CPO roundtable; Amit Sharma, Global Procurement Practice Leader for Cognitive Process Services (CPS) –IBM led our attendees in a discussion on how procurement leaders can ensure their cognitive projects come out on top.
There is so much potential in cognitive technology to transform the role of procurement. It will allow professionals to do dynamic forecasting, telling you when to raise acquisition and awards contracts to a particular supplier based on a triage.
“For procurement, maintaining our relevance to the organisation beyond cost savings is imperative” said Amit. “[Procurement pros] need to embed the latest in technology as best practise into the business as it will free up our time and help us to move from transactional to strategic management.”
“The logic is unquestionable. We know the sophistication of AI is going to come. It’s a question of when, not if.”
But when it comes to making the leap to cognitive, which can do a world of good for analytical and predictive analysis, organisations are still hesitant.
Procurement needs to make the business case for how cognitive can add long-term value and, as Amit reminded us, “If you’re not convinced, you can’t convince someone else”
Throughout our discussion, four key reasons for an organisation’s reluctance to embrace cognitive tech became apparent.
1. Remaining skepticism at the value of cognitive
As Amit explained, cognitive technology like Watson can help procurement professionals to analyse reams of data. It would, for example, allow users to plot the price at which they are being charged for something by suppliers and analyse how the index has moved in past [x] years. Five years ago this process would have been extremely time consuming but with the index data, the system can quickly tell you exactly where you’ve been overcharged.
So it all sounds great. But in reality, business leaders are often skeptical about the actual cost savings brought about by this kind of analysis.
Do you genuinely make better decisions in the long term by having so much data at your fingertips? Or can you have just as much success through effective negotiations with your suppliers?
Amit’s response to this “If you’re not doing spend compliance – you don’t know if you’re compliant. If you’re not analysing this data, you don’t know the potential cost savings.”
“I spoke to a CPO who thought their processes were good. [But it was discovered that] there was a 40 per cent unit price difference across the company in the same category, simply because the left hand doesn’t know what the right hand is doing!”
2. Spend within organisations is fragmented
One key problem for procurement, when it comes to implementing cognitive technology, is that the CPO doesn’t always have the authority to drive transformation. Perhaps they are reporting to a CFO who doesn’t see value in cognitive tech or the spend might simply be too fragmented across the business. When it depends on lots of other people, procurement are unable to drive change effectively.
As one of our roundtable attendees pointed out “there are organisations I know who can’t justify the need to implement Ariba to their CFO- let alone cognitive technology!”
3. Trouble looking at the bigger picture
Several of our roundtable attendees cited short-termism as a key reason for their organisation’s lack of cognitive adoption. “The mistake we make is that we look at opps in a tactical way and not at the bigger picture,” said one CPO.
“For example, we know that there will be headcount reduction in the coming years and we will benefit hugely from cognitive tech, but articulating that at a hollistic level to the CFO and explaining it as a 5-year journey is the challenge”
4. Confusion about AI
Remarkably, one of the biggest challenges remaining around the uptake of cognitive technology is a universal lack of understanding of what it actually is and the distinctions between different terms.
“You can start talking to a group about AI and within a few minutes people are talking about blockchain, as if the two are interchangeable,” said one of our attendees. “People need to have a clearer understanding of the buzzwords ; AI, blockchain cognitive etc.”
Of course, there are people who know a little and people who know a lot. And that’s a challenge in itself.
Read more here on the insightful discussions had at our London CPO roundtable.