Tag Archives: cognitive technology

Harness the Power of Unstructured Data

Do we still need the smartest guys in the room if we have the smartest machine? IBM paint a vision for the future of procurement and the power of unstructured data.

Unstructured Data

“Are you going to be relevant in 3-5 years’ time?”

What a start to the day! Barry Ward, Senior Procurement Brand Manager at IBM Global Procurement, has just left the stage, leaving the assembled thought leaders with something big to think about.

Barry, a 27-year veteran in supply chain at IBM, is currently European lead for commercialising Procurement Analytic Solutions with IBM’s clients. This leaves him ideally positioned to provide context for all the discussions that will be happening throughout the day at Big Ideas.

Summarising the global business environment that procurement is currently operating in, Barry described a fast and relentless pace of change, major disruption across markets, and high levels of external upheaval.

Technology as a Disruptor

With increasingly stretched resources, organisations are being asked to do more with less, all the while trying to stay on top of information which, given a greater speed of dissemination, could quickly impact the brand and reputation of the company.

According to Ward, there are “mountains of data” available to organisations. However, as it’s 80 per cent unstructured, and needs sifted before use, it isn’t useful. Procurement needs to harness the power of this unstructured data. This is where the development of cognitive technology looks to be a boon to procurement.

The potential for these cognitive technologies, such as IBM’s own Watson, are just mind-blowing. As the technologies are developed, they will be able to do everything that a human can do, but in a fraction of the time. This is more than AI, it’s like have a computerised “colleague”.

Upskilling Procurement

These technologies will take over the manually intensive activities currently done in procurement, facilitating the ability for work to be carried out anywhere, at any time, in line with increasing mobile access and social collaboration.

The Watson Buying System is just one facet of this technology. IBM are at the stage of proof of concept of this technology. The system will assist with purchasing, based on needs of buyers. It can match pictures of items, or match speech too, to catalogues, and get goods bought for users and delivered anywhere it’s needed.

Systems will provide real-time data, showing potential risks in the supply chain, and how they are being mitigated. According to Barry, mitigating risk through predictive technology will no longer be a “nice to have”, but will become essential for organisations.

Procurement will play a major role in this cognitive revolution, using it to drive value-adding activities for the business, such as a focus on innovation. However, this will bring a challenge of ensuring that procurement have the correct skills to leverage this opportunity.

Procurement professionals will focus more on a data science-type role, as well as on SRM activities. Innovation will be found through building proper, collaborative relationships throughout the supply chain.

Challenge to CPOs

Barry ended by issuing 3 calls to action to procurement leaders:

  1. CPOs need to adjust the design of their organisation.
  2. Enabling success for procurement will be driven by using the right technology.
  3. Procurement needs to upskill in order to drive value-adds for the organisation.

There is no time to waste. There’s no time for incremental steps. As Barry says, it’s time for CPOs to be bold.

Procurement Will Be ‘Cognitive’

It’s time to redesign the function to be ‘Cognitive’. Procurement once again faces revolution, and this time it is beyond ‘only’ a transformation. The function we know today will cease to be.

The first turning point saw the profession move to an industrialised model, including centralisation and strategic sourcing. Later on, transformation reached another key step, enabling Category Management, and increasing focus on automation for higher efficiency, better compliance, and outstanding cost savings.

Taking the function to the next level, CPOs then focused on supplier innovation and risk mitigation, to provide more value to their stakeholders on top of day-to-day savings.

Today, equipped with the right technology, CPOs have the opportunity of accessing, and acting upon, huge volumes of relevant data in order to truly impact supplier innovation and mitigate risk, two major mandates in today’s procurement environment. Deriving insight from this data provides the modern CPO with an incredible opportunity to execute procurement strategy on an entirely new level.

New, Data-Driven Era

As the buying function continues to automate, CPOs can plan and prepare for a new data-driven, ‘Cognitive’ era.

Let’s firstly clarify what cognitive technology is, before we explore its implications. Cognitive technologies are products of the field of artificial intelligence. They are able to ingest data and continuously learn as humans would, but with data on an enormous scale. They can perform tasks that only humans could, thereby allowing the workforce to concentrate on more innovative work streams.

Cognitive technology now brings the capability to ingest all (even unstructured) data, and can understand its meaning, reason and context to generate hypotheses, arguments and recommendations from which procurement professionals can make more informed decisions.

How is This Relevant to Procurement?

It means that we can now apply technology to automate and execute tasks that were initially performed manually. Many companies have now implemented catalogues, and automated PO creation, invoicing and reporting, all being ‘operational’ or administrative tasks.

What Procurement cognitive technologies bring to the table is the ability to take over strategic sourcing tasks, such as RFx creation, analysis and even scoring, including a level of complexity and data analysis that can’t be handled by ‘human’ on the same scale.

Even market research or negotiation can be improved, to reach a point when the technology will perform these tasks in a better, more efficient and secure manner.

What Does That Mean for our Procurement Function?

It means that the opportunity for Procurement is huge. However, the function needs to be ready and start considering how technology will indeed transform their very role and skill-set in their organisations.

1. Changing CPO Focus: Today, focus is placed on the front end of the procurement lifecycle, mostly on steps until the contract signature with suppliers. Introducing Cognitive technology to this part of the process will allow procurement to concentrate more on the post-contract signature activities. Vendor management will become critical, improving supplier collaboration, innovation and value-add.

2. Organisational Structure: Is the relevance of organisation by spend category diminishing? The model was relevant to procurement objectives which were to industrialise operations, consolidate, standardise and leverage volumes to generate savings. But today we know that we are reaching the limits of this model, and we are changing our success factors towards outcomes and values, so organisational changes to reflect this will pave the way to a function that is successful and efficient.

3. Measuring Procurement Success: One of our key measures is savings, but because KPIs such as revenue growth, value add, innovations, customer satisfaction, and risk management are also becoming increasingly important, we need to be able to implement a reliable calculation model to quantify progress.

4. Technology Assessment: Are CPOs equipped with the right tools to fully enable this collaborative approach with stakeholders and suppliers, as well as being well to manage risk and protect their brand?

5. Skills and Training: CPOs will need to define what new skills their team will need to develop to be successful in a new strategic model of cognitive procurement. Key competencies such as a collaborative ability to manage complex vendor and stakeholder relationships, leveraging technology, influential communication skills, problem solving, and changing agent attitude, will become even more critical.

In fact, failing to acknowledge the need to evolve will put the procurement function in a position of road blocker rather than a growth enabler, threatening competitive advantage. Embracing a cognitive approach encapsulating procurement data represents a key stepping stone for procurement organisations to remain relevant to the business and successfully differentiate themselves.

With the right strategy, structure, skill-set and cognitive technology, the procurement function is best placed to thrive and evidence its value to the organisation.

IBM are one of the sponsors of the Big Ideas Summit, being held in London on April 21st. 

If you’re interested in finding out more, visit www.bigideassummit.com, join our Procurious group, and Tweet your thoughts and Big Ideas to us using #BigIdeas2016.

Don’t miss out on this truly excellent event and the chance to participate in discussions that will shape the future of the procurement profession. Get Involved, register today.