Tag Archives: digital transformation

Could You Afford To Lose $2 Billion In Sales?

What does digital transformation mean for the procurement and supply chain profession?  How will it help CPOs to mange risk in their supply chains?

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The concept of digital transformation has been around for quite a while, ISM CEO Tom Derry argues. “In the late 90s we started doing reverse auctions and e-auctions. Not too long after that dynamic discounting began to enter the equation and FinTech platforms have also been around for a while. We’ve been embracing it but recently we’ve hit a pause in that innovation wave. And it seems like we’re on the brink of this next wave.”

How will digital transformation transform procurement and supply chain?

Digital transformation is the full impact or outcome of using data on elevated platforms to really reinvent what procurement and supply chain professionals are doing.

“In the source-to-settle process we typically identify 37 discreet steps” explains Tom. “And we think four technologies – procure-to-pay platforms, RPA, machine learning and IoT – will mean that all but eight or nine of those discreet tasks will be automated.” This, of course frees up time for humans carry out only the most important things like stakeholder management and supplier relationship management, the things that can only happen as a result of conversations between people.

Indeed, it is these soft skills that will galvanise the procurement and supply chain professions and make them step out into the future. When data is pointing you in different directions and the computers don’t know what to do, that’s when you step in.

Is supply management ready for change?

A recent survey revealed that only 6 per cent of CPOs possess the strategic leadership traits to lead digital and analytical transformations.

“I’d say there is a lot of discomfort. People don’t really understand the technologies we’re talking about and they don’t necessarily have the in-house skills,” says Tom.

“An interesting example is the technology that is currently being piloted in 30-40 per cent of large companies – RPA.” And yet most people don’t even understand what this technology is. “They think it means a robot from ‘lost in space’ when we’re actually talking about software code. The code fits into the gap between systems so imagine your ERP system, your spend analytics tool and any other systems you’re using. We’re typically trying to build reports by extracting data from these disparate sets of data, putting them in a data warehouse or a data lake, doing some analysis and running reports.

“RPA can automate most of that work so a human doesn’t have to go in and identify the data. RPA is good at doing routine, highly-defined processes.” This frees up the time of professionals so that, instead of spending half the day obtaining and cleansing the data, time can be spent on activities where there is real value-add. “The insights and the applications, for me, is the real opportunity.”

Selling the benefits of digital transformation

How does Tom advise managing those risk averse CPOs, who are reluctant to take the plunge with new technologies? Can you overcome that and sell the benefits to them?

“One of the biggest pay-offs for even the most risk averse CPOs is using digital tech to visualise the risk in your supply chain.

“I heard about a publicly traded pharmaceutical company in the states who did a risk analysis and claimed that anything less than $1M in spend is so small it’s immaterial. They wouldn’t even look at it. But it turned out they had $200,000 in spend on a coating for a consumer medication, which supported $2B in annual sales.

“[The plant in Japan that produced this coating] had a fire and they were at risk of losing all of these sales. If that doesn’t get the board’s attention, I don’t know what will. So when it comes to risk, that’s where the immediate benefits will be!”

When it comes to digital transformation, people know they need to be educated. “you have to get as smart as you can on what’s coming!” says Tom.

In our 10-part “Tuesdays With Tom” podcast series, Tom Derry discusses a broad range of critically important topics that every supply management professional should be across.

Listen to the full podcast here.

5 Steps To Providing Procurement As A Service 

The core activity of Procurement 4.0 will be to deliver <<as a service>> in the same way that cloud technology has evolved…

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At Ivalua Now The Art of Procurement earlier this month, Emmanuel Erba, Group Chief Procurement Officer – Executive Vice President -Capgemini discussed what the journey leading us to Procurement 4.0 could look like.

In an unprecedented period of technological disruptions, we simply cannot escape them. Emanuel advised that procurement professionals choose to see this as a realm of opportunity and question how to deliver all the promises of digital transformation to our clients.

The procurement environment is changing and this must be embraced or the profession will sink like a stone, he warned.

Unpredendented disruptions

  1. Cloud : Cloud is now the primary way of delivering and consuming IT – it’s the new normal. No one can imagine running a business without cloud computing
  2. Cybersecurity:  Last year, 689 million people globally were victims of cybercrime. By 2020 60 per cent of businesses will suffer major service failures. In today’s world, no CEO goes to bed certain that tomorrow their company will not to be impacted by a cyber threat. Cybersecurity needs to be integrated within our systems
  3. Business Platforms: These are a core feature of our current landscape. Business platforms have enabled getting the client closer to the supplier
  4. Industry 4.0
  5. AI and automation: This will strongly disrupt data gathering and processing. Repetitive and mundane tasks will be automated

What would your CEO say if you asked them what their priorities are? It’s likely that the way you manage costs is not high in the agenda. It’s important to understand what top management wants and what your clients expect and then work out how your procurement team can address these needs.

Emmanuel believes that the core activity of procurement 4.0 will be to deliver <<as a service>> in the same way that cloud technology has evolved.

Five forces driving the market towards <<as a service>>

  1. Time to scale – The speed at which the biggest brands are growing is ever-increasing. For organisations including Youtube, Amazon and Android the time taken to go from 0-80 per cent WW market share is only five years
  2. Disintermediate– Direct access to the resource to capture value – for example Uber, AirBnB and Apple
  3. Go to market – GTM via most powerful marketplaces powered by AI, automation, analytics. For example, digital ads sold Teslas with $70 million in advertising investments
  4. Revenue share – All of these factor are funded by 20-30 per cent revenue share model and leverage of client assets
  5. Investment power – Free cash flow generated enables immense CAPEX ability and acquisitions

5 steps to providing procurement <<as a service>>

For procurement, the 4.0 wave should

  1. Integrate disruptions – let’s not ignore disruptions, Emmanuel argues, they are much more powerful than us!
  2. Gear its people to embrace – Globalise!
  3. Position its role as aggregator of services, either internal or external, and map them to the business outcomes of the organisation
  4. Adopt the platforms that will increase the speed of execution, the automation and the data insights
  5. Think not only bottom line impact but being a Growth Enabler

In the <<as a service>> world, you don’t need to integrate everything vertically, but rather focus on your key differentiators and aggregate other services in the most effective way thinking in terms of meaningful outcomes.

Procurement as a service can address sizable needs both in direct and indirect spend. As Emmanuel revealed Procurement cloud addresses a $5 trillion scope.

Procurious attended Ivalua Now The Art of Procurement earlier this month. Find out more here.

When Did Podcasting Become So Cool?

50 per cent of the population can’t be wrong, right? But just why is podcasting so popular and why do we keep listening?

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In 2017, when I received a call from Colin Beattie, one of the best leadership and cultural transformation architects I know, I had no idea at all about podcasts. So when Colin told me that he had an idea for an innovative podcast format exploring leadership dilemmas, and asked if I wanted to be one of his executive speakers, it was more my enthusiasm at having a chance to work with Colin again that had me saying yes. Two great conversations facilitated by Colin with the wonderful Simone Carroll, some improvisation from the talented Rik Brown and Amanda Buckley, and two more episodes of the podcast series LeaderShip of Fools were created. From my end, I was a convert.

With the advent of digital technology, the way we work, socialise and engage has changed dramatically. So it’s no surprise therefore that the way we consume information, listen and learn has also changed. What may however be a surprise is that what we now commonly refer to as podcasting, has its origins in the 1980s. For those of us who were around at the time, we may remember it referred to as audioblogging (among other names). For its time, it was a ground-breaking way of recording and communicating information and messages. It wasn’t until the early 2000s and the introduction of the Apple iPod however, that momentum started to build around this digital platform. With a diverse library of 000’s of recordings being made available via the iPod, digital recordings became that much easier to access and started being more consistently being referred to as podcasts.

In this age of digital where only some things really stick and embed, and others join a cycle of hype before finding oblivion, what is it about podcasting that has not only endured but thrived? Nielsen estimates that in 2017, 44 per cent of Americans have listened to a podcast, with 80 per cent or more listening to one podcast each week.  If you think that sounds only vaguely interesting, and it’s simply a US-inspired phenomena, think again. According to Statista The State of Podcasting, would you have guessed that South Korea is firmly at the top of list of countries? With 58 per cent of people having listened to podcast in the last month, they are followed by Spain with 40 per cent. We Australians aren’t doing too poorly at 33 per cent, matching the US in percentage, if not in population numbers.  So irrespective of the range and location of listeners, it seems that podcasts are global and they are here to stay. Which raises the question of why exactly are we listening?

  1. Our need for connection. There does seem to be an irony here that I am very aware of. Does that really make sense? How can podcasting, a digital format helps us connect?  With over 600,000 podcasts out there, there are many topics and formats, as a well as a diversity of content. Done well, a podcast captures a conversation and invites us to be part of it. It can allow us to feel that we are listening and learning as active participants, even though we have not been there at the time. The authenticity of an open conversation, different perspectives from what we may otherwise be exposed to, and discussion that could confirm or challenge what we think we know, is a unique experience. Importantly, the challenge is non-confrontational and we give speakers a chance to explain themselves (unless we decide to pause them, or even more drastically, delete them from our library). They provoke our curiosity, and hopefully our admiration. Many times, and this has happened to me, they also provoke disbelief and ire. What? or Are you kidding me? is something I know I have said out loud while listening to more than one podcast.
  2. Interested in politics, starting a business, functional expertise, marketing, popular culture, music, crime, gardening, a discussion of your favourite TV show (yes, even if it is from the 90s and a guilty pleasure and therefore destined to remain unnamed)?  Well, you get the idea. Almost every, and any topic is likely to have a podcast associated with it. Note to readers: I have included “almost” to qualify my comment given that I am sure there will be someone out there who will be able to find a gap in the podcast market for a subject of interest. Applying a digital lens, podcasts have become a highly personalised way for us to choose what we want to consume, and how we want to consume it.  The breadth of content is extraordinary and the access to expertise so great. As someone navigating the business world whether in your own start up or in a large organisation, where else would you be able to hear about the challenges of entrepreneurship, digital transformation, leadership and customer engagement from those who have innovated, succeeded, and failed at scale? Similarly, where else would you be able to access the breadth of experiences and insights of people who are influencing the agenda on science, social justice, politics, economics and the environment be it locally, nationally or globally?
  3. If digital is redefining the idea of anywhere, anytime, then podcasting exemplifies this. Just as the options for content are endless, as a listener, I have the choice as to when and how, I listen. There are a multiplicity of listening platforms and devices; desktop, smartphone via iTunes, Spotify, Podbean. Something to suit everyone. Choices can be based on location, the time that is available and what is of interest at that particular day, week, or even moment. You can choose to be educated, entertained, moved, or inspired. Sometimes, a great podcast can achieve all of those things. There are many times that I have found myself laughing out loud as I listen to a podcast while I am walking. So a note to those who are new to podcasting; it does take a special type of confidence to walk down the street and not be disturbed by the curious looks of other pedestrians as you smile or laugh out loud. If you aren’t quite there yet, there are many other locations and time options for you to think about and get started with.

My podcast library is highly versatile depending on what I am interested in learning more about. A few current favourites from me that I am talking to friends about: npr’s Hidden Brain, Freakonomics Radio, HBR Ideacast, and of course, LeaderShip of Fools.

Great things happen when we seize the opportunity to be curious. If you haven’t become a podcast listener yet, it’s not too late to make a start. And if you have and lost some momentum, tune in to one on a topic of interest and reignite your learning and inspiration.

Three Key Mindset Shifts To Lead In The Digital Age

The wonder of digital is the array of choice and opportunity it brings. To drive a successful digital agenda and succeed in the digital age however, mindsets need to build on leadership fundamentals while also shifting to respond to the new environment.

By Brian Lasenby / Shutterstock

Digital, the awe and the promise, filling us with inspiration and fear at the same time. Initially, the digital discussion was all about technology. After all, technology is cool, and we all want the cool factor. It demonstrates that we are at the forefront, leading the way, innovating. All great things when organisations and individuals are in a highly competitive environment and looking for a point of differentiation.

The wonder of digital is the array of choice and opportunity it brings. RPA? A great place to start. Mobility? It’s all about anytime, anywhere. AI? Not quite sure what it means, but let’s go with it anyway.

As many organisations sought to implement technology and transform themselves, the promised utopia did not quite eventuate. Technology moves fast and the innovation of today is tomorrow’s nostalgia (Any 80’s movie featuring a brick cleverly masquerading as a mobile phone will make this point all too well for those of us who were there to remember it the first time). That’s because digital requires a reinvention in how an organisation operates from business models, to systems and processes, through to engaging with the market and customers. It turns out that without a mindset and cultural shift, the full benefits of the technology are never realised or sustained. And so, for leaders this poses an interesting question. What does leadership look like in this digital age?

There is a multitude of research, writing and discussions on leadership in general. It is no surprise therefore that the conversation around digital mindset is met with cynicism, or fatigue. Don’t throw out those books yet (unless you received a kindle for Christmas). The fundamentals of what we know to be great leadership endure; humility, curiosity, emotional intelligence among others are key call outs and are as relevant today as when they were first identified. To drive a successful digital agenda and succeed in the digital landscape however, mindsets need to build on leadership fundamentals while also shifting to respond to the new environment. So where can you start to make a shift like this?

1. Experiment and embrace learning, not failure

Everybody knows about this one. In the strive to be innovative, there is a focus on experimentation. Experimentation is a call out for me because it brings together a number of attributes that differentiate digital leaders; challenging the status quo, creativity in seeing something the rest of us do not, courage to advocate for it, curiosity and determination to pursue it.

Interestingly enough, this also requires what might be considered a high tolerance for risk (which is why I mentioned courage). The default position for many leaders and organisations is to say “no” in a variety of ways.  I am not sure how many times I have heard “that’s not been done before”, “that won’t work here” or “we tried it and it didn’t work”. And there were times when I listened, and others when I thought there was something worth pursuing and did, demonstrating probably more hope and naivety , than courage.

The real issue of risk in experimentation arises because we need to be comfortable with  failure. Failure here is not an aspiration, it is simply highly likely when trying something new or doing something for the first time, even if it has worked somewhere else. Failure is problematic because it makes us susceptible to self-doubt, and the critique of others. Both are tough. And the idea that we celebrate failure in the digital world is a confusing and honestly, a little ridiculous to many. So, let’s be clear, that with experimentation, it’s the learning that needs to be celebrated, not the failure. Gary Pisano makes this point clearly in his book “Creative Construction: The DNA of Sustained Innovation”.  Try something new, take what worked, evolve it and get it right. Or work out whether it is even worth pursuing further, or call it quits and move on.

2. Understand skills, cultivate expertise

There is no shortage of dystopian views of the end of the human workforce as the result of automation and AI. If failure incites fear, there is no doubt that human redundancy as a result of technology amps up the anxiety level. The McKinsey Global Institute estimates that workforce transitions due to automation will impact approximately 14 per cent of the world’s workforce, so the scale of the impact is significant. My first implementation of digital analytics was in 2011, long before we were even having the conversation so I have seen the potential and the limitations. Developing an executive dashboard of key business metrics including daily sales, was a great start to automating analytics and producing actionable insights. So much more would be possible today. I am optimistic about the future of humanity and the ability of the man + machine interchange.

There is no doubt that many tasks will be automated. Many routine ones in fact already have been. At the same time, demand for new skills is emerging. And these skills present an opportunity to generate value in ways that may not have been possible previously. Digital savvy leaders adopt a mindset that see this threat as an opportunity. They understand the impact for themselves, their teams and the organisation. Anticipating what is coming, they identify the skills and behaviours that are needed and develop them, positioning themselves at the forefront through different ways of learning. With so much being so new to so many, expertise and differentiation comes to those who are willing to learn, try, and apply. Equally important, they cultivate this mindset with their employees and enable them with the skills and attributes needed.

3. Operate within new models, divest old paradigms

Welcome to the new world of work. Expertise exists in unlikely places; traditional reporting structures don’t always work and teams operate with autonomy and accountability. It takes a distinct mindset shift to relinquish decision making and control. The more important the initiative, the greater the risk, the harder it becomes. Yet the digital world values and rewards expertise, speed and adaptability. That means setting the agenda and outcome, defining parameters and empowering the team with expertise to execute. It does not mean abdicating accountability for progress and delivery, nor does it mean micro-managing the team because things aren’t being done as you would do them.

For many leaders, the paradigm shift to new models of leadership is challenging. The results however are inspiring. When I was tasked with working on the National Emergency Warning Project with the amazing Joe Buffone who was leading the Government’s Emergency Services response, we both knew that we needed to assemble an A-team, give them guidance and clear direction, and then let them do their thing while we did ours. The result? A first-of-a-kind initiative, with media attention, up and running (and more importantly working) on time and within budget, which is practically unheard of in either public or private sector, was the result.

There is no doubt that the digital landscape presents challenges that many may find uncomfortable at best. Embracing new ways of thinking and applying mindset shifts is a tremendous opportunity for leaders to transform themselves, their teams and their organisations. Time to be inspired by the potential of what is possible.

Now, More Than Ever, It’s Time For Procurement To Go Digital

At a time when technology is transforming nearly every aspect of the enterprise and its approach to buying and selling, the role of the procurement professional — already central to any organisation — has become even more strategic, more consequential, and more indispensable.

By linking together vast troves of data across enterprises and unlocking meaningful insights, cloud-based applications have freed up procurement professionals from the tangle of day-to-day tactical activities so that they can focus on strategic responsibilities such as supply chain resilience and flexibility, brand protection, and new sources of innovation.

Key Accelerators for Digital Transformation

The transformation is just beginning. As emerging technologies like artificial intelligence, machine learning, the Internet of Things and blockchain begin to take hold, procurement will become even smarter, faster and more connected. And beyond savings and efficiencies, it will open the door to innovations that improve customer satisfaction, and ultimately, impact revenue generation.

Another accelerator in digital transformation in procurement are business networks. They are driving totally new way of interacting and expanding the value that procurement can deliver across the enterprise.  Just like their social counterparts, they bring together millions of buyers and sellers and provide a community in which they can shop, share and consume. On a true many to many platform, trust and transparency are the benefits the network participants find.

Managing Supplier Risk and Corporate Responsibilities

More than ever, customers, regulators and investors hold companies accountable not only for their own ethical conduct, but for that of their suppliers and their suppliers’ suppliers. Companies with strong supply chain practices invest to mitigate any risk and respond to adverse events and recover from the any disruption faster. With business networks, companies can gain the transparency needed to ensure that they are not only in compliance with laws in every locale they operate in, but that they are upholding and advancing their own corporate social responsibility goals.

Leveraging real-time and historical purchasing data, supplier intelligence and business network content, procurement can shine a light on the materials, regions, and suppliers that are most likely to have issues or challenges with unexpected natural disaster, forced labor or conflict minerals. To drive a positive impact, companies may launch campaigns to connect diverse suppliers on the business networks in underdeveloped markets where a little assistance goes a long way.

Supplier Insights for Innovation

Take product design. Suppliers can be rich providers of design ideas, providing insights on new technologies and innovation while improving costs given their technical knowledge of manufacturing processes. Adopting the Design to Value approach, companies involve procurement organisations in the product development process far earlier.

Through business networks, procurement gain significant supplier insights quickly and potentially open the door to new, more innovative and cost-effective ways of producing products and components.  With a better collaboration with suppliers on the networks, the companies can even invent a new product or services and create a new business model. Finding new sources of supply in a global operating environment is exponentially easier with a business network.

Procurement Leading the Digital Transformation

This enhanced visibility and insights in supply chain through data may have once seemed a luxury, but business networks and the technology underlying them make it easier to achieve today. Procurement organisations that embrace these ideas can continue their digital transformation journey and lead their companies to new worlds of operational and performance excellence.

Pat McCarthy will be speaking at Big Ideas Chicago on 27th September. For more information and to request an invitation to this leading CPO event, click here.  

It Only Works If You Believe It Works…

As organisations embark on digital transformations, they must also be prepared to trust in ‘new-ness’, adapt to the speed of change and take note of the 3D’s… 

Last week the Procurious team hopped on a plane to Munich to attend Jaggaer’s REVInternational 2018 for two days of inspiring discussion on eProcurement innovations, digitisation, and the future of procurement.

One of the stand out sessions came from futurist Stefan Hyttfors who lectures on how innovation, disruptive technologies and behavioural change affects the worlds of business and social issues.

His mission? To inspire as many people as possible to embrace digital change.

Trust in “new-ness”

“I have a lot of friends working in tech and they often approach me to ask ‘What advice should I give to my peers?’

“And my frequent reply is ‘How come you believe you have any advice to give to your peers?’

“Because if we believe in the concept of disruptive tech then we must also be humble about the fact that experience and knowledge are a problem.”

The reality of the extreme pace of change hit Hyttfors hard last summer when his 20 year old son returned home from university for summer break.

As the family sat down for dinner one evening, Stefan took the opportunity to  interrogate his son about his summer plans; would he be spending the break getting some work experience?

‘No I’m not going to work” he replied.  “I value my time and I don’t want to sell it to anyone”

Instead of work he had conjured a number grand plans including a road trip around Norway and various other escapades.

Stefan’s line of questioning instantly transferred from ‘What are you going to do?’ to ‘How on earth are you going to afford it?!’

His answer, ‘Don’t worry dad, I have some bitcoin’

“This is the millennial perspective today,” Hyttfors asserts. “And money is a particularly interesting discussion, particularly across generations.  Where I was sightly skeptical about how far cryptocurrency should be trusted, my son was offended at the mere suggestion and far more wary of our banking systems.”

“Strange things are happening in the world; things that we don’t understand, thing that we ridicule and laugh at. We are guilty of assuming that our kids need to know what we know”

But in actual fact, it’s a trust in ‘new-ness’ that is going to become one of the most crucial factors for organisations in tomorrow’s world. Money is a great technology and a great innovation; it makes transactions smooth and solves a whole world of problems.

But, as with all technology,  it only works if you believe it works…

Pay attention to the speed of change

Disruptive technology is nothing new but the speed of change is ever-increasing. In the past, organisations had the luxury of time permitting them to be skeptical about and distrusting of new innovations, which took 50 years or more to catch on.

Nowadays we hear a buzzword for the first time and within a matter months it’s everywhere; “a unicorn company appears and usurps all the other companies in that space.”

“We talk about organisations like Kodak and Blockbuster as if they were stupid. But the problem isn’t that they were stupid. They were simply the best at doing something no one needs anymore.

“When you are very good at what you do you will not be the one to disrupt your own industry.”

There are examples of this happening in every industry. And it’s never because the old companies were poor. Someone simply found a new way to solve old problems

“The speed of change puts so much pressure on leaders.  But if you focus on making current processes more efficient you cannnot disrupt at the same time.”

The 3D’s of Digitalisation

As your organisation prepares for, and embarks upon,  digital transformation, take note of Stefan’s predictions for the future of digitalisation. It all comes down to the 3D’s…

  1. Dematerialisation

As technology advances it figures that we will simply need less ‘stuff’.

As Stefan points out, “If you can solve a problem digitally you don’t need material things.

“Don’t tell your kid that an iphone is expensive – think of all the junk you used to have to buy in the past to do the same job [a single iPhone can do].  It solves so many problems. Nowadays everyone in the world can take pictures for free.”

Dematerialisation means that more people can afford to do what used to be expensive and exclusive.

2. Deflation

Deflation, as Stefan sees it, means having “millions of micro transactions rather than thousands of  major transactions.”

Take cars as an example. They are absolutely not efficient; often parked for 23 hours of the day and contributing to congestion and pollution in our cities.

Along came Uber, which offers ‘mobility as a service’ and suddenly transportation is transformed globally.  Selling £50,000 cars is not an ideal model – mobility as a service is the future.

“We are a big world on a small planet and because of this sustainability will be the main leading strategy of the future.

“We need to make much more with much less.”

3. Decentralisation

We all like to believe that we are part of the last uninformed generation; that we have all of the answers and all of the information. But, in Stefan’s opinion, that’s simply not the case.

We will continue to face big problems and these problems can only be solved with global collaboration and global crowd-sourcing.

“We see a big decline in trust because people don’t believe in old institutions anymore” whether it’s governments,  law enforcement systems or our banks.

“Why should my son trust in a banking app when he can trust in a bitcoin app?”

“He believes in decentralisation, a world in which where there is no boss.” Because, at the end of the day,  it’s your boss that makes a system inefficient and corrupt.


Learn more about Jaggaer and  REVInternational 2018 

The Two Obvious Challenges Of Digital Transformation That Everyone Ignores

A digital transformation is set to take place in the coming years, and the Procurement world can expect substantial changes as a result. 

As Heraclitus once said, “the only thing that is constant is change.” Another thing that is equally true today is that digital is playing a central role in pushing organisations and individuals towards change.

Digital transforms everything, from B2B to B2C and beyond: what we consume and buy, how we consume and buy, and how we work. We are just starting to see some of these changes but what we are witnessing today is just the tip of the iceberg.  There is much more to come. Within the next few years, a digital revolution is set to take place, and the Procurement world can expect substantial changes as a result.

This is why Procurement needs to embrace “digital” and succeed in that transformation more than any other function. the function has been lagging behind and the current situation is far from ideal.

The adoption of any change is not something that should be taken for granted. John Kotter, in his international bestseller, Leading Change published in 1996, reports that 70 per cent of change initiatives in organizations and businesses fail. More recent sources reveal a similar situation. Despite years of experience in the project management field, projects continue to face the same issues and obstacles year after year:

Source: Project Management Institute: Pulse of the Profession 2018

History shows that Procurement is also not immune to recurring challenges,  especially when it comes to the Procurement technology that has been around for years. However, adoption (by teams, by stakeholders, by suppliers) is not a reality for most organizations. Analysts and research firms have all reached the same conclusion. For example, many reports show that the adoption of eSourcing by “best-in-class” companies has stagnated at 60 – 70 per cent since 2007.

So, considering its past record of poorly managing digital initiatives and the growing need to respond to ever more frequent and profound changes (both representing threats and opportunities), Procurement must urgently learn from the past and find new ways to transform and move forward. Although one article cannot cover every aspect of such a vast issue even taking the time to consider the few simple and pragmatic points presented here can already difference between success and failure.

Challenge #1: Understanding the many facets of “digital”

“Executives increasingly use the term “transformation” as shorthand for “digital transformation.” But the ongoing digital revolution does not itself constitute a transformation—it is a means to an end, and you must define what that end should be.” What Everyone Gets Wrong About Change Management, Harvard Business Review

The most common mistake that organisations make is to look at technology as the solution to all their problems and to think of it it as an end in itself (when it is just a means to an end). A second pitfall is that, many organisations tend to use new technology “to mechanize old ways of doing business. They leave the existing processes intact and use computers simply to speed them up.” By doing this they are actually missing out on the real value and transformative impact of some of the latest technologies. When implemented strategically and intelligently, new technology which can enable organisations to do things that were previously impossible.

“Ideally, [the] investment will lead to digitally automated processes, even beyond the transactional purchase-to-pay, with only limited manual support required. Such digital tools and processes will additionally support business process outsourcing and shared-services centers, further boosting efficiency. Ultimately, however, the benefits will arise not simply from reducing costs, but also from freeing up highly qualified procurement resources from mundane, repetitive tasks so they can focus on delivering value to the business.” Procurement 4.0: Are you ready for the digital revolution?, PwC

This poor understanding of what technology can do and what organisations can do with technology  is painfully evident in the misuse of words like digitisation, digitalisation, and digital transformation. These terms are often used interchangeably when they actually mean very different things:

  • Digitisation is the conversion from analog to digital. Atoms become bits (e.g. digitisation of data). You cannot digitise people.
  • Digitalisation is the process of using digital technology and the impact it has (e.g. digitalisation of a process). It is what most digital projects in Procurement are actually about.
  • Digital transformation is a digital-first approach that encompasses all aspects of business, not just Procurement (which is why ”the digital transformation of Procurement” is an abuse of language; a good one to make though). It leads to the creation of entirely new markets, customers, and businesses (people, capabilities, processes, operating models,…).

So, before defining what technological approach to take, the first step is to determine and identify the business value that needs to be captured or improved as a result of a digital project.

Challenge #2: Transformation and people

Many organisations make another serious mistake when looking at digital initiatives. They approach them in the same way they would approach simple IT/technical projects, when these projects really need to be about transforming business. n. This tendency also explains another set of common mistakes that result from forgetting the human aspects of these projects.

“In the most basic sense, people have been the missing variable in the digital transformation equation. Instead of the prior decade’s obsession with business-IT alignment, enterprises must now pursue a more balanced approach to digital transformation that’s equal parts business, experience, and technology.” 2017 Global Digital IQ Survey, PwC

Absence of (or weak) meaning

”If you don’t know where you are going, any road will get you there.” —Lewis Carroll

A surprising but persistent issue in digital projects is the lack of real business/use cases that detail “why”  the change is a necessary one (goal, purpose, vision). This lack of purpose makes it almost impossible to create the proper conditions for a successful change, to motivate people, and to drive adoption.

An organisation that does not know where it is going will have difficulties defining some of the critical aspects of digital projects. For example:

  • deliverables that include, among other things, the requirements for the solution to be implemented (poor requirement management is one of the most common issues),
  • scope (which categories, which suppliers, which geographical locations, which processes…),
  • roll-out and deployment plans (what, where, when, how).

Rushing in without planning

Being too quick to take action and not allocating enough time to planning is another frequent mistake. Most people have a natural tendency to “do” and many prefer to skip the important planning steps and tend to dive right into new projects without taking time to think. Organizations are also under pressure to get results fast, and can be over eager to “make things happen” putting even more pressure on project teams to deliver. What is interesting is that preparation and patience are important and valued in many other areas of procurement. For example, Procurement practitioners know that 90 per cent of the success in negotiations comes from good preparation, but for some reason many forget to apply that same approach when it comes to the implementation of a digital Procurement solution.

Focus on deployment while adoption is left for later

”We’ve spent an awful lot of money on technology, but I still see people working in the old way,” complained the CFO of a large hospitality company.  The result is often widely deployed internal applications that no one actually uses effectively.” Convincing Employees to Use New Technology, Harvard Business Review

When an organisation launches a project to deploy a new solution, there is an implicit understanding that the system will also be used. But, this is yet another typical mistake. Assuming that, because a system is in place, people will use it is ignoring the fact that most people are creatures of habit. To draw a parallel to savings, the difference between a deployed solution and an adopted solution is like the difference between negotiated and realised savings. Adoption will not happen automatically. To achieve true adoption, specific action needs to be taken to get people onboard and these steps need to be defined and accounted for from the start (resources, budget, time).

Another way is possible and needed!

“Insanity: doing the same thing over and over again and expecting different results.” –Albert Einstein

The use of digital technology in Procurement is not a new topic. However, the way Procurement organisations approach such projects has to change. Experience shows that results are not at their best; Procurement technology is still far from being widely adopted and there are still many areas that will need to improve before teams can actually benefit from past initiatives.

More importantly, “digital” means much more than using a piece of software. It is a critical capability and characteristic in a world that is becoming more and more complex and is characterized by VUCA (Volatility, Uncertainty, Complexity, and Ambiguity). Only digitally-enabled Procurement organisations will thrive in our modern world because they will be able to transform apparent threats into opportunities and deliver more and better business value to the rest of the organisation.

Agile Procurement Through the Ages…

Agile principles are all about the decision-making process. What changes should you implement to drive greater value at higher speed?

At IBM, we understand agile as a set of principles and values that when thoughtfully considered across the business, enable quality decision making, empower teams, and delight customers.

In procurement, the Category Manager’s role is to enable their internal customers by eliminating any disruption or friction within the business while also managing cost using their category knowledge and procurement skillset. The key here is the category managers’ ability to have deep category knowledge paired with a breadth of understanding for all internal customer profiles and needs.

As a category manager, team members must build a consultative skill set that allows them to identify pain points, use time wisely, and seek feedback. The result is a category manager who works towards customer needs rather than contract expiration dates and the latest price benchmarks. As a guide, we should seek to digitise and automate as much as possible regarding benchmarking, negotiations, RFx process’, contracting, etc., allowing us to give the appropriate attention to discovering internal customer needs including service levels, pain points, and demand.

What we did before vs. what we do now!

Previously, IBM, like most large companies, hosted a heavily layered procurement organisation requiring multiple sign offs and complex processes in order for decisions to be made. Agile principles are all about the decision-making process. Our leadership knew we needed to make some major changes resulting in fewer layers of management, accountable teams with decision making authority, and greater collaboration across the business, allowing them to drive value for our customers at the speeds they expect.

In a traditional procurement organisation, the category manager’s role is to identify where the savings opportunity is and act accordingly. They do this while following age old processes and having little to no interaction with internal customers. Many organisations seek to use poorly participated customer surveys to get a sense of how well category managers are serving their customers.

Yet, the best way is to open the channels of communication and collaborate with the business, whether it be face-to-face or virtually, allowing category managers to make the right decisions.

While cost reductions are still a priority for nearly all organisations, we found that when we work closely and listen to customers, we can eliminate the costs associated with under and over delivering across the business, which in turn, results in lasting cost savings.

The journey

To achieve this transformation, it takes strong displays from leadership of all the principles and values agile organisations are known for, establishing a belief system across the business encouraging category managers to ask ‘why’ when performing a task their internal customers do not care for or need to be successful. Implementing an agile belief system into a large organisation requires a major cultural change that takes time and patience from all parties.

In this new space, the role of a category manager has quickly evolved from contract and cost management to a crucial role that links business needs to the external marketplace for a specific category of goods. To achieve success in this role, category managers must interact daily with internal customers and evaluate each moment of their time spent not serving their customer’s needs.

Even so, many procurement organisations are too deep into spreadsheets and other manual processes to be ready for such an agile way of working. These manual processes make it impossible for category managers to have the time capacity to be a true advocate and trusted advisor for the business. To lift category managers’ heads from the clutter, organisations must invest in digitising their procurement processes where possible and identify the areas where they are not ready and get ready!

This article was written by Shawn Busby, Global Category Lead- IBM and Norman Braddock, Sourcing Consultant – IBM. 

6 Critical Skills You Need If You Want To Succeed In A Digital World

How should procurement professionals adapt in order to survive in a digital world? The digitally enabled workforce needs to nail six key skills…

This is a unique time for procurement organisations.

Never before have companies been able to derive more competitive advantage from superior procurement capability. The function’s role is shifting from a sourcing gatekeeper to a provider of insight and decision support, made possible by improved access to digital technologies, data and advanced analytics.

Investments in automation have helped make these organisations more efficient, allowing them to redirect headcount from compliance and operations-focused processes to higher-value activities such as sourcing and supply base strategy.

But this is only the part of the story.

World-class groups achieve their superior performance because they have higher-caliber people who apply their skills to effectively harness digital technologies and capabilities.

The Digitally Enabled Workforce Requires Six Key Skills

Effective procurement teams focus on people development from multiple points of view. Softer skills like relationship management and business acumen are important for managing customer relationships, while technical skills are necessary for analysing data and developing strategic insights.

The following skills are fundamental to the operations of procurement organisations in the digital era.

1. Business acumen

As economic volatility increases, category managers need to sit side by side with their stakeholders to make business decisions that impact the supply base.

It is crucial to understand complex business needs and be able to identify ways for procurement to address them using new technologies. Business acumen is fundamental to elevating procurement’s role as a trusted advisor.

2. Relationship management

Evolving the value of procurement requires working cross-functionally with a variety of stakeholders, from senior budget owners to line managers, as well as being a customer of choice and partnering with valuable suppliers. Procurement should have multiple communication channels open with business partners and customers to fully understand their needs.

3. Supply risk management expertise

In a market of increased risk and volatility, risk management capabilities are more valuable to the enterprise. For procurement, this no longer means simply reacting to events – now the focus is on predicting and avoiding risk using internal and external tools.

4. Strategic mindset

Understanding the broader market and aligning procurement’s vision with that of the business is fundamental to navigating change and extracting value from the supply base.

5. Data analysis and reporting

Big data will change the way procurement organisations use information. Those able to sort through the data and draw the right conclusions have the potential to add value to the organiSation. The tools are available today, but it will take years for widespread adoption, making analytics a prime vehicle for competitive advantage for early adopters.

6. Savings and financial analysis

Tying savings and value benefits to financial statements documents the business value contributed by the procurement organisation and drives profitability. Identifying direct procurement impact on the budget can be elusive but critical.

Digital Technologies Are Changing the Way Organisations Hire and Retain Talent

Access to new technology makes it possible to hire more effectively. By analysing demographics, job experience, recruiting data (like quality of resume) and environmental data, organisations can increase the effectiveness of new hires.

Even the culture of procurement groups is changing now that hiring standards have risen. Social media has provided new channels for knowledge and learning. Learning on demand is a common service delivered to employees, allowing access to training modules or experts from their preferred devices.

Joining networks of colleagues and outside communities to tap into knowledge and solutions to problems is common with tools like LinkedIn.

Strategic Implications

It is getting harder to find and retain people with transformation change experience and the ability to think strategically.

Unfortunately, procurement’s hiring practices, training and skills have not kept pace.

To compete, they must not let themselves be limited by organisational or geographical borders. By hiring globally, procurement deepens the potential talent pool and opens the door to new ways of thinking.

Next-generation procurement organisations are “borderless,” allowing for the free flow of ideas and talent regardless of geography. Leadership is distributed based on supply and customer priorities, not headquarter location.

The model that procurement must work toward is one that is capable of expanding, contracting and adapting rapidly as situations change, just like modern-day supply chains.

This article was written by The Hackett Group’s Laura Gibbons Research Director, Procurement Executive Advisory Program and Amy Fong Associate Principal, Procurement Advisory Program, and Program Leader, Purchase-toPay Advisory Program. 

For Procurement to Fly, You Need The Right Team Onboard

Digital Transformation is critical to the future performance of any procurement department… But you need the right team on board to truly fly!

In case you hadn’t noticed, the old approach to Procurement no longer works. Following a strict sourcing process, beating suppliers for extra margin and imposing strict controls on employees is simply not a viable strategy to meeting Procurement’s new objectives. Procurement today is expected to still manage costs, but also manage risk, drive innovation and revenue, improve cash flow and increasingly consumerise the experience for employees. That much is broadly acknowledged. But how?

A new model for Procurement

To meet the growing risk of objectives and enable companies to thrive in today’s highly uncertain market, Procurement leaders are actively evolving their organisations. They are becoming smarter, freeing capacity for more strategic work, leveraging information better to make more informed and timely decisions, and better measuring Procurement’s performance and value contribution. They are becoming more agile, driving digital transformation initiatives and ensuring they can adjust to a rapidly evolving market. And they are becoming more collaborative, working with diverse groups of internal and external stakeholders in very different yet scalable ways. A tall order indeed. Even the best admit a long way to go.

It’s still about the people

Digital Transformation is critical to the future performance of any Procurement department. Technology plays a key and growing role, as innovations leveraging AI and other advanced technologies come to market to empower such transformation. Procurement leaders must stay abreast of the innovations that are truly creating value, but the people are the real heroes. As Ivalua CMO, Alex Saric puts it, “let’s not become so enamoured by technology that we discount the human contribution (and effort) involved.” Innovation won’t start until the right people are in place, with the right teams. That is when technology can truly empower these teams so that they can start to bring about change, often starting at getting the basics right.

Swissport takes off with help from Procurement

An example of this is the work Ivalua’s customer Swissport is doing. You can read about this in Supply Chain World Magazine. As the world’s largest provider of ground and cargo handling services in the aviation industry, Swissport provides services on behalf of some 835 client-companies, handles around 230 million passengers and 4.1 million flights (movements) per year.

When Marianna Zangrillo, SVP and Group CPO at Swissport, took over, she had to build everything from scratch. Under her leadership her team has grown and, as she says “we need talents to improve every one of those business areas and therefore work closely with our HR departments to get the right people onboard, (…) Recent studies show that 70 percent of the current procurement resources won’t be able to do what procurement will need to do as the world moves forward.”

Renier Orth has led the team that has centralised all Procurement for nearly everything the company buys – including cargo-handling equipment, food and drinks for airport lounges and office supplies. We are proud to also say that Swissport brought in Ivalua to digitise the source-to-pay process and optimise performance. Ivalua has brought efficiency to the different stages of the source-to-pay workflow in a single tool, which is a new, but very welcome change to Swissport.

Swissport’s Procurement team has built a Procurement organisation from scratch and earned a seat at the board level to be part of the future conversation of the business direction of Swissport. “We think of procurement as integrated into the business organisation,” Zangrillo says. “We are going to support many important decisions using the talents of a still too often underestimated department.”

Continue your Journey with Ivalua

If you’d like to hear directly from Reiner Orth, CPO at Swissport, and other leaders transforming Procurement, join us at Ivalua’s first conference in London, Ivalua NOW LondonThe event will take place on the 13th March, at Kings Place, near King’s Cross. The theme is “the Voice of Procurement” as we intend to look at innovation through the lens of the leaders truly driving change. How are they upskilling their teams to lead a digital transformation? What unique factors must leaders in manufacturing, retail, logistics and other industries consider? What technological innovations in areas such as AI are empowering them today and what is coming to accelerate their transformations? What basics must be addressed to ensure your company can benefit from the latest innovations? The event will look at the Future of Procurement, focusing on what can and should be done today. Other keynote speakers will include Peter Smith, Managing Director – Spend Matters UK/Europe, Francesco Cortini, Group Director of Strategic Sourcing at Smiths Group and Hemant Gupta, CFO at Blackberrys Menswear. We hope to see you there.