A clear path

From the February 2020 print edition

On receiving the assignment to write about e-procurement trends and what was driving the move towards more organizations going digital, the usual areas for discussion immediately came to mind. Specifically, those issues are the impact on both the enterprise and procurement profession, the ROI and what it all means going forward. In short, a broad perspective.

Of course, one could easily fall into the trap of a familiar and somewhat perfunctory dialogue in which an article such as this takes the reader down an old and familiar road.
You probably know all too well to what I am referring.

To start, we would talk about exciting developments and how the new digital tech built on artificial intelligence (AI), robotic process automation and the advent of smart chatbots will rock and reshape the procurement world.

All of this is very true. There is a great deal about which we can all get excited. However, the road from digital promise to the realization of that promise is not yet on the map for many organizations.

Therefore, the purpose of this article is to show you the way, or at least point you in the direction towards the right, albeit less travelled, road leading to digital success.

The starting point
When it comes to e-procurement – which from this point onwards we will refer to as digital procurement—the journey for many of you has yet to begin.

According to a McKinsey survey of 1,650 global organizations, only 20 per cent have an overall digital transformation strategy. Of those, a paltry two per cent involve the supply chain.

Given that so many executives appear to be in a holding pattern regarding digital transformation in general, digital procurement ROI and impact doesn’t exist. There is nothing to calculate as nothing is happening with most organizations.

Instead of debating the merits of digital procurement, the starting point is to figure out why your organization isn’t moving forward with a digital plan.

Resource limitations
You would be hard-pressed to find anyone who disputes the potential of the digital era from the standpoint of having a positive impact on business, including procurement.
The challenge, however, has little to do with the recognition of the benefits or even an intent to move forward. A major issue is one of “limited” resources.

As it stands, most digital initiatives will still flow through the IT department. In short, even though CIOs may not be making the decisions regarding an organization’s digital technology, they are still ultimately responsible for its implementation and integration within the existing infrastructure.

Unfortunately, and despite the obvious need for digital transformation, 87 per cent of respondents to the 2019 State of the CIO survey said they are still juggling standard IT operational tasks (see below CIO graph).

Much like the challenges with integrating disparate legacy technologies following an M&A, introducing a new digital mandate and corresponding implementation of technology can appear to be a daunting task for an already overburdened IT department.

In moving forward with a digital strategy, your plan must identify ways to “load balance” responsibilities across multiple stakeholder departments so that each has a manageable role within their area of responsibilities and practice expertise.

The fact that many digital procurement technology providers can facilitate implementation with minimal disruption through a non-intrusive pilot program is also worth noting.

Results speak
Forget about everything that you have read before this point. Imagine that you have never heard the words digital procurement, AI or robotic process automation. Now answer this question: with no knowledge or understanding whatsoever of what digital is and what it can do, would you buy it?

If you said yes, I have a bridge in Brooklyn that is for sale.

Kidding aside, the results of a Deloitte survey of Global CPOs that was published this past December could potentially have the same effect on an organization’s willingness to buy into a digital strategy.

According to Deloitte’s survey, the majority of CPOs who have implemented a digital strategy are not satisfied with the results. Think about this revelation for a moment. If you sent an expedition party out on a certain route and they failed to return, or worse, you knew that they came to an untimely demise, would you take the same route?

Let’s reframe the question. If you are considering bringing a digital procurement strategy to your senior management team, what impact will the results from this recent survey of CPOs have on your willingness to proceed?

For this reason, it is important to understand the following two things:

  1. Like the majority of the companies that jumped to the cloud without a clear understanding of what that meant and are now repatriating their data and processes back to either a private cloud or an on-the-ground facility, going digital without a clear plan is a bad idea; and
  2. Introducing and implementing any initiative requires a cultural shift as much as it does a change in technology, starting with effective stakeholder collaboration leading to the recognition of the need for clean data and moving away from the use of spreadsheets.

The important takeaway from the Deloitte findings is not the results but the reason for the results.

Poor planning
Unlike years past with limiting ERP-based e-procurement functionality derailing most procurement automation initiatives, today’s digital procurement technology is sound, intuitive and therefore infinitely easier to use. It is also considerably more cost-effective. In short, the problem is no longer with the technology, but the plan.

In this context, the old saying “if you fail to plan, you plan to fail” has never been truer than it is with regards to digital procurement.

Going forward, you must facilitate enterprise-wide collaboration in creating a strategy with clear and measurable objectives, and load balancing responsibilities regarding implementation and ongoing management.

While this less travelled road may require more work initially, the destination is well worth your time and effort.

Jon Hansen is editor and lead writer for the Procurement Insights Blog and was host of the PI Window on The World Show on Blog Talk Radio.