Looking beyond technology

From the April 2024 print edition

You are probably familiar with the old saying, if you fail to plan, you plan to fail. Makes sense?

Well, forget about it because, while it sounds like good advice, it lacks the substance to translate into a good outcome. In short, just because you have a plan doesn’t mean you have the right plan. This article is about developing the right plan for digital transformation success, rather than digital transformation pursuit.

After over 40 years in high-tech and procurement, I have found that the simplest ideas are complicated beyond recovery with the pursuit
of technology-driven plans.

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.

Here is an excerpt from a Procurement Insights blog post from 2007, titled Dangerous Supply Chain Myths (Part 7) about enabling technology: “Between 2001 and 2005, 75 to 85 per cent of all e-procurement initiatives “failed” to achieve the promised savings results. Accentuated by high-profile misses such as the automotive industry’s Covisint marketplace and the Veterans Health Administration’s seven-year, $650 million JD Edwards-Oracle misadventure, a dramatic change in thinking was bound to occur. At the heart of this change is a growing realization of the fundamental truth that people and processes, not technology, are the driving force behind a successful e-procurement initiative. Specifically, credible targets are established and ultimately met through process understanding and refinement combined with technology’s ability to adapt to the way in which the real world operates.”

That was 2007. Now, imagine what year the following Procurement Insights blog excerpt is from: “Uh oh. What is the old saying about those who fail to learn from history? Are the dismal results of e-procurement initiatives in the ERP era going to be repeated in the digital age? According to the recently published Deloitte Global CPO survey “most companies that have fully implemented digital technologies are not satisfied with the results.”

To save you some research time, the above is from the December 2019 post, Deloitte CPO Survey: Digital Transformation of Procurement a Bust? These two short excerpts, spanning an 18-year period, confirm the peril of a digital pursuit versus digital success. The big difference is that the latter has little to do with technology.

As stated earlier, I have been in high-tech since the early 1980s. I love technology, which has evolved tremendously over the past several decades. However, no matter how far we have advanced from the days of punch cards and CP/M-driven personal computers to intuitively intelligent self-learning algorithms and AI, procurement’s ability to capitalize on technology’s promise continues to fall short for many.
Why do you think that’s the case? Does the saying “nobody ever got fired for buying IBM” mean anything to you? For those reading this who are unfamiliar with the not “getting fired” part, it simply means that if you buy the right technology, your job is secure regardless of the outcome. The primary focus was selecting the right provider’s technology versus achieving the right result.

Asking the hard questions
What are the hard questions, and to whom should they be directed? Well, here is the “hard” answer – if you want to define and execute
a plan/roadmap for digital transformation success, don’t look at the technology. As someone who used to do everything from writing dBASE II code and source proprietary I/O cards for different brands, I know that today’s digital technology is solid across the board. There is no right brand because they all work.

You need to look at the experience and expertise of those behind the logo. I am not talking about their technology expertise, rather about their experience in your industry sector. Beyond technology, have they walked a mile in your shoes? That is the difference between chasing solutions and solving problems.

When organizations make the mistake of leading with technology, they bend their people and processes around an equation-based model approach in which the tech drives success.

When you lead with people and process understanding, an agent-based model, technology moves from a functional (primary) driver to a problem-solving support tool that streamlines and delivers efficiencies and tangible results using the following three-step framework:

Step 1 commodity characteristic analyses
Step 2 effective process alignment
Step 3 effective technological alignment

I want to re-emphasize this one point: the groundwork for our accomplishments occurred before introducing the technology.
Therefore, understanding spend, for example, commodity characteristics alone, without understanding what role the other stakeholders
or agents play in procurement’s success, is critical. In other words, there is an important bridge between steps one, two and three: understanding internal and external stakeholder interests.

For example, the client organization’s field service technicians had their own processes, performance targets, and technology. How did this impact procurement’s ability to procure and ensure timely “next-day” delivery of a quality component at the best cost? What about suppliers? What impact did location and time of day (TOD) have on product cost, quality, and delivery performance?

Unfortunately, both in the past and the present, most procurement organizations never looked outside the department when deciding on
a solution to improve the procurement process and performance. This siloed thinking meant that no matter how well the technology worked, underperformance and failure were inevitable.

I have often discussed the importance of service provider leadership stepping out from behind their company’s logo. What I emphasize is that the critical play is not the technology but the expertise behind it, the market expertise and experience to leverage technology to solve
a problem. In the above case reference, I started by researching how key stakeholders like the service technology department worked. Here is what I discovered:

  • Field service technicians carried laptops to update calls and order parts through the procurement department.
  • The technicians’ performance was measured by how many daily service calls they could attend.
  • While it was a policy that they ordered a required part after each service call, they sandbagged all the orders until the end of the day because of the number of calls-per-day metric. In short, procurement would not receive the bulk of the orders until late afternoon or early evening.

I then researched how the suppliers were operating. Here is what I discovered:

  • 85 per cent of all suppliers were based in the US, meaning we had to deal with Canadian customs and another stakeholder, for example an agent, in the procurement process.
  • Because we were dealing with dynamic flux (MRO) versus historic flatline commodities, the later in the day a part was ordered, the higher the cost.
  • Besides higher costs, there was a significant impact on delivery performance.

The likelihood that we could change technician or supplier behaviour, for example “agents” for required parts the next day, was virtually impossible.

The fork in the road
When we were initially engaged, the client sought to address the above challenges by implementing a technology solution. But ask yourself this question: How would using technology to improve performance within the procurement department alone address the above external challenges? It wouldn’t, which is why, without understanding internal and external stakeholder objectives and processes, leading with technology, no matter how amazing, will never work.
Unfortunately, most initiatives are siloed and ultimately dependent on a change management approach that is difficult, if not impossible,
to achieve. For example, what is the likelihood that field service technicians’ behaviour will change regarding the number of service calls they must complete in a day?
What about getting lower prices from suppliers who know they are likely the only source later in the day? Let’s not forget about clearing customs. Even the most robust procurement technology will not overcome these competing factors.
Here are the client results from the above three-step framework:
1. Improved SLA performance from 51 per cent to 97.3 per cent in three months.
2. Consistently reduce MRO cost
of goods by 23 per cent year-over-year.
3. Reduced their FTE from 23 down to three in 18 months.

One final word of caution. This is not a cookie-cutter framework.

While the three-steps are consistently the same, the “bridge work” between steps one, two and three is unique to each client situation. This bridge requires the solution provider’s experience and expertise beyond their technology.