Here’s what you need to know
Digital procurement continues to be a hot topic with procurement functions looking to digital in order to increase transparency, improve decision-making and boost internal customer satisfaction. However, selling the vision to leadership and stakeholders remains a key challenge. This is not surprising; the majority of our respondents find procurement technology confusing, and hard to keep up to date with.
Working alongside WBR (Worldwide Business Research) we conducted a study which takes a temperature check on the future of procurement in the digital age. It looks into the opportunities and challenges that procurement is facing alongside the strategies that they are deploying to ‘go digital.’ The user group surveyed consisted entirely of procurement professionals.
To find out what they had to say,
download the full report.
The ‘old world’ is disintegrating; with so many choices, gone are the days of defaulting to a one-size fits all ‘platform technology solution’. There are now numerous different digital procurement technologies and delivery methods available to Chief Procurement Officers (CPOs) which allow for very different strategies and approaches. Today, leading organizations are increasingly choosing best of breed digital solutions for procurement to fit their specific needs and the needs of their internal customers.
Our research suggests a rise in ‘customer-centric’* thinking with respondents valuing customer satisfaction as a key performance indicator and customer-centric design as the number-one success factor behind successful transformation delivery. Despite this recognition, a worrying number expect their customers to judge procurement transformation as a failure.
A by-product of digital procurement is the ability to reposition the procurement function into more value-adding activity. A high number of respondents saw a need to make this shift, seeing access to external expert perspectives as the key tool to building this trust with their internal customers. This may be the next frontier.
Read on for the Executive Summary – by Simon Geale, Executive Vice President
When we first looked at the outputs from this survey, two themes came to mind. These were ‘customer-centricity’ and ‘best of breed’. The two are intrinsically linked and may hold one of the keys to faster deployment and enhanced adoption of digital procurement solutions, and therefore the route to better data, more informed conversations and smarter decisions. Put simply, there are lots of micro digital solutions for procurement available today which are designed around specific customer problems, providing a good user experience, and rather importantly, work. The data also pointed towards a third theme; confusion, confusion on three levels;
- Understanding the procurement technology market.
- Building a digital procurement roadmap.
- Articulating the business case.
There are more and better options available to CPOs than ever before, but our survey suggested that CPOs are suffering from too many options and too much information, bringing confusion over clarity.
Staggeringly, many of our group expect their digital procurement strategies to under deliver, and it’s not the availability of tech that’s holding them back
Have legacy procurement technology solutions under delivered against expectations?
Have legacy procurement technology solutions underdelivered against expectations? It’s a popular debate and in reality a superfluous one because the market that they were competing in even five years ago bears little or no resemblance to the market that exists today. Gone are the days where size and budget dictate the choice of solution providers.
A more relevant question for today’s market is “are the suites a best of breed choice”, to which the answer is an emphatic no. Today’s procurement technology market is awash with solutions that can, in theory, knit together in a best of breed architecture enabling a firm’s digital capability to go broad (in domain) and deep (in functionality). It is genuinely exciting both for digital natives and old hands alike.
The best of breed narrative has gathered pace, particularly on social, fuelled by the marketing budgets of software providers and procurement transformation consultants alike, self-included. Even the Goliaths of digital procurement technology, SAP, Ivalua, and Coupa are getting in on it, making a series of acquisitions and striking a succession of partnerships to create a hybrid platform offering. The noise is deafening.
And therein lies a problem; best of breed initially offered a narrative of simplicity; an antidote to the solutions that had failed to capture the imagination (or attention) of customers; “here is a solution that really solves your problem, it’s easy to buy and quick to deploy”.
But as the number of digital procurement solutions multiplies and the marketing noise intensifies, simplicity fades as complexity appears upstream; the buyer becomes the builder, a technical architect if you like.
Knitting together a best of breed architecture is hard, time-consuming, costly, complex and requires a specific set of skills. For the architect, the phrase “best of breed”, should really be “best of need”.
The case for digital procurement has changed
Historically software has often been sold on ‘problem’, or ‘opportunity’. With a “problem sale” the buyer has to feel the fear of not buying, and with an “opportunity sale” believe the benefits of buying. Many seasoned sales professionals will argue that fear is the more effective motivator of the two when it comes to ‘discretionary’ spending on software.
Our survey identifies a key challenge for the CPO has been to sell the digital imperative internally. However, have the disruptions caused by the pandemic turned the CPO’s digital business case on its head? Is the C-Suite now compelled to demand solutions, because there are now real business problems for procurement to solve? It may be the fear of bad data, fear of complex supply chains, fear of sustainability failures, fear of inflation, etc. In any event, at board level, the investment case for digital procurement may have got that much simpler.
But, be warned: successful procurement transformation does not start and end with the business case. Now you have the mandate, you have to do something, and it’s a confusing market out there.
Tech is just tech, you’ve got to use it to get the benefits
The importance of building digital architecture around the (procurement) customer and supplier is a clear takeaway from this survey. As is the need to look deeper into their problems and needs rather than accept at face value what procurement has always done or what an organization thinks procurement should do. A more customer-centric approach uses purpose, as the key to unlocking the potential of digital procurement, and continuing to iterate.
This growth in interoperable best of breed solutions allows CPOs the opportunity to delight customers through great procurement technology. If not the new default option, at the very least this best of breed model must now be seriously considered by CPOs when planning transformation.
What makes these solutions so important? It can be described in 3 words, functionality, innovation and adoption. Not only do they often excel in user experience, and customer service, but they also offer CPOs the ability to tailor their procurement transformation journey; starting small, investing wisely, accelerating adoption and quickly showcasing benefits, before moving on to the next challenge.
This ability to architect a digital roadmap, and make it happen is a core skill requirement.
As a CPO, your challenge is to digitize in order to humanize
There is plenty to consider here about how human and digital resources need to work together for successful procurement transformation. But, it is also important to note that while delivering digital procurement is a starting point, it is not the ending point for CPOs. When reading this research, it is essential to keep in mind that the CPO’s greatest impact is not going to be digitizing procurement processes per se, it is going to be what they do with the outcomes and how this helps their business.
Digital is a great enabler, but done in isolation it can also put more distance between procurement and its customers, dumbing down relationships rather than ramping up collaboration. We often talk about using digital as a means of moving into more value-adding work and we must use the time and insights we create to improve the business, rather than just settling for improving procurement.
Understanding our business, our customers and external markets is our north star. In ‘becoming digital’, we should also be focussing on what next; connecting and collaborating, bringing new insights and fresh perspectives. That is not the same as what has passed before as best in class procurement, it’s a new frontier and that work too, can start now.