Procurement agility in the age of digitalisation

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GilesBreault.jpgHow can your procurement team embrace the age of digitalisation and develop an effective roadmap that ultimately puts you in the driver's seat?The digital enablement field is wide open, with no single right answer on how to proceed.

However, there are ways that can help organisations to plot a way forward. CPOs must define a roadmap for change and align it with enterprise-level digital transformation initiatives, says Giles Breault, Supply Chain, Sourcing and Procurement Executive at The Beyond Group AG.

The need to improve procurement efficiency (doing more with less) and at the same time master changes in technology (specifically the impact of digitalisation) are two very different objectives. They demand different resources, different thinking and different leadership, leaving procurement teams in an untenable bind: needing to contribute more but without the capability to assimilate new technology that might be a remedy for the specific problem.

AGILITY IS MAKING FLEXIBILITY LOOK LIKE A PLAN

Each year The Beyond Group holds a Procurement Think Tank (PTT), which strives to create an environment of real learning and interaction among business peers. In 2017, the PTT reflected on agility, and found that it is not just about flexibility, but rather a never-ending cycle of thinking-planning-action, all in a Devolved Approval Matrix (see Breault's blog Agility - making flexibility look like the plan).

While digitalisation might be a foundation, in and of itself, digitalisation is only an enabling tool of agility, says Breault. When viewed in this context, the rush to become 'digital' is less of a frenetic all-out race to do something 'digital' and more of a 'pick-and-choose' from a menu of enabling technologies that will help to achieve business strategy.

However, while procurement is tasked with dealing with a broad range of new technologies, it must also deal with its traditional mandate.

As procurement continues to evolve toward digital mastery, it must still manage increasingly complex supply chains, reduce risk, become more efficient, expand its influence and become a trusted business advisor. The enormity of these tasks has created a conundrum for procurement teams around which priority to tackle first.

Depressingly, procurement teams have not taken a leadership position with respect to digital technologies, opting instead for being a receiver of whatever mandates are forthcoming from broader implementation efforts. The data shows that most procurement organisations are either unprepared or have taken a 'wait-and-see' approach to digital technologies, often adopting them in a haphazard or uncoordinated way.

The sheer number of available technologies that must be evaluated for their usefulness has stymied procurement organisations from building an effective path and being able to move forward.

The issue, of course, is two-fold. First, specific knowledge must exist within the procurement teams about the technologies that are available and, second, this must be followed by leadership awareness of those technologies and how they fit together in the strategic landscape. Then, and only then, can a framework be developed that prioritises how and when to implement the chosen solutions. Today, most procurement organisations are not rising to the challenge in either of these areas.

While many new digital technologies are fast becoming standard, often the solutions that promise the quickest way of making transactional processes more efficient are no longer within the wing of procurement. These activities have been absorbed into other, often larger, business services functions. While we have long been advocates of moving transactional activities to other functions, one can see the writing on the wall, says Breault. The continued erosion of the procurement remit combined with automating technology could easily foretell the doom of the function as we know it.

The logical outflow of this is that procurement is evolving towards a two-tier function: one where an enhanced set of operative activities is managed largely via digital technologies and another that is much more strategic, managing issues such as supply continuity, risk management, collaborative value creation and sourcing innovation.

So how does a procurement team who is embracing the digital revolution develop an effective roadmap that ultimately puts (and keeps) them in the driver's seat as to which technologies to adopt and at what rate to adopt them? What is the digital path forward?

A particularly useful insight was that no organisation can progress purely via a technological journey without fully understanding how that technology contributes to better strategy and insights. This relationship between new technology and better insights progresses through the entire digital journey. Thus, procurement teams must be in the decision chair as to which technologies to purchase.

SO, WHAT SKILLS ARE REQUIRED TO DRIVE DIGITAL?

Very few procurement organisations have a digital strategy and roadmap, partially owing to the broad range of technologies available. Simply put, there are too many digital options to know which to tackle first. Even fewer organisations have talent and leadership to run their digital transformation. It is imperative that procurement builds its own digital roadmap that addresses specific technologies in a sequential format that is aligned with the company's overall digital strategy. We need to understand, recruit and develop specific digital skills at all levels, recognising that the senior leadership is often most lacking.

The Hackett Group points to four key attributes required to adequately embrace and drive digital transformation:

1. Intellectual curiosity: to deliver faster insight and build sophisticated models for business decisions.
2. Technology savvy: professionals do not need to become data scientists or programmers, but they do need to be familiar with new technologies so that they can have intelligent conversations with their IT peers and quickly adopt new tools.
3. Business acumen: staff needs to have a thorough understanding of the company, its operations, value drivers and competitive environment. The imperative for the business partnering capability was amply covered in an article about the output from last year's Think Tank.
4. Storytelling skills: data is the mechanism that makes digital business possible; the delivery mechanism is the 'story'.

THE WAY FORWARD

1. Define a digital roadmap and vision
Strategy needs to support an organisation's overall approach to leveraging digital technologies to transform its business model and to ensure that each investment in a digital capability has a beneficial business outcome. Favourable business benefits will help drive a new cycle of technological investments that, in turn, create greater benefit.

2. Align with organisational strategy
On their own, big data, predictive analytics or any of the other so-called 'digital' enablers are not valuable as stand-alone technologies. Outcomes need to help the business make decisions and drive actions that are consistent with the overall company objectives and digital plan. Any discrepancies between the two can create 'technology islands' and puts procurement at odds with corporate objectives.

3. Build a digital competency within procurement...
...to understand, master and lead the prioritised acquisition and implementation of digital tools.

We closed out this year's series acknowledging that most organisations are at the very beginning of their digital journey and it also left us with a strong impression that procurement teams have an intense desire to lead this effort in collaboration within the organisation's overall digital strategy and not become a victim of it. Ceasing the leadership of this effort is the challenge.

The complete article and related graphs can be read on Medium.

Adapted from Procurious

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