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I was speaking to a former colleague recently, who is a very experienced Procurement executive, and we were talking about the adoption of Procurement technology, and more broadly, lack of compliance to Procurement processes in most organizations – and what’s behind it.
I think he was having a bad day because he was quite pessimistic about Procurement’s ability to really get people to rally around their goals, utilize their processes, and be more compliant. It was a bit surprising because he has driven significant change and found tremendous success across various organizations throughout his career.
We talked specifically about Procurement technology and the increasing options for expanded functionality within large application suites, and the proliferation of more point solutions for specific parts of the Source to Contract/Pay process. Many reports and surveys reveal the importance of and focus on, digital transformation as a strategic Procurement initiative for 2022. For example:
There is no short supply of similar surveys and reports that consistently reflect these themes and highlight the importance of digital transformation to most Procurement leaders.
But in light of this, quite concerning is the result of a recent report from BCG stating that 70% of digital transformations fail to reach their stated goals! So, with all this focus on the importance of digitization, and the need for organizations to adapt and embrace it, why is there such a collective lack of resultant benefits and realization of what’s expected? Why are so many leaders trying to lead with and leverage technology, but failing in their expected outcomes?
Back to the discussion I had with my former colleague, we debated the roots of this problem and shared perspectives. But we started debating what “digitizing” of the Procurement function really even means. Is there a common definition of it? Simply put, it can mean the automation of common or repetitive processes to save time and save money. But that’s the easy answer. To some, it means looking at the technology wrapped around the end-to-end Procurement process and “optimizing” it. It can also mean enhancing the functionality of current suites – e.g., adding new modules. It could even go so far as looking at the end-to-end and seeking new technology to overhaul the way those processes are handled through the tech.
Hackett Group’s 2022 Key Issues Performance Study lays out several areas of what digitization or tech adoption can mean:
While this provides a framework for discussing what a digital approach to Procurement transformation can mean, my former colleague’s overarching opinion was that many Procurement leaders focus on slick new functionality or tools to make elements of the Procurement process more efficient, with the promise of better data, perhaps as a means to drive more savings, which accomplishes some of Procurement’s primary objectives. Much of that functionality and the associated configuration and integrations are to serve the other administrative functions of the business – i.e., Legal, Finance, etc. so, it’s more of an end from the means, rather than defining the means to the desired end.
While addressing the ultimate failure of many digital transformations, and even upgrades or functionality enhancements, his opinion was that Procurement often lacks the influence and ability to bring enough people to the table to ensure the success of the transformation or implementation. It’s back to the age-old argument of Procurement needing a seat in the C-suite.
My perspective is a bit different. I think one of the main problems that the Procurement function has historically had, is that the focus is on “their” tools, “their” processes, and “their” metrics. Sure, these are all in support of the business that Procurement ultimately supports, but by simply changing the tools that are in use, most organizations do not address the core of why they lack the proper compliance to the desired Procurement processes.
There is minimal focus on the actual customer. While many implementations and transformations will include stakeholders from important groups like the aforementioned Finance, Legal, and IT, they will often lack that level of involvement from the people who actually are being told to use the process. There may be “superuser” groups from whom input is sought, but the translation of that input into actual requirements and then the design of the new process with those requirements at the core (rather than the capability of the tech) is what is the foundation to successful change and digital transformation.
As the focus on digitization rolls on, ensuring that the tech enables the ease at which the business needs to operate, rather than dictating the way the process will work, is the critical success factor that can put you on the road to achieving your digital goals.
Jon Kesman
Global Practice Lead, Workforce Procurement
An experienced, innovative advisor delivering strategic guidance on workforce procurement, addressing all areas of the universal workforce, with a particular focus on the sourcing and procurement of contingent labor and labor-based professional services.