A large majority of procurement leaders believe making better use of existing digital procurement technologies is a key next step in their digital journeys, according to ‘Procurement 2025: Is digital transformation driving more effective transformation?’, a study we have conducted in collaboration with Cranfield University.
In our view, this focus on harnessing existing digital technologies rather than investing in new ones is a result of companies failing to realise the benefits of past technologies in the way they had originally expected.
We surveyed 225 procurement leaders globally about their five-year plans to digitally transform their procurement functions.
A significant 4 in 5 (82%) say they are keen to make better use of the digital tools they already have in their technology suites. This suggests that investments made to date as part of the digital transformation journey have yet to live up to expectations. In the same survey however, the capability of current technology is the least-cited barrier to technology delivering the expected benefits, with just 37% of respondents referencing it as an issue.
So why do procurement leaders appear to feel let down by technology?
When it comes to digital procurement, for many organisations the first challenge is defining success. If a procurement function wants better transparency of spend it may consider investing in a spend analytics tool. But before that it needs to give proper thought to the outcome it wants to achieve once it has gained improved transparency, otherwise the investment is likely to fall flat.
So, for example, spend transparency only delivers value if insights that can be generated from the tool are acted upon, such as which categories to prioritise through sourcing and addressing maverick spend. If these are the objectives defined at the outset, then it’s clear that a spend analytics suite can only be one part of the solution. Driving continuous improvement in terms of data quality and employing people who can interpret the data and run sophisticated analysis are additional requirements to achieving the desired outcomes.
Limitations of software
There is often an over-estimation of the capability of software, which invariably leads to unfulfilled expectations. Software is generally focused on managing and controlling workflows, as well as capturing data – both of which are important tasks. It can also run pre-programmed analysis, although there is a limitless list of analysis that can be done on the data captured by the tool which cannot all be pre-programmed. Finding alternative ways to run this analysis will help procurement professionals make better use of software.
Consider a sourcing platform that allows a company to run competitive tenders with a built-in analytics suite to automate the evaluation of supplier bids and aid supplier selection. Depending on the category sourced, company profile and supply market landscape, there are likely to be a number of custom scenarios that will need to be run to make the right supplier selection decision. If the tender has been set up well, the data with which to make this decision will be captured in the tool but will require people with specific data analytics skillsets to run the powerful analytics required, often using an additional business intelligence tool to visualise it, such as Tableau or Qlikview.
Without this additional skillset, procurement departments are likely to continue to feel underwhelmed by their technology investments.
Poor technology buying decisions
A procurement professional is typically not someone with a technology background. This means that when procurement buys technology, they are less likely to understand what it is they are buying, e.g. how it works and whether it’s the most suitable solution for their needs. They are more likely to be influenced by branding and marketing, such as being sold on the benefits of having a piece of software from a company that has an established market position. The reality is that much of the innovation in procurement technology comes from agile start-ups that are often less well known.
Patience is key to deriving the benefits from existing technology. A new solution is unlikely to show immediate benefits but, without this, people are unlikely to be motivated to use it and change the way they work. This means procurement practitioners need to lift themselves out of the day-to-day challenges and think of what their role could be tomorrow and how to adapt to it so that they are able to progress their objectives.
For example, a contract management tool can help companies make considerable cost savings during the contract lifecycle. Once the tool is used in the right way and the benefits are clear to everyone, it creates a pull effect. But getting to that stage takes a significant amount of investment in time that involves mapping out the metadata that needs to be captured, ensuring it is captured from each contract, running the analysis that helps to manage supplier performance, proactively managing renewals and maximising contract coverage, and so on.
Make technology work for you
With new technologies continually coming onto the market and a wide range of vendors with clever marketing and branding initiatives, it is hardly surprising that many companies have been driven to make technology investments from which they feel they have yet to see any benefit.
Regardless of role or age, everyone has a responsibility to become more digitally literate and understand how systems can potentially transform ways of working. Through an inquisitive attitude, enhancing one’s knowledge of the ‘art of the possible’ and an understanding of forecasted future disruption, it is possible to make better decisions. This is open to anyone who works in procurement and wants to make technology work better for them. Read thought leadership, attend panel debates and teach yourself new skills online or in a classroom.
This article was originally published by CPO Strategy