The circle of life includes death, and traditional procurement is dying. The sooner that procurement organizations, and the solution and service providers that serve them, recognize how the various aspects of the old procurement model are dying, the more quickly they can plan for rebirth. Honestly, I think procurement today is really not that different from 10–15 years ago, but procurement 10 years from today is going to be very different indeed, and it’s going to be because of technology.
Technology is not just about simple siloed and “empty” packaged apps automating incrementally improved processes. It’s not just a workflow enabler. Rather, as value chains go digital and begin getting “disrupted,” that, by definition, will have to radically alter those who are the architects and orchestrators of those value chains. If procurement groups want to play those roles and help formulate strategy, which is increasingly involving digital transformation, then procurement needs to be digitally savvy about things like advanced analytics, big data, cognitive computing, B2B platforms, and everything as a service (XaaS) frameworks — all topics we will be exploring at our upcoming Global Procurement Technology Summit with ISM in March.
Such savvy must include, at a minimum, not only knowing how to commercially engage a new breed of emerging digital providers — and incumbent providers who will also need to disrupt themselves — but also how to apply it to procurement’s own internal services business. Although procurement has done great in delivering huge ROI to the business, it has not had its budgets doubled and will never extricate itself from the tactical level enough to pursue this new digital imperative by using incremental transformation alone. And everything will need to be fundamentally changed:
- Methodologies and techniques beyond traditional best practices
- Metrics and operating models
- Talent and knowledge models
- Transformation approaches
Of course, there’s also technology. But I’m not going to just list it as a bullet to the above list. It’s not just “people, process, and technology.” (Read this if you want more insights.) Rather, the impact of new digital technologies like deep machine learning working on big data will help generate predictive analytics embedded into procurement and supply chain processes that offer huge advantage to those who can tame it and those who can provide it. (And in the new world, there will be fewer artificial separations of terms like practitioner and provider.)
Just as supply management is a set of processes embedded into every value chain process that requires external resource, rather than a siloed n-step sourcing process sitting in a SCOR model (see figure 3 in here for more on this), and just as analytics sit at the core of a DMAIC process, the digital transformation in procurement begins with recognizing how digital will disrupt the internal procurement elements listed in the bullets above and how that will help procurement brings its new digital chops to the table as it helps bring in supply market innovation that is increasingly digitally based.
- But, how will this unfold in practice? (Hint: It’s already happening)
- How will digital affect procurement in these different areas?
- What are leading companies doing who are breaking from the pack
- Who are the new value chain innovators?
- How will technology like AI radically alter the XaaS market serving procurement and supply chain?
Well, we’ll be writing a lot more on this in coming posts, but if you want full immersion, you need to come to our conference in mid march that we’re co-hosting with ISM. More details are here, but call us if you want to be a part of it. It will be a very different kind of conference — an “anti-conference,” if you will — with the new architects of this digital revolution in the supply chain. We have IBM talking about how it’s applying AI in its own value chain. We have Amazon, which is the ultimate mashup firm with perhaps the most advanced supply chain in the world. The conference itself is a mashup, too, made up of CPOs, ex-CPOs, academics, government officials, NGOs, analysts and providers.
Stay tuned for more. Much more.