“When we look at the [priorities] that have had the highest change in importance this year, we start to see where the focus areas really are. Increase in savings is always number one, and that hasn’t really changed,” said Amy Fong, associate principal at The Hackett Group. Improving procurement’s business agility saw a 53% increase in perceived importance, as did supporting enterprise digital transformation objectives. While the latter wasn’t among the top five priorities, this significant increase in importance is certainly worth looking at.
A graphic displayed during the webinar mapped various goals based on their importance and procurement’s ability to address them. “There are some things that are important, but we’re pretty good at them, like reducing operating costs,” Fong said. “There are still a few companies learning how to do strategic sourcing, but for the most part, reducing costs is the bread and butter that we’ve been working on for many years.”
Goals of high importance and low ability to address thus make up the key development areas, and as you probably have guessed, supporting enterprise digital transformation is a big one.
Enabling Digital Transformation
“Digital transformation is poised to fundamentally change procurement,” Fong said. Among participants in Hackett’s 2017 Key Issues Study, 89% agreed or strongly agreed that talent and business needs of their business will be fundamentally changed by digital. A vast majority (84%) also thought that digital transformation will offer step change performance improvement of the procurement function and change the way procurement services are delivered over the next three to five years.
“We’re all in agreement that things are changing,” Fong continued. “The challenge we see though is [that] there’s not necessarily a strategy or resources in place for making it work. We haven’t established digital roles and we don’t necessarily all plan to. It tends to be aligned with just a couple people in the organization. We haven’t aligned our digital strategy to our enterprise-level strategy, we haven’t necessarily developed and executed a digital transformation strategy, and we don’t have the competencies or resources in place to really be successful. So more than 50% of companies are saying that they’re not quite ready for where we’re going in 2017 and beyond.”
What does digital transformation really involve, and how can procurement get on board? Fong explained that there are four main areas to look at, with the overarching one being improving the stakeholder experience. The other three areas are “orchestrating a procurement-as-a-service (PaaS) portfolio,” “setting a foundation of insight driven analytics,” and “[using] technology to accelerate transformation.”
Improving stakeholder experience has become more important over the years. “It’s really about aligning our value proposition to what your stakeholders really want,” Fong said. “For most stakeholders, the number one goal is not cost savings.”
Below are brief summaries of recommendations that Fong presented for each of the four main themes:
- Go above and beyond stakeholder expectations by creating an omni-channel whereby goods and services can be procured from anywhere and providing the real-time status of any given transaction.
- Build agility into your PaaS operating model by developing a balanced portfolio of sourcing and P2P service offerings.
- Achieve quality and insightful analytics by creating a center of excellence and using predictive forecasting to mitigate risk. While supplier risk used to be the number one risk concern for companies, cyber and information security has shot up in importance.
- Find the right mix of suite and niche solutions. This is crucial if you want to utilize technology to its full extent in accelerating transformation.