Latest ‘CPO Rising’ Report Released: For Many CPOs, Technology is No. 1 Priority

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Technological innovation is the theme of Ardent Partners’ latest annual CPO Rising report, which the research and advisory firm recently released. Andrew Bartolini, Ardent Partners’ chief research officer (and a one-time Spend Matters contributor), has been writing and updating the report for 12 years. This year’s report shows shifts in CPOs’ priorities and strategies — with a clear consensus on the importance of technology adoption.

CPO Rising: Tools of the Trade weaves together perspectives from 313 procurement executives, nearly half of whom are VP-level or higher. Two-thirds of the respondents represent companies with revenues of above $1 billion, and 72% are located in North America. They come from a variety of industries, though manufacturing, oil and energy, construction, and financial services are the most represented.

CPOs’ Priorities Are Shifting

While there are no surprises this year in what CPOs consider their primary business pressures (“find more savings,” “better communicate the procurement department’s value and performance” and “increase procurement’s effectiveness and influence” have remained the top three, though cost cutting may not top that list for long) — there has been a shift in the strategies procurement executives are using to tackle those pressures.

In 2017, slightly more CPOs are focused on improving technology use (44%) as a response to business challenges, over internal collaboration (41%) — a trend that is likely to continue. On the flip side, supplier collaboration has seen a curious decline in priority. Only 24% of respondents named improving supplier collaboration as a top strategy, compared to 35% in 2016. However, the report suggested, this may simply be a fluke as technology overtakes everything else as a hot priority.

What is not a fluke, the survey results show, is the steady decline in the relative importance of cost cutting. More CPOs are turning their attention to improving in-house processes and cutting out inefficiencies. Developing the expertise of current employees and attracting new talent is another top priority, as CPOs see that “the function can benefit from a burst of innovative thinking that can take it into a new era.”

Technology Adoption Faces Hurdles

As one CPO from the financial services industry told Ardent Partners, “The internal risk aversion and inertia to change at my company make launching a new technology implementation very challenging.” Although procurement automation tools have been around for decades and would free CPOs to focus on strategic tasks, organizations have been slow to implement them. Adoption rates are highest for e-procurement (62%) and e-sourcing (53%) and lowest for contract authority (21%).

A major challenge is user proficiency. After all, technology is no good if people do not know how to use it. When the survey respondents were asked to rate their own procurement organizations’ technical proficiency, 57% said it was “adequate” or “poor,” compared with 15% who claimed to be “advanced” or “very advanced.”

To deal with this, the “CPO Rising” report suggests an approach that is a mix of tough love and setting realistic expectations. When implementing a new system or tool, the report argues, procurement organizations ought to require all employees to use it, but incrementally and allowing for errors. For example, allow employees to slowly vamp up the percentage of their activities done through a new system — but nonetheless requiring steady progress.

Recommendations

The report concluded with more than a dozen “strategies for success,” and I’ll paraphrase some of my favorites below:

  • Don’t grow complacent on supplier relationships, as decisions across the supply chain will have ever growing consequences on the bottom line in today’s “heightened competition in a global marketplace that is increasingly interconnected.”
  • Have a strategy for process automation and big data management, so that your organization is prepared to move on to more “disruptive” technologies such as machine learning.
  • Rethink talent management. As the contingent workforce continues to swell, Ardent Partners recommends procurement to partner with HR to tackle the new talent sourcing landscape.
  • Seek fresh perspectives and outside viewpoints. The CPO Rising report quoted computer scientist Alan Kay as saying, “a change in perspective is worth 80 IQ points.” Who can’t use that extra boost?
  • Finally, staying agile is Ardent Partners’ “perpetual recommendation.” Procurement needs to be able to keep up with the evolving role and responsibilities of the department, as well as with potential future volatile market conditions. 

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