IBM CPO Study – are you Influential, Capable, Innovative or Emerging?

IBM published last week the results of one of the largest surveys of procurement directors I’ve ever seen. It covered some 1200 firms, and involved detailed surveys and also interviews with selected participants. This gives the data some real credibility, and the results, whilst perhaps not startling, have that weight of robust process behind them.

The survey asked a range of questions about processes, strategy, and use of technology and so on. IBM then defined strong performers into three intersecting groups - this is how IBM describe it.

Through our research, we discovered three key points of differentiation that separate high- performing procurement organizations from the pack:

  1. Effective delivery of traditional procurement capabilities
  2. Influence within the enterprise over purchasing and strategic decisions
  3. Identification of innovative ideas from a diverse range of inputs.

Like all such studies, it is hard to know whether a differentiation like this is really a scientific “finding” or just confirmation of ideas that the survey designers may have had to begin with. But this classification does ring true, and I rather like it – although we might question whether you can truly be “capable” if you are not also “influential”.  And what about organisations where procurement is “influential” but not “capable”? That sounds like a very dangerous combination – analysis of such organisations might be very interesting!

Anyway, 54% of responding organisations were defined as “capable” – based on their response to certain questions.   33% were “influential” (within their own organisations) and  27% were “innovative”.  At the intersection of the three definitions, there were 15% of firms who were paragons of virtue, being in all three groups. Likewise, 38% were in none of the three categories – they are somewhat kindly defined by IBM as “emerging performers” but really “weak” might have been a better word.

Perhaps the most interesting point is that IBM found a clear correlation between performance and the average profit margin of the organisations – obviously the relatively small percentage of government type organisations in the survey weren’t included in that analysis. But the top performers showed an average margin of 7.12% against an average of the overall sample of 6.19% and the emerging performers who averaged 5.83%

Now of course there may be other factors at play, and this isn’t a scientific multi-variable analysis that might inform a PhD study somewhere. But the sample size does suggest some robustness around this finding.

An additional point of margin might not seem an awful lot in return for being a top procurement performer. But to a large firm, that could be tens or even millions of pounds, dollars, Euros or whatever. And it doesn’t cover other benefits that strong procurement might bring – for instance, firms might re-invest procurement benefits into driving sales growth rather than margin improvement. (The study didn’t look at that).

 But it is an interesting report and significant finding, and something else that can support the business case for organisations looking to drive procurement improvement and maybe needing some investment to get there. That extra point of margin may be enough to justify some serious procurement investment in skills, resource, tools or technology.

We’ll come back to the survey at a later date  and look at some more of the key findings in more depth as well – but you can download it here now.

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