John Paterson, IBM CPO, on the CPO Survey, transformation and prospects for procurement (part 2)

Here is part 2 of our interview with John Paterson, IBM’s CPO. Part 1 is here.

As well as the CPO report, you’ve also published a short paper on procurement transformation. What do you see as the two or three most critical success factors for successful procurement transformation?

Leadership commitment is vital. Living and breathing it, understanding and communicating why we are doing it. That means procurement leadership primarily but if the rest of enterprise is against it, transformation won't happen. So wider executive support is also needed for success.

It needs a strong governance model - for instance, if we do a good deal and it doesn't get used because there is no governance or compliance, then we've wasted our time.

Thirdly, communication and collaboration with internal clients is key. You have to show you are adding value and that they are being more successful by working with you. That builds and becomes sustainable as you can show success.

And there are other points to consider of course - process standardisation, automation, people and skills for instance.

I am interested that you mention governance high on your list there. But in my experience you can't force people into co-operating with procurement, a mandate is not enough?

I agree, a strong governance model is not a basis or enough for long-term success - you can't terrorise stakeholders into using processes or contracts that don't work for them. But in the early stages of transformation – for the first year or two - it is important as it helps to get the momentum. Then you have to show the real value you are delivering.

How do you keep transforming after 10 years or more - does transformation eventually come to an end?

In the time we've been doing it, the overall IBM business has changed and transformed, on the basis of geography, products, focus and so on. So procurement has to keep transforming to meet the changing business needs. It is maybe not as fundamental as the change process 10 years ago, but it is no less important. And it gets harder to deliver increased value year after year. We need to get smarter and more creative every year.

So what sort of activities drive that value now?

We are very proactive in looking at deep analysis of our data and seeking innovative ways of delivering incremental value. That may be commercial or it could be demand management - we know better than anyone where money it is being spent, what it is being spent on. We also involved with strategic activities such as make / buy decisions, working on mergers, acquisitions and divestitures, both at strategic stage and post-event.

What are the most significant changes you have seen in procurement in your 40 years in the profession, and where are we heading?

In that time procurement has moved from being seen as a back-office administration function to the front-office, adding real value. It's gone from being a job to a profession, and that is true all over the world. And good procurement organisations don't just focus on cost savings, they give input to fundamental issues, like the make/buy decisions we just mentioned in our context.

Technology has had a huge impact - it has been no real boon to organisations who have taken advantage of it to free up resource to do more strategic work. That will continue, as will the move to globalisation. That creates new issues as well.

What sort of issues? Do you think we will see fewer procurement jobs in the Western world for instance?

I don't think so. As we move into new geographies, or indeed entire new markets are created, that requires new procurement support, which will probably be local in many cases. So that means people all over the world for firms like IBM. But Europe and North America are still huge markets and a large percentage of business for most global firms.

Many thanks to John for his time and sharing the fruits of his 40 years in procurement. And remember you can download the IBM CPO report free on registration here.

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