The IBM CPO Study – identifying what defines top performing organisations

With their acquisition of Emptoris a year or so ago, IBM have increased their presence in the procurement solutions world. And they recently completed what was their largest ever CPO (Chief Procurement Officer) survey, and probably the largest we’ve seen anywhere.  We’re going to be featuring some of the key findings from this impressive work, and seeing what conclusions we can draw that will be useful to procurement practitioners in general.

So IBM, with the help of their research partners Oxford Economics,  surveyed 1,128 global procurement executives, from 22 countries in North America, Europe and Asia. And we’re talking large firms here.

“Collectively, these executives lead procurement operations in almost every industry, and the companies they serve all have annual revenue in excess ofUS$1 billion”.

The basic premise of the analysis then was to look at how the top-performing organisations differed from the rest. Of course, this relies on being able to define the “top-performers”.

“We defined leading procurement operations as those that believed they had mastered core procurement capabilities, those that said they enjoyed outsized strategic influence, and those that successfully leveraged multiple sources and emerging technologies to bring innovation to the companies they serve”.

Whilst you can’t get away from the issues of self selection inherent in any analysis of this nature, that seems to me like a pretty good basis for defining high-performers.

So the first element within this definition  is to master the fundamentals of procurement capability. Spot on, in my view – it’s hard to develop the more cutting edge aspects of procurement if the basics aren’t in place and done properly. (One example: I don’t believe you can deliver real supplier relationship management benefits, without first having basic contract management capability, processes and information in place).

In terms of the whole sample, only 50-60% of the firms generally feel they are “effective or “very effective” in areas such as transaction processing, supplier development or sourcing. That shows just how many organisations – and remember, we’re talking about large firms here – still have some way to go to achieve these basic capabilities. You can look on that as worrying for the profession or an opportunity, I guess, depending on your point of view.

When we come onto the “influential” aspect of high-performance, the results are even less positive.

“Only 33 percent of respondents (377) say they enjoy significant or very significant influence over at least six of eight strategic organizational imperatives, such as delivering customer service, driving efficiency, introducing products and services more quickly and creating meaningful brands to drive price premiums”.

And finally, in terms of the three core imperatives, we have “innovation”. Here, procurement organisations score even more poorly again. Value chain engineering, using suggestions from employees or collaborative product development with suppliers are important to less than half the sample and overall IBM reckons that only 27% of the sample firms exhibit the characteristics of innovative procurement organisations.

So there we have some of the headline numbers from the survey; in our next instalment, we’ll start getting behind that data and look at the implications for organsiations.  In the meantime, you can download the report here, free on registration.

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