‘More people in the tools, lower risk, faster processing, better results’ — Roy Anderson sums up procurement’s future (Part 3)

“Use your suppliers to get the work done more efficiently, effectively and start to manage the overall supplier base like an orchestra leader,” procurement veteran Roy Anderson says, laughing at the image — but not the lesson. “That orchestra leader can’t play every instrument and certainly isn’t going to sing every song, but has to be able to have the structure and the reporting and the analytics to be able to manage it more effectively.

“That’s the future. A virtual procurement operation living on a marketplace of capabilities is the future of procurement.”

In Part 3 of Anderson’s conversation about his career and digital changes in the industry, he talks about being at Tradeshift (“where ideas win”),  how “every CPO has a bandwidth problem” and the promise of AI.

Anderson, who became Tradeshift’s CPO and digital transformation officer in September, sat down with another procurement veteran, Pierre Mitchell of Spend Matters, to share some laughs and lessons about how the industry adapted to technology over the last 40 years.

The following is the last of a three-part series of their conversation, which has been edited for clarity. Part 1 ran Monday, and Part 2 ran Wednesday.

Pierre Mitchell: Right. OK, so now let’s make the shift toward, some say and I would agree, “software is eating the world,” with the advent of AI and the ability to really begin to capture interaction and data and insights and use that as part of making the end-to-end process better.

As we move toward this age of platforms and this notion of being able to open up the ecosystem, going way back to your transformation back when you were at Hancock, let the innovation in the supply market create, whether it’s apps on an app store or managed services, to plug those into an overall platform, kind of like what Salesforce does on the CRM side, is something that we’ve been championing for a long time.

The technology, historically, has not caught up to that. It’s been there on the CRM side, but it’s only now starting to really come to the SRM side.

Tell me a little bit about how you got exposed to Tradeshift and that platform model and what appealed to you with them, beyond the platform. Was it just innovation? Was it the people? Tell me a little bit about how you made this last shift to where you are now.

Roy Anderson: Sure. Interestingly enough, way back when, Scott McNealy from Sun said “the network is the computer.” It was like, yeah, this makes sense. The network can actually be bigger, more intelligent in the structure.

About two-and-a-half years ago, I became a business partner of Tradeshift because their concept of having a network, a platform that is an app-enabled, so apps plug into it, is brilliant! It creates a marketplace, that is going to have intelligence built into it. It’s going to be able to create a flow of data that a CPO would have to do as a one-off and build it one category, one tool at a time, through the whole effort.

Now, if you plug into the marketplace and the platform, you could get all of these tools and services through a virtual procurement function. Ultimately, the marketplace on the platform is the procurement operation. All the suppliers are tied into it, digitally connected.

The key element here is the fact that inaccuracies in the commerce world drive huge human costs and resources to be able to fix the errors. They don’t have the accuracy in the system to be predictive of the future and understand the trends and deliver models more effectively.

With this platform and all your suppliers tied into that environment, you can now start bringing apps that are unique, everything from spend analytics to contingent workforce applications, print resource applications. You can tie in legal case-management structures, supply-chain financing applications.

Now, the entire marketplace is a flow of data. You talk about requirements, bids and orders, invoices and delivery information, tied into a blockchain solution, that allows you to get better and better, more accurate data and then be able to optimize that on a network level.

“You know I’ve seen more presentations from more companies that say, well, I make a slightly better mousetrap. My issue is to fix this world, you got to get rid of the mousetraps” [laughs]. You have to change the whole mindset and make it big.

The idea that I saw in Tradeshift, and that has been reinforced in my six weeks here, is the fact that this platform allows you to have a significantly more flexible solution to your very different, dynamic roles inside your organization and the supplier’s organization.

Let me give you an example. In today’s world, the CPO is trying force-fit everyone to a single P2P. A one-size-fits-all approach. We all know that the real estate people are working with leasing and facilities management tools, your legal teams are working with case management tools. All of them have some level of requisitioning tool that makes it easier for that role to utilize requisitioning approval and placement with their particular supplier base, in their language, making it easier for them to get their job done. Why not allow the user to have the tool that fits them more effectively and, therefore, just plug it in as an app into that structure? Additionally, you have people of different age groups and from different cultures in those roles, and they all have a unique perspective of what is easy to use. An app for each role, culture and age, creates a dynamic, flexible and user-friendly solution.

As we said before, “user friendly” means more people use it and they get better data out of it. More people in the tools, lower risk, faster processing, better results. The suppliers collect accurate information to process orders more effectively and provide digital feedback to improve the customer experience. They allow for automated, delivery information, create a better handle on how cash is managed. Supply chain financing, dynamic discounting, factoring all become much more readily available, because now you have accurate, digital data to take action on.

You then add in AI to that structure. Now we’re starting to be able to be more predictive. We can reduce the risk because we have a better understanding of the global environment, and the flow of commerce.

That digital value proposition allows the CFO, the CEO and the line of business to make better decisions with the data, from a more supplier-integrated solution. Therefore, the supply chain, becomes part of the integration, where they add their value into the end-business mission.

Roy Anderson: I guess my closing point of that was of all of the things I’ve done in my career, this last six weeks have been the most exciting, most revolutionary, most transformative CPO opportunity in my career. I am just extremely excited about the value proposition and how this is going to take supply chain to a whole new level.

Pierre Mitchell: Yes. I definitely get the sense you are a kid in the candy store with the innovation that they have. As you said, there is this application platform as a service, with the apps and all that stuff.

There is also the integration platform as a service in terms of the acquisition of IBX, starting with invoicing on the transactional side and using the data to work your way upstream, which is what you see in a lot of shared service areas.

There are a lot of implementations that you’ve seen in your implementations working on that downstream efficiency then using the data to point you in the right directions, as you said, around working capital or sourcing opportunities, etc.

Let me ask you a question. For a CPO who is more familiar with their ERP vendor and with the bigger vendors in the word, the Ariba’s and Coupa’s and others, how do you make that concept around the openness and the open network, the platform concept, the ability to bring innovation? How do you sell the initial value in supporting what they’re trying to, as well as this option value, to be able to bring in a broader ecosystem and openness?

This whole thing around “closed” or “open” might not actually catch up with them for a few years down the road. How do you sell them on that value prop upfront?

There’s a ton of innovation at Tradeshift, but at the end of the day, you’ve got to go in and sell that CPO and that industry around those hard benefits. Obviously, the benefits are there, but what have been some of the things that you’ve been doing as you come in to now, as the CPO of Tradeshift, you might not have the hugest spend, but also playing your other role as adviser, change agent, an external face to the market?

What are some of the things that you’re providing some counsel on to sell this immediate value versus the longer-term digital option value there that Tradeshift has?

Roy Anderson: A couple of things. One, every CPO has a bandwidth problem. They work to create value out of those top 5% of the suppliers they do business with, which is 80 percent of their spend. If they’re smart about this, they’re spending all their time where that value proposition is. That leaves 10,000 suppliers without any management structure whatsoever, what many people call the tail spend.

Step 1 is the fact that, if a chief procurement officer is looking to say how do I get control of my entire supplier base, they cannot do it in an old-fashioned way. They can’t sit there and say, “Well, I’ll rationalize every category,” because the tail spend is dynamic. It’s changing every year. The 10,000 you used last year are going to be 50 percent different than the 10,000 you use next year.

It is much faster. Your internal customers are much faster.

Let me give you sizing. My procurement operation at MetLife was 60 people. I had 60,000 internal customers all going off trying to get the job done. It’s not a big enough organization if you try to do it all inside the walls.

What I try to tell them is you have to be like an orchestra conductor. You have to stand and say, “I need to use all these suppliers, all these tools in a digital environment and be able to bring them in as necessary. I want to constantly find the best musician, the best singer, the best instrument, the best music to be able to make this come together.”

The CPO has to say, “I have to open up the wall and be able to be a marketplace,” and have marketplaces that are tied to other marketplaces to be able to reach the 60,000 users that I want to do business with internally and then the 10,000 or 15,000 suppliers that are currently adding risk to my portfolio.

We try to explain that the marketplace creates a virtual procurement function that you can actually add people to, on a task basis more effectively, use applications to streamline that process. As I told all of my sourcing people, I said, “Listen, this work has to be done, but it doesn’t have to be done by you.”

Use your suppliers to get the work done more efficiently, effectively and start to manage the overall supplier base like an orchestra leader. [laughs] That orchestra leader can’t play every instrument and certainly isn’t going to sing every song, but has to be able to have the structure and the reporting and the analytics to be able to manage it more effectively.

That’s the future. A virtual procurement operation living on a marketplace of capabilities, that is the future of procurement.

Pierre Mitchell: Yeah, that’s great. That really does talk to the flexibility that you need across different categories and business units, where sometimes you just need some better app functionality. Other times, maybe you can do that as a managed service.

In each case, those are services that have different types. As long as they can share a common DNA, with common data and threading the process together, then you can assemble that process and then have more flexibility there.

Roy, I’ve got to ask you. Now you’re at a smallish company, relative to your other companies. This is very innovative, high-growth, lots of millennials. It’s a new environment for you. Tell me a little bit about what it has been like working in this new culture.

Out of the 500 companies that sell procurement services and solutions, I’d say there’s probably about 495 scantily clad emperors. They don’t necessarily do all those great things themselves internally. We don’t have to get into the details there, but tell me a little bit about some of the interesting observations coming into a more dynamic, smaller, high-growth tech company.

Roy Anderson: It is a level of adrenaline and the excitement associated where ideas win, so good ideas that can be brought to fruition. You know me, Pierre. My whole life has been, “Hey, I give you 10 ideas, one of them is going to be good [laughs].”

You need to get this new young workforce into the idea that supply chain can be a much more valuable solution set and that the people coming into supply chain, which, by the way, is why I guest lectured at Rutgers or Northeastern or Georgia State. Because I want finance people, engineers, marketing people, legal types to realize the place you can actually make a bigger difference is to go into supply chain and be the engineering connection inside of supply chain. Be the marketing person who works with your marketing team inside supply chain. There’s a huge value proposition to be created.

They’re a younger crew of people that have no limitations. They haven’t seen or experienced the walls that are created by internal teams that are trying to resist what you’re trying to do or people who are trying to protect their jobs.

Because jobs have to change. We all know the economy is getting disrupted with technology — 30, 40, 50% of the jobs of today won’t be there in 10 years. The whole mindset of the younger group is “I’m going to be changing constantly.”

The skill set that you most need is the ability to be flexible and create change. This is living here [at Tradeshift]. It’s a heartbeat. They call it the pirate ship. It’s literally a heartbeat of enthusiasm and energy that has been wonderful to be a part of.

Pierre Mitchell: You’re wearing a lot of hats now there. Right? You’re kind of the CPO. You’re kind of an externally facing evangelist. You’re going to be doing a lot of different things there. How are you going to be divvying up your time? I have the feeling you’re going to be brushing up on your frequent flier miles. What are you going to be doing over the next six to 12 months?

Roy Anderson: The key element here is internally at Tradeshift, we basically are going to live and breathe the virtual procurement organization on the platform so that the company lives and breathes Tradeshift tools, applications from third-party providers, virtual buyers’ network. We’re going to build an SCM function inside of this organization that is best-of-breed, next generation using third parties.

Pierre Mitchell: Nice. Sort of “heal thyself” and then say “Hey, we did it to ourselves. We can do it for you as well.” Classic, the old IBM playbook.

Roy Anderson: Classic. It definitely is. You wouldn’t believe how many times I talk to a salesperson. I said, “Oh, you’re selling this. Show me how you use it internally,” and they couldn’t. I’d say, “What are you talking about? You don’t even use it internally?” It doesn’t make sense.

That’s going to be here. This quarter’s results make that fully functioning going forward and then growing and developing it from there.

On the evangelist side, Pierre, you know that I am a big believer in supply chain, a believer in the CPOs who have made change happen. With the experts who have done the sourcing and the technologists there, I believe in their value proposition to the e-commerce world. I’m going to be driving as much as possible to be able to tell people that this is the next generation of opportunity.

Pierre Mitchell: Nice. That’s great. Let’s not get into anything around blockchain or whatever. I don’t see a lot of CPOs clamoring for distributed transaction registries, but, obviously, it’s going to be more than that. It’s going to be transformational. Still, let’s pick one area, AI. What are you most jazzed about with some of the AI stuff that you guys have and the opportunity there?

Roy Anderson: When you deal with AI, the scenario is you have to have data, right? With the data that is going to be coming through the platform, you now can then use that data with AI to be able to start driving risk-mitigation structures.

You’re going to be able to drive optimization of costing structure. You’re going to be able to show both internal customers, CFOs and others what the finance opportunities are for cost of money.

The idea is with the marketplace huge amounts of data, AI becomes alive with value propositions. That is, I would say, data-driven decisions. D3 is the way to go.

AI on real data that is in a massive size is going to be able to provide that very dynamic, fast transformation of activity so that people can make better decisions faster so we reduce the cost of doing business. Therefore, we can get better results from all of our companies.

Everyone can win in this. This is not a lose-lose scenario. This is everyone can win because of the synergy of the platform using AI is huge.

Pierre Mitchell: That’s great. You have value diagnostics serving up the value, basically, giving that to the CPO and everyone else and saying, “Here it is staring you in the face. It’s up to you on whether you’re going to go pursue it,” and having the data to inform that because AI is data hungry. I guess you have the network to really make better insight.

All right, Roy, I’ll let you go. Thanks for this. It’s terrific. Appreciate your time.

Roy Anderson: It’s good to talk with you today, Pierre.