Ensuring a Positive Return on Technology Investment
A recent Efficio survey of 225 procurement leaders found that technology is driving significant activity in their organizations. Indeed, 63% of survey respondents admitted to completely rethinking their procurement approach as a result of new technologies, while 78% believe digital transformation should be a boardroom priority. Transforming processes with technology was also the single most popular procurement objective in 2018, indicating the level of focus currently on digitalization.
The same survey revealed that 82% of organizations prefer to make better use of existing technologies before investing in new ones. This implies that the benefits of technology investments made to date are yet to be fully realized and that, so far, technology is failing to meet expectations. In our view, companies can take a number of steps to ensure they get the best return from their technology investments.
Technology Is Only Part of the Puzzle
Companies often slip into the mindset that technology alone can solve their problems without realizing that other changes will need to be made in parallel to achieve the optimum results.
Therefore, before investing in a new tool or technology it is critical to understand what benefit you are expecting to get from it and the processes that will need to be put in place to support your required outcomes. For example, investing in a demand forecasting tool will only add value if your processes support the continuous improvement of data quality to ensure ever-better forecasting accuracy. It’s also important that your people know how to capitalize on the output.
Nearly three-quarters (72%) of our survey respondents agree that lack of talent is a key inhibitor to technology delivering on expectations. Understanding how the role of your people will change following the implementation of new technology will enable you to either recruit people with the required skills or develop your current workforce.
At a recent event to launch our survey results, panelist Louis Fernandes, vice president and country manager at Basware, said: “Organizations implement technology and think it will solve all their problems. What they often fail to do is bring their entire workforce on the journey, and that is a critical piece of the puzzle.”
Look to the Future
Many procurement leaders approach buying technology almost exclusively from the perspective of how it will be used by team members for their current tasks. Yet understanding how it will improve the end user’s ability to procure better in the future is far more valuable in terms of helping to embed the best ways of working.
Another panelist, Michelle Baker, CPO at KPN, said: “Unfortunately, many technology investments I see today assume procurement will be at the center, controlling how things get purchased, and I don’t think that’s sustainable. I am looking for new technology solutions that help get procurement out of the way and make dealing with procurement frictionless.”
Taking the time to draw up your company’s vision of procurement in three to five years’ time, supported by a roadmap, will help you make future-proof, technology-buying decisions that deliver long-term value — without any regrets.
Involve Vendors in Problem-Solving
Procurement functions often miss out on the value of technology simply because they try to design the tools themselves rather than tapping into the huge innovation that’s taking place in the market every day — much of the time by small start-ups.
It’s not uncommon for a business to have a perceived problem and to finalize a list of technical requirements it deems necessary to fix it — sourcing prices within these very specific parameters. This approach constrains vendors in terms of what they can offer and restricts them from working and, importantly, innovating with their potential client.
Working collaboratively with vendors requires procurement teams to be open to new ideas and ways of working by involving others in the problem-solving process.
Basware’s Fernandes has first-hand experience of this. He observes: “Clients often go to market asking vendors to answer ‘yes’ or ‘no’ to a list of a hundred technical requirements they have drawn up themselves without having had a conversation about how the tool would be integrated into their organization and how it is going to affect their people.”
Tradeshift Sales Director Ian Thompson echoes these comments. “Oftentimes the client believes it knows exactly want it thinks it wants to buy and then reverse engineers this in the form of questions. That is not what procurement is meant to be.”
A simple way to benefit from new technologies is to get yourself where the innovation is and to be guided by the market.
KPN’s Baker is clear about her intention: “We have set a dot on the horizon and want to automate as much of the source-to-contract process as possible in the next three to five years. We have trawled the world for all sorts of emerging technologies. We have started to run sprint-based proofs of concept, meaning every quarter we are running two evaluations and getting the team used to using emerging technologies. In parallel, we are looking at how we need to develop our people to support this initiative.”
Understanding the benefits you want from procurement technology is the first step to realizing those benefits — but that’s not enough. Organizations need to consider what else — beyond the technology — is going to help them achieve their procurement vision and ensure those elements are aligned. Tapping into market innovation will provide a competitive advantage in the long run, but this will require a deeper dialogue and more collaborative approach with potential vendors.
Simon Whatson is a principal at global procurement consultancy Efficio.
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