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‘Is Complexity Mastery THE Top Skill for CPOs?’ Deloitte’s 2019 CPO Survey Asks as It Closes This Week

06/10/2019 By


Let’s face it, the world has gotten a lot more complicated. Trump tariffs are popping up at the drop of a tweet. The Volatility Index hit 20 in May after being down to 12 in April. Middle East tensions are on the rise, and the Brexit spectacle is still a comedy/tragedy being written. China is chummying up with Russia and doing some saber rattling with threats of a rare earth supply quarantine. Regulations are not slowing globally, and consumers are also demanding increased scrutiny into the global supply chains that serve them.

Meanwhile, even as markets are at all-time highs, there’s emerging nervousness surrounding a potential recession in 2020 and how that might ripple up into supply chains with smaller and more financially sensitive suppliers. The market in turn is driving investors to push for stronger demand growth, especially growth that is resistant to pesky things like competition (Peter Thiel’s comment of “monopoly as a feature, not a bug” comes to mind). This in turn is driving powerful suppliers to become more so, but new disruptive digital business models and aggressive M&A activity create complex dynamics internally and also with your supply base (and customer base).

All these factors are forming “structural complexity” that generates headwinds and headaches for CPOs, but it also creates impetus for building resiliency, agility and intelligence that makes the value chain (and internal business functions such as procurement, IT, HR, etc.) able to weather these storms. Such complexity mastery can be used to their advantage!

This is especially the case with digitalization, where an exploding ecosystem of cloud-based digital solutions/services are helping to reduce/manage some degree of complexity while simultaneously also creating a bit of a digital disaster of fragmented systems, data, vendors and contracts. This also has an impact on talent management where companies want flexible and virtual workforces (that are digitally savvy too, of course), but they struggle with how to manage mixed and fragmenting talent channels within the contingent workforce, especially with old/fragmented technology currently in use.

So, CPOs and their stakeholders are having to overcome all this complexity while:

  • adding more value to external customers (especially in new digitally innovative ways)
  • aligning with internal customers
  • extending that out to supplier partners
  • continuing to deliver hard-dollar value improvements, by the way!

These improvements go beyond traditional cost savings from competitive sourcing, but rather, emerge from a broader and more complex service portfolio. In other words, some internally generated complexity can be a good thing. One example of “good complexity” is the ability to execute differing procurement responsibility/influence models by category/region/business-unit rather than one-size-fits-all models — including “center-led” models. Doing so however in a scalable fashion requires an underlying configurable operating model and equally configurable technology platforms. Complexity is also inherent in large-scale transformation — and so is complexity management. For example, one Fortune 50 life science firm uses a supply chain center or excellence to coordinate the complexity of literally thousands of supply chain projects, including procurement.

CPOs who can do all this are “complexity masters.” They’ve found a way to eliminate and scalably manage bad complexity while also being able to handle such good complexity.

Yet, keep in mind that complexity isn’t binary, but rather, it’s a spectrum. Similarly, the capabilities that help master this complexity also fall on a spectrum. Both can be measured and help procurement leadership benchmark themselves in a “complexity adjusted” manner. Firms with higher structural complexity are at a disadvantage when they’re benchmarked against firms with lower complexity.

So, if higher complexity firms are actually performing better than lower complexity firms, how are they doing it? Wouldn’t it be good to know what they’re doing differently?

This is one of the primary goals of Deloitte’s new annual CPO study, which Spend Matters helped Deloitte design to support this complexity management theme (as well as themes around digital, talent and supply chain). It focuses on the complexity that CPOs and their teams are facing, and also examines their complexity management capabilities (especially digitally enabled ones), and their resulting performance. It also looks at plans in these areas so that CPOs can benchmark with each other and see who’s “voting with their dollars” on what areas.

Take the survey here. It will be open through Thursday. CPOs, or a designee such as a head of “Procurement Excellence,” who participate in the study will receive a more in-depth analysis and readout to compensate them for their time, but the primary CPO Research findings will be reported similarly to previous years. If any solution providers would like a copy of the more in-depth report, please have your qualified CPO contacts participate in the study (it takes roughly 30 to 45 minutes to complete) and those CPOs are then welcome to share those results with you.

I’m honored to participate in this effort and am hopeful that my 20 years of procurement benchmarking, research and technology experience can bring some fresh insights into this year’s edition of what has become the gold standard of CPO research studies.

If you have any questions on the study, please don’t hesitate to reach out to me this week. And stay tuned for more updates!