Although procurement leaders are generally aware of the potentially significant impact of digital transformation on the way they deliver services, few are confident that they have the necessary strategy, talent and competencies in place, according to the results of a recent survey. The result is a gap between procurement’s transformation agenda and enterprise-level digital transformation priorities.
The Hackett Group’s 2017 Procurement Key Issues research, “The CPO Agenda: Keeping Pace with and Enabling Enterprise-Level Digital Transformation,” is based on results gathered from executives at more than 180 large companies in the U.S. and abroad, most with annual revenue of $1 billion or greater.
The research shows that nearly 85 percent of the leaders at procurement organizations believe digital transformation will fundamentally change the way they deliver services over the next three to five years. However, only 32 percent of procurement organizations currently have a formal digital strategy, and only 25 percent of the organizations have the needed resources and competencies in place, according to the responses.
“The gap between awareness and capabilities in digital transformation isn’t unique to procurement—we’ve seen similar results in finance, HR and even IT,” says Chris Sawchuk, Principal and Global Procurement Advisory Practice Leader at The Hackett Group. “It’s disconcerting to see that many procurement organizations are simply moving ahead in this critical development area without a comprehensive plan or the requisite talent. This simply isn’t a recipe for success.
“Procurement has been focused on agility for several years now, and today, digital transformation is clearly a strong way to enable that, while at the same time improving efficiency and effectiveness,” says Sawchuk. “Procurement leaders need to make sure they are aware of the technology that’s out there, understand which ones they want to focus on first, and build a foundation on which they can move forward.”
The Hackett Group’s research reveals four areas where the digital transformation of procurement organizations initiatives should focus. The first is to strive to improve stakeholder satisfaction to help procurement gain organizational permission to take on higher level work. The group’s research identifies strategies that are key to success in this area: build an omni-channel and personalized stakeholder experience, measure value beyond savings and segment the stakeholder community to find the right service level mix.
Secondly, organizations should work to orchestrate a Procurement-as-a-Service Portfolio to streamline the buying experience and create an organizational model which permits procurement to be closely aligned to its primary stakeholders so it can react quickly to changing requirements. Keys to success for this strategy, the group found, are for procurement to develop a well-balanced portfolio of sourcing and purchase-to-pay service offerings, rebrand the procurement organization to increase awareness and influence, and optimize use of centers of excellence and placement of resources globally.
As procurement’s role matures from transactional facilitator to trusted business advisor, a key enabler is to gain proficiency with next-generation analytics which offer an ability to quickly generate insight from structured and unstructured data from multiple sources. Toward that goal, The Hackett Group recommends that procurement organizations invest in training for analytics, center of excellence and special projects teams; deliver new forms of market intelligence, in part by using third-party intelligence reporting services; and mitigate risk through predictive forecasting.
Finally, the group recommends leveraging technology to accelerate transformation. To ensure a successful transformation, the research shows that companies should find the correct mix of suite versus niche software solutions, build flexibility into the roadmap to take advantage of emerging technology, and help improve technology sourcing for the company.
What are your thoughts about the impact of enterprise-level digital transformation on procurement? Does your organization have the necessary strategy, talent and competencies in place?