Are you avoiding these three digital procurement transformation pitfalls?

I love writing, but it's always been more for myself than any other reason. However, after recently making her own first post, Angela Ma convinced me I should take mine one step further and share what's on my mind like she did.

So as I sit on a plane right now*, what’s on my mind is just how many of my clients have been going through exciting and complex procurement transformations. These directly affect hundreds of people, billions of dollars in spend, and save hundreds of millions of dollars. But when you are in this industry you also see many organizations struggle. In most cases they fell into three avoidable pitfalls:

1. Letting technology drive their transformation
2. Failing to identify their real business needs for the technology 
3. Thinking in a siloed approach 

Angela already took the first point from me with her post on business-led technology transformations, so I wanted to look at avoiding the other two risks. Identifying your real technology needs and avoiding a siloed approach.

Designing deliberate technology needs

If we follow Angela’s advice and begin with business needs, the next step is to solve the people and technology capabilities you will need to meet those needs. I work a lot with clients to clarify their new operating model capabilities and accountabilities. Only once you have the structures, roles, and processes will you be well positioned to identify your real technology needs.

With a recent client, their goal was to create and sustain substantial savings. They developed a strong operating model to support this, but due to the incredible diversity of their organization they needed to decentralize purchasing activities across multiple business units. This meant challenging the modules they thought would create value, and instead prioritizing the end-users and benefits realization with a path for full integration.

However challenging convention and internal inertia can be difficult. To overcome this stage, you need to include key senior technology people at the strategic stage - ones who are willing to push and stretch the system to meet your business needs while minimizing customization. In my experience, if you pick more intermediate or junior staff they are often unwilling to push the system to meet your needs. Once you have these details you can begin to look at your implementation roadmap.

Overcoming silo’s with integrated thinking

In the final pitfall, one organization invested heavily to transform their operations, building a modern department and contracting tens of millions in savings. However they limited the technology to just replacing their current environment and didn’t consider what technology they would really need to fully realize their savings and efficiencies. Ultimately this meant contract leakage and needing almost 30% more staff than if they had selected the right modules initially. Now they are going back to bring all the elements together, but they have a long way to go to fully deliver on the promise of their transformation.

To prevent this you need to focus on how your operating model creates value and where your traditional issues are. In one recent case, the value was capturing the savings from a few major categories. While all their processes were manual, purchase-to-pay was the most critical for realizing the savings and generating user buy-in. Despite their outdated tendering system, the priority needed to be on purchase-to-pay if they wanted the “right” to invest in other modules. Following purchase-to-pay implementation, they began replacing the “front-end” for sustainability and effectiveness.

As you transform, make certain you know which modules need the most investment and create the most value. A fully connected system is critical for full benefits, but the order of implementation can make or break your overall transformation.

Ultimately when we see organizations fall into the pitfalls above it’s because they didn’t let the business needs drive the technology. I think when you take a strategy first approach and prioritize the right components and order of your technology your transformation will be successful.

Following Angela's lead - I nominate Anirudh Vij to share the ways Machine Learning can be used in Social Procurement! Following this crisis, I feel a lot of us will be taking a more holistic look at our supply chains.

TT

*I started this long before travel was interrupted, but without flights I really don’t find time to write at all...and I still ended up missing my April deadline!