To thrive in an era of intensified competition and volatility, procurement has to “evolve its capabilities to not only become more efficient but also enable the enterprise to realize its strategic objectives,” so says The Hackett Group in its new report on “World-Class Procurement: Redefining Performance in a Digital Era” .
“Digital competition is shaping the business model of the future. Although few businesses are truly there yet, business leaders understand that digital is changing everything,” the company points out, noting that nearly 60% of business leaders from a variety of functions responding to a 2019 study say digital transformation has already had a high or very high impact on their industry.
That number that will grow to 72% within two to three years, predicts The Hackett Group, which says 46% of companies says that digital transformation has already affected their current operating models (and 72% expect to see those impacts within the next 2-3 years).
“When looking only at responses from procurement executives, the expectations are similar,” the companies points out in its report. “Eighty-six percent of them anticipate a high impact on the procurement function’s performance over the next two to three years, and a similar percentage say digital transformation will have a substantial influence on their operating model.”
Pinpointing the trends that are pressuring procurement organizations to digitize their operations, The Hackett Group sees rising consumer demands, disruptive technologies, and increasing competition as three of the biggest influencers.
“Procurement is not exempt from these demands and will need to step into a more strategic role as a business partner and operational enabler,” it adds. “Adoption of digital tools, agile thinking and behavior, advanced analytics, and performance measurements adapted to the digital era are all core elements in the future procurement organization.”
Time to Move the Needle
How can procurement organizations get from here to there on the digital transformation spectrum? According to The Hackett Group, it all starts with a comprehensive framework for transformation, grounded in a clear business value proposition.
“The scope of the transformation needs to be holistic, as improvements in just one or two areas will not move the needle,” it warns. “While certain components of the service delivery model will be in greater need of transformation than others, performance improvements that will deliver the quickest benefits should be prioritized.” Here are some good starting points for organizations that want to start seeing the benefits of digital transformation:
- Review KPIs and take action where improvement is needed. Metrics should gauge the drivers of performance and strategic goal achievement, The Hackett Group advises. Other good action steps including ensuring that customer experience metrics are incorporated into the updated performance metrics, and working with business leaders to develop initiatives aimed at improving these performance barometers.
- Put customers at the center of service design. Design service delivery for different workforce segments and levels of management, the firm advises. “Apply methods such as focus groups, design committees, user personas, customer journey mapping, and iterative prototyping,” it adds.
- Use digital technology to increase productivity and improve the customer experience. Provide information and tools that increase the productivity of procurement staff and the workforce as a whole. “Use a ‘mobile-first’ principle to enforce simplicity of design,” The Hackett Group advises. “Introduce smart automation such as chatbots to handle routine inquiries.”
- Build analytics capabilities. To develop better insights and decisions, assign dedicated analytics resources in every area of procurement, the Hackett Group suggests. Then, establish data management governance and processes to provide consistent, usable, and meaningful data for analytics.
- Develop procurement’s data savviness, but don’t ignore the value of soft skills. Train staff to solve problems using data, the company recommends, and package analytical findings into business-relevant stories and recommendations. Recruit from other areas of the business, and assign staff to cross-functional teams to learn about the operations of different parts of the organization. Keep in mind that while digital and analytical skills are important for the next generation of procurement associates, softer skills such as people management and communication are also increasingly necessary. “In fact,” it concludes, “stakeholders list soft skills as highly important; it should be a concern that procurement is falling short in meeting those expectations.”