The integration of digital technology into all areas of a business, digital transformation fundamentally changes how organizations operate and deliver value to their customers. It’s also a cultural change that requires organizations to continually challenge the status quo, experiment, and get comfortable with failure.
Companies are taking digital transformation seriously. According to IDC, worldwide spending on the technologies and services that enable digital technology will reach $1.97 trillion in 2022. “IDC predicts that, by 2020, 30% of G2000 companies will have allocated capital budget equal to at least 10% of revenue to fuel their digital strategies,” said Shawn Fitzgerald, research director, Worldwide Digital Transformation Strategies, in a press release.
“This shift toward capital funding is an important one,” Fitzgerald continued, “as business executives come to recognize digital transformation as a long-term investment.”
5 Ways to Embrace Digital Transformation
As entire organizations push toward a more digital future, procurement departments continue to implement technology, software, and processes that help them work smarter, better, and faster in the evolving business environment. According to a new report from Spend Matters and procurement software maker Jaggaer, there are five steps that all buyers can be taking now to help prep their organizations’ digital transformation.
Here’s a synopsis of the five strategies (the full report is online here):
- Develop a Digital Procurement Strategy. According to the Jaggaer survey, 51% of procurement professionals say they’re “up to date” or better with digital (an optimistic 3% declared their level of knowledge to be “excellent”). The software provider sees this number as “optimistic,” and says buyers that aren’t up to date should focus on understanding the potential for digital transformation and developing a step-by-step roadmap to success.
- Strive for integrated, consistent data. “Most of the new processes described above will fall down if data is not accurate, robust, timely, and consistent,” according to Spend Matters. For example, having accurate vendor master data has always been important, but when that data is driving key artificial intelligence (AI) decisions on sourcing, on risk management—and other key business process and actions—it also has to be reliable. Issues around vendor master data will become more pressing for procurement, it adds, and processes like “onboarding new suppliers will become more critical.”
- Develop the right skills and capabilities. “Organizations need individuals who can develop strategy and drive through implementation, all of which requires a wide range of skills, from strategic planning to an understanding of digital procurement technology,” Spend Matters points out, “from competence with data and analysis to excellent change management skills.” It says individuals will also need the skills to execute the ongoing work in the digitized and transformed procurement function.
- Think beyond AI and blockchain. As the two emerging digital technologies that companies are most focused on right now, AI and blockchain are taking up a lot of mindshare. According to Spend Matters, procurement should not neglect other emerging digital technologies like 3D printing and digital manufacturing processes, both of which can contribute to the complete digital transformation picture.
- Don’t be afraid of change. Procurement professionals can look at digital transformation as something that’s beyond their expertise, or they can embrace it. “Digitization, digitalization, and digital procurement transformation are coming, whether we as individuals see that as a great opportunity or a huge threat,” Spend Matters concludes in its report.
Recognizing both the opportunities and the challenges that digital transformation presents for procurement, Spend Matters points out that much of the new digital world relies on business models that are driven by commercial, collaborative relationships. “Effective, talented procurement people should be well placed to help their organizations navigate through the new digital business world,” it writes, calling its recommendations “a good first step to embracing all the opportunities that ‘digital procurement transformation’ can offer to the organization, driven by a digitally-literate procurement team.”