The integration of digital technology into all areas of a business, digital transformation fundamentally changes how organizations operate and deliver value to customers. Getting there also requires cultural change and a continual challenge to the status quo—neither of which is easy.
According to a new report, many procurement professionals are getting onboard with digital transformation initiatives not because they understand their overall value, but because they’re afraid of missing out on their benefits.
FOMO is Kicking In
In “Procurement 2025: Is Digital Transformation Driving More Effective Procurement?,” Efficio Consulting (which conducted the study in partnership with Cranfield University) says that digital procurement is driving significant activity among procurement leaders, with 63% having rethought their approach due to new technologies and 78% believing it should be a boardroom priority.
“Much of this activity is, however, being driven by fear of missing out (FOMO) rather than a true understanding of the digital requirement,” Efficio reports, “as acknowledged by nearly half (48%) of the survey respondents.”
Skeptical about technology’s ability to fulfill on its promises, 72% of buyers say their departments lack the talent needed to harness the power of machines. Another 66% feel that poor vendor support during the implementation phase will keep them from achieving a return on investment (ROI), while 64% say the technology itself won’t be supported by the right processes and skillsets.
“Interestingly, the capability of current technology is the least-cited barrier to success,” the company reports, “with only 37% of procurement leaders viewing it as a significant hurdle.”
Procurement is Onboard, but Dubious
Despite the challenges that digital transformation presents…
- 78% of procurement professionals think digital procurement should be a boardroom priority.
- Digital transformation activity is being driven as much by FOMO as by a true understanding of what the long-term business case for it is (48% of participating companies agreed with this statement).
- 63% have rethought their approach due to new technologies.
- 22% think faster, higher, or more sustainable savings will be the biggest benefits of technology to procurement.
- Nearly two-thirds (64%) believe strategic suppliers will play a crucial role in helping them to meet their procurement objectives over the coming five years.
Getting there may be a challenge. In looking at where procurement stands right now on the digital transformation spectrum, Efficio says that while 78% of companies believe digital transformation should be a boardroom priority, 42% consider themselves to be ahead of the competition when it comes to delivering this transformation, clearly indicating the importance it plays within these organizations.
“This viewpoint is reinforced by the current focus of today’s procurement functions,” Efficio notes in its report. “Transforming existing systems and processes with technology is frequently cited as the top procurement objective by our survey respondents, ahead of more traditional aims such as getting access to the right skills, delivering savings, and being a source of innovation for the business.”
6 Steps to Success
With 18% of surveyed companies expected to make digital transformation a strategic priority over the next five years, and 40% ranking it among their “top three” strategic considerations, Efficio gives buyers these six success tips for getting there (the complete list of recommendations is in the report, available online here):
- Start with a vision. Consider the big picture of where you’re trying to get to and why.
- Analyze your requirements. What is your key deliverable to the business? (e.g., agile buying processes, cost savings, supplier quality, etc.)
- Build a digital roadmap and prioritize. Digital transformation is an ongoing journey and it’s vital to keep on top of it. “To facilitate and carve it into manageable chunks requires an agile roadmap,” the company advises.
- Dare to take smaller steps that make a high impact.
- Be careful about investing in complex technology suites that may overwhelm people and contain functions you are never likely to make full use of.
- Use your data to your advantage and build a platform that enables reuse of knowledge to drive faster cycle times and better results.
Calling digital transformation a journey versus a “one-off” exercise, Efficio’s Simon Whatson tells buyers to get their vendors involved with the effort. “Have an idea of what outcomes you want in future, irrespective of technology, and talk to vendors now about what their ideas are and how you can achieve that,” he told Supply Management.
“You need to speak to people in the industry,” he continues, “especially the vendors where all the innovation is coming from to find out how they can help you on that journey. It really does need to be a journey and not a one-off exercise in investment.”