Digitization Should Be a Revolution, Not an Evolution

Digitization is upending all parts of the world’s companies, from the nature of the goods and services they produce, to the way they provide them to customers, to the operations they use to make and sell their products.

Corporate functions are at the center of all this change; not only must they use their expertise to help their companies take advantage of digital trends (such as IT, strategy, and R&D teams) but they must also harness the opportunities this gives them to make the own teams more efficient and useful. For instance, less than two years ago, 70% of shared services teams said they hadn’t done any work with robotics — today, just 17% of functions fall into that category, according to CEB data.

Good, But Not Good Enough

The benefits of all this for procurement teams are clear. The function can automate routine activities and gain visibility into important data by using the right technology solutions. Significant savings in cost and time are well within the department’s grasp.

And, while procurement teams are making some progress – senior executives understand the advantages and they’re looking for a change – the function isn’t moving quickly enough. In fact, 60% of procurement teams say they don’t have a clear digital strategy, according to a recent survey. The problem is that procurement executives often make incremental investments because they’re uncertain whether their investments will deliver on their promise.

Three things in particular are making them move so cautiously

•   Previous negative experiences with technology: Every procurement manager has a story to tell about technology implementation gone wrong. These disheartening experiences can give chief procurement officers (CPOs) pause when they consider new digital investments.

•   Low buy-in leads to low participation: When procurement leaders do adopt new technology, business partners and procurement staff often avoid using it, which means Procurement never sees the expected payoff.

•   Vendors that don’t address Procurement’s concerns: What procurement executives really want to know is how good a fit the technology is for their function, but technology vendors usually don’t address that when they pitch their products, leaving functional leaders unsure which they should pick.

Why Procurement Needs to Act Decisively

But despite skepticism and concerns about new technology, procurement teams need to act fast. If they don’t make the right digital investments when their business partners are already doing so, they’ll get in the way of ongoing digital transformation initiatives.

And this could make it harder to get stakeholders on board with their own pet projects. Business partners often stereotype Procurement as “slow.” Don’t give them another excuse to use that label.

What’s more, avoidance could cause big headaches later. Technology is getting easier and easier to buy — so impatient end users throughout the business may well try their own experiments with procurement technology. The function needs to step in quickly to avoid the proliferation of multiple unsuitable products. Not only will this be difficult to control, but it will also exacerbate existing challenges, like spend consolidation.

Plus, digitization will help procurement teams collaborate more closely and effectively with business partners, which will improve relationships overall.  So, although digital transformation can take place at extreme speed compared to other major changes, like outsourcing, it’s critical that Procurement develops the confidence to make the right technology investments now.