Thought Leadership

A Procurement Resolution – Realize Your True Potential

Alex Saric, Chief Marketing Officer, Ivalua

In this time of personal New Year’s resolutions, it seems appropriate for leaders to also consider a resolution for their departments. For Procurement leaders in particular there couldn’t be a better time to do so. In recent years, the function has made tremendous progress in transforming into a strategic value driver.

Yet, as leaders broadly acknowledge, this transformation journey still has a long way to go. A recent study by the Hackett Group found that only 63% of Procurement organizations have even developed a plan for digital transformation. 33% bluntly stated their service does not meet customer expectations. A Forrester study on enabling smarter procurement found only 22% believe their reporting and analysis is where it should be and only 22% that they have the required agility to respond to changing requirements. What better time to set and start tackling key objectives for 2019?

My recommendation is to set an aspirational resolution that reflects Procurement’s true potential. One that is distinct from your MBOs, which are likely based on continuous improvement of performance aimed at closing the gap with best-in-class.

The problem with Best-in-Class

There is nothing wrong with benchmarking yourself and striving to improve performance to match the best of your competition. Organizations should do so, especially if still early in their transformation journeys. Success will result in greater value to those organizations. But achieving BiC performance won’t result in Procurement becoming truly strategic, and may actually hinder it in the long term. How so?

Look at it in the context of the World Cup (or the upcoming Superbowl). Every team in the tournament earned its spot by being the best in their region. Hence, each team can be said to be BiC. Yet only one is the champion and that team doesn’t win by playing at the same level as their BiC peers but by playing better, doing something critical differently. BiC is not a competitive advantage in sports, nor in today’s increasingly winner take all market. It is a stepping stone on the path to true greatness.

If leaders are to build competitive advantage and truly drive strategic value, they have to think beyond BiC and view that as an interim objective on their transformation journeys. Leaders must ensure that the people and technology they embrace to navigate those journeys have the capability to take them the full way, and not become a constraint at some point.

Yes, your top competitors are doing this right now

What exactly does going beyond BiC entail? Is anyone actually doing this? Yes they are. Your top competitors are extending their competitive advantage as you read this. Just a couple of examples:

  • Revenue. A leading Telco leveraged the flexibility of the Ivalua platform to create a private marketplace where suppliers can bid for used mobile phones in mass volumes, generating hundreds of millions of dollars each year
  • Innovation. In 2014 Meritor launched a 3-year initiative to drive massive value by transforming their supply chain in what can be thought of as a drive to achieve BIC. They then followed that with a new initiative to unlock massive innovation through a unique approach to new product introductions, configuring Ivalua’s platform to their ideas. The result? Their stock price rose from $4.45 to $13.30 at the end of 2016 and much further since, far ahead of competitor growth.

Note that in both of these examples the teams implemented BiC processes and wanted quick value. It should never be a compromise. But they kept the ultimate objective in mind and brought on the right talent and technology to take them to the next level when ready.

The talent challenge

In any meeting with CPOs I have attended in recent years, the top pain raised is attracting and retaining top talent. Talent that is up to the task of driving successful transformations, to BiC and beyond. This is a key reason we are including sessions led by recruitment specialists at Ivalua NOW this year.

The above examples illustrate an important point about talent, and the symbiotic relationship with technology. What good is top talent if your systems are too rigid for them to bring their best ideas to life? Out of the box best practices are important, but that shouldn’t mean constraining yourself from doing a few strategic things differently.

Meritor has a great team with great ideas. So when deploying software, they took embedded best practices but ensured they had the power to greatly configure once they were ready for that next phase. This empowered them to realize a unique and innovative approach that supported their financial success.

Realize your true potential

So as we enter a new year, filled with endless challenges and opportunities I encourage you to set a Procurement resolution. One that, if achieved, will set you on the path beyond BiC, to building a competitive advantage. One that will empower your talent to truly make Procurement strategic and realize your true potential.

This blog was first published on Procurious.com

You can also see this article on LinkedIn

 

 

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