As procurement faces an ever-growing list of objectives, digital transformation becomes ever more critical. With resources flat or declining, the only way to accomplish more is to free capacity through automation and improve the quality and accessibility of information for faster, better decision-making. As user expectations for a consumer-like purchasing experience grow, providing intuitive, self-service eProcurement with access to all content is essential. No surprise then that there is hardly a procurement organization out there that has not started or is now contemplating digital transformation.
Unfortunately, a couple of key barriers are limiting success for most organizations. The first is a drastically exaggerated sense of progress among procurement leaders. The most glaring finding from an April 2019 study conducted by Forrester Consulting on Executing a Successful Procurement Transformation was the disparity between respondents’ self-assessment of their maturity and Forrester’s own. 65% of respondents self-assessed their procurement organizations as being advanced, delivering a competitive advantage to their organization, in comparison to only 12% assessed as such by Forrester (who found 60% to be at the beginner stage).
Interestingly, those same respondents had a realistic sense of their digitization, with over 75% acknowledging their level of digitization is below (often far below) 50% for every step of the Source-to-Pay process. If that is supposed to be an advanced stage of digital transformation, it is time for a reset. Truly advanced organizations are achieving high 90s in terms of digitization, as evidenced by CACI, Credit Agricole and others. Yet, complete digitization alone does not on its own deliver a true competitive advantage. It sets the foundation, reducing operating costs and freeing capacity. Far too many organizations view digitization as an end goal. But true competitive advantage only comes from leveraging that capacity to drive value in more strategic areas – growing revenue, accelerating time to market, delivering more innovative, profitable products. Even if organizations are just starting their transformation, they need to have the long term vision in mind. Otherwise you may build a team and select technology that helps meet today’s objectives but quickly becomes a roadblock.
That brings me to the second barrier derailing so many digital transformations – the technology. Most organizations do a poor job selecting technology. 82% of respondents switched (39%) or are considering switching (43%) technology, finding it failed to deliver the expected value, often becoming an obstacle to their transformation rather than an enabler.
Overall 2 failure points were identified as being the top reasons for switching technology. Top of the list is supplier adoption. There is so much focus on user adoption, which is critical and the number 2 failure point. But that goes hand in hand with supplier adoption. If your suppliers aren’t onboarded, users can’t find what they need and have an excuse to go around your system.
While there were common obstacles, the top ones differed greatly by stage of maturity. Beginners struggled most with lack of executive support and budget. For them, technology that delivers a rapid ROI to prove the case for further investments is key. Intermediate departments struggled with supplier adoption, user adoption and data quality. For them, supplier-friendly models, user-friendly technology and systems that improve data quality are key. And advanced departments struggled with integration across S2P processes and change management. True suite integration is critical for them (unsurprisingly they are most likely to use a full suite or be planning to deploy one.
The disparity in challenges provides a great lesson for selecting technology. Leaders must avoid the trap of focusing evaluation purely on today’s requirements. They matter and should definitely play a heavy role in weighing alternatives, but you need to simultaneously consider future requirements. Otherwise, you’ll find yourself in the same situation as the 82% in this study, regretting your decision later on and having to make a costly decision to fight on with a system no longer fit to purpose, or rip and replace.
Looking at the top obstacles, details matter. You must look under the covers. Take S2P integration for example. As organizations increasingly expect full suites, most vendors now claim to have one and on the face of it they often sound the same. But there are actually huge differences and they matter greatly, especially when it comes to integration. Integration can be at various levels and you need all to realize true S2P digitization. Some have no integration, often after recent acquisitions. Others demo well with nice demos showing integrated workflow. Others go a step further and built the interface so there is a common experience across all modules, for users and suppliers. True integration is at all those levels, plus also at the data level, with a single set of tables, one common supplier record, etc. These differences are why many advanced organizations still struggle with S2P integration despite having deployed a suite.
For supplier onboarding, again it is a case of understanding what really drives results. The impact is massive. Some factors, such as network size or how many current suppliers are already on a network, seem like they would support rapid onboarding but in fact don’t. The vast majority of suppliers always have to register again due to different addresses and processes they onboarded for so what really drives onboarding is making it easy for suppliers. Flexible options to connect and the ability to collaborate on more than just transactions to build the relationship help. Limits on what suppliers can do, vendor-specific conditions they must agree to and fees destroy onboarding. Maxim Healthcare faced this issue, onboarding under 20 suppliers in 7 years with a large network provider that imposed conditions and fees. After finally switching to Ivalua they deployed and onboarded more suppliers in 8 weeks than those 7 years.
Digital transformation may seem like a daunting journey, and the statistics revealed by this recent Forrester Consulting study may reinforce that, but the reality is that a fruitful journey is very possible. Leaders need only plan their long-term course and build the team and select the technology that will support you EVERY step of the way. And don’t forget the details – you need to be able to spot the differences. To hear more details live from Duncan Jones, Forrester VP and Principal Analyst, register for the webcast scheduled for May 29.