Lack of internal resources and talent may hinder procurement's digital transformation

Most procurement leaders are well aware that digital solutions and applications such as cloud computing, analytics, and robotic process automation have the power to revolutionize the way they do their jobs, according to a recent report by The Hackett Group. Yet many of these same leaders are also saying that their companies lack the necessary talent, strategy, and competencies to take full advantage of that transformation, says the consulting and benchmarking firm.

The report, "The CPO Agenda: Keeping Pace With and Enabling Enterprise-Level Digital Transformation," is based on The Hackett Group's annual survey of 180 companies in the United States and abroad. Respondents report annual revenues of US $1 billion or more.

According to the report, 84 percent of all respondents believe that digital transformation will "fundamentally change" the way their organizations provide services to internal customers over the next three to five years. Yet only 32 percent say they currently have a formal digital strategy, and only 25 percent say they have the necessary internal resources and competencies to support digital initiatives. In spite of these resource and strategy gaps, the survey found that twice as many digital transformation efforts are underway this year as compared to last.

"The gap between awareness and capabilities in digital transformation is not unique to procurement. We've seen similar results in finance, [human resources], and even IT," said The Hackett Group Principal and Global Procurement Advisory Practice Leader Chris Sawchuk in a statement. "Yet it is disconcerting to see that many procurement organizations are simply moving ahead in this critical development area without a comprehensive plan or the requisite talent. This is not a recipe for success."

Adding to that challenge is the fact that procurement organizations' operating budgets are expected to grow by less than 1 percent this year, according to the study. As result, The Hackett Group predicts that only the highest-priority initiatives will receive any funding and that procurement may need to "self-fund" some of its goals.

To help with that prioritization process, the consulting firm recommends four steps companies can take to guide their digital transformation efforts:

1) Improve the stakeholder experience. Procurement should focus its efforts on initiatives that will improve internal customers' satisfaction. Such actions might include creating multiple buying channels (for example, help desks, self-service online catalogs, and third-party aggregator sites) that are available at all times on many different devices, and enabling on-demand, real-time status checks on procurement requests and transactions. The procurement organization should also work to personalize the shareholder experience by creating intelligent purchasing processes that recognize buyers and their role in the organization.

2) Create a "procurement as a service" portfolio. Procurement also needs to focus on efforts that will streamline the buying experience and will create better alignment between its own organizational model and those of its primary stakeholders. This priority might include "rebranding" the procurement organization to increase awareness and influence throughout the company; emphasizing procurement's ability to provide on-demand analytics and market intelligence; and creating centers of excellence for activities such as analytics, benchmarking, and reporting.

3) Set a foundation of analytics-driven insights. In order to serve as a trusted business advisor to its internal stakeholders, procurement must be able to analyze massive amounts of structured and unstructured data from multiple sources, says The Hackett Group. To accomplish this, procurement must train its staff about sophisticated analytical tools and methods; leverage market intelligence reports from third-party sources; and use predictive forecasting to mitigate the company's exposure to risks such as volatile commodity prices.

4) Leverage the right technologies. The Hackett Group says that procurement must create a technology platform that takes advantage of both traditional software suites and emerging technologies. Having a single provider for all procure-to-pay applications allows companies to have a tighter integration between modules, receive price discounts from bundling, and take advantage of less-complex maintenance and support. According to the survey, 63 percent of respondents either have a single procure-to-pay solution or are working toward having one. However, organizations must also be able to supplement their main software suite with niche, best-of-breed solutions in areas where they might provide differentiation, such as in supplier lifecycle management and spend analysis.