Procurement leaders struggle with digital transformation agenda

Despite all the focus and efforts put into digital transformation, procurement leaders from companies of all sizes continue to struggle with successfully delivering their digitisation agenda.

According to a new report by Proxima, based on a survey of 200 chief procurement officers and heads of procurement across Europe and North America, around a third of leaders believe their digital transformation under delivers against stakeholder and, or corporate expectations. 

The finding comes amid a growing need for procurement functions to go digital, amid growing expectations to improve decision-making and boost internal customer satisfaction. Proxima’s report found that giving their teams better data and insight is the top digital priority of procurement leaders, followed by adding value to customers – both internal and external. 

Notably, reducing costs and driving internal operating efficiencies, traditionally one of the key drivers of procurement change, ranks third, alongside with improving means of collaboration between members of the procurement function.

Across the board, procurement leaders see digital as a way of ramping up their value-added towards the chief executive and chef finance officers. 56% of the surveyed leaders admitted that procurement too often is still viewed as an operational department, and need to be repositioned as a value-adding function.

This mean that the procurement functions needs to expand its remit from just processing transactions and managing supplier relationships to leading efficiency, collaboration and innovation. Digital is an enabler, facilitating among others better spend analytics, real time internal data and enhanced supplier relationship management. Digital also helps in tailoring the value delivered by procurement to the varying needs of internal leaders.

A delivery struggle

However, in practice, as seen elsewhere, digital transformation remains a notoriously challenging area for procurement leaders. An alarmingly high percentage of nearly a third of respondents expect digital transformation to under deliver against key performance indicators. 

“Put simply this means that three out of every ten procurement professionals surveyed expect their efforts to be regarded as a failure,” said Simon Geale, a senior vice president at Proxima, a consulting firm dedicated to procurement and supply chain.

Putting things in a brighter perspective, Geale said, “We can take some comfort in knowing that only a small percentage think that this will be a significant failure, and at roughly 30%, the total expected failure rate is far below the numbers that are commonly cited by analysts and consultancies [typically 60% or more].” 

Fact remains that the digital transformation agenda faces an execution gap, and Proxima’s study identifies a few reasons for this. First, half of all respondents encounter some form of stakeholder or executive buy-in challenge when taking the first steps in ‘going digital’. This includes selling the vision/business case to the C-Suite, at 27%, and gaining stakeholder buy-in, at 23%. 

While this for a large part has to do with priorities and budget allocations amid a disruptive environment, it also is the result of poor visioning from procurement leaders. 85% of leaders admitted to having some sort of problem with articulating the burning platform for their digital plans, or the benefits thereof. 

To this end, procurement leaders should according to Geale develop a more tailored approach as they ‘pitch’ their plans. “Procurement is one of the few functions that has the potential to touch all parts of the organisation, meaning that stakeholders are numerous and their needs are varied. While the benefits of digital needs to talk to all of these stakeholder groups, the message needs to be different for each.” 

Critical success factors

For procurement leaders to get more budget freed up for their digital plans, a customer-centric design is advised. “Embed customer-centricity into thinking and actions,” said Geale. “The customer, and their needs, should be front and centre of the digital strategy and roadmap.”

Equally important: make sure that the business case is realistic. Collaboration with finance is recommended to get deep insights into financials and benefits, and a governance structure should be established that ensures tracking of benefits. This will inject confidence into management ranks, improving the odds of obtaining leadership buy-in.

Then, procurement leaders need to consider what team they need for successful delivery. Geale: “Successful execution will depend on how CPOs are able to infuse transformation experience in their team, and instil confidence and trust in those around them. Stellar delivery will build on the design with strong project management, functional and stakeholder collaboration, constant reference to and delivery against the value case, and excellent communication and change management.”

But the success of digital procurement goes beyond the delivery of systems. Because ultimately, “CPO’s greatest impact is not going to be digitising procurement processes per se, it is going to be what they do with the outcomes and how this helps their business,” remarked Geale.

“Delivering digital procurement is a starting point, humanising its benefits is what comes next; connecting and collaborating, bringing new insights and fresh perspectives.”