Preparing for the Procurement Automation ‘Bite-Back’
In this past Saturday’s Wall Street Journal, there was an article by Greg Ip in which he talked about the innovation ‘bite-back’. That label might not mean anything at first pass, but you’ll get it very quickly with a few examples.
“The cultivation of sugar beets in the 19th century led to vastly more consumption of sugar and a “precipitous increase in tooth decay,” he [Joel Mokyr, a technology historian and economist at Northwestern University] said. When lead was first added to gasoline to improve engine performance in 1921, nobody knew it would eventually be linked to learning disabilities and crime.”
For every meaningful step forward, unintended consequences or side effects threaten to steal the newly won advantage from those who are unprepared. At a very high level, bite-back is like the boardwalk game whac-a-mole. You conquer one challenge, or begin one path towards improvement, only to be pushed back by an unanticipated consequence. Luckily, we don’t need magic or predictive analytics to anticipate where the bite-back is likely to appear.
Rosslyn Analytics, provider of an award-winning set of self-service tools designed specifically for business users to easily extract, integrate and cleanse data for analytics using the RAPid Cloud Platform, has presented me with the challenge of increasing dialogue within the procurement community about our relationship with automation. They have placed no constraints on me regarding the discussion, preferring an open and honest exchange of ideas that has been long overdue. I will share all related content and commentary here on Buyers Meeting Point and on Twitter using the hashtag #AutoProcure.
Last week, I kicked off this conversation by outlining three key topics/questions for discussion. I’ll admit that I’m an optimist, so they are pretty blue skies from a forward looking perspective. As I read the newspaper on Saturday morning, Ip’s article seemed like a cosmic reminder that there are reactions to every action – and although we can’t necessarily avoid them, we can absolutely be proactive and try to anticipate them.
IN MY OPINION, increased automation is the only path forward for procurement (and for business in general). So let’s play our own devil’s advocate and consider what form the procurement automation bite-back might take. After all, there is a good chance we will face these types of questions from our own executive team. Better to have thought them through in advance.
Bite-back #1: After automation has improved the speed and accuracy of the spend analysis process, procurement will find that we have been investing our effort to source the wrong categories.
Now, this bite-back could take several forms. The most straightforward possibility is that we’ve concentrated our efforts on logistics when we should have prioritized marketing (e.g.). In this case, it is a simple matter of imperfect visibility and understanding leading us to address spend categories in the wrong priority order. The other, less appealing yet totally realistic, possibility, is that we find for all our emphasis on strategic category management and supplier collaboration that the greatest savings opportunity is associated with doing a better job of managing tactical or transactional spend. While this is not great news from an aspirational perspective, such a finding would give procurement the green light to use full-on strategic sourcing and employ the time-tested volume levers to make a significant impact on spend.
Bite-back #2: Procurement gets approval for the desired investment in automation, only to be informed that their desire to add to headcount has been denied.
You can’t embrace automation half way. Either you believe in the advantage of smart machines and are willing to work along side them, or you will continue to fight against the machine, inevitably losing out in the end. Looking at influence as indicated by headcount is an outdated approach. What is the depth and breadth of knowledge and capability possessed by each employee? Start ups can’t afford to have a bunch of specialists on staff, and yet they manage to innovate with the right assistance from technology. Remind yourself that the reason you employ automation in the first place only leverages a fraction of its true potential. In order to convert automation into a competitive advantage, procurement will need to implement, learn, and then start pushing its boundaries as soon as possible. Pushing against the technology gives it – and its human counterparts – the opportunity to flex their muscles and take performance to the next level.
Bite-back #3: Procurement rolls out a new level of automation and the executive team likes it so much that they want more automation brought to bear on procurement and other internal processes.
The thing about leading change is that you can’t be so presumptuous as to think you know where it will stop. When embracing automation, procurement will have one thing in mind. If they are successful, the executive team will almost certainly want more – perhaps even enough more to completely change the scope and impact of the intended transformation.
A brilliant idea isn’t conceived with a specific end in mind, but rather comes to life for its own sake. Even the person/team who introduced the idea becomes little more than a steward. They must be willing to allow it to lead them and the organization in unexpected (and sometimes uncomfortable) directions. Success comes from introducing the idea – not being able to foretell where it will lead in the end.
The advantages of automation are easy to recognize and even celebrate. It is the boldest leaders and organizations in our midst that are able to identify risks and challenges in advance and embrace an approach anyway because they recognize that forward progress is the only way to reach an elevated future state.
What are your reservations about automation? Are any of them based on the unintended consequences of automation? Try to project forward – how would you respond?