This week’s webinar notes are from a December 4th event presented by Ardent Partners on what they have dubbed “The New Procurement”. If you want to read more from Andrew Bartolini and his team, visit CPOrising.com.
Before I get into my notes on the three dynamics outlined in the webinar, there was some good news and some scary news (my choice of words) shared up front that provides an interesting context. The good news is that procurement’s responsibilities continue to change, as do internal perceptions of CPOs. While there is still work to be done, Ardent Partners’ research found that only 4% of CPOs were viewed as silo’d. Talent management continues to be a high priority in procurement, with an ever-increasing need for general, consulting-type skill sets.
The scary news is that even established procurement technologies have not been implemented by the majority of the market. When looking at the use of common solutions such as eProcurement, spend analysis, contract management, etc, no category of functionality was being used by more than half of the companies surveyed. Spend analysis was only in use in roughly a third of organizations. As a result, spend under management suffers, and while best-in-class companies have over 85% of their spend under management, all other companies are stuck around the halfway mark: 54.4%.
I consider this news scary because if, as the premise of the event suggests, it is time for NEW procurement, many companies are going to be faced with the fact that they have not yet mastered the OLD procurement.
As you might expect, talent is at the heart of best-in-class procurement organizations. Their strategies include a focus on visibility, having team members with strong but broad skills, and placing a deliberate emphasis on collaboration inside the organization. For organizations that don’t have those capabilities in house already, the ability to recruit from a wide pool of candidates (think in terms of both industries and geographies) as well as to consider the merits of non-traditional hiring models will help make up the gap.
Bin Shrestha, Global eProcure’s VP of Global Delivery, did a fantastic job of providing a perspective on Ardent’s research by sharing observations based on his client base. Asking the tough questions about what needs to be changed, including outsourcing tactical responsibilities if that makes sense, is just the start. Leading procurement teams also have to have high productivity levels and be willing to take calculated risks as appropriate. He also introduced the idea of pushing the performance of standard programs, contrasting supplier relationship management (SRM) with true supplier innovation.
According to Ardent Partners, the three dynamics of the ‘New Procurement’ are agility, mobility, and visibility.
Bartolini used a great visual to emphasize this dynamic, that of a cheetah. A cheetah’s lethality (and therefore ability to survive) is not determined by speed alone, but by its ability to start, stop, and change direction accurately while moving at high speeds. The same must be true of agile procurement organizations, and “intellectual acuity” is the phrase he used to describe the requirement. Operational growth opportunities are locked up in contract structures and cost models that react to or even predict the needs of the company and external market dynamics.
While new talent can be recruited from anywhere (as mentioned above) which makes it easier to build the right team, it is also easier for those resources to move on to new positions. As a result, recruiting and retention are both of equal importance.
A procurement function without spend analysis has limited strategic capabilities. Operating blind hampers any effort to increase spend under management, measure realized sourcing savings, or track compliance/maverick spend. Bartolini asked a compelling question to drive this point home: would any competitive organization monitor their sales effort without clear visibility into bookings, revenue, and pipeline? The clear answer is no.