Procurement Transformation and the impact of Technology: Unlocking the potential for lasting change.

There is a perception that the days of complex, over-centralized decision processes and 5-year
business plans with layers of management and top-down processes are long gone. But is this the
case? True transformation is reliant on these models and approaches be reconsidered. Only then can
success be achieved by implementing procurement technologies in practice.
Transformation is one of the most overused words in business. When we apply it to procurement it
will often relate to the implementation of one or more digital solutions, or the automation of processes
to deliver target efficiencies or reduce complex and time-consuming tasks.
That is indeed a huge part of it, however, true transformation is driven by people and procurement
leaders need to consider how those technologies are applied in order to reach their goals and
overcome their challenges.
It is important that procurement leaders are empowered by senior stakeholders and have the
personal tenacity to drive the success of their transformational initiatives.
Arron Sachs and Anupam Kundu from Thoughtworks shared a powerful image that summarises
organizational transformational models – consider how this might relate to procurement
organizations.

Mindset change takes time and innovation requires to be supported by a healthy culture that truly
empowers employees to impact positive change.

Let’s focus then on some key mindset changes that need to happen to
succeed with digital transformation in procurement

• Transparency

Traditional procurement leaned towards secrecy, particularly relating to costs and pricing during
negotiations with suppliers. There is now a shift towards more strategic relationships with key
suppliers, where openness and transparency can be beneficial for both parties.
The increase in cloud-based platforms is also driving this shift, whereby there is mutual access to
data on demand. This type of transparency breeds trust and meaningful relationships.
Procurement teams need to focus on being open to stakeholder feedback when trying to implement
change. When selecting procurement technologies, they should consider the needs and value
opportunities of their internal customers. This will help not only with adoption but long-term
the success of those tools.

• Results Orientated

It isn’t only about the tools and efficiencies; procurement leaders need to be trusted to deliver to
their key stakeholders. Procurement should be seen as a key trusted partner. Teams and processes
need to be agile and any implemented tools need to complement the ability to deliver better results
and more useful data.
Sourcing and Category strategies should be flexible and open to feedback, input, and guidance from
their teams and stakeholders. In addition, clear measurements of success are important to
demonstrate the effectiveness of new technologies and any aligned strategies.

• Business Partnering

Top-down, hierarchical procurement teams are outdated and ineffective. The move to more fluid,
the center of excellence procurement teams is on the increase. Category managers are trusted to work
closely with their stakeholders as subject matter experts and business partners, regardless of the
perception of their strategic importance. This in turn creates value networks, closely aligned to the
category or business function’s strategy, targets, and culture.
Procurement technology in turn needs to be flexible to adapt to those more agile ways of working
and the team setup is important to consider alongside selecting the right tools and processes.

• Empowerment

It is still true in some cases that procurement is seen as a cost-controlling function, only there to
promote processes and negotiate prices. The early involvement of procurement as a key strategic
partner in any organization is fundamental. Networking and the adoption of technologies can
simplify or automate the traditional functions facilitating procurement to focus on more strategic-level initiatives. Customers need to feel supported and it is important that they feel a shared sense
of ownership which can lead to the empowerment of the procurement function.

• No more rigid processes!

Particularly in these unprecedented times, traditional long planning cycles with fixed processes are
no longer effective. Procurement needs to be more agile, innovative, and flexible. With technologies
constantly evolving, procurement leaders need to be more open to utilizing different tools and
adapting systems to suit the requirements of the business. Innovation is driven by being more
open-minded and supportive of flexible processes.

Example
With this in mind, let’s consider how these principles have been applied successfully.
Internal customers and stakeholders need partners for success. Procurement professionals need to
continually improve their working relationships within their organizations.
Many organizations are seeing a shift to procurement “Centre of Excellence” (CoEs), with Category
Leads acting as business partners to their particular functional area.
A leading Danish engineering company has seen a positive shift in strategic initiatives by
creating such teams, resulting in increased trust, openness, and satisfaction. A CoE Lead role was
created in the IT/Digital Function, with a reporting shift to a dotted line directly into the CIO as well
as Indirect Procurement. As a result, the CoE was seen as a trusted partner, advisor, and truly value-added. The benefit to Procurement was that they were able to closely align and deliver an effective
Category Strategy over 3-5 years. They were included in the IT Leadership Strategy, key initiatives,
focus, and requirements. This new relationship model also meant that Procurement was supported
with investment to deliver the right technology and tools with business cases closely relating to the
needs and targets of their internal customers through a simple focus on “common goals”.
This culture shift is a great example of the importance of changing the perception of Procurement
from a function to a valued partner and integral part of the team.

Summary:
There is no doubt that procurement technology is positively impacting change, however, in order to
effect true transformation, building a strong foundation of lasting relationships, networking,
empowerment and transparency are essential.
Alongside the need for a wider shift in mindset, procurement also needs to be smarter, fresher, and
more agile. By taking this holistic approach, leaders in the field can achieve measurable success.