What does the future hold for Procurement as investment in digitalization grows?
An Interview with Giles Breault on how to approach digital transformation in procurement
In this podcast, we are joined by Giles Breault, former CPO of three major corporations including Novartis Pharmaceuticals, Aventis Corporation (the precursor to Sanofi Aventis) and Roche Pharmaceuticals – and Founder of The Beyond Group, a specialized consulting company that focuses exclusively on the topic: ‘What’s next for procurement?’
The state of Procurement today and how it can improve
In the interview, Giles speaks of Procurement’s need to step up from a strategic perspective, pointing out that this evolution has ‘stalled’ in parts, largely due to the function being a victim of its own success. He explains, “By consistently generating year-on-year savings, the function, which in my mind is a very capable function, simply has not been rising to its full strategic capability.”
There are two areas that Procurement needs to focus on in order to fix this, namely by attaining a higher level of strategic importance within the organization and achieving a higher level of strategic performance. Giles believes that the current, immediate issues that Procurement is facing now provides the foundations for its further evolution.
Key issues for Procurement to face
In our discussion, Giles highlights how he sees it being the macro issues that are driving this change for Procurement. Macro issues include:
- Climate change
- Geopolitical instability at local, national and global levels
- Risk identification and management
- Impact of technology
As Giles points out, “These directly translate into issues that Procurement teams will need to face. Sustainability; global supply chain security; risk mitigation; and technology and digitalization will dominate the discussions of leading procurement teams in the future. They are already key topics that we are discussing today – but they will be an even greater part of that discussion in the future.”
Of course, the COVID-19 pandemic has also played into this, although Giles warns that there are still big questions that remain unanswered, especially in the wake of further waves of the pandemic:
- How will people cope with the continuous notion of isolation?
- How will people develop their careers, their need for development and their need for advancement?
Giles adds, “None of these things have really been sorted out yet and they remain for the moment just as questions and will certainly need to be worked on as a key priority going forward.”
The future of technology in digital Procurement
Giles also talks about technology investment in Procurement, citing areas such as data mining, artificial intelligence, bots and robotic process automation as being increasingly influential in the future, as we discussed in detail in our previous interview with Nic Walden.
Giles explains, “All of these technologies are going to give procurement teams a huge understanding of not only their past behavior, but also huge insights into their future actions and strategy. The predictive capability of these new digital technologies is tremendous and it really will allow procurement teams the ability to focus on the core mission of generating value through better insight.”
However, with this comes a warning. “Very often, procurement leadership is not taking control of how these technological solutions are used strategically. Different functions own different parts of the purchasing process and the opportunity to link and derive strategic insight from all of this data and information is simply forgone.”
How to approach digital transformation in Procurement
Giles argues that the digitalization process needs to be guided by a key fundamental objective which states that every new technology taken on board must demonstrate what he terms ‘line of sight to benefit:’ “With every new thing you do, every new technology that you bring on board, you need to have direct line of sight to the benefit that it will eventually deliver.” He continues, “We see today a lot of processes and technology that companies are bringing on board, that are really quite innovative, really quite exciting technologies, but they simply don’t allow the organization to achieve its goals. It’s not moving the organization towards an objective. So, our view is, focus on technologies that drive value and not just on ‘cool’ technologies.”
Another barrier is data incompatibility, caused by the fragmented ownership of various parts of the purchasing process within organizations across different areas, as Giles describes, “They collect data differently, they collect it in different places, they use it differently and they use it for different strategic objectives. That level of data incompatibility fundamentally prevents the accurate aggregation of data that really prevents using that for strategic insight.”
The problem, Giles adds, is, “that most companies, when they’re on the digitalization journey, don’t fully recognize this until it’s well too late.” As a result, there is frequently a functional struggle around questions such as how to define the data, which in turn means having to redefine procedures on who collects that data, who owns the data or who manages that data.
Giles continues, “What happens is, because that struggle is now in the midst of a major digitalization process, organizations simply end up making a whole bunch of compromises, that again prevent you from using that data effectively for strategic insight. So that’s an area that we really think needs to be really worked on and thought about at organizations – well before they jump into the overall digitalization process.”
This drives to the heart of much of the work that Giles carries out as part of the Beyond Group, where a pillar topic is ‘Creating Value Through Strategic Alignment.’ It’s a topic that focuses on finding, in Giles’ words, “the sweet spot between the traditional position of procurement organizations around savings and this much larger contribution that they can make through alignment with company global strategy.”
His closing advice: “Think big and act boldly.”
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