An Interview on Innovation, New Technologies and ‘Fifth Generation Purchasing’ with Herve Legenvre
For this episode of the Supplier Experience Live Podcast from HICX, we were joined by Herve Legenvre. Based in Geneva in Switzerland, Herve holds a number of roles. He is Director of the EIPM Value Creation Observatory, where he conducts research on innovation, purchasing and new technologies that are changing industries. He is also co-author of the recently released book Fifth Generation Purchasing: When Pace Meets Power.
Fifth Generation Purchasing: From the idea to a framework, to the book
Herve begins the conversation by talking about his newly released book, which really drills into the pace of change in procurement activities. The idea for the book came to him as he was coaching one of his executive MBA students and realized how many of Procurement’s initiatives were being measured in terms of years, rather than in weeks and months.
“The pace of change and speed are absolutely essential to the world we live in and it’s absolutely key to be able to work in sync with the market and with the internal stakeholder. We really wanted to reimagine Procurement around the logic of pace, speed and time,” he adds.
However, the ‘generations of purchasing’ concept incorporates observations from a time when Procurement didn’t even exist. “The evolution of purchasing over the past 150 years was driven by changes in industries,” Herve explains. “The evolution of the broader environment has led to a massive transformation of Procurement over time. There was a time when Procurement didn’t exist as a function. Before we had very large companies, the founder was also the general manager, was also the sales manager, and was also the ‘procurement person’ of the company,” he adds.
The second generation started with the emergence of large corporations and focused on rationalizing, investing and negotiation by the appointed procurement person. The third generation, or ‘The Dark Age of Procurement,’ as Herve calls it, covers a period after World War 1 marked by closed borders and trade barriers. However, the industry recovered and evolved into the fourth generation, focused on globalization and supporting supply chains across the world.
The fifth generation started after the 2008 global crisis, which saw innovation coming from outside the organization and an emergence of new technologies and structures that are continuing to change the way in which Procurement operates today.
Key trends in the business landscape, digital technologies and digital solutions
When discussing trends, Herve believes that people are rarely looking at the big picture and are too often focused on Procurement alone, rather than the whole landscape. “What’s important is not about what’s next in Procurement. What’s important is: what’s next for the business? What’s next for the industry? What are the key trends that will be impacting your industry, your business, and how can you reflect on these, shift priorities and scale up some of the skills of Procurement?” he continues.
Although trends vary by industry, others are common throughout. For example, supply chains are increasingly being superseded by networks and ecosystems. The world has also moved on from standardization to personalization of products and services. Lastly, the ESG/CSR agenda has never been more important than today.
When thinking about upscaling through the use of digital technologies, Herve highlights that it is important to consider types of technology that are not only going to help Procurement, but also other functions within the company as well. “It is not simply about efficiency and control. This is about boosting the strategy capabilities of Procurement. So, I really think that we need to pay attention and find the right balance between all these types of benefits in order to really deliver the true mission and the true vision of the procurement organisation,” he advises.
Collaboration, innovation and organizational transformation
Herve believes that, often, many professionals approach innovation in an inefficient way. Instead of asking about what the companies’ problems and challenges are, they ask about their needs and requirements. “When we understand problems, then we can go and look for solutions outside. Innovation is not about having great ideas, it is not about finding technologies. It is about understanding, framing problems and then going to access the right solutions,” he adds.
On the topic of organizational transformation, Herve advises organizations to not forget their roots or why they started in the first place. “I think we need to get back to the vision. What’s the vision? What are the long-term goals of the procurement organization? What is our aspiration? Continuity of purpose. Not just new set of priorities every year,” he concludes.
If you would like to read the book Fifth Generation Purchasing: When Pace Meets Power, Herve is happy to send it to anyone who requests it by messaging him on LinkedIn.