How to Enable Best-of-Breed ProcureTech
Procurement network and intelligence platform providers, Procurement Leaders, hosted a webinar featuring Supply Chain and Procurement experts, Dr. Elouise Epstein, Partner at Kearney, and Costas Xyloyiannis, CEO at HICX. During the webinar, the panel discussed how to enable best-of-breed ProcureTech and the reasons why best-of-breed solutions within the ProcureTech landscape are growing so rapidly, and the importance of adopting a strategy-based approach for implementation to ensure success.
Digital technologies drive path to strategic procurement
Technology and data will have a crucial role in enabling business strategies in 2022. Increasingly, companies are looking to build agile, flexible and stakeholder friendly ProcureTech landscapes. Digital technology drives gains in efficiency, experience and enables a greater focus on strategic procurement.
This invariably leads to a mix of best-of-breed and suite solutions co-existing, bringing together different best-in-class capabilities.
This creates a challenge. How do you bring data and workflows together to connect the solutions within the ProcureTech landscape efficiently – and enable best-in-class user experiences?
An exciting time for Procurement
Dr. Epstein opens the conversation with some positive words for Procurement. “I often say that now is the greatest time to be in Procurement. It’s because technology has arrived, digital has arrived for Procurement – and it’s driving this path to the strategic procurement we all dreamed about for the last decade or two.”
Her statement comes with a warning, though, as she continues, “However, traditional technology is wholly inadequate to support the digital evolution. There is a mountain, an overwhelming amount of evidence, to say that the way we’ve done it in the past doesn’t work. Kearney is one of the most expensive management consulting firms in the world. You don’t hire us to implement one of the traditional providers. You only hire us when there’s either a huge opportunity or a huge problem. And I’ve built my career coming in off the back of failed implementations. So, I have seen this, it’s abundantly clear that we have to do something different.”
Recent events also serve as a wake-up call. “We find ourselves stuck in the old paradigm, the old upstream-downstream construct, and this no longer works. It took the pandemic to really blow this out of the water, although we saw it already with the trade wars, at least in North America, the America-China trade wars,” Dr. Epstein adds.
It is this, Dr. Epstein claims, that is driving her vision of the best-of-breed ProcureTech landscape as she presents it, which she describes as a technology architecture consisting of an ecosystem of connected micro-services, offering value creating point solutions. This architecture comprises a central hub or platform, into which a wide range of services are connected – everything from supplier performance through to contract lifecycle management (CLM), smart contracts, advanced sourcing, process intelligence, spend analytics and so forth. It is, in Dr. Epstein’s words, “the procurement value chain deconstructed.” New services are being added all the time as requirements quickly evolve.
She adds, “We’re in 2021 and going into 2022. We need to bring procurement technology to where the user is. We need to use that intelligence to make the user experience much better. The point is, we need a new architecture which means as you think about your digital strategies going into 2022, you need to look at this in terms of capabilities.”
Time to value
Dr. Epstein stresses the importance of time to value, which she views as the single most important outcome of a well-executed best-of-breed ProcureTech strategy.
Again, she compares this to the traditional approach to illustrate the difference, as she explains, “Typically, historically, consultants will come in and tell you, you have to do CLM, you have to do the repository, you have to do workflows, rerouting, approvals – and these are all really good things. But if you spend 18 months and several millions of dollars on consultants to define all this and all the code, after 18 months you have delivered zero value to the business.”
She adds, “You’ve gone through an intellectual exercise for Procurement, a good governance exercise, but nothing to help the business. Whereas, if we flip the paradigm and say, ‘let’s get all of our contracts together (it doesn’t even have to be a single repository) and we put some analytics on top of it, guess what? – All of a sudden, we can start to extract insights from our contracts in terms of how complex they are, where we have risk, where we have pricing mismatches – and start to enable our categories managers and the business itself.’”
“When we talk about best-of-breed ProcureTech, the time to value should be three to six weeks, not three to five years, and this is a critical takeaway. So, if we take nothing else away – time to value measured in three to six weeks,” she continues.
Software evaluation criteria
This flip, as Dr. Epstein describes it, means that when evaluating software, it will need to be considered against new criteria, which she believes need to be defined by six guiding principles, namely:
- Top user experience
- High quality data
- Ubiquitous analytics
- Full automation
- Flexible, best-of-breed ProcureTech solution
- Enabler to create value
In particular, on the last point, Dr. Epstein highlights that the focus is not on cost savings, but on ‘growth enablement,’ and enabling management of new capabilities through managing the firm’s ecosystem partners.
Overcoming negative stigma: Challenges of best-of-breed ProcureTech
Costas opens his section of the discussion by emphasising how challenges need to be addressed head-on, due to the negative stigma that has been associated with best-of-breed ProcureTech. “One key thing, which we want to demystify, is how people think best-of-breed might be this Frankenstein monster. This is a confusing way of helping people look at best-of-breed. Random acquisition of software just to address specific problems is not a best-of-breed ProcureTech strategy. It’s not planning for it; it’s letting it happen, which is the road upon which a lot of organizations have ended up.
“We need to plan for it and then we can be very successful with this approach,” he adds.
Costas highlights two main challenges:
- Supplier data: The key issue to address here, first of all, is ownership. There’s so many cross functional elements to supplier data, such as Shared Service functions, Procurement, Finance, Compliance. No one owns the whole process, but everyone owns lots of different parts of it.
- Integration: Technologically, integration is not difficult. The reason it becomes challenging is around the data and the data quality when you have all of these solutions. Every time a solution is added, there is the potential risk of creating bad data, which is not governed, introducing variation and volatility.
Supplier Experience & Supplier Experience Management
Costas adds, “The other part, which you don’t want to brush under the carpet, is this fragmented and inefficient supplier experience.”
“There’s a lot of burden on the user internally and suppliers to actually go and figure out: ‘which system should I use? When should I use it?’ There are a lot of portals, and a lot of networks, which, over time, have also become full of polluted data, and also a lot of different logins. We do things many, many times, which of course is inefficient for the supplier, but it’s also inefficient internally, and it’s very difficult to join up all these things.”
“From our point of view, what people are now looking to do, is to connect the experience. We don’t want to replace the systems because – as we’ve said – no one can be good at everything. It’s just that technology is moving forward so extraordinarily quickly and not everybody needs the same solution. The question is, can we orchestrate a unified experience? Can we create those unique and tailored experiences across our landscape?”
In the webinar, Costas provides an example. “If a supplier needs to see their invoices, it doesn’t matter if they are in Coupa or Ariba, you can aggregate that. Suppliers can have a view whereby, if they want to submit an invoice, you can guide them to the right place. And there are good reasons, if we take this example further, why people use different payment networks, because for some regions, the payment network is much, much better. So, there are good reasons to do that.”
Foundations for success: hierarchy and data model
Costas continues, “We always say that success starts with the right hierarchy and data model, and this is about creating that foundation in data management. Where a lot of companies have fallen into a trap is where they were led down this path of using the digital core. By which, we mean the ERP or the suite. Now, the problem with these digital cores, and most of these systems, is that they’re transactional systems. And we do much more with our suppliers than just transactions.”
He warns, “As soon as you do something incorrectly, the outcome of that is going to stay for years and years. You’re going to accumulate if I borrow a term from the software industry, a technical debt, I call it here a data debt. And the longer you allow this to happen, the more it is just growing and growing and growing. So, in step one, we have to control the entry point. Then we need a complete record of our suppliers, for 100% of our suppliers.”
He advises, “In reality, you have to think end-to-end. When we onboard a supplier, we want to onboard them and enable them in Coupa, and in the ERP, and in Tungsten, and, of course, wherever else they have to be. It has to be an enterprise onboarding, not just for Procurement but for the whole enterprise. And then, you have to always think that you’re going to need a no-code, low code, flexible capability because requirements are going to change over time. You’re going to come up with new use cases which haven’t come up before – and you have to be able to adapt and be agile around this.”
Creating a 1:1 Supplier Experience
The challenge today, as Costas explains, is that we’re not creating a one-to-one supplier experience. As he illustrates, “Sometimes, for many people, when you say ‘supplier portal,’ it can actually just mean a portal on our corporate website, with an amalgamation of information and links. Actually, that is one of the bad experiences. What this means is, ‘Dear Supplier, here’s a lot of information. Go and read it and figure out where you need to go and what you need to do.’”
The danger is, it opens it up for error because it is being left to interpretation.
On the other hand, Costas advises, “You’re going to have significantly better data if instead, you tailor the experience. In turn, better experience yields better data – and actually better data yields a better experience. So, for us, there is a flywheel effect.”
The result: “We have much better visibility, much better controls around our risk, or we are removing a lot of ‘admin burden’ from our ecosystem internally, and from suppliers. This means we’re actually allowing and creating an environment where innovation can happen.”
Skill sets required
Picking up on the data aspect, Dr. Epstein remarks that one key skill needed is, “the ability to think about what we could be, or should be doing, and then being comfortable with data and asking questions of data.”
“We have, as a procurement function, skated by, ignoring data for too long, or just taking a very narrow sliver,” she adds.
Dr. Epstein believes that obtaining that ‘seat at the table’ is a valid aspiration, but this comes with a warning. “If you get the seat at the table, you had better bring some value. How many procurement people, whether it’s the CPO or the actual people on the ground working with the business, show up to the meeting and add zero value? That’s a negative for all of us. You need to be able to get the data, be able to ask the questions in advance, and actually proactively work with it, because the greatest challenges for procurement over the next decade – sustainability, diverse suppliers, innovation – solutions to these are not going to come from approving invoices or making the buying process more difficult.”
Best-of-breed ProcureTech strategy: Plan for it
Closing out the webinar, Costas remarks that, “the key takeaway is how best-of-breed ProcureTech is an innovative ability. There are a lot of facts out there to show that the old way isn’t working. We’ve also seen that best-of-breed ProcureTech is going to happen. So, you can either plan for it, or let it happen. But it’s going to be much more successful if we are planning for it.”
Costas adds that the way to enable best-of-breed ProcureTech is to focus on the synergy between data and supplier experience. “Let’s start looking at problems differently. Let’s look at it through the lens of the supplier’s experience, because our perspective is that if you are successful here, you’re actually going to fix your data problems inherently. Because who are you dependent on for all this data? It’s the supplier.”
Thinking about trends, Costas reminds us how today’s initiatives rely upon organizations extracting more and more information from suppliers. “For ESG sustainability, for carbon reporting, conflict minerals and so on. It’s all about getting information from your suppliers. So, if you’re inherently making this difficult, and are not prioritising it, then you’re not really going to solve your data problem because, again, you’re dependent on suppliers for it. They are that source of truth for you. My recommendation is: Plan for it.”