In a recent MIT Technology Review article, Revolution in Progress: The Networked Economy, it was noted that there will be three primary areas of impact – 1) Earning customer loyalty, 2) Enabling open innovation and 3) Enhancing resource optimization. Hyperconnectivity, smart & embedded devices, all things personalized (marketing, services, etc.) and a generation of digital natives are driving this revolution. So then, how will this impact Procurement’s role and related enabling technologies in 2015 and beyond?
The areas of primary impact noted above can be directly applied to Procurement’s internal strategy and best implemented in a Service-Led Procurement model. The first dimension is earning customer loyalty. This is primarily focused on providing a tailored or customized experience for customers. Translate that into an enterprise point of view and you get a tailored set of services in alignment with the needs of Marketing or IT or Manufacturing or other groups within the corporation. This personalization should, in part, be data driven – spend analysis, category dynamics, compliance reports, supplier scorecards, voice of the customer (VoC) and other sources. The other component beyond big data and technology here is the human element. Voice of the customer surveys and follow-up interviews can be invaluable in understanding this dimension. “We hear you and this is what we can do to help”. In a recent transformation, we found that 77% of internal customers felt like Procurement was out of touch with what services were really needed or wanted.
The second dimension is enabling open innovation. In the past, we’ve explored both open and closed innovation strategies and the relative levels of success in Procurement, Innovation in Procurement: A New Era of Innovation in Procurement Process. An open innovation approach, not surprisingly, was identified as more successful on multiple dimensions. In the context of the Networked Economy and Procurement’s role, consider this as Procurement’s opportunity to collaborate with both internal and external stakeholders (supply partners) in the innovation cycle. Success depends on Procurement’s ability to execute the following:
- Establish an innovation engine within Procurement (skill sets and technology enablers)
- Define Procurement’s value in the innovation lifecycle (process and what’s in it for me)
- Proactively engage Marketing, IT, Manufacturing, Suppliers and others on innovation topics
Don’t wait around for the invitation to the seat at the table…earn it. Being able to execute the first dimension discussed above provides a solid foundation and credibility to deliver on the second dimension. In the Hackett Group’s 2014 Procurement Key Issues study, innovation was an essential component in reinventing Procurement’s value proposition to the enterprise.
The final dimension is enhancing resource optimization. In the Networked Economy, the focal point is on getting more out of existing assets. What happens when the sourcing savings start to dry up? This is where world-class Procurement organizations differentiate themselves and become a competitive advantage for the enterprise. Consider the challenge the supply chain group will have executing same-day delivery at an unchanged level of cost to serve. What can Procurement do to minimize or eliminate the margin impact that same-day delivery could (will) have on operational budgets? Read about Macy’s and Bloomindales same-day delivery program.
The underlying enabler for Procurement’s success in the Networked Economy is people (or partners). Over the past couple of years, our research has indicated that world-class Procurement organizations spend twice as many hours in targeted training sessions than other Procurement groups do (non-world class) and are developing & hiring very different skill sets – project management, financial & statistical analysis and relationship management. Traditional category experts as well as transaction support is being delivered more and more by 3rd parties from remote delivery centers such as India, Poland, Hungary and others. Also, Digital Transformation is playing a key role in this shift of how Procurement services are delivered and measured. Think cloud solutions such as Coupa, Ariba and Zycus.
So, with that you should be completely prepared for 2015 and the Networked Economy, right? Well, don’t worry. Replicants courtesy of the Tyrell Corporation (Blade Runner) have got you covered.
Capgemini Consulting would like to invite you to the conversation around this topic or others. For additional information, please contact Matthew Shull or follow him on Twitter @Matthew_Shull.