The 7 secrets of digital transformation
June 28, 2022, By Jonathan Dutton FCIPS, CEO at PASA
In the modern age of technology, a digital transformation programme should not be too difficult, right? Not for Procurement … Jonathan Dutton explains the 7 traps of procurement digitalisation for Supply Clusters members:
The six challenges facing procurement post pandemic
At the start of 2022, PASA outlined SIX key challenges for procurement post-pandemic, briefly:
1. Rebalancing RISK -v- COST on overseas sourcing
2. Saving small suppliers
3. Optimising ESG requirements
4. Realigning to new stakeholder needs
5. Get digitalisation right
6. Managing people anew – post working-from-home
Nestled at a lazy number five on this list of challenges was ‘digitalisation’ and the assertion that we need to get it right. Sort of implying that we have not quite got it so right so far.
Most procurement teams of any size have been through a digital transformation process. Many twice. Some three times already. So, what is it that so many get wrong, that demands two or three attempts, and maybe more yet?
The 7 traps of supply-side digital transformation projects
There is no one thing that Procurement gets so disastrously wrong that it derails every digitalisation transformation project. No, much more likely, it is a combination of things that sum to a failed project. Not all teams fall into the same traps, but surely most teams make most of these mistakes it always seems:
1. Unclear needs – not knowing what it is you truly want? What are you buying and why? This question often splits into four key questions:
a. Your system architecture – most project inherit a set of existing legacy systems that contribute some of your needs. How will these be used in future, how will they integrate to your new software, and to what extent will remain futureproof to changing needs downstream?
b. ERP & P2P integration – how will your new procurement software integrate with your exiting ERP/P2P systems? It is a common fallacy that ERP/P2P systems are procurement systems, they are not. At best they include procurement functionality, more likely only very limited facilities.
c. Automation v Design - Are you trying to automate your existing process? Or design a new and improved procurement process and systemise that? And what will your new system cover, source-to-contract (S2C), source-to-pay (S2P) or purchase-to=pay (P2P) or something else? What is your business need?
d. User interface – to what extent are you trying to enable your USERs to buy for themselves – to self-serve from your supplier base on an existing framework you have pre-arranged? Or, are you trying to bolster control & compliance by centralising your approach? How will the system help your aims?
A real cost of not getting your needs clear early in the project, can be the escalating cost of adjustments – that is everything from early configuration requests through to high-end programming and skilled code cutting. Each task to allay a user query of “cudda ya just” requests and re-work to adjust what people don’t like as the development path unfolds. This can drive up cost in a big way and delay projects interminably.
2. Thin business case – the primary business case proffered by many advocating for digital-transformation is to improve supply-side efficiency. It is not enough. Few CEOs are laying awake at night hoping for more efficient eProcurement systems.
Try defining your business problems. How will you solve these business problems from the supply side through a new system? A system that is also more efficient of course?
3. Poor change management – change management is perhaps the most under-rated aspect of systems implementation. And, it is often suffers early budget cuts to help make the RoI to justify the system purchase. Or, often just suffers from early inattention – who needs systems training nowadays eh – is it not menu driven and intuitive anyway? What can go wrong?
Truthfully, change management is three things – communication, communication and communication. Maybe with some system training and awareness thrown in. Plus some decent project management and stakeholder engagement too.
User ‘buy-in’ is too often taken for granted. The system-solution has to be sold to users and has to offer real benefit for them and their working life. Without this buy-in from the wider group, the system will fail. As Peter Drucker famously said, “Culture east strategy for breakfast” as he described cultural staff resistance to grand plans. Communication is the key to solving this riddle – and communication is a two-way process. Consultation might be a better word, in this context, in order to achieve true buy-in.
As one project manager exclaimed at a recent eProcurement event, “whatever your change management budget is, double-it, then double it again. Never cut it, for you won’t succeed without it.”
4. Unprepared and under-resourced – for the wave of complexity which hits you immediately after choosing your new system. The myriad of questions from the vendor, unrefined requirements from USERs, system needs from the I.T. department – a whirlwind of complexity.
5. Part-time project management – is never ideal to manage full-time complexity (see 4. Above). Procurement often has a “we are busy” attitude – focused (rightly) on buying stuff, not building new systems. Too often it is some hapless buyer in the wrong place at the wrong time gets the job of project-managing the ‘new system’ with a casual suggestion “to fit it in” to their current workload.
This level of under-investment in a supply-side system underpinning perhaps 40-70% of your revenues in third party expenditure, and used by many people within your organisation to enable their work, is a dangerous game. A system that will channel hundreds of millions of dollars of your spend needs a full-time project manager, with perhaps a team to support them with a mix of full-time and part-time members.
And, don’t be fooled by the frequent early ‘quiet’ in corporate chatter after a project is launched on eProcurement. Quiet is bad, it indicates people don’t care or are not paying attention to the project. A good sign is lots of chatter, feedback and corporate noise. It means they are taking it seriously and envisaging how it will work for their team.
6. Launching with a Big-Bang – which is always tempting, a glorious product reveal, with a tah-dah moment, and everyone delighted and surprised with the beauty of the new machine.
More likely is early dramas in different pockets, locations and aspects of the system. You quickly find yourself fighting on several fronts to put out corporate ‘spot-fires’ and manage user dramas – some resulting in supply line threats even. This scenario can quickly spiral and turn against the project. Sometimes turning a perfectly good system implementation with a few teething-problems into a white-elephant and a pariah system that needs to be ‘fixed’.
Better for most is a gradual roll-out, with a neatly segmented programme that isolates key users and easier implementations from the more difficult ones. Presenting a programme that can be proactively managed with focus and care and not having to react to multi drams on many fronts simultaneously.
7. Configuring the reporting suite as an afterthought - System reports should be a key part of your business case. Better management information on the supply-side of your business should be valuable, incisive and actionable.
This quality of reporting should go to the heart of the matter of your business case (see above). What business problem are you trying to solves with the new system? What don’t you know, that if you knew, would make the business so much better?
In this sense the reporting-suite is a critical output from any new system. And not an afterthought to be mashed up when everything else is done, and the only thing left for you to add is, ‘hey, you might find this data from the new system quite interesting’. Much better to hear from user line-manager, before the new system is live, ‘hey, when can we expect that new report, we are keen to act on the new data to support our new initiative.’ This, in itself, is a measure of success and proves relevance for your new system.
During the early stages of the pandemic, procurement generally did well. But one of the few areas for improvement was noted at the time as supply-side reporting and the performance of eProcurement systems outputs.
That is, anecdotally, many eProcurement systems failed to live up to the hype and investment pre-pandemic. As one CPO lamented in a Roundtable session in April 2020, “Our CEO said to me, ‘for all the millions we spent on supply-side systems, you can’t even give me an accurate list of our most critical suppliers and their up-to-date contact details?’ … and I felt he was right too.” Other CPOs agreed.
As the ‘Six Challenges’ PASA paper indicated, “getting digitalisation right” is still a goal for too many. These 7 suggestions above are not the 7 sins or the 7 crimes of procurement teams getting it wrong, but the 7 traps that are all too easy to fall directly in to, as so many have, running complex and difficult projects – often with too little justified resource.
The fact that they also seem to be 7 secrets is, perhaps, a sin. And a trap in itself. These lessons should be shared and explored by everyone planning a new eProcurement system implementation. As they largely were when mostly shared at ProcureTECH, the annual PASA event, and the country’s largest independent event dedicated to eProcurement technology. These points were mostly shared freely and honestly by speakers presenting their case studies and lessons from their implementations over the last few years. Anyone engaged on any eProcurement project would be wise to heed them and foolish to ignore these open secrets.
Jonathan Dutton FCIPS has a non-executive role at SUPPLY CLUSTERS and writes a monthly column for the website. Jonathan is the CEO of PASA who run a wide range of procurement events and training programmes each year www.procurementandsupply.com and cover all aspects of procurement thoroughly in their forthcoming conferences and PASA CONNECT industry Roundtables – which includes ProcureTECH, the country’s largest independent conference on eProcurement technology, which Jonathan has chaired for the last dozen years. He has also worked extensively in the past as a procurement consultant and trainer in the eProcurement space.