Accounts Payable, Digital Transformation, Strategy

Crawl before your Walk, Walk before you Run, it’s a Digital Journey

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Digitalization projects are difficult. It’s not about the technology. Yes technology plays a part but it is understanding how the potential technology can be applied and developed to shape the user experience, aka customer journey.

There is a temptation to jump in without any directional oversight which frames the anticipated customer journey. These plans, or roadmaps, are more than a project timetable; they consider how the user interacts with the technology as well as the required functionality. This forms the minimum viable product (MVP) – both aspects must be addressed. A common failing is to get lost in the technology, and ignore the user.

A better way? Perhaps?

A personal frustration is the lack of data points assessment. Cutting through and making sense of the various data points is key in producing a storyboard that delivers both efficiency and effectiveness. Who get’s data, what do they do with it, how is the decision reached, what is the data output are some of the questions that need to be asked and addressed. Understanding the customer journey involves a more holistic appreciation of the end to end process.

Similarly when the business fails to assess data quality, data remains ‘dirty’ and unstructured. It seems crazy that organizations believe that they can ignore these factors and succeed. For example, imagine a zero-touch accounts payable invoice goal where the supplier master data is just garbage and missing bank accounts.

Embedding this into the roadmap ensures alignment on a facts and data basis. Where there is mismatch on MVP, change the phasing or delay the project.

Quick win?

In some cases preparing solid foundations for digitization can take years. A good example was the ebook value chain: obtaining rights from authors and agents and setting up the electronic distribution business model were critical to enable the introduction of the ebook. This was not a quick win.

There is no clean start or stop: goal posts move, organizations grow and evolve, new functionality becomes available, customer demands alter – there is constant change. This is the digitalization journey.

There may be options for quick wins; depending on the context. In the main these will be determined by the quality of the digital foundations and how quickly they can be re-validated. These broader factors can become barriers if you fail to address.

Technology is an enabler. Central to the digital journey is the customer experience. These factors influence your critical path. Line up the planning sequences and eat that elephant in the room, one bite at a time!

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Digital Transformation, Strategy

Addressing low Digital adoption – Top Tips

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If you are still using a manual arrangement for raising and issuing orders, you have fallen behind. For those organizations already out of the starting blocks; experiencing delays in adoption and or experiencing compromised implementations that fail to deliver the value expected, the clock is still ticking…….

Runners lined up on starting blocks

The prevailing assumption is that digitization improves efficiency. Removing paper from the process is good; automating workflow approvals is good; using catalogs to help your organization buy off contract is good; yet for these examples and others, organizations face low adoption. Why is this?

The gap between vision and execution. They say ‘bad workmen blame their tools’ and unfortunately if the solution is not delivering against expectations, the technology is blamed. The gap between the vision and execution is a failing that challenges many projects.

One shoe size does not fit all – however the end-to-end process steps to assemble shoes is the same. Organizations unable to segment different use cases and apply appropriate and relevant processes within the platform will face user resistance. These failings will have users complaining that the new solution and process is more complex and less efficient than the previous manual arrangement. It is no surprise then adoption remains low!

Critical to success is the ability to assess, match and configure a process to a process flow sustained effectively within the applicable technology platform. Configuration does not mean customization. The art of digitalization is delivering a more effective outcome for the user and business by balancing and re-engineering processes to leverage standard platform functionality configured to meet your business needs. There is more than one right answer, but typically one answer makes the most sense.

This art requires an agile mindset – particularly, where there is a need to integrate across different technology platforms. There may be trade offs when considering functionality overlaps – which platform remains the source of truth and core to the process – this requires a solid understanding of the end-to-end process and how similar use cases can be consolidated and optimized. The goal is ensure a seamless flow from A to B, to C, to D that is both efficient and effective.

Top Tips

  • Understand the landscape holistically to define the strategy
  • Understand the technology suite
  • Engage users early on to understand use cases (capture the As-Is baseline and pain points)
  • Align the best talent and user champions to design the new To-Be processes
  • Challenge current comfort zones to avoid repeating the existing process
  • Keep userability front of mind – keep it simple and intuitive
  • Lead, communicate and train extensively

The digital journey is not an easy one. Value the transaction and act accordingly.

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Category Management, Sourcing, Strategy

Is Category Management really dead?

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Fashions come and go, and then re-branding invents a return. There have been past pronouncements claiming the death of category management, but it is a little like saying that the Newton laws of motion are outdated. So what? Application and practices evolve as we subject them to new tests, but basic theory remains sound.

For those not familiar with the Category Management term, my favored definition is:

” Category Management is the strategic end-to-end process for buying goods and services that aligns business goals and requirements with supply market capabilities.

It transforms the long term value achieved from an organizations spend and drives reduced cost, reduced risk, improved revenue , improved service and ultimately better business performance.

Effective internal and external collaboration is the bedrock of successful Category Management ” – Future Purchasing

How does this differ from strategic sourcing ? In short, category management underpins procurement’s strategic understanding of goods and services that it acquires from the relevant market and allows the organization to create subject matter expertise to help structure supply side focus. Category Management is as much as an organizational construct as well as a vehicle for those sourcing strategies to be determined.

Unfortunately not all organizations have been able to successfully implement Category Management. A typical failing is that procurement talent lacks the dual ability to perform the analytics, develop the insights and most importantly, engage in a collaborative relationship with stakeholders to challenge the status quo and agree an appropriate action plan.

The inability to embed Category Management is a result of missing ‘soft’ skills, and a lack alignment with the business. Alignment extends beyond understanding the business goals, it is becoming that trusted member of the team; a valued contributor. This trust needs to be earned.

Value success measures these days are much broader and arguably makes the challenge more complex. Strategic sourcing is a bigger play. This does not mean that the category management approach is dead; it is in my opinion more valuable then ever given the current supply chain disruptions. There is no substitute for good product and market knowledge, however the procurement terminology and language used outside the function needs to be more explicate and inclusive. Long live Category Management!

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Digital Transformation, Digital Twin, Strategy

Mirror, mirror on the wall is my Digital Twin worth it all!

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With no apologies for the word play, yet another digitalization opportunity is emerging to further aid our ability to simulate the real world virtually and help organizations and individuals make ‘better’ decisions.

What is a Digital Twin? A digital twin is a virtual representation, a model, of any physical asset, process, system or environment that is created to look and behave like its counterpart in the real world. These models use data inputs to mimic real world conditions and help design, development, operation, prediction and scenario testing.This arrangement is more cost effective than real world simulations, however the data modelling concept is not new as engineers have been using computational modeling since the 1960’s.

What’s Changed? The ability to leverage computational modelling has been accelerated by significant performance and cost improvements in data processing power, device and sensor technology. The move to constantly stream real-time data into a model makes the digital twin more dynamic.

Further twinning the digital twin with data and process mining – additionally boosted through the application of AI and machine learning – is another evolution that is gaining traction (PWC,”Twinning the digital twin with process mining: the right recipe for a truly connected supply chain”). This set-up can be an extremely valuable tool to help organizations generate insights on process gaps, bottlenecks and inefficiencies, and then simulate alternative scenarios.

The Crunch? Garbage in equals garbage out. Outside the cost of software, sensor /device hardware and IoT cloud capacity and connectivity, a significant amount of people time and effort is required to build and translate the digital twin into a meaningful model. The challenge for many organizations are the skills needed to comprehensively identify, structure, and map data in the context of the applicable process flow. Over simplification results in an inaccurate model, and over complexity typically confuses.

Forming a digital twin is therefore likely to more attractive for specific industries, for example, construction and manufacturing, where there is a more direct line of sight into the computational model from the start. For those organizations without a clear line of sight, the use case and digital twin ROI benefit may feel overwhelming. Accuracy is determined by a large quantity of good high quality data and where datasets contain critical errors, and/or miss key attributes; this can confuse baselines. This complication may discourage organizations from understanding the value of creating a digital twin.

Open up your opportunity and explore how to achieve a digital win with the twin. Contact Us.

KPI, Strategy

How do you calculate Procurement’s value add?

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The procurement discipline has been around since ancient times; the earliest recordings dating back to the Greeks, Chinese and Egyptians. As a profession, modern day procurement and the so called ‘materials man’ was first termed by Charles Babbage, considered by some as the ‘father of the computer’ in his book, ‘On the Economy of Machinery and Manufactures’ (1832).

Despite these early beginnings, procurement has only been recognized as a management function since the 1960’s becoming more prominent as organizations understood a need for a more strategic approach to supply chain management. This begs the question, how is procurement valued?

Bang for Buck

The traditional and main key performance metric ingrained into Procurement is savings measurement. Throughout my career there seems no hard and fast standard; each organization measures savings differently (‘hard’ cost reduction, ‘soft’ cost avoidance inclusion or exclusion, as well as different definitional permutations and combinations in an attempt to establish a measure that the senior leadership of the respective organization understood and value).

Sales and procurement are two sides of the same table, but mathematically, providing you have the sales, sustained procurement effort gets the bigger ‘bang for buck’. For example:

  • Assume a $10 million organizational revenue, whose cost of sales of 65%, returning 20% profit. To grow the operating profit by an extra $1 million, sales would need to increase by 50% ($5 million). That’s a lot of sales effort!
  • In contrast, for the procurement organization, to deliver an extra $1 million operating profit for that same organization, procurement would need to reduce costs by 15.4%. That’s not easy either, but it’s less effort.

The challenge is that the above is a simplistic view and ignores the interlink between sales and procurement. Without the supply assurance of materials or resources, the organization has no sales. Without sales, the organization does not need to consume. The better way is to capture and align supply side value measures that link and support sales. The metrics need not only to capture the effectiveness, but also efficiency of the related processes. Additionally, with ever increasing complexities of supporting organizational brand reputation, supply initiatives around ESG integrity, sustainability, anti-slavery etc., dictate a need for a set of broader value measures.

Technology advancements are playing a major part in enabling organizations to generate and collect data, connect the dots, and support the ability to seamlessly integrate and grow the business. Intrinsic, automated reporting should be incorporated at the start of any digital journey, allowing the function to implement new value measures to track and visualize contribution. Define your measurable goals and start calculating your value add!

You get what you measure. Need help to develop and design your measures. Contact Us.

Digital Transformation, Strategy

Improving your Digital Transformation success rate

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According to BCG, the success rate for Digital Transformation is less than 30%, however they identified 6 key success factors that can reverse the odds to 80% (BCG, 2020, Flipping the Odds of Digital Transformation Success). The study indicated crucially that all the 6 key success factors had to be addressed. Where only some of the factors were addressed in part or full; partial effort still led to failure.

Digital Transformation image

The success factors they identified were:

  1. Presence of an integrated strategy with clear Digital Transformation goals
    • A clear plan on the why, what and how supported with quantified and measurable benefits
  2. Commitment from senior leadership team.
    • Clear top down sponsorship
    • High engagement and alignment
  3. Use of High Quality talent
    • Allocation of the most capable team resources to support the program
  4. Having an ‘agile’ mindset to govern the program and to accelerate adoption
    • Tackle roadblocks quickly, adapt to the changing contexts, and don’t delay in the pursuit of perfection
    • Awareness of shortcomings and creation of an action plan as you progress
    • Mastery of continual innovation and improvement
  5. Effective progress monitoring
    • Establishment of clear success metrics with sufficient data availability and quality
    • Maintaining eyes on the broader goals
  6. Business led [this is not an IT led project]
    • Business needs driven
    • Integrated modular technology platform that can seamlessly scale across the ecosystems.

More concerning is that a more recent Gartner survey indicated that only 22% of procurement leaders have a long-term Digital Strategy (Gartner, 2022, Procurement Digital Strategy). The reasons for this were not captured but the implication for those procurement leaders and laggards unable to develop a strategy and convince the leadership to invest does not bode well.

Of all the success factor combinations, only where all 6 are present, will an organization sustain digital transformation success. The conclusion is that adequate preparation, planning and execution time and $ investment is required. No revolutionary insight, yet not easy!

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Collaboration, Sourcing, Strategy, Supplier Management

Navigating Stormy Waters – What’s your strategy?

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The global economy remains in a state of flux. Are we heading for a global recession? Who really knows, however uncertainty is our biggest enemy in predicting and steadying the supply chain. The result is a reluctance to make a commitment as all organizations want to nullify risk.

For Buyers, there is a drive towards fixing costs. For Suppliers, they fear losing money because they cannot pass on inflationary increases. These conflictory positions place additional pressure on already strained relationships. The dilemma is that maintaining a fixed price could force supply organizations into bankruptcy, evidenced in the construction and retail industry. For customers insisting on fixed price, suppliers either add overly cautious premiums making the arrangement untenable, or walk away and no-bid. This serves nobody.

To avoid the zero-sum game, organizations need to determine how arrangements can be structured to create a shared risk/ shared reward. Central to this approach is creating transparency to move the relationship from away from transaction to collaboration. Transparency equals trust, and whilst full ‘open book’ may be a bridge too far, there are different overlays that can be applied to help formularize the demand, cost and value drivers.

Defining and structuring appropriate parameters, as well as changing the bid by bid transaction mindset, will encourage relationships to be developed that buffer and stabilize the supply chain. We call that a win/win.

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Category Management, Sourcing, Strategy

Courage in Procurement

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Given the current economic challenges, procurement organizations will face increasing pressure to improve performance and as a result will need take a ‘back to basics’ approach.

Spend data unfortunately can be outdated and flawed with inaccuracies. It however remains the main data point that is pivotal in understanding where opportunities may exist. At the heart of this understanding is the strategic art of segmenting spend categories, and engaging with stakeholders to truly understand the specific dynamics to form actionable initiatives. There will be a number of spend false positives that need to be excluded in order to form a bottom up approach – avoiding the common blanket top down saving target pitfall!

Arguably the larger challenge is tackling the non-addressable sacred cows; whether this is as a result of a lack of procurement skill-set, internal politics (its always been that way) or a continuation of operating within the existing comfort zone, procurement need courage to challenge the status-quo without the full knowledge of a successful outcome.

The essence of strategy is choosing not what to do

Michael Porter

There is no foregone conclusion, and the recommendation is not to do everything, yet seeking external advice may be the best path to open up new options. This is not an easy journey or a quick win, but represents a call to action which at least deserves investigation.

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Change Leadership, Digital Transformation, Operating Model, Project Management

The Danger of back office Digital Transformation without Balance

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With all new technologies, there is a danger that they get misapplied. misused and abused. Given the drive to digitalize the back office and deliver ROI, there can be a lack of consideration and practical understanding on how policies, people and processes are optimized.

Finance and Procurement functions measure spend managed by the team, encouraged by compliance and governance committees, to steer towards a ‘one size fits all’ approach in how the technology platform is configured. This usually leads to an overstretch of available resources, creation of process bottlenecks and a failure by finance and procurement to service the business adequately. The result is seen as an over promise and under deliver, and the technology is blamed.

This is not a technology problem, rather reflects the challenge of how the technology was implemented. Organizations must spend time to get into the detail on how the stakeholders buy; seeking to differentiate and simplify the different sourcing channels that can become configured correctly in the technology platform, and supplemented as appropriate, with complementary solutions. The output defines the new target operating model, matched with organization’s capability, to deliver value add across the end-to-end process without hampering one function over the other.

Together with investment in change management and all that it entails, digital transformation becomes a journey that starts with this first purposeful step.

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Supplier Management, Sustainability

Net Zero

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Carbon neutrality is no longer a matter of if but when. The 2021 court case against Shell in Netherlands demonstrated it is no longer about ticking the boxes but taking real action. What does this mean for your supply side? Scope 3 emissions cover all indirect emissions that are incurred in the supply chain both upstream and downstream and, for many businesses, suppliers can account for between 50% to 80% of total emissions.

Having accurate information on your supply base is imperative; this creates the first key challenge, “data” capture. With potentially 1,000’s of suppliers, businesses who have not structured or enriched supplier master data with the appropriate dataset will struggle to get to grips with net zero. There are a number of third party solutions to help businesses, however unless these tools are embedded into a robust supplier on-boarding process and regular supplier review, the process itself becomes unwieldy and less meaningful.

Accompanying this data challenge, a change of perspective and approach must be applied to ensure the net zero objective can be operationalized in a meaningful way. Importantly this action must be measurable and capable of being validated by customers. Is your sustainability goal more than lip service? What changes have you made?

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