Here at Acada, we have spoken about the need for digital transformation of the procurement profession for years now. However, in spite of the huge benefits that digital transformation can bring, many teams are still early in their adoption of digital products and practices.
Indeed, research from Statista estimated the procurement software market would bring in $5.9bn in total revenues in 2021. For reference, Salesforce’s revenue last year was $17.1bn, meaning a single organisation’s revenue is more than three times the sum the entire procurement industry spends on tools that would make them more efficient, effective and, ultimately, profitable.
Things are changing though, the market for procurement tools is growing at breakneck speed with an expected annual growth rate of more than 10% in coming years. Anyone who doesn’t get to grips with digital transformation and what it can offer them will find themselves left behind.
With this in mind, we wanted to outline the key things procurement teams need to know when looking to adopt digital transformation:
#1 Focus on true value, rather than cost
Procurement is usually a support function within a business, rather than the main revenue driver. This can have a negative effect on how procurement teams are managed by their organisations. Too often, teams are viewed through the lens of reducing cost, making it extremely difficult to drive increases in headcount or investments in improved tools or processes.
“The focus on value is often too much about getting the lower price, procurement professionals can see their role as preventing the money from being spent,” said David Kershaw, Partner at Curshaw. “Digital transformation allows teams to move faster and ultimately act as a support, rather than being a thick red tape that people need to negotiate around.”
Ironically, it is the teams that are willing to take a more holistic view of value that ultimately end up generating better savings in the long term, as an initial outlay in technology and setting up new processes ultimately allows a smaller resource of people to work more effectively and focus on the larger, more strategic work.
#2 It’s about the user
A decade ago, digitising your procurement processes would have taken around a year, cost hundreds of thousands of pounds and needed large teams of people to implement it.
Luckily, things have changed and the proliferation of plug and play software-as-a-service tools means that anyone who wants to can begin their digital transformation very quickly and at very low cost.
However, these tools can still be used poorly. So we caution anyone looking to begin their digital transformation to think about how your improved system will be used and optimise it accordingly.
As our CEO and Founder Rich Sains said: “Don’t think of it as a system that you turn on and just hope everyone uses. You need to incentivise user adoption. That’s something we always keep in mind with Acada: it needs to be a system that makes it easier for a user to do their job on a day-to-day basis.”
Kershaw agrees, and suggested beginning any digital transformation project by convening a multidisciplinary team that includes someone that represents the end user, alongside figures from the commercial-procurement team, someone from the legal team and someone from finance.
He added: “The first step is to form a multidisciplinary team. You cannot achieve anything if you’re stuck in your silo. The second thing is to make sure your processes are user-centred. They need to be focused on what the end-user needs out of the system. The third thing is to be open – show people what you’re doing, ask for comments, ask for feedback. The fourth and final thing is to work in an agile way, which means taking small, incremental steps and iterating as you go.”
#3 Transformation is constant and continual
Digital transformation can revolutionise the way your team works and how much it is capable of achieving, but it isn’t enough on its own. As Bill Gates’ famous quote reminds us, when technology is applied to an efficient operation it magnifies the efficiency, but when it is applied to an inefficient operation it magnifies inefficiency. Digital transformation should be accompanied by a thorough review of processes and optimising as much as possible.
It should be part of a continual, wider procurement transformation process. You should always be looking at your processes and asking how you can make them more agile, optimising and then digitising.
Successful digital transformation starts before you implement any new tools. The only way to create a truly impactful transformation is to begin with a willingness to look at your processes critically and continually. You’ll only find improvements if you’re willing to look for them.
If you need any support or guidance for your transformation, please feel free to drop us a line