In his second blog in the series, Peter Smith discusses the balancing act of selecting and implementing a procurement solution. Read more to learn why this endeavour must be planned carefully while taking into account the increased importance of agility and pace.
In my first introductory article in this series, I talked about some of the challenges around procurement change (or significant change of any sort, really). But I don’t want to be discouraging. Every organization has to change to survive and thrive, and there are many positive stories to tell where that has been achieved successfully.
Even before the pandemic, it was a truism to talk about the pace of organizational change being faster than ever, and “disruption” had become a commonly discussed business concept. As we now head slowly towards a post-pandemic world (or maybe it will be a “living with the pandemic world”) it is clear that the pace has increased again. Organizations and whole sectors have had to adapt faster than ever, whether it is craft breweries moving from a “taproom and pub” model to a “bottling line and home delivery” approach, or doctors who resisted the idea of video consultations for years then were suddenly forced into that innovation. And actually, they found it worked pretty well.
(Could visibility be the key to stability in disruptive times? Read more in the blog.)
The balancing act of procurement speed and rigor
Without a doubt, there will be related pressure on procurement functions and leaders to drive change in coming months, and the economic pressure many organizations will be under for some time to come will impact procurement, too. So, there are going to be some tricky balancing acts to navigate, I suspect, and when it comes to driving procurement change, that will include the balance between speed and rigor.
Anyone who has been through a major procurement change or transformation program understands that it can and usually does take years. From my own experience and working with change experts such as George Owens (CIPS European Professional of the Year, 2017), I’d say that 3 years for a major program is probably a reasonable estimate. We know that a major change program requires diligent planning, appropriate governance, adequate resources to be lined up, and, critically, wide buy-in. And that’s before we even get stuck into the delivery phase.
As Owens said to me in a 2017 Spend Matters interview, “The success of a large transformation program, even one with senior management buy-in, requires the supportive understanding and acceptance of all stakeholders, at all levels.”
Here comes the dichotomy…
Now that timeframe can be accelerated somewhat, but if you are looking at a major systems implementation, new processes, re-skilling teams, educating the wider stakeholder organization, getting suppliers onboard with new ways of working… this isn’t something that can be driven through in weeks or even months. So, it is fair to suggest that you shouldn’t rush into change before you’ve really thought it through.
But here comes the dichotomy. Organizations and markets need change more than ever, and CEOs are impatient. Few will happily wait three years to arrive at the promised land of procurement nirvana. They want visible change and positive results quickly.
So, I’d suggest that today more than ever we need to think about making change modular, and the overall program (which might well take three years) needs to have clear interim milestones and deliverables, with associated benefits along the way. It is fine to plan well and to have that big picture endpoint in mind. Indeed, it is motivating and sets a clear sense of overall strategy and direction. But you also need to be able to point to what will be delivered this year and explain how you will show rapid benefits.
To achieve that, organizations should carry out their own assessment of opportunities and prioritize based on potential returns, short and longer term. So a business that has never looked at an organization-wide category management approach might well achieve some quick wins through some consolidation, rationalization, and leveraging of spend in key areas. That could be phase one of full category management implementation.
Plan procurement change carefully
Similarly, a vision for an end-to-end, state of the art, “no PO no pay” purchase-to-pay system and process might be inspiring, but what about starting by getting to grips with the invoicing process? Make sure all invoices are captured, eliminate duplicates and over-payment, and allow rapid control and analysis of spend. Again, benefits here could flow in months rather than years, and such actions would then form part of the longer-term approach.
(In our blog, read why a P2P ecosystem, not an end-to-end approach, is best practice.)
One word of warning. You don’t want to drive an initiative that will get in the way of future change or act as a barrier in terms of the overall vision. So be careful about getting locked in or going down a path that will make the long-term goals harder to achieve. That route to nirvana can be a little winding, and it is fine to take the odd detour to look at the scenery (metaphorically speaking), but the path does need to head in the right general direction.
To sum up; procurement change needs to be planned carefully. Don’t rush into anything without careful thought and be aware that serious change and transformation programs usually take years to implement fully. But remember that pace and agility will be more important than ever for organizations in the coming years, and those qualities will be expected from procurement. So, if you are undertaking a major change program, look for relatively quick benefits and gains that can demonstrate to senior management that you’re on track to achieve the longer-term goals.
Check back soon for more from Peter Smith as he continues to offer his insights in this blog series. In the meantime, download the Forrester eProcurement Wave report to learn about leading e-procurement solutions available on the market.