Technology is becoming ubiquitous across all facets of the contingent labor industry, and procurement departments are feeling the evolutionary pull. Procurement operating models are changing, incorporating technology to enable better decision making. Without a greater focus on the people who will implement new strategies and solutions, however, that technology will not bring value.
In a recent Efficio study, “The Human Factor: Strategic Procurement and the Leaders of Tomorrow,” the procurement consultancy found that two key elements — digital literacy and soft skills — are necessary for procurement to successfully implement new models that will allow them to make data-driven decisions with a highly skilled workforce.
Procurement leaders are facing new types and larger amounts of data that cannot necessarily be managed using traditional methods. However, having too strict of a focus on technology will not result in positive change. And, procurement needs a more prominent role in overall business development, which has traditionally been a struggle for procurement leaders.
While Efficio’s survey found that most procurement leaders understand they need to work toward people-centric technological changes, it also found that change is slow.
To understand how companies can use the survey in practical ways, we talked with Efficio Principal Simon Whatson.
Q&A
Spend Matters: There are so many changes coming to procurement and at light speed — what do you see as the overarching trends and influences now? In what ways is technology making an impact?
Simon Whatson: There are lots of changes and developments in procurement technology, but the reality is that those that get the most hype and have the most game-changing potential — like blockchain, AI and predictive analytics — are not accessible or even right for many companies today. The majority of companies can make major gains in their procurement effectiveness today simply by taking ownership of their spend and contract data, supplier performance data, and data around how the procurement function works. By using technology that has, in some cases, been around for years, procurement functions can minimize the time it takes to collect and analyze this data, often in real time, and quickly generate insights. Those insights can then be made accessible to the company’s decision makers through dashboards and other visualization software.
These tasks of data acquisition, analysis and insight generation, are important, but alone add no value. They also used to take up most of a procurement team’s time. Only acting on the insights generated at the end of this chain adds actual value. Technology can help ensure procurement organizations now have more time to take action and be more strategic. This makes procurement functions much more effective.
Your survey points out that “technology has the power to revolutionize procurement,” but only if procurement leaders have the digital literacy to use that technology to its greatest benefit. What, exactly, does digital literacy mean, why is it important, and how do procurement departments begin to address the matter?
Digital literacy requires an understanding of a number of factors:
- the terminology of digital transformation (different words and acronyms such as relational databases and API, or application program interface)
- how software works at a basic level
- what types of technologies are available now and what will likely be available in the future
- how those technologies can apply inside and outside procurement
Digital literacy is important, because without it, it’s difficult to make effective long-term purchasing decisions regarding technology. People in procurement, like most of us using technology, are sometimes drawn to gadgets through advertising and hype without fully knowing how it is going to add value. Knowing how software works at a basic level enables procurement leaders to have a longer-term view on solutions, such as how they will form broader immediate and forward-looking technology solutions and integrate with other existing solutions.
Once procurement leaders are better educated and aware, what should they do to ensure their teams are equally as prepared?
Arguably the most important challenge procurement leaders will have to face in the coming years is how to prepare their teams for the arrival of new technology that will be used in their daily work.
This is because new technology can broadly have two benefits — it can either replace the work of a person (which has a direct full-time employee cost savings) or enable people to make more effective decisions in procurement (such as which suppliers to use, what initiatives to prioritize and how to negotiate with suppliers). The second benefit is by far more important, and to successfully harness it, leaders will need to determine the impact any new technology will have on their workforce. Procurement leaders must also understand how it will change roles, then ensure workers have the skills to capitalize on it.
A simple example could be a piece of technology that collects and analyzes data on supplier performance. While that may have been done by a human before, unless there is a human in the new setup who can ensure the right information is being collected, analyzed and then turned into a compelling negotiation strategy, then the technology investment is wasted. In that case the procurement leader would need to recognize the new skill set requirement and train or recruit a person to fill that new role.
How do procurement leaders balance technology investments with worker training? Should they plan their investments in a specific order or within certain parameters?
The two have to go hand in hand, as I mentioned. More specifically, there needs to be a digital transformation strategy that contains three individual elements, all of which are linked: technology, people and knowledge/data. Developments in either one will place requirements on the other two. When planning the strategies and roadmaps, it should be done using a series of milestones or desired states (e.g., dynamic pipeline building, effective category planning) and for each, the technology, people and data changes need to be identified and planned for.
A hot topic right now is the worry that people will lose their jobs to automation. Do you find that at the outset with procurement technology changes, some workers are nervous about losing their jobs to technology and automation? How can leaders mitigate those concerns and create new opportunities for workers?
Yes, it is definitely the case that some people worry about losing their jobs to automation in procurement. That is also a reason why there is internal resistance to technology, especially new technology, from some people in procurement. Ultimately, this is a completely rational and normal fear, so procurement leaders need to do two things to mitigate this, beyond the obvious one of incentivizing people who may feel this way.
First, they need to understand the impact of technology on their people when planning investments and building digital roadmaps. They need to answer a few questions, including:
- What skills will I need to capitalize on the technology?
- What skills that I currently have will I no longer need?
- What is the gap between the new state and the current situation?
Second, they need to help their workers and give them the opportunity to adapt to new roles. Of course, this involves training, but more fundamentally it involves the correct incentives, so leaders generate the correct behaviors from their team. And this starts from the top. A leader needs to define how their function will add value to the business, get buy-in from the business, and then agree how it will be measured. Leaders will then need to embed those overarching objectives into the objectives of the procurement team.
Finally, creating a culture of self-learning for the team and supporting people to reinvent themselves in line with their new objectives will be key. In this era of extremely cheap and readily available information, people no longer need to wait around to be told which general training course they should attend. They can take control of and tailor their own learning through the many online courses and communication channels, both inside and outside their organizations, that exist.
When technology is integrated in procurement, what functions are often automated? The study discusses how technology automates the acquisition and analysis of data, then workers are freed up to take on more strategic roles. What else are you seeing?
Automating non-value-adding tasks so that people can spend time on value-adding tasks and be more effective should be the goal of any digital procurement strategy. The purchase-to-pay (P2P) side of procurement has the potential to be fully automated, but in source-to-contract (S2C), the potential for automation only goes so far. Since acting on the insights generated in S2C offers limited automation possibility, this is where procurement leaders should plan for their workforce to operate in the future. Roles that help curate a rich knowledge platform, involve making business critical decisions on the basis of key insights, require the spotting of patterns and opportunity in the overall procurement system, and influence and lead other functions to make better decisions — these will be the roles of tomorrow.
Can you talk about how this process often requires workers with fewer direct technical skills, but stronger soft skills?
This is as a direct consequence of technology. In the past, procurement relied on people with good knowledge of process methodology. They needed to know technical details about the market and products and understand what the cost make-up of a certain category was. In the future, high-performing procurement functions will have this information residing in the overall system — companies will have curated knowledge platforms. Therefore, it will no longer be necessary for people in procurement to have as much procedural and product/market knowledge as was required in the past.
What will be important is having people who can best apply this knowledge. This is where soft skills come in. The range of soft skills is extremely broad. Take leadership and influence as an example — this will be even more critical when trying to gain stakeholder buy-in for new solutions. Agility will be necessary as priorities become more dynamic, given new levels of visibility for performance and effectiveness. Problem-solving skills will rise in importance as roles become more about spotting patterns in the data that now resides in one integrated system.
Can you talk about what, in a practical sense, companies need to do to find and retain workers with these skills? How might companies change their recruitment and training programs to support their new procurement models?
The procurement skill set will forever develop, so hiring people who have a hunger to constantly learn and reinvent themselves will be important. Hiring for a particular skill set today does not guarantee you the correct workforce in five years, given the major impact technology continues to have on the way procurement functions work.
Hiring for soft skills and business acumen will become more important than interviewing people with direct procurement experience. A number of organizations are already doing this by advertising job openings that present problem statements rather than particular qualifications.
What will happen to companies that fail to mitigate digital and soft-skills gaps?
Simply put, they cannot have a procurement function that does anything different from what it does today. And that means it will not deliver anything different, which for procurement could well be fatal. It’s already a corporate function that many other departments try to bypass because they don’t see what value it adds. So, by not elevating itself from where it is today, procurement faces the very real possibility of being wiped from the corporate map.
Digitalization and the worker development that goes with it is not something that’s merely nice to have — it is essential to the future existence of procurement. And that is why the next crop of procurement leaders has such a vital role to play. We all must find ways to overcome the challenges and capitalize on the opportunities that this digital journey will throw our way.
