January 17, 2019

The Clear-sighted Route to Digital Transformation

What is digital transformation business change

The Clear-sighted Route to Digital Transformation

There is no shortcut to effective digitisation. It takes thought, careful investment, time and resources.

Much has been made of the transformation that digitisation will bring, but as time goes on and we understand more completely what it takes to become digitally enabled, the less glamorous it all seems.

It feels a bit like the dotcom euphoria of the early 2000s, when it was painful to wake up after the drunken party where we were promised the unending benefits of interconnection and universal collaboration on the back of technology that no one quite understood (and were incapable of delivering).

Hopefully, we are in a better place today as we realise that digitisation takes thought, careful investment, time and resources. In the words of one pundit, we are moving past the ‘peak of inflated expectations’.

Understanding the steps towards digitisation

So, what does this more sober and realistic perspective entail? Through intense discussions with The Beyond Group’s Think Tank members we made some key observations.

To begin with, you need to understand the first step towards digitisation, and this is often the hardest. Identifying the basics that must be covered will ensure that digitisation investment bears fruit in the form of better decision-making and insights.

Not surprisingly, high quality, structured data with solid governance for prescriptive and predictive procurement operations is fundamental.

Next, you should assess the overall technology landscape, sorting out the basic from the more advanced. Diving into technologies that are advanced but sitting on rickety platforms of disparate systems, uneven implementation, and fragmented and missing data in an ungoverned implementation environment gets you nowhere.

Is the technology fit for purpose?

Thirdly, it is important to build a stepwise decision process that ensures technology is fit for purpose. Technology must be in line with company objectives.

An organisation that concentrates on supply-chain risk management may not need category management enablement on its technology radar. Conversely, if tight price control is critical, then category management is a top priority, leaving strategic-level supplier relationship management (SRM) systems until later.

Investments in technology don’t provide instant results – they can take three or more years to deliver real benefits.

Potential pitfalls you need to avoid

There are certain traps you also need to avoid. Number one is don’t give away governance and technology decisions of purchase to pay (P2P) systems to other functions, such as finance.

Contrary to common wisdom, giving this away leads to technologies that solve process issues but often don’t lead to better insight.

Secondly, don’t rely on legacy systems and processes. Procurement functions have built up considerable knowledge and processes that are purely operational, but not designed to provide insight. The continued use of these processes slows down the delivery of benefits.

A foundation for efficient processes

Getting the data right at the time it is input builds a foundation for efficient basic processes, which in turn are the foundation for effective digitalisation. We strongly recommend starting with data management before moving quickly to the systems and processes that allow you to reach your goals.

Most companies have been trying to do this for years, sometimes with limited success. Our experience shows that digitally empowering some fundamental processes not only yields benefits sooner, but also gives you the opportunity to use the expertise already in place.

This progressive approach takes much of the confusion out of a market crowded with stuff that simply does not matter.

Kick-start your digital transformation

The consensus recommendation from our 2018 EU “Productivity Think Tank” was to focus on three main areas to kick-start the digital transformation process and gain benefits quickly.

First, fix the P2P processes, as this uneven landscape is hampered by poorly governed data acquisition, accumulation and refinement. Robotic process automation (RPA) will be best applied in this context.

Next, build out the source-to-contract (S2C) systems in important category areas. Artificial intelligence is the next technology that will help analyse the rich information environment that procurement teams have built over years of strategic category management and where value can be extracted most effectively.

Finally, build advanced, effective SRM systems that truly help evaluate suppliers, markets and risk (and not just supplier scorecards). This market is full, so choose a system that helps you focus on what matters most in your supply chain.

This article originally appeared in our special report, The AI Revolution in Procurement, and was written by Giles Breault of The Beyond Group (Principal and Co-founder).

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