Deloitte CPO Survey: Digital transformation of procurement a bust?

Posted on December 11, 2019

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“Interestingly though, a large percentage of companies that have fully implemented these modern technologies are not actually satisfied with the results.” – Deloitte 2019 Global CPO Survey

Uh oh. What is the old saying about those who fail to learn from history? Are the dismal results of eProcurement initiatives in the ERP-era going to be repeated in the digital age?

According to the recently published Deloitte Global CPO survey “most companies that have fully implemented digital technologies are not satisfied with the results” (see Figure 3 below).

Deloitte CPO Survey 2019 1

Besides understanding why there is such a high level of dissatisfaction with the results, let’s first understand what it means.

Early Adopters

In the July 2019 article Who are Early Adopters and Why Do They Matter? Martin Luenendonk writes that “Early adopters give you the first impression of the market,” and as a result “are effectively the metric for how strong your start has been.” He then goes on to say that “A slow start for a startup has almost always been a strong indicator of a business that might not reach the growth stage in the product life cycle.”

On many occasions, I have referred to the results of a McKinsey survey of 1,650 incumbent global companies in which only 20 per cent have a digital strategy in place. Of those, a meagre 2 per cent involve the organization’s supply chain. In short, when it comes to digital transformation, most executives are in a “wait and see” holding pattern.

Given the feedback from these early adopters, one has to wonder if and when digital will go mainstream. It is a fair question, especially given the historical influence early adopters of new technology have on mainstream buy-in.

The Real Problem

From my standpoint, I do not see it as being a technology issue – which was one of the main shortfalls with ERP-centric platforms. In other words, the digital tech is sound.

So, what is the problem?

It comes down to poor data governance, an unwillingness to move away from the familiar, i.e., the continuing reliance on spreadsheets, and a reactive versus proactive approach to formulating and implementing a digital strategy based on the failed consultancy models and methodologies of the past. These are not the only reasons, but they are among the main reasons why the level of CPO satisfaction with digital results may be so low.

Let’s do a quick unpack of the above points:

Data Governance: As Robert Handfield states, digital transformation will not happen without clean data. The paucity of clean data and determining who is responsible for cleansing has to be dealt with upfront. Unfortunately, most CPOs indicate that they do not have the resources and therefore cycles to go through the data cleansing process. As a result, they abdicate that responsibility to a service provider who, according to Handfield, is not equipped to do the job.

Spreadsheets: Next to discussions about gaining a seat at the coveted table – whatever that is, the subject of spreadsheet use is probably the next most frequent topic of discussion. In countless surveys, there is the recognition that the continuing reliance on columns and cells is perhaps not the best idea. However, until we clearly answer the “what’s the alternative” question, spreadsheets will continue to be a significant obstacle to digital transformation.

Failed Methodologies: Traditional consulting firms are general practitioners who usually win business first, and look for ways to make it work after the fact. In short, most do not have a deep bench when it comes to procurement expertise, meaning that they are not usually able to walk the talk. With the emergence of new procurement-centric consultancies and related implementation models, this obstacle will likely be the first to fall. Providing, of course, that “client” organizations have moved beyond the no one ever got fired for buying IBM belt with suspenders mindset.

Where to go from here?

I am sure that some are reading this post who will argue – and justifiably so, that one survey doesn’t prove that the digital transformation of the supply chain is not possible or is a worthy pursuit. I agree.

However, we cannot ignore the result or summarily dismiss it as being out of order. We need to learn from the survey’s feedback, starting with recognizing that new and exciting digital technology requires a fresh perspective and approaches, beginning with addressing the three significant obstacles referenced above.

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