I spoke to countless CPOs about digital in the context of their own organisations. Many of them struggle to understand what digital transformation actually means for them in terms of which opportunities to pursue and which initiatives to prioritize. Some of them expect it to involve a radical shift in the way procurement operates, and huge new investments in technology. For others, radical disruption is often quite unnecessary, and they have done equally well using a more incremental approach that leaves the core value proposition and operating model essentially unchanged. For them it’s less about a radical rethinking of procurement than about learning how to use new digital tools to better serve internal and external stakeholders.
More than procurement and technology
Whatever your digital strategy may be, digital procurement transformation requires digital leadership. The transformation ahead is not (just) about procurement or technology. It involves stakeholders, suppliers, and a team to get things done. The person in charge needs to excel at:
- Creating a transformative vision of how the procurement organisations will be different in the digital world
- Engaging employees in making the vision a reality
- Channeling the procurement organization’s energy through digital governance
- Breaking down silos at the leadership level to drive digital transformation together
Digital leadership – is your CPO up to it?
Without someone really taking charge of something, we all know it usually doesn’t lead to much results, as everyone is very busy with their jobs. In the ideal world, your CPO should embody everything that is needed for digital transformation and personally take up the digital agenda. Unfortunately, not every company is blessed with a digital savvy CPO, so they need to bring in digital leadership in another way.
The first response of the CPO is to go look around the existing organization to find senior management that can handle the job. The logical choices could be the head of procurement operations, technology sourcing, or Center of Excellence (CoE), but this is not necessarily the best approach.
We need a Head of Digital Procurement
To take charge of the digital transformation, I believe that you need someone new: a Head of Digital Procurement who becomes a permanent part of the team. He or she doesn’t need to be a digital guru, but rather a digital general manager with all the skills to manage a lot of internal and external change.
Your Head of Digital Procurement needs the following capabilities:
- Leadership and charisma to align all stakeholders to make the transformation happen
- Breaking down the traditional procurement silo to create new organizational structures
- Understanding and managing the internal politics and speaking the languages of the business
- A challenger of everything that is already in place on a strategic, operational and process level
- A thorough digital knowledge in: S2P, e-sourcing, ERP, supplier management, data etc.
The digital transformer needs to be part of the executive team
The biggest mistake I see is CPOs setting up the digital team to fail. They see the threat of digital disruption, they go to conferences and look good on panels, they network with peers and everybody’s talking about digital and so they hire somebody to manage the digital transformation, a head of digital procurement, or someone else. And unfortunately, that person is often set up to fail. They’re given a good title, they’re given a big responsibility but within the (procurement) organization, they have very little legitimacy to actually drive change and often, internally they are ignored.
So, in order to get that digital team to be successful they need to have more than a nice title. They need to be given a “license to change” and have real resources in order to go and leverage and scale the digital activities that really drive benefit across the wider organization.
It has to be a permanent role – digital transformation will never stop
Digital transformation is a permanent process. It will never stop. Once you digest one wave of disruption through the proper transformation, you will face another one. This new senior person will stay on the executive team for a long time and must be part of the core. Someone with a special mandate for a limited period of time will not succeed. Consultants can be helpful at times, but they typically have not digitally transformed a procurement organization themselves and do not have the depth of knowledge of your business, company culture and people.
My final thoughts
I believe that appointing people from within the company with the right mind-set, willingness to learn and a strong will for change to help drive the digital transformation is the way to go. Ultimately, digital transformation is as much about organization change as it is about technology. Insiders who are willing to learn have an advantage because they understand how the business works, they have the relationships to get things done, and, most important, they understand what they don’t know. But, for procurement organisations that are still operating fairly analog and feel comfortable, disruption is needed and the skills required to lead that change may not be found within the organization.