Three Pillars of Digital Transformation: Advancing Your Procurement Team to Best-in-Class
In this article, we will explore the three pillars of digital transformation: people, process and technology. Many corporations look at technology as the panacea for their procurement challenges; however, to achieve best-in-class procurement performance all three pillars of digital transformation must be considered.
Let’s start with a critical point: Digitally maturing companies behave differently than their less mature peers. According to an MITSloan report, the difference has less to do with technology and more to do with business fundamentals. To help ensure success, in addition to technology you have to address fundamentals that include the people and process components of digital transformation holistically. Accomplishing this requires creating a strategy that enables leveraging the right people managing the right process based on the right information supported by the right technology. With these principles in mind, we will examine some important areas that organizations often miss―or severely underestimate― as they plan their digital transformation journey.
Addressing the Workforce Challenge
To begin with, in our experience at Canon many organizations are still challenged by the “people problem” when it comes to digital transformation. As mentioned, it is critical to have the right people with the right skillsets doing the right type of work as a well-integrated team in order to succeed at any type of transformation. To do this successfully, companies need to consider at least two workforce challenges: acquiring and retaining key talent and dealing with the shifting demographics of today’s workers.
First, given the current highly competitive job market, it is difficult to find and retain key talent. The second challenge has to do with a shift in demographics within the overall talent pool. Research has shown that millennials are different than their predecessors and organizations have to adapt new strategies for attracting, managing and retaining workers from this generation.
At Canon, we work with our clients to leverage a blended workforce. This spans contingent and temporary labor, consultants, contractors and managed services providers that can take over repetitive, non-core activities such as document scanning and data entry for sourcing, procurement and accounts payable operations. It is an approach that can yield such benefits as freeing up time, money and resources, allowing organizations to better focus on achieving best-in-class performance.
To tackle these challenges, we recommend starting with an assessment of your current teams, the resources they have at their disposal and how they are structured. The best approach is to dive deep and thoroughly evaluate the strengths and weaknesses. Then, build a strategy for filling key talent gaps in order to optimize the team, which includes aligning compensation with clearly defined and measurable business goals.
Planning for Significant Process Change
Now let’s briefly look at the “process” pillar of digital transformation. While people can be remarkably inventive, they can also be resistant to change. This includes stubbornly trying to apply old processes to new business developments. Many digital transformation projects have failed due to insisting on the strategy that “this is how we’ve always done it” therefore “this is how we have to do it.”
The definition of transform is “to change composition or structure.” Yet it is amazing how many organizations resist changing the structure of antiquated, inefficient and painful processes as part of their digital transformation projects. If you’re not planning for significant process change when it comes to your digital transformation initiative, you may want to take a step back and re-assess the goals and strategy of the project. This can help ensure that you’re not going down a wrong path simply because it’s easier.
A best practice for overcoming this hurdle is to build a team of key internal and external stakeholders who are responsible for defining the requirements of the project. For the group to be effective, the internal stakeholders must have the backing of senior executive sponsors within the organization. This helps guarantee that the changes necessary to support a digital transformation will be implemented.
Based on overseeing many projects for clients, we’ve learned that every project has at least one case where internal stakeholder and senior executive sponsorship proves critical to the success of the initiative. Without this support, an organization is likely to end up with great technology that was rendered ineffective by disorganized processes and workflows. Companies also run the risk that, by missing critical project benchmarks and failing to implement change at the right level, they frustrate key talent that they worked so hard to recruit.
Fostering Collaboration and Innovation
The third pillar of digital transformation to consider is technology. The road to success here starts with breaking down information silos as much as possible so that teams can seamlessly share data. In the case of sourcing and procurement, this data will have to be shared outside of the company’s four walls, including business partners and suppliers.
If you think that mainly relying on email is still an effective way to collaborate, you may be a victim of the “this is how we’ve always done it” type of thinking alluded to earlier. To leverage other collaboration and data sharing approaches, the best course of action is to partner with your IT team and other key stakeholders with the goal of building out this portion of your transformation strategy.
The key point is that your technology strategy needs to include collaboration in order to drive innovation. Your team has to be able to share the right information with the right stakeholders at the right time. While it is difficult to quantify, much can be lost in terms of productivity, time and money when information cannot be shared effectively between project teams and stakeholders within the organization as well as with suppliers.
The goal of spotlighting these insights has been to emphasize why developing a cohesive strategy around three pillars of digital transformation is so critical to the success of a transformation project. We’ve also touched on how a digital transformation project is critical to achieving best-in-class performance. In our experience, a digital transformation plan can serve as the roadmap for navigating the transition to a more collaborative, agile and innovative environment within your sourcing and procurement department. If you haven’t crafted such a plan, there is no better time than now to set the wheels in motion and begin your journey.