What’s Procurement Got to Do With It (DX)?
There are two critical roles for this department to play in digital transformation for any business
When embarking on a digital transformation (DX) effort for any business, it is critical to engage your key stakeholders for organizational change.
I often find that digital leaders will stress the importance of working closely with your IT department (for technology) and your HR department (for talent).
But what about the rest of the organization?
Throughout “The Digital Transformation Roadmap,” I argue that real transformation requires the involvement of every business unit, and of every business function.
What about a decidedly non-sexy, non-customer-facing business function… like procurement?
What does procurement have to do with digital transformation?
It turns out, quite a lot.
My Trip Down the Procurement Rabbit Hole
I recently returned from Amsterdam where I delivered the opening keynote at the DPW 2023 conference.
DPW is the world’s biggest annual gathering of leaders in the field of procurement. Think of it as Burning Man (without the mud) for the executives who work at the intersection of supply chain, finance, operations, and sustainability.
For my keynote, I spoke to 1,500 live attendees and several thousand more online.
Later in the day, I got to lead a more intimate workshop on digital transformation with the Chief Procurement Officers of global brands in consumer goods (Coca-Cola, Danone, Kraft-Heinz, Mars, Campari), pharmaceuticals (Merck, Bayer, Sanofi), financial services (Discover, Raiffeisen Bank), industrials (Tata Steel), energy (BP), and big tech (Google).
Yes, that’s right. Even Google needs a procurement department.
As a decentralized, digital-native firm, Google lasted twenty years without one. But five years ago, a global procurement team was established, in order to help the company better scale its resources (think: server farms and real estate) to match its torrid pace of growth.
Procurement’s Two Digital Opportunities
I quickly discovered that, when it comes to digital transformation, CPO’s get it.
They know that new digital business models and customer expectations demand a much faster pace of innovation and change from their organizations.
The CPOs in my workshop spoke fluently about the risk of business model disruption to their firms, about low-margin entrants coming in from outside their industry, about balancing a b2b strategy and a direct-to-consumer strategy at the same time, and about harnessing IoT sensors and machine learning to yield better solutions to the customer problems their business was created to address.
They also know that CPOs have a key role to play in this digital transformation.
In our workshop, we focused on two key opportunities for procurement to be a part of DX:
First, the procurement team must work to enable innovation across the business, rather than being an impediment to change.
Second, procurement leaders need to boldly transform their own function, reinventing their role and disrupting their traditional ways of working.
Job 1: Be an Enabler, Not an Impediment
The job of becoming an enabler of change is critical for procurement, and for every other control function—finance, legal, risk, compliance, etc.
This job starts with recognizing that digital transformation is not about technology.