Blue Ocean shift in Procurement

“Procurement Times They Are a-Changin'”, as could have sung Bob Dylan.

Looking at company policies, competition is the name of the game but the playground has changed: energy transition and policies, digitalization (in the meaning of having instantaneous access to most appropriate information to support decisions) and geographical shifts are definitely megatrends that will modify the competitive landscape.

But what are the megatrends in procurement?

To continue the analogy with corporate policies, the procurement function still needs to find its “Blue Ocean”. But what is it?

In corporate policies, markets over which the competition is fierce have turned red. In the “red ocean”, even the organizations which?manage to stay afloat often face decreasing margins. By opposition, “blue oceans” describe markets still not explored or non-existent (that is to say: to be created): blue oceans are created when there is a perceptible change. There needs to be value innovation. And when it happens, it makes competition irrelevant as it has created an uncontested market space.

So, again, what could be the “blue ocean” for the procurement function?

Many of us tend to believe that the next “blue ocean” for procurement is digitalization. However, in such case, “digitalization” often refers to the digitalization of procurement processes. This is a tactical improvement, but not an innovation per se. To this extent, this can hardly be referred to as a “blue ocean”.

At this stage, we need to sort of step back to the real market drivers behind digitalization: the need (generated by the technology) for the acceleration of connectivity in order to use the best information possible - and to draw the most appropriate decisions at a given time. “Connectivity” is the key word here.

You can possibly make as many “procurement digitalization” projects as required and needed, but connectivity is at the center of the game, if willing to reach the next “Blue Ocean”.

Connectivity… to whom, to what and for which purpose? Stepping back again, the procurement function is usually in charge of 70%+ of the costs of the company. But the question is not about the costs only: it is more about the level of interactions that such a position needs and can be used for in terms of achieving strategic goals. This is the point behind “connectivity”.

One would be surprised to see how procurement functions usually interact with internal and external stakeholders, as being very historically focused on costs and supply control at field level.

From one side, procurement has unlimited capabilities to connect with stakeholders able to bring value innovation. And, from the other side, procurement is often limited by resources of any kind and by tasks either self-assigned or assigned by immediate business needs.

For sure, the next “blue ocean” for procurement lies in this question of ad hoc connectivity with internal and external stakeholders of any kind - including in order to give enough space to serendipity during these contacts. In an era of distributed networks, sticking to procurement paradigms sometimes established a long time ago at times of Taylorism would probably be like staying in a “red ocean”.