How the Rise of Digital Procurement Can Finally Bring About Strategic Procurement Transformation Nirvana

And it has nothing to do with AI, savings, spend data, contract lifecycle management, tail spend, process automation, ESG, accounts payable, or supplier performance management.

A version of this article originally appeared in the August, 2022 ISM-Dallas NewsLink Newsletter.

I have a hypothesis that leaders of Strategic Procurement Transformation have been missing the boat for the last two decades by focusing too much on pushing new processes and technologies at the expense of the people (procurement and business partner personnel) who are asked to power through uncertainty, fear, anxiety, ambivalence, and other common emotional responses to change in order to try and deal with those new processes and technologies. If my hypothesis is true and nothing changes, procurement organizations are going to see a cataclysmic erosion of value over the next 8 years as the Digital Procurement Software market is projected to grow from around $6 billion today to $14.10 Billion at a CAGR of 10.1% by 2030, according to Grand View Research.

Why might my hypothesis be correct? Well, historically low Procurement stakeholder satisfaction ratings for one. In their 2019 Global Chief Procurement Officer Survey, Deloitte found that Finance, HR, IT, Legal, Operations, Risk, Sales & Marketing, and Tax all rated their relationship with Procurement as overwhelmingly poor and by as much as 56%. This is shocking considering all the time, money and influencing-effort Procurement leaders have put into their transformation journeys. To their credit, 64% of Deloitte’s 2019 survey respondents listed business partnering / relationship management as the top soft skills training they would like to provide their teams, followed by effective manager training, conflict management, emotional intelligence, and self-awareness. Clearly, there’s been a disconnect between transformation efforts and desired outcomes, as evidenced by low stakeholder satisfaction numbers.

And no, it doesn’t appear that a 2-year pandemic and the supply chain issues that ensued, while although generating some fresh goodwill toward Procurement, has done much to wipe away these historically low stakeholder satisfaction ratings. In fact, Deloitte reported in its 2021 Global Chief Procurement Officer Survey that CPO’s perception of stakeholder satisfaction had actually fallen, especially in IT, Finance, Legal, and HR. A notable exception being Manufacturing, the lone area where Deloitte’s survey did indicate Procurement received an uplift in stakeholder satisfaction. And not surprisingly given the heroic efforts that were and are still required to keep goods and materials flowing during the global lockdown.

So, what’s been missing in most efforts to bring about Strategic and Digital Procurement Transformation, you ask? My contention is that effective, and I underscore effective, Organizational Change Management practices. This seems apparently the case given that a search on LinkedIn of my 1st and 2nd degree connections with the phrase “procurement transformation” in the search field returned some 4,600 names, while strikingly, when I added (“organizational change management’” OR OCM) to “procurement transformation” in my Boolean search string, only 21 results were returned. And of these, only 5 worked directly in corporate procurement leadership roles. If purported leaders of Procurement Transformation do not pay homage to OCM in their LinkedIn profiles, how likely is it that they make it a priority in their transformation efforts?

But I don’t lay this apparent lack of appreciation for formal Organizational Change Management squarely at the feet of the CPOs. After all, formal OCM initiatives have a long-held failure rate of 70% in general and as much as a 90% adoption failure rate for Digital Procurement, specifically (cips.org, 2019). It’s no wonder that CPO’s bent on driving improvements in cost, quality, risk, ESG and other sources of potential value to the enterprise have focused more on leveraging their efficiency-laden business cases and executive mandates while caring less about looping in the company’s OCM group to do things like assessing organizational readiness and user impact.

Even still, I say that leaders of Strategic Procurement Transformation should indeed begin leveraging OCM as a standard practice when rolling out new procurement processes and technologies, but to not stop there. McKinsey reported in their 2018 article, Unlocking Success in Digital Transformation, that organizations are twice as successful in their change initiatives when they provide leadership development training to their change teams and offer programs on coaching others to adopt new ways of working. The point here is that adoption of change is always personal and emotional, as well as “organizational.” As Errol Gardner, Ernst & Young Global Vice Chair – Consulting reported in a recent Forbes article, “leaders who prioritize workforce emotions in their transformations are 2.6 times more likely to be successful than those who don't.”

I’ll end where I started. With so much money flowing into Digital Procurement start-ups and customer implementations, which is forecasted to continue at hyper-speed for the better part of the next decade, Procurement has a rare opportunity to adopt some best practices from the OCM world but then go even further to avoid that ominous 70% failure rate. OCM is important but standard OCM surveys, CxO dictates, communications plans and user training are just not enough. Deloitte’s 2019 respondents got it right with their list of soft skills needed for their teams, all of which can be described as Emotional Intelligence (Stein et al., 2009).

In conclusion, procurement, plus OCM, plus leadership and Emotional Intelligence training and coaching seems like the winning combination for Strategic and Digital Procurement Transformation that sticks, especially as the pace of change and technological innovation plows forward.

Corey Matthews

Member, ISM-Dallas Board of Director