A solid procurement process and practice is the essential foundation for a successful e-procurement initiative.
This article tells you why and how.
NOTE: THE PROCUREMENT ITALIA MAGAZINE - Year 5 Number 4 - 2019
Q4 2023 Quarterly Investor Presentation - FINAL - v1.pdf
Looking beyond technology is the key to Procurement’s successful Digital Transformation
1. 8 9
DIGITAL TRANSFORMATION
Looking beyond
technology is the key
to Procurement’s
successful Digital
Transformation
by Jon Hansen
M
ore than 35 years ago,
I entered the high-tech
world. Shortly after that
the procurement pro-
fession. Needless to
say, I have witnessed and
been a part of many interesting develop-
ments over these long years, including
building up a software company and
eventually selling it for 12 million dollars.
During this time, I have worn many
hats. From technical expert and supply
chain consultant to SaaS service provi-
der and practitioner. What is interesting
is that with these various roles, the one
constant over the years is that when it
comes to supply chain success, the tech-
nology is secondary.
RESULTS VERSUS EXPECTATIONS
“75% of all such initiatives (e-business)
will fail despite the benefits to all tran-
sactional stakeholders”. – Dale Neef,
e-Procurement: From Strategy to Imple-
mentation (2001).
In one of the first magazine articles,
I had written – and this is going back
many, many years - I wrote how the as-
sertion that “technology is the key in the
supply chain organization of the future”
was the main reason why the majority of
eProcurement initiatives would fail.
The errant assertion to which I was re-
ferring is from an old ISM, CAPS, and AT
Kearney report. At the time, my position
was somewhat controversial as it appe-
ared to be going against the current of
growing popular opinion regarding the
promise of then-emerging technologies.
Given my background in which I was on
the ground floor of many of the early and
exciting technological breakthroughs,
my suggesting that technology was not
a key to supply chain success may seem
like the epitome of contradiction. I un-
derstand why someone might think that.
However, and the numbers do not lie,
most eProcurement initiatives did fail,
and fail miserably.
As the editor and lead writer for
the Procurement Insights Blog, Jon
Hansen has written nearly 3,000
articles and papers; as well as five
books on subjects as diverse as supply
chain practice, public sector policy,
emerging business trends and social
media. In addition to being a much
sought-after speaker and moderator
internationally, Jon is also the host of
the highly acclaimed PI Window on The
World Show on Blog Talk Radio, which
has aired more than 800 episodes
since its initial broadcast in March
2009. A two-time Ottawa Finalist for
the Ernst & Young Entrepreneur of the
Year Award, out of a group of 15,000,
Blog Talk Radio named Jon Hansen as
one of their top 300 hosts.
#
Jon
Hansen
In his book e-Procurement: From Stra-
tegy to Implementation, Dale Neef said
that 75 percent of all initiatives would fail.
Other reports indicate that the number is
closer to 90 percent.
High profile examples that I have often
cited include the Veterans Health Ad-
ministration’s failure to implement not
one successfully but two different ERP
platforms. Besides costing more than
a combined $650 million, the failure to
streamline the procurement process
hurt patient care resulting in what be-
came known as the Bay Pines VA Heal-
thcare Congressional hearings.
If technology is the key to the supply
chain organization of the future, then
what went wrong? Why did so many tech-
nology-centric initiatives fail to live up to
expectations?
PROCESS, NOT TECHNOLOGY
“At the heart of this change is the growing
realization of a fundamental truth that pro-
cess and not technology is the driving force
behind a successful e-procurement initia-
tive”. – Jon Hansen, Enabling technology
– the right way (2008)
I do not think that anyone today will
argue with the logic that a solid pro-
curement process and practice is the
essential foundation for a successful
e-procurement initiative.
Of course, back in 2008, there was a se-
emingly pervasive belief that technology
was the fix-all answer to any procure-
ment issue. But like slapping a coat of
paint on a wall that has not been “pro-
perly prepared,” the old cracks and mar-
ks will eventually begin to show regard-
less of the number of coats you apply.
Eventually, everyone began to realize
and accept the fact that technology in
and of itself will not fix a broken process
no matter how much money you are wil-
ling or able to spend.
In heralding the beginning of the “post-
modern ERP era”, Gartner Fellow Andy
Kyte talked about how “Early ERP adop-
ters, particularly large enterprises in
energy, manufacturing and distribution
industries, are paying the penalty of a
decade or more of excessive customiza-
tion.” Such statements are a testimony to
process before technology thinking.
So, what does this have to do with a
2019 article on procurement’s digital
transformation?
Here is where the second part of the
Kyte comment comes into play. Specifi-
cally, his assertion that businesses can
take advantage of “lower costs, better
functional fit, and process flexibility offe-
red by blending cloud (SaaS) applications
with on-premises applications”.
THOSE WHO FAIL TO LEARN
“Once your organization’s processes are
understood, refined, and aligned, you will
be able to evaluate technologies that will
accelerate the procurement process rather
than define it”. – Jon Hansen, Enabling
technology – the right way (2008)
We have all heard the saying about
“those who fail to learn from history are
doomed to repeat it.”
The emerging digital era is full of incre-
dible possibilities that we could not even
imagine in those early days of the tech-
nological revolution. That said, acknow-
ledging the importance of process before
technology is still as relevant today as it
was back then.
For example, Bank of America Uni-
versity Distinguished Professor of Sup-
ply Chain Management, Rob Handfield,
stresses that the paucity of clean data “is
a major issue for the majority of organi-
zations”. Handfield then goes on to say,
“you cannot transform your supply chain
digitally if you do not have clean data, and
the lack of clean data has been an on-
going problem for some time”.
Of course, the problem is getting to the
point of having clean data – the process
of which is a topic worthy of a separa-
te article. However, the point Handfield
is making – and one with which I am in
complete agreement, is that without ha-
ving sound processes in place in this as
well as other areas of your procurement
practice before implementing a digital
solution, means that history is likely to
repeat itself.
“ A solid procurement process
and practice is the essential
foundation for a successful
e-procurement initiative
”