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Looking beyond technology is the key to Procurement’s successful Digital Transformation

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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

Published in: Technology
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Looking beyond technology is the key to Procurement’s successful Digital Transformation

  1. 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 ”

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