We recently published my twelfth annual CPO-themed report, CPO Rising 2017: Tools of the Trade, which is part of an ongoing dialogue that my team and I have had with Chief Procurement Officers (CPOs) and other procurement leaders for more than a decade (I began writing a version of this report in 2006). Over the next few weeks, we’ll be discussing the report in a series of articles on this site. You can get the report here (registration required).
The CPO’s Top Business Pressures
When Chief Procurement Officers were asked to identify the “top two” business pressures facing their organizations in 2017 as part of this research study, the responses were quite similar to those seen in last year’s edition of this report, CPO Rising 2016: The Art and Science of Procurement. The pressure to “find more savings” (39%) maintained its position as the CPO’s top business pressure this year, but that pressure remains much lower than it was just a few years ago, continuing a multi-year downward path. Conversely, the need to “better communicate the procurement department’s value and performance” (33%) and “increase procurement’s effectiveness and influence” (25%) are trending flat while remaining the second and third most common pressures facing CPOs this year. Actions speak louder than words, but from a prioritization standpoint, CPOs believe that they need better and stronger words to market and explain their actions. The two pressures are inextricably linked but belie the fact that strong leadership is needed from the CPO in the form of both marketing and execution.
Leading CPO Strategies
Transformative strategies designed to leverage the collective resources and capabilities of stakeholders, organizations, and trading partners will be the keys to procurement’s ability to unlock more value in the future. While the business pressures facing procurement teams have stayed remarkably static over the past twelve months, the strategies that procurement leaders employ in response to them have been more varied. For many years, collaboration has been the chief strategy used by CPOs to drive their annual agenda. CPOs understand that collaboration is a powerful strategy that can enhance savings opportunities and increase their level of influence within the enterprise and across the supply base. After all, procurement’s ability to place spend under its management or influence is greatly enhanced by its ability to engage budget-holders and functional peers in proactive conversations.
In 2017, internal collaboration remains among the top strategies in the CPO’s arsenal (identified as a top strategy by 41% of all CPOs), but this year it has been displaced by the drive to “improve the use of technology” (44%) by investing in new systems and/or improving current ones. An element of the change may have been driven by the “self-selection” nature of the research topic, but a nearly 20% increase in this strategy is notable for several reasons. Over the past five years, the typical procurement department has been given more responsibilities, while also trying to influence more spend. Since headcounts have generally stayed flat for the past few years, CPOs have to seek other ways to gain scale. CPOs’ use of services to gain new expertise or augment current operations is on the rise and third-party services are becoming a larger part of procurement’s annual budget. One consistent challenge with leveraging outside help is that the knowledge that is introduced into the organization during the engagement is hard to retain when there are no tools in place to capture it. Interestingly, several of the CPOs interviewed in this study described their planned investments in new technologies as an active attempt to develop and scale organizational expertise and support more projects.
Similar growth is also seen with the next most popular strategy in 2017, “improve internal communication with stakeholders” (41%). Finding the right internal platforms to use and developing a messaging style that meshes with the larger enterprise can take time. Instead of seeking outside help, try to tap into internal marketing and communications resources for tips and guidance. Most professionals are happy to share their wisdom – flattery and a cup of coffee may also help.
Finally, one of the most unusual findings in this year’s study is that the expanded focus on the strategies noted above is coming at the expense of “supplier collaboration” (24%), which has been a major trend this decade. At this point, it is unclear if this is a momentary dip, driven by the deeper focus on technology and collaboration or a signal that the drive to expand supplier collaboration as a way to improve overall performance is waning. Over the next year, Ardent Partners will track this current de-emphasis on supplier collaboration to determine if this is a temporary shift or the start of a newer trend.
For more on the Top CPO Pressures and Strategies, refer to the CPO Rising 2017: Tools of the Trade report.