January is a time for resolutions and predictions. We have many planned for you this month, but, before we dive into out 2015 ideas, we thought it would be interesting to take a look at how we did with our 2014 predictions. Since I was behind many of the predictions, I’ve asked Matt to grade how we did as part of an interactive two-part discussion.
Last January, our team delivered a webinar entitled, “Procurement 2014: Big Trends & Predictions” where we identified the major procurement and supply management trends for the year and made a number of predictions for 2014 to boot. That was 12 months ago and a lot has happened in the interim. Overall, many of our predictions were spot on, but admittedly some missed the mark. So, before we issue our 2015 predictions, let’s revisit the first set of our 2014 predictions.
2014 PREDICTION: While Big Data will get bigger, CPOs will work to ensure that Big Data also gets better: It was our prediction that procurement departments, who were already drowning in the big data from all of their different systems and new, third-party sources were going to start to make their best cuts and begin to define a core set of data and metrics that they believed were the key determinants to a successful operation. We felt that Chief Procurement Officers needed to put the blinders on and focus on what’s most important. And while there could be some value in the “discarded” data, when teams attempt to track and analyze everything, they ultimately are tracking nothing – it becomes a useless exercise. As enterprises and procurement departments become inundated with near constant streams of diverse data, we said that Chief Procurement Officers (CPOs) will focus more on data quality instead of data quantity. They will prioritize specific metrics rather than trying to examine every piece of data that the enterprise collects. Not only will a focus on the right data be a big focus in 2014, but the tools used to manage, present, and analyze the data will continue to advance with many of the newest capabilities being incorporated in the new supply management technology releases. We said then that “if you’re working with 4-year old reporting tools, it’s time to send out an RFI” and investigate and adopt one of the newer, more powerful tools. In this vein, we also predicted that CPOs will also increase their focus on data analysis and reporting tools that allow the enterprise to extract value from big data. Lastly, we said that big data projects will need to have a clear rationale and CPOs will need to be able to illustrate a return on investment before commencing work. — Andrew Bartolini
How did we do? While we did not see any paradigm shifts in technology innovation or adoption in 2014 (nor were they expected), we did see wider adoption and emphasis placed on data analysis within procurement organizations in 2014 – particularly spend analysis and supplier information. CPOs have continued the multi-year trend of prioritizing data management and quality while also trying to harness the value of that big data within the procurement organization and the enterprise as a whole. Newer, more robust technologies have been emerging that allow procurement teams to consume, categorize, cleanse, combine, and analyze structured and unstructured data and distill intelligence from it all – particularly spend and supplier intelligence. Nonetheless, with purse strings still being tightly controlled, demonstrating ROI for these tools remained a challenge for many CPOs. — Matt York
Final Comments: We also said that enterprises in the midst of big data projects or about to undertake new ones will change the focus and rationale behind the projects – no longer will managing data for data’s sake be an acceptable reason to invest in a project – there will need to be specific outputs and results that are to be expected. Procurement does a pretty good job of this with their investments, but as the lead group sourcing large IT projects, we said that 2014 would be the year that businesses demand a better rationale for investment in these projects and force the project leaders to commit to an ROI. — Andrew Bartolini
Final Grade on this Prediction: A –
Building on this first Prediction, we continued…
2014 PREDICTION: CPOs Will Focus on Data Management: Big Data is prevalent and in 2014, there will be more and more sources of interesting and potentially valuable data as it relates to specific procurement operations, be it specific suppliers or bidders, specific categories or regions, or performance benchmarks that can be used to improve operations. In 2013, we saw a rise in the use of networks, both business and social by procurement groups and some of these may present interesting opportunities to share different kinds of information, if not data. They will also seek to leverage more third-party data from social and business networks, market research, media, finance, and public market information. Although this may seem contradictory to our first prediction (prioritizing data quality versus data quantity), third-party data can supplement internal and supplier data to help procurement teams make better informed sourcing decisions. We also predicted that some CPOs will begin to define and then hire a “Director of Procurement Data and Information” role. — Andrew Bartolini
How did we do? It was interesting to see in 2014 was the growing interest in leveraging third-party data and information – like news feeds and alerts on suppliers, commodities, and regions – as well as the location/placement of the data/information within the various procurement/sourcing systems like having supplier news feeds and performance information intermingled. Procurement leaders continued to value third-party information – information that is perhaps more consumable and traditional and thus, more palatable for procurement organizations that have yet to harness big data within their enterprises. Nonetheless, while procurement organizations and CPOs are placing greater value on data managers and scientists to help structure and analyze multiple data streams flowing into enterprises, these roles are largely being filled at the line-of-business level and reporting up to CPOs and other supply management leaders and we have not seen this new type of position yet. — Matt York
Final Comments: There were several components to this prediction that I think we hit directly, but we have not seen a Procurement CIO or Data Czar job listing as yet. I believe that this role will emerge and that we were simply a bit early. — Andrew Bartolini
Final Grade on this Prediction: B+
2014 PREDICTION: Volatility – While we did not predict a global recession or financial meltdown – we felt that the 18 months ending 12/31/14 had been pretty smooth sailing for large companies, fantastic sailing for investors, and while job requisitions were still hard to come by in the average procurement department, for the most part, things had been progressing well for most procurement departments. We predicted that that arc would change in 2014.
Specifically, we predicted that that volatility would manifest itself in
- The stock market: which would be much more choppy in 2014 than 2013 and that it would not rise nearly as fast.
- Commodity pricing: that there would be increased volatility in some commodity areas
- Oil prices: we guessed that prices would spike in Q2
- Dynamic discounting: would increase due to higher borrowing costs
— Andrew Bartolini
How did we do? There was certainly more volatility in 2014 than 2014 however the degree of volatility we predicted was not reached Specifically with
- As we predicted, the stock market did not rise as fast as it had in 2013 and it was more volatile
- Commodity pricing was more volatile in 2014 than 2013, but that isn’t saying much – while a few commodities rose or fell, it was a pretty uneventful year
- There was certainly a big oil price volatility and prices rose by about 15% in Q2 when it peaked for the year, but the big news about oil was the price collapse in Q4
- Ardent saw an increase in interest in dynamic discounting in 2014 and spoke with several companies that started to dive significant cash flow as a result. The cause of this increase was not, however, volatile borrowing costs and general access to traditional credit
— Matt York
Final comments: I don’t know that our predictions about volatility in 2014 were either brave or fearless, but 2014 was more volatile across the board. We get downgraded because we felt there would be more of it. I think we nailed the stock market prediction, fared ok with commodity pricing, saw a real increase in dynamic discounting (even if our rationale was off) and that we timed the oil rise and peak in Q2 and that it would be less predictable throughout the year. Nonetheless, we did not see oil moving where it did, when it did to end the year. — Andrew Bartolini
Final Grade on this Prediction: B- / C+
What other predictions did we make and how did they play out? Tune into the second part of this series to find out.
RELATED ARTICLES
The Implications of 2015’s “Talent Vortex”
Why 2015 Will Be a Critical Year for Events Management
2014: The Year Ahead in ePayables (AP Automation)
Supply Management: Big Trends & Predictions (Globalization)
Supply Management: Big Trends & Predictions (Big Data)
