Three Lessons Learned from 25 Years of Conducting E-Auctions

Posted by Ardent Partners Analyst Team on March 1st, 2019
Stored in Articles, Lists, People, Process, Strategic Sourcing, Strategy, Technology

Publisher’s Note: Today we welcome back Jacob Gorm Larsen, longtime “friend of the site,” and a onetime Keynote Speaker at our annual CPO Rising Summit, as a guest contributor. Jacob is also the director of digital procurement at Maersk Group and a real-life innovator in the procurement field. In part one of this article, Jacob reflected back on 25 years of sourcing and the dramatic transformation that the procurement function has undergone in parallel with the rise of eSourcing. Today, we have part 2.

 

 

 

 

 

 

 

By Jacob Gorm Larsen – Director of Digital Procurement, Maersk Group – Copenhagen, Denmark

In Part Two, I will apply a few lessons that we as an industry have learned over these years to today’s business environment, when procurement functions are exposed to a range of new technologies that could have a profound impact on the function. I believe the lessons from the journey with eAuctions can better position the procurement function when trying to realize the many potential benefits of digitization. I will finish by outlining some of the learnings I have drawn from my personal journey with eAuctions over the last decade that will be helpful considering the many digital opportunities we have in front of us.

     1. It’s a lifestyle – not a diet.

This was something my CPO said during one of countless discussions on how we ensure increased adoption of eAuctions and it is spot-on, since introducing eAuctions is not a project or something that you are ever done with. It is a program that requires constant attention to stay successful – history shows many examples of companies that have taken their proverbial foot off the eAuction pedal, resulting in an instant drop in adoption. I see a direct parallel to many of the emerging digital solutions. This is not a one-off project or consultancy engagement to become successful with digital – It is a fundamental change in how we operate a procurement function, which goes way beyond the initial hype that often surrounds new technology.

     2. It is a core procurement skill.

Having experts that truly understand the technology is a pre-requisite for success. The barrier is not the technology, but the people dimension and as mentioned, many myths and misconceptions continue to haunt eAuctions. The only way to overcome these is by ensuring that you have the right capabilities available to your organization.

Let me illustrate this point with the example of something as simple as the definition of eAuctions, which is still not commonly accepted after 25 years. The definition that I use for eAuctions is:

An online, market-driven negotiation based on total value and with commitment.

Many organizations struggle with the commitment part of the definition in particular, which means that while they think they conduct eAuctions, they actually conduct a kind of benchmarking exercise and not a negotiation. Remember that the outcome of an eAuction isn’t necessarily a contract award. Only by having the right capabilities available can an organization overcome these challenges and drive successful, consistent adoption. Other examples where having the right capabilities available could include: an e-auction strategy, development of value models, understanding how eAuctions differentiate from other sourcing methods, and so on.

     3. The potential goes beyond procurement.

As mentioned initially, eAuctions follow a traditional flow for any digital transformation considering that the idea originates out of a potential to automate and run a more efficient process. But once the core is digitized it creates more opportunities for further transformation.

Over the years I have seen how eAuction technology and capabilities have added value going beyond procurement. Examples of this could be the selling of used assets or scrap metals via eAuctions; even large real estate transactions are something we have supported with our eAuction capabilities. Coaching of sales teams exposed to eAuctions is another example of how capabilities have been applied outside the traditional procurement scope.

Considering things like fully-automated sourcing bots, you also need to consider the value proposition beyond the efficiency that this will create within strategic sourcing. For example, consider how it will impact operations (ours and those of our customers) if we can test the market instantly in all situations, because we have a fully-automated sourcing process. There’s endless potential value here.

When assessing digital solutions, you will miss out on half of the potential if you do not focus on the wider value proposition. Thus, make sure to consider how a digital solution can improve the value proposition beyond the initial automation potential.

It has been an exciting first 25 years in the life of eAuctions and, as outlined there, are many interesting developments ahead of us. I have enjoyed every day and every discussion I have had on eAuctions over the years, so I am truly grateful for the visionary mindset of Glen Meakem and all others who have contributed to the development of the eAuction methodology over the years.

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