“One can have no smaller or greater mastery than mastery of oneself.” – Leonardo da Vinci
Our ongoing series that looks at the 15 annual CPO/State of Procurement reports that I have written continues today with Part Two of CPO Rising 2016: The Art and Science of Procurement, a report published in June 2016. As with many of our works, this one served as the genesis and theme for a new organization to use as a lens to examine procurement. The idea behind the theme (and subtitle) of this year’s report was not to pose the question of whether procurement is an art or a science. Rather it is to examine how the unique elements of each field can and should be applied in the pursuit of procurement mastery.
Procurement is a blend of art and science, combining business, category, and supply expertise with leading technology, data analytics, and associated value-based decision support capabilities. (To be fair, the survey did asked the question and 94% of CPOs at the time agreed that procurement is a blend of both art and science.) Procurement is a science because it deals with process and application and it studies and tests its results; quantitative analysis and precision are valuable tools of the trade. Procurement is also an art because it involves the knowledge and insight from the humanities and the social and behavioral sciences; nuance and negotiation are critical to the craft.
Here are some excerpts:
[On Art versus Science:] Today’s popular education narrative has, for some reason, polarized the two disciplines in an unnatural way. The reality is that, as was clear in ancient times, the two coexist across life’s pursuits and serve each other far better when viewed and used as complements. Music, after all, is a mathematical equation and the DNA double helix is a work of art. That is not to say that individuals do not possess strengths in one area versus the other or that they should never be classified as either a scientist or an artist. The point is simply that in business and procurement, successful leaders are able to tap into both sides of the organization’s “brain” to make decisions that use both data AND insight, logic AND instinct, and rigor AND creativity. Of course, the different capabilities and skills must exist within the team or at least be accessible to it. This makes it an inescapable fact that building the right team and enabling it to perform is the CPO’s key mission.
Whether CPOs view themselves as the conductor of an orchestra or the head of a research lab, the teams they have assembled will be focused on a few major areas over the next three years. Even as the pressure to deliver more savings continues to recede, more CPOs (40%) are still focused on delivering it over the next three years than anything else.
While this year’s technology adoption numbers remain consistent with earlier years, albeit slightly improved , the scope of technology projects and the number of business processes considered as targets for process automation continue to grow. “I am pushing heavily for technology changes in 2016. The need to take paper out of our environment as well as the need for automated, auditable workflow remains my #1 priority. I have contracts and POs and am now pushing for ePayables, vendor on-boarding, and supplier management forms,” said Director, Procurement & Corporate Services, Financial Services Industry.
There is no profession where a true master tradesman intentionally lays aside the core tools and equipment of their craft – skill, creativity, and dedication cannot replace them. While budget and resource constraints as well as perceived complexity often hinder investment in supply management technology, it has been clear for some time that some CPOs simply do not consider these solutions to be essential to what they are trying to accomplish. These CPOs are predominantly from the baby boomer generation and, while mistaken, come to their views honestly with careers that began well before the solutions first launched twenty years ago (studies have shown that technology adoption is less likely when it is introduced to someone after they turn 30). The department that employed these older artists was formerly known as purchasing and it epitomized the back-office view of an antiquated and highly tactical operation. The lingering question is if enough competitive and professional pressure can eventually either drive this cohort to actively pursue process automation or drive them out of their procurement leadership positions entirely. Until then, many of these “old masters” will continue to act and perform like apprentices.
When CPOs were asked to rate the impact that a long list of external factors will have on the procurement profession over the next five years, “supply management solutions” were rated as the one most likely (83%) to have either a significant or very significant impact. Innovation (82%) and supply risk (77%) were the next highest ranked factors. Additionally, 68% of all procurement leaders believe that predictive analytics and other “smart” technologies will have a similar impact on the profession. Finally, Ardent Partners research now shows that those that have adopted and successfully deployed a supply management solution are nearly three times as likely to deploy another complementary solution. Seeing is believing…
Deliberate processes powered by rich insight that is drawn from clear context seems much more likely to succeed than other methods. As shown in Figure 7 below, enterprise-level visibility into savings, spend, and performance is not universally held today. The simple fact is that it is more difficult to manage projects and allocate resources when faced with poor visibility into final results and uncertainty as to overall enterprise objectives. Beyond that, the difference between identified savings (75%) and both booked savings (58%) and implemented savings (48%) has the potential to create a gap between procurement’s perception of its impact and reality. In the past these breaks have undermined procurement’s credibility, most notably with the CFO. These findings highlight a tremendous need for many procurement organizations to improve their visibility into spend, savings, and other key metrics. Fortunately, this necessity requires no invention: spend analysis and supply management solutions have been available in the market for more than a decade.
RELATED RESEARCH
NEW WEBINAR – Aug 18: ePayables 2020: Smart Strategies for Tough Times
CPO Rising 2016: The Art and Science of Procurement
CPO Rising 2015: The Agility Agenda
CPO Rising 2012: Keeping Score
CPO Rising 2011: Innovative Ideas for the Decade Ahead
The CPO’s Agenda 2009: Smart Strategies for Tough Times
