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As we dive into the concluding section of the CPO Rising 2022 Report, one thing is clear: Now is the time for chief procurement officers and procurement professionals to embrace data analytics and develop a strategy for big data management. The Data Revolution is here. Invest in the foundation to glean the most intelligence from the volumes of data becoming available from across the enterprise.
A Call to Arms
Business professionals working in 2022 have been first-hand witnesses to The Data Revolution that began in recent years, leading to an explosion in the volume and production of data matched by a growing demand for data from all parts of the enterprise. Businesses now analyze massive amounts of information in near real time, and business intelligence has become a primary driver of decision-making on strategic, tactical, and operational levels within most enterprises.
Beyond that baseline use, truly revolutionary use of data has radically transformed a select group of professions and industries by redefining “common knowledge” and the inputs and capabilities that create value and enable success — the use of advanced data analytics has fundamentally changed how many business functions operate. There have been no major breakthroughs in procurement yet, but CPOs can look to any number of functional peers within the enterprise for inspiration and the key inputs to make a business case for investment in a big data strategy (every revolution needs funding). Take the following as good examples.
Sales and marketing teams use data to improve customer targeting and engagement. By tracking a user’s online activity, these teams can deliver customized marketing and advertising messages that lead to higher sales.
- HR teams use data to better target and recruit potential candidates. By leveraging algorithms that match the capabilities of their top-performing staff with those of potential job candidates, recruiters can find better candidates faster and increase their odds of success.
- Product teams use data to inform and influence product decisions in their organizations. By tracking and quantifying customer behavior data, they are able to improve product design and streamline product roadmaps.
- IT teams are using data to manage risks caused by hacking and user noncompliance to policies. By tracking cybersecurity activity, IT analysts can instantly observe, detect, and block irregularities from hindering a network.
- Finance teams are using data to increase profitability and reduce fraud. Some AP teams are using systems to identify unusual invoices and payment activity.
Procurement teams have similar and, in many cases, larger opportunities; but only 33% have an active data strategy in place today. Now is the time for more procurement departments to join the fight.
The State of Big Data in 2022
The vast majority of CPOs know there is inherent value and tremendous opportunity in procurement data. In fact, 84% say that this data is either “extremely” or “very” valuable in helping a CPO develop their annual plan. But if a procurement organization is struggling to process POs, has little traction with budget-holders, and/or is the major bottleneck to finalizing contracts, it is unlikely to make a major investment in a larger big data management project. To many struggling CPOs, a lack of data science capabilities is a “First World” problem, something they would love to be able to focus on, but only after they address more pressing matters. At the same time, 46% of all CPOs have committed specific budget and resources to big data management in 2022.
Walk Before You Run
Data analytics/science and the resulting intelligence is the major game-changing opportunity for procurement organizations this decade. Over the next few years, a new type of intelligence is going to enable CPOs to view their operations differently and, by doing so, it is going to force these same CPOs to manage them differently too. There is no need to offer more evidence on the subject because the opportunity is understood by a clear majority of CPOs today.
The question for CPOs in 2022 is not “if” an investment should be made in big data management, but “when” and “how much.” The obvious answers would appear to be “right now” and “as much as can be budgeted.” But the truth is, a strong data and technology infrastructure should exist before any serious investments in “big data” are made. Accordingly, CPOs need to start thinking about intelligence in the context of their organization’s current state of maturity and work to identify the areas of greatest leverage.
At the same time, all CPOs need to ensure that there is a foundation in place to take advantage of the Data Revolution because opportunities will continue to emerge. For example, with the surplus of new data from procurement systems comes a dearth of real expertise in how to analyze it and extract true intelligence. While many procurement professionals have strong analytical capabilities, the next generation of analysis falls within the arena of “data science.” New data science roles within procurement will start to appear. However, it will be important that these data scientists are partnered with procurement experts who can identify the critical business problems that need to be solved. There will be many paths to success and many more approaches taken.
Here is how one CPO from a publicly traded biotech company described his Big Data strategy. “When it comes to Big Data, it is our 2022 goal to improve data accessibility, governance, sources, and breadth to facilitate better data-driven decisions for improved measurements and outcomes in nearly all aspects of sourcing and operations like P2P. We are partnering with our IT team to invest in both our infrastructure and people to develop a data lake, front-end applications (BI/dashboards), sourcing tools (Spend Analytics, eSourcing), integrations with key data sources, and personnel/staff development to support the effective utilization of such tools.”
Over time, Big Data best practices by company size, industry, and back-end system for CPOs will emerge. For now, these leaders must continue to extend and enhance their teams’ capabilities in order to maintain their momentum and accelerate to the next level of performance. To get there, CPOs must not simply think outside the box, they must redefine the box. Every revolution seems impossible until it happens; then, it was inevitable. Now is the time for procurement to join The Data Revolution. It is inevitable!
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