Editor’s Note: Over the next few weeks on CPO Rising, we’re publishing some “best of” 2022 articles as we reflect on the year and prepare for the new year ahead.
Our “Procurement Experts on CPO Rising” series continues today with an excerpt from my 2021 episode of the Procurement Rising Podcast — Jacob Larsen, former director of digital procurement at Maersk Group, and a published author (click to listen to the full interview). Note that this excerpt has been edited for readability.
Andrew Bartolini: Maersk Group is a very progressive organization in the way it thinks about procurement and technology and knowledge. Going back to the early 2000s when you started at Maersk, more chief procurement officers have gotten over the hurdle of weighing technology against other budget issues and started to more aggressively and broadly adopt solutions that both automate and transform their organizations. When looking at procurement technology more broadly, what role do you think it should play in a procurement organization today?
Jacob Larsen: The role of procurement technology is becoming more and more important. And the interesting part, but also a frightening one for some people, is that this is not going away. If as a procurement team or you as a CPO are not taking charge of this development, eventually someone else will do so. Thus, it’s one of those things you have to embrace and take charge of. And when you do that, it can be a fantastic ride. You can multiply the impact of your procurement organization by applying technology in the right way.
In my conversations with our CPO, we see the next chief procurement officer as a digital CPO. Digital will be at the center of the future procurement organization. I have no doubt about it. If you really want to have an impact, you can’t have an army of people to control everything. You need the transparency and automation that digital creates, as well as the insights that some of the AI-powered solutions will give you, which you can never do on your own.
I think there are many good examples of this. One of the more mature examples is an area like e-sourcing that applies automation and efficiency around quotes. But that’s only one part of it. When you have complex spend categories, you need a smart solution to run scenarios on how to allocate business across thousands of items. Those scenarios are the deep insights when it comes to strategic sourcing. You can apply that view across any procurement process for transparency, automation, efficiency, and these deep insights. That is the differentiator that digital has the potential to provide if you get it right.
AB: I think that’s spot on. The transformational CPO was a common term for many years. But I think there’s been a merging with digital transformation. For this to work, though, you need organizational leadership that has that vision and a team that can execute it. Explain how that vision is set forth and how you’re empowered to execute it.
JL: You’re touching on something that is really important which is the mindset aspect. This is something we have discussed extensively in our leadership team and with our CPO. A digital procurement transformation that makes a real difference and has a profound impact on the business is what changes people’s minds and gets them on board.
To get people on board, they need to realize that this is not just incremental change. It requires a mindset change to understand that these digital solutions can completely alter the value proposition that comes from the procurement function. That’s really the tough part. And you don’t fix that in one strategy seminar. It’s done over time through repeated sessions. Sometimes it requires going into more depth with certain colleagues to ensure they understand what this means for their category, and that it applies to everybody and is an ongoing process.
Very early on in the journey, we sat down and discussed the endgame. If we automate everything possible through digital, what does that endgame look like and what is the potential? We did a process-by-process mapping exercise of the organization to determine the automation potential. In the end, we had close to 50% automation potential, which sets the ambition bar of our journey. And one thing that is critical when you do an exercise like this is to explain to the rest of the organization that we are not transforming procurement through digital to downsize or eliminate it. We’re doing it to free up more resources and time to do more strategic work so that we can develop this new value proposition.
Today, people spend a lot of time moving data, collecting it, converting it, presenting it, and keeping the wheels turning. And if we can automate all of that, then procurement can focus on supplier innovation and supplier relationships, while also putting focus on some of the moonshots that our company has overall, such as completely eliminating our emission footprint. It’s a fantastic vision which motivates everyone that works for this company. But we can’t do that alone.
We’ll need strong partnerships with suppliers and external partners. We don’t do that by hiring a new army of people, but rather by becoming more efficient internally so we can invest time in exciting projects and partnerships. And I see procurement playing a large role in that endeavor.
It is the mindset change that is the essence and the key for driving a digital transformation of procurement. And it’s extremely important not to consider this as a project where you’re hiring a consultancy that runs a free diagnostic, gives you an expensive action plan, and then you’re digital. That’ not how it works. You have to take charge yourself to transform the organization — almost individual by individual.
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