perspective Googlization and Amazonization of Procurement Essential building blocks for increasing user and spend adoption

Transcription

1 perspective Googlization and Amazonization of Procurement Essential building blocks for increasing user and spend adoption

2 Introduction Making an informed choice on sourcing and procuring best quality products and services at the best price is challenging at any time. It is more so today, when sourcing and procurement has morphed from a tactical to a strategic function. Until recently, enterprises paid scant attention to optimizing indirect procurement since it was not considered integral to core business. However, businesses are beginning to realize the potential of indirect procurement in driving cost savings and adding business value. Procurement as a function is transforming quickly and developments such as vendor consolidation, procurement outsourcing growth, commitment-based pricing and gain share deals are driving the change. Striving to factor in these factors and address cost pressures, Chief Procurement Officers (CPOs) are looking for an integrated platform delivery model that focuses on IT transformation and process control to increase efficiencies in indirect procurement. Spend and user adoption of procurement platforms continues to play a critical role in procurement transformation. Digital consumerism and social commerce have altered buying behavior and expectations not only of consumers but also of employees. Enterprises need to pay heed to these trends and reshape their procurement strategies by enabling a Social procurement experience for their employees if they are to derive the true business value of an indirect procurement platform. They need to Googlize and Amazonize indirect procurement.

3 Procurement in the Digital Age Traditionally, IT has been managing complex back-end systems that track procurement transactions and support supply chains. Now, enterprises are adopting technologies that improve business process and performance while promising cost savings. However, the emergence of specific consumer trends specifically digital consumerism and social commerce has created a dissonance between the promised efficiencies of commercially available technology solutions and benefits delivered. Market-ready software and tools that are available to assist companies in indirect procurement often have poor user interfaces and non-intuitive systems. And therein lies the problem. Companies that implement such expensive solution suites are grappling with under-utilization of software and poor user and spend adoption, defeating the very purpose of deploying a procurement solution. CPOs seek user-friendly front-end applications that can be smoothly implemented and adopted. Today s enterprises need advanced e-procurement solutions where the service provider takes complete ownership on outcome-based contracts and institutes measures to increase spend and user adoption. The solution must enable a people-centric strategy that embraces emerging technologies such as digital consumerism and social commerce, and connects with users to drive engagement, visibility, usability, and flexibility. To enhance user adoption of their procurement platforms, enterprises need to look to their employees to learn what features can increase adoption. Enterprises need to understand that their employees are also consumers. Like all consumers in the digital age, they are demanding and technology-savvy, leveraging social media

4 to research products and make informed purchase decisions. The rise of social media has given them a ready forum where they can learn, participate, express opinions on products and services, and influence peers. As the dynamics of consumer buying undergoes a radical transformation, companies need to explore the key trends and apply the learning to optimize their procurement capabilities. This will ensure higher user adoption and a more cost-effective and efficient procurement function with an enhanced Return on Investment. The two key trends are: DIGITAL CONSUMERISM Customers have embraced the digital age and all its possibilities, using the online medium as an avenue to communicate, gather information, and transact. Within the enterprise, these customers are also employees and want their professional systems to leverage the usability, intelligence, and information offered by sites such as Google and Amazon. They want access to social communities such as Facebook and Twitter where they can share product reviews and information with other users, get recommendations, and compare prices. SOCIAL COMMERCE This is the age of social commerce, as social networks and shopping processes intersect online. Most websites have powerful search criteria that integrate user profiles, online social circles, and peer purchases and reviews; thereby creating a holistic shopping experience for consumers. For instance, Amazon visitors benefit from intuitive recommendation engines that showcase products based on purchasing history. Consumers can compare prices and access peer reviews as they shop, which creates a social community and ensures a connected shopping experience. Not only do users share purchase information but they are also influenced by the persuasive buzz of that information. By leveraging intuitive intelligence and packaging the right information, Amazon drives adoption it transforms browsers into consumers who return for subsequent purchases. The Winning Strategy Companies need to understand that while the above trends are consumercentric they extend to employees as well. The current challenge when it comes to procurement is the high rate of abandoned transactions owing to user frustration with poor interfaces and inefficient systems that render procurement engines redundant. Procurement service providers need to

5 Googlize and Amazonize their systems to drive platform usability and ensure effective solution implementation. Supporting digital consumerism and social commerce in their spend and user adoption strategy, enterprises can ensure intelligent, informed, and intuitive procurement. Let us explore the four key elements that such a procurement strategy must be based on. Contextualized enforcement Digital consumerism has created a breed of savvy online users that desire speedy access to information that generates instant results and improves productivity. Intelligent search capabilities at the workplace have enabled significant labor productivity gains for knowledge workers. In keeping with the trend of Googlization and Amazonization, users of procurement solutions want information to be readily available rather than spend work hours searching for relevant references. For instance, an employee seeking to hire contingent labor wants access to the subcontractor labor policy to create requests efficiently rather than spending time digging up the policy and reviewing it in isolation. Thus, contextualized information becomes a key driver in improving user adoption through smart policy enforcement that allows relevant information to be available to users at the right time. Contextualized procurement An enterprise s strategy for indirect procurement needs to be linked to business goals while enabling speed, efficiency, and cost savings. Take for instance a retail store, which was facing difficulties on account of a simple matter a forklift malfunction. The store s existing procurement policy mandated a complex set of procedures and documentation to replace the broken forklift. The delay in procuring new equipment led to a reduction in replenishment during peak sales traffic and the store began to lose business. In contrast, several companies engage in maverick spending to avoid loss of business due to unforeseen equipment failures as explained above. Procurement functions require process control and standardization to avoid such unauthorized spend. Organizations need to implement contextualized procurement processes with a smart and proactive procurement strategy that enables spend adoption and mitigates business loss due to delays or failures. Contextualized technology Enterprises seeking to improve their procurement functions must upgrade from rigid systems and leverage new social capabilities. Influenced by social media, users are employing advanced e-commerce tools of consumer reviews and peer feedback when making purchasing decisions. Users of procurement engines expect the flexibility, scalability, and intuitiveness of socially enabled solutions at their workplace, the lack of which generates user frustration leading to reduced user adoption. Decreased user adoption nullifies investment in procurement technology and policies. Enterprises need to institute effective change management policies that support the adoption of user-friendly technologies. By leveraging the trend of social commerce and technology, enterprises can improve purchasing habits and provide an optimum business environment for sustainable procurement policies. Social commitment Intelligently designed procurement engines can drive growth, not only by optimizing purchases but also by highlighting an enterprise s corporate social responsibility in balancing environmental impact and economic benefit. Green procurement initiatives do not require added spend and instead assist CPOs in achieving business objectives. For instance, socially aware procurement such as green buying, minority-owned businesses, and local buying to support developing communities has shown greater resilience during tough economic times and consistently delivered value. Further, trends indicate that employees that partake in such initiatives at the workplace continue to support these values after work-hours. Companies can embed their social commitment policy into their procurement processes by enabling features such as social specification and standards, green selection criteria, lifecycle costing approaches, and social clauses in contracts.

6 Essential DNA of a Successful Procurement Solution Enterprises need solutions that leverage emerging trends and incorporate intuitive user interfaces. A successful solution enables a Platform Delivery Model that is hosted on the Cloud and designed keeping in view the changing user trends. Based on the principles of usability and flexibility, the solution needs to leverage an easy-to-use and easy-to-adopt platform that caters to an enterprise s procurement needs while keeping the users in mind. Such a solution can comprise the following key modules: 1. Strategic Sourcing With end-to-end features spanning project management to supplier management, such a function helps enterprises benefit from enhanced process visibility and better efficiency. It can leverage key understanding of ecommerce in finding the right vendors for competitive prices. 2. Contract Management This facilitates conversion of negotiated savings into realized savings. It is essential that sourcing and contract integrate tightly to ensure much-needed contract compliance with preferred supplier and price. 3. Operational Procurement This is key to effective user and spend adoption. The buy-pay channel optimization will ensure effective control of spend in an efficient manner. 4. Procurement Insights The solution must leverage advanced analysis and collaborative tools to gain insight on spend targets, price and cost variations, supplier performance, and risk. The Platform Delivery Model represents a paradigm shift in procurement whereby enterprises can leverage their service provider s Googlized and Amazonized processes and technologies to incorporate efficiency in a cost-effective manner. The transfer of responsibility to service providers for managing procurement technology and process enables CPOs to focus on strategic objectives, cost leadership, process excellence, and a variable cost structure. While socially capable software can efficiently streamline workflows, the primary role of technology is to enable efficiencies. In order to meet business goals and ensure that sourcing and procurement functions deliver value, CPOs must institute a strategic combination of advanced technology and people-centric processes. Just as the technology is Googlized and Amazonized, the strategies and process should become more contextualized and business-friendly. This involves a guided approach to incorporate 360-degree spend visibility, ready reckoner policies, 100% compliance, and social collaboration. Such a comprehensive solution that addresses the needs of end-users will enable enterprises to streamline their procurement functions while ensuring a true contribution to the bottom line.

7 Conclusion The emergence of the two key trends of digital consumerism and social commerce has created a new breed of digitally savvy consumers who are looking for instantaneous results. An enterprise s employees are part of this new breed and expect the same advanced capabilities in the solutions and platforms they use at their workplace. Enterprises seeking to optimize their sourcing and procurement functions need to integrate capabilities that enable social community and refined search criteria to deliver full business value. By extending the principles that make Google and Amazon successful businesses, enterprises should adopt a technology and strategy that provides contextualized information for users of procurement solutions. This includes 360-degree spend visibility, ready reckoner policies, compliance, social collaboration, and guided steps. The winning solution is one that can leverage technology through key features of strategic sourcing, effective contract operational procurement, and intelligent analytics. At the same time, the solution must package its features it in a user-friendly and intuitive interface that fuels adoption, thereby ensuring cost efficiency and contributing to the bottom line.

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