Digital Transformation of Procurement is just like teenage sex
Everyone talks about it. Nobody knows how to do it. Everyone thinks everyone else is doing it. Therefore everyone claims to be doing it… Just like teenage sex…
Vocabulary is important here because it is very easy to get confused with all those "digi words". Among the wealth of information available, it is obvious that words like digitization, digitalization and digital transformation are misused. Often, they are interchanged when they actually mean very different things:
Digitization is about data. It is the conversion from analog to digital. Scanning and optical recognition of invoices is an example of digitization. In the past four decades, this has already happened in all companies and organizations.
Digitalization has to do with processes. It is the recognition of what technology can do for the organization to carry out a process more efficiently and an adaptation to such standardized lean digital processes. E-procurement tools such as e-auctions are good examples of digitalization. This is where procurement software editors are playing right now and what most digital projects in Procurement are actually about.
Digital transformation on the other hand is a complete new way of doing business. A digital-first approach enabled by the convergence of technologies including Artificial intelligence, Internet of Things, Machine Learning, Speech recognition, Advanced Analytics, big data, … It is based on a company-wide culture of forward thinking without limitation about what it can do with the (future…) available technology.
With this approach, Procurement cannot perform a digital transformation on its own. It must be part of a transformation that encompasses all aspects of the business, even outside the traditional boundaries of the company. The breadth and depth of the digital transformation extend to the complete ecosystem surrounding the company, to maximize the value created as a whole.
It will never be over emphasized about digital transformation that between those two terms, transformation is by far the most important. As I mentioned in a previous post on the subject, only about one third of the companies have undertaken such project. Success resides in the use of data-driven action-oriented multifunctional teams, with an agile forward-thinking mindset, which is easier said than done.
Digital Procurement will be smarter, more agile and user friendly, well equipped to reduce risks and extract more value overall for the organization. At the same time, buyers will be freed from administrative tasks to take on more of the strategic value-added work.