What makes today’s macroenvironment so particularly challenging? And what can companies do to set themselves up to thrive? We caught up with Fang Chang to find out. With nearly eight years at Coupa, Fang drives product strategy and roadmap across Coupa’s AI-driven platform that connects finance, procurement, and supply chain. In this interview, we explore:
- The margin erosion zone and why companies need to steer around it
- How benchmarks can help businesses expand their margins
- Real data for real business results: The 2024 Coupa Clarity Total Spend Management Benchmark Report
The margin erosion zone and why companies need to steer around it
Q. A few months ago, our CEO Leagh Turner started referring to the “margin erosion zone.” What does that mean?
Fang: Right now, companies need to find a way to drive growth within their businesses while facing a lot of external pressures. Inflation is stickier than we originally thought, and costs keep rising. There is political instability in many parts of the world. Supply chains are still impacted because of what happened during the peak years of the pandemic. And increasing ESG regulations around the world add ever more complexity to compliance.
So if companies can’t navigate these pressures as they move forward, they see a drag on their margins. And the longer it takes companies to respond, the more that drag on margins has a compounding effect. That’s the margin erosion zone.
Q. What makes margin erosion different from challenges companies have faced in the past?
Fang: It’s easy to say that the challenges of the past are different from the challenges of the present. That’s obvious. But what’s different is that the strategies and models that grew margins in years past don’t work anymore. Look at just-in-time supply chain management. Pre-pandemic, that was what everyone was working toward. It created margins for companies because they no longer had to hold on to excess inventory. But now, frequent disruption is the norm and companies are experiencing how just-in-time doesn’t give them any leeway to respond and maintain top-line growth.
So companies are cautious about a lot of things — managing their supply chains, integrating new technology, moving forward with digital transformation. Every project is under intense scrutiny. Leaders know their business needs to adapt, but many of them have been burned by unsuccessful technology implementations and don’t want another misstep.
How benchmarks can help businesses expand their margins
Q. Let’s talk about getting out of the margin erosion zone. What role could benchmarks play?
Fang: Benchmarks play a significant role. One of our core values is ensuring customer success. And how our platform creates a margin multiplier effect is central to that. I think our benchmarks perfectly embody the five multipliers we talk about.
Let’s take productivity as an example. As a business, you don’t really know how productive you are unless you can compare your business to its peers, right? If your e-invoicing goes from, say, 29% to 79%, that’s a big jump. But do you know if it’s good? That’s key — if companies in your industry and companies of your size are seeing similar improvement. Our benchmarks give you a reference point to see how you compare in the market.
And you can use benchmarks to make strategic decisions. Imagine that the benchmark for e-invoicing is 80%, and you’re at 79%. Is getting to 80% something you want to commit resources to? Trying to squeeze an extra 1% might not be very fruitful. Or is there another metric that you’re tracking that is worse but presents a better opportunity to improve margins?
Baseline your performance. Measure yourself against the industry. And take the right next moves for competitive advantage. Get started with the 2024 Coupa Clarity Total Spend Management Benchmark Report.
Q. Today’s leaders have so many sources to choose from when measuring success and financial performance. What do leaders need to watch out for when they’re evaluating these sources?
Fang: Leaders need to really understand the data on which any of these benchmarks are based. It’s one of the biggest challenges we’re seeing as AI gains more and more traction. AI is only as good as the data it’s trained on.
Ask: Where’s this information coming from? Is it being pulled from objective collection analytics? Surveys? And who has permission to access and use this data? [Editor’s note: If you’re implementing an AI strategy at your company or considering it, check out these five questions to ask.]
Traditional benchmarks are often based on self-reported survey information. That’s an incomplete picture. You can get a sense of what leaders are thinking about and what companies are measuring in general areas. But you don’t really know who was surveyed, or how many companies in which industries, or for how long.
If you’re looking at benchmarks that are based on customer data, you should be clear on if it’s ethically sourced and if it’s being used as intended.
Real data for real business results: The 2024 Coupa Clarity Total Spend Management Benchmark Report
Q. Coupa publishes a benchmark report every year. What makes it different, and what value does it offer?
Fang: Our Total Spend Management Benchmark Report is unique in a couple of ways. Number one, it’s the data — real data that our customers can use to drive real business results. For more than ten years, we’ve been working with our customers’ permission to aggregate, anonymize, and analyze their spend data so all of us can learn from each other as we help transform businesses.
The benchmarks for the KPIs are based on more than $6 trillion of real transactional data generated by more than 3,000 customers around the world doing business with millions of buyers and suppliers.
And our report is specific to the domain our customers are operating in. It includes 22 operational KPIs across source-to-pay and showcases what customers can achieve with a total spend management platform.
Q. For those leaders who are new to Coupa or aren’t familiar with our Total Spend Management Benchmark Report, what are your top three tips for getting the most out of it?
Fang: Sure. Well, I would start with this one:
1. Be ready to measure
Put the report aside and ask, “What are our goals as an organization? Have we actually established KPIs that we can measure and track consistently? What changes do we need to make internally to start measuring and tracking?”
Once you’ve established those KPIs, you can align them to what’s in our benchmark report and see how you’re tracking against them.
2. Come with a transformation mindset
Sometimes we come across a customer who has invested in our platform but sees the implementation as more of lifting legacy processes and shifting them onto Coupa. But that’s not the intent of transformation, right? These projects are about rethinking what work gets done by people and what gets replaced by technology to fuel growth.
Our report provides recommendations on how companies can use our platform to achieve this. An example is electronic PO processing. The 2024 community benchmark is 98.8%. [Editor’s note: This figure describes the percentage of total POs that are approved and received by suppliers electronically.] Yes, this by itself is great for paperless initiatives, but there’s additional insight on what else you can connect with electronic processing to increase efficiency.
3. Leverage the community
On the surface, our report is to provide you with accurate benchmarks. But what I want to emphasize is the global community behind the numbers – real companies generating more than $6 trillion in transactional spend. This community is such a unique resource.
I strongly encourage customers and prospects to reach out to other companies in the Coupa community and start conversations about what they see in the report. This is something I hear repeatedly from customers themselves. Just a few weeks ago at our Inspire EMEA event, we had a customer on stage talking about her company’s transformation journey and how they were using digital payments and virtual cards to drive both top and bottom-line growth. Later that day she couldn’t believe how many people approached her about that story, asking to learn more about how they built a digital payments program and all the benefits it’s brought.
