How to Define a Procurement Problem to Solve with Technology
At a recent conference I attended, The Hackett Group presented a study saying that 95 percent of respondents believe digitalization will drastically change procurement in the next two to three years. So, do you have a strategy to apply machine learning to make recommendations for you? Do you have a pilot for RPA to automate your sourcing processes? Do you have an RFP scenario optimizer? Have you thought of how to get data on demand for all decisions that are being made by your sourcing team? Do you believe that a simple sourcing event could take seconds and a complex one under 4 weeks? What if you had a potential supplier database at your fingertips?
Did I just overwhelm you? Sorry. You want some good news? You don’t need all that yet. What you need first is a digital road map, and you do not need to invest tons of money in developing it. You don’t have to be an expert on blockchain, 3D printing or machine learning. You don’t even need a slew of consultants to tell you what to do to make this happen. And, you can move pretty quickly, as these solutions are fairly simple to implement (erase that ERP implementation you did years ago from your mind).
Because I believe in procurement so much and I know that we can make this happen together, I would like to share what I’ve learned leading and participating in several technology transformations. In this four-part series, I’ll take you step by step through a process for developing a digital roadmap, starting with defining the problem you want to solve; identifying areas for improvement; reimagining your process, and prioritizing digital investments. It’s a collaborative process that, if you do it right, will increase.
Unlike a lot of today’s technology, the concepts that I will be sharing are not new but can be applied to becoming digital rockstars in a year or less.
But first, let’s get one thing straight. I’ve heard it said that digitalization means that process is dead. I disagree. I’m not in favor of applying digital technology on top of a broken process or bad data. That seems like the same road we’ve been down before—just getting to a bad outcome faster. That said, I firmly believe that the processes we have today can be radically re-imagined with technology, and that machine learning can help us with our longstanding data problem.
Ok, now that we are clear on that, step one of the digitalization process requires no technology whatsoever. That does not mean it is easy!
Step one is to clearly define the problem you are trying to solve. This is often overlooked and critically important, especially when you are trying to explain why you are changing. Without well-defined problem, you won’t know how to keep your scope locked in, how to communicate the change, and most importantly, whether or not you’ve been successful in your efforts.
Here is how you go about defining the problem:
- Pick a scope you want to work on digitalizing. Maybe it’s procure to pay, or source thru pay, or some subset of that. Be deliberate here, as it sets the course for the rest of the work you’ll be doing.
- Identify the team of people who are involved in the process, remembering to include those people upstream and downstream to the process – for example in procure to pay, your end users and your suppliers. Keep your group to 15 people or fewer. If you feel like you need more people, it is a good indication that your scope is too big.
- Get those people in a room for a 60-90 minute session. (Note – You can combine this session with the next session that I will talk about in the next post, for about four hours in total. Or, break it into a two-day workshop. The format isn’t as important as doing all the steps described.)
- During that session, explain that you are trying to understand their pain points, what they believe could be done faster/more effectively, etc. It is very important to be humble and welcoming of all and any ideas. Also, share how this work ties into the bigger picture of what you in procurement, and the company as a whole, are trying to achieve.
- To collect ideas, pass out sticky notes and have the attendees write one opportunity per sticky note. This technique is called silent brainstorming. Give people as much time to complete this as is needed.
- Once everyone is done, stick the notes on the wall and start grouping them by themes, and naming those themes. You will be amazed how clearly the opportunities start popping out.
- Now here is the fun part: Discuss the themes that emerged as a group. You and/or your team should be in listening and “5 whys” mode—mainly asking why or clarifying questions in order to learn.
- And here is the hardest part: Co-creating the problem statement. Drawing from the key words in the themes, create one statement that gives focus to the problem you are trying to solve. Here’s an example: “Due to lack of available information when we are making decisions, we have to spend valuable time researching supply markets, identifying suppliers, and still we have to make gut decisions. These delays and non-data driven decision making impact new product introductions and our stakeholder relationships.”
- Whatever that problem statement is, this is now your true north. It should be presented at every subsequent session as a reminder and guide to make sure you stay focused on solving the actual problem.
The hardest part is keeping the session in open discussion mode, being objective, not defensive, and staying open to all feedback and ideas. When I have led this kind of session, I have had a lot of squirming in seats and even some emotional reactions from attendees. If that happens, take a break and regroup in 10-15 minutes. The intention is not to make people uncomfortable, but to get everything out on the table. That is what will help you be successful. If you do not believe that you can facilitate the meeting in an objective way, enlist a trusted colleague to facilitate.
As you can see, these are really simple techniques that do not require any investments other than your time. Believe it or not, if you can do this successfully, you have already completed one of the most difficult steps: Getting started. In my next post I will discuss how to pinpoint areas for improvement.