As we look to the start of a new decade, the future looks bright. Much of this optimism is based on an ongoing digital revolution that started in the beginning of the 21st century. Today, the next phase, sometimes called the 4th industrial revolution, has taken shape in the form of what many have come to recognize as “digital transformation.” Any Google search on these terms will generate thousands of results that include views from pundits and non-pundits alike, on what it is and what it’s not.
Defining digital transformation and its challenges
For the futurists, a business world positively influenced by emerging technological advances is established by the ongoing and accelerated adoption of emerging technologies in the fields of Artificial Intelligence (AI), machine learning, blockchain, Internet of Things (IoT), and robotics. Driven by the dramatic increase in computing power, memory, and communications to process information, these latest technology areas demonstrate the promise for all parts of an organization to become both more effective and efficient at delivering value to its customers and internal stakeholders alike.
But the potential of digital transformation also requires the ability for organizations to adjust and advance the impact of change within the proverbial four walls. As we enter 2020, most business executives are still looking to make sense of how to best adopt rapidly emerging technologies in concert with existing technology and business process infrastructures. For fear of falling behind the competition, many organizations have rushed into digital transformation initiatives without a clear definition of what digital really means to their organizations. Recent research from McKinsey & Company shows that as much as 70 percent of complex, large-scale change programs don’t reach their stated goals.
Despite the advances in technology, the modern challenge for most, if not all, organizations remains taking a holistic approach to digital transformation by overcoming data and process constraints. In the world of procurement, we at Corcentric continue to see constraints on digital efforts through the lack of access to good data. Organizations need 100% visibility into their data in order to conduct the proper analysis on spend, sourcing, purchasing and financial opportunities, which, in turn, enable them to optimize operational decision making. Additionally, “source-to-pay” or “order-to-cash” processes have been improving the exchange of goods and services. However, logically taking action on these opportunities has also been bogged down by lack of the digital capabilities required to connect and enhance business processes and the relationships that bind them.
Executing a digital strategy with organization, people, process and technology
In an age where we are always looking for something new, one approach that has stood the test of time is modeling how organizations adjust to change. Adapted from the classic model designed by Harold J. Leavitt in 1965, it’s been over half a century since the introduction of this concept as a method to identify the key components for business success and change management.
Leavitt, Harold J. (1972). Managerial Psychology. Chicago: University of Chicago Press, 1972. Print.
In Leavitt’s classic model, people represent the workers (i.e., talent), structure represents how a group of people is organized (i.e., organization), tasks refer to what those people do (i.e., process), and technology covers the tools that people use. Whether it be in consulting or wider business framework, we’ve all seen this model in some form or another.
Fast forward a half century and we can only be amazed by the advances that have been made since the time the model was first developed. For procurement and AP professionals, consider the innovations in the areas of spend analysis (business intelligence), strategic sourcing, contract management, and procure-to-pay. Consider the process of digitization that has already transpired in the form of mobility and cloud computing. How organizations continue to adjust to the rapidly evolving digital business models with new emerging technologies will be the key to their success in the next decade. But for many it’s still taking the first step to advancing their digital efforts related to anything from establishing spend analytics and sourcing best practices, setting up digital contract repositories, improving PO automation to reduce maverick spend, or promoting paperless invoicing to suppliers.
If we make “digital transformation” the new change agent of today, it is clear that the principals of Leavitt’s model remain largely unchanged. From our perspective, digital transformation requires adhering to rapid change while adhering to core principles that can address a combination of growth, technology, talent, and relationships for meeting the digital demands of the future. As we enter 2020, consider Leavitt’s model as a guide for digital transformation.
(Organizational) Growth – Any digital transformation initiative should point to how it impacts the growth of the company. The question that should always be asked is “why are we here?” and “what impact does our operational role mean for the business?” In this context, digital initiatives for procurement, payables or finance should all engage in activities that can improve operational effectiveness and efficiencies that can make real and measurable bottom line impact for growing the business.
Technology – Many organizations are investing heavily in AI, machine learning, RPA and other emerging technologies, but one question that should be asked is how do emerging technologies fit with existing infrastructures. Another is how do you bring together one end-to-end journey for source-to-pay operationally across procurement and finance. How can you integrate systems with proper workflow and data management so you can better map information. In the end, it’s about having a clean process for the different channels of spend and better controls.
Talent – There is a serious talent problem in procurement. Not enough people know about emerging technologies and their potential where the expectations is that a smaller headcount will be performing higher skilled tasks in the future. In 2020 it is about awareness and being able to recruit and retain the right talent especially from those companies where they are already familiar with these skills that includes more knowledge around data science and process automation. Organizations going through the digital transformation need to strike a balance with core process on the one hand and then having a level of talent in the organizations to be able to see the opportunity and then look to deliver the value and move on to the next step.
Relationships – Before making any digital project decisions, it is essential for procurement, finance and AP to understand the potential impact on internal stakeholder customers, suppliers and enterprise goals. Digital transformation projects must satisfy some prerequisites, including improving customer experiences, operational efficiency, agility and business value contribution. Moreover it also means breaking down the traditional silos between finance and procurement and establishing better visibility for achieving common goals.
As we continue our own transformation into 2020, we are united by our company core values to – Do the Right Thing, Embrace and Drive Change, Be Empowered, and to Be Relentlessly Focused on the Customer. Through the lens of our clients, partners, and our own internal thoughts leaders, we look to a new decade with a sense of wonder and optimism, and look forward to sharing our own stories of digital transformation.
To begin your company’s process of digital transformation, download this free white paper, “Transforming Procurement and Finance to Fuel Business Growth” from CFO.com.