Dec 08, 2020

A 5-Point Framework for Leveraging Vendor Partnerships for Digital Procurement Transformation

This article was originally published on Procurement Leaders.

In Procurement, the need to digitally transform is particularly important, as organizations grapple with supply chain issues and a widening set of objectives. Unfortunately, many organizations struggle on the path to successful transformation. Recent research from Procurement Leaders found that, just in the previous 12 months, 38% of procurement respondents led or contributed to a failed digital project. Forrester research reported similar results, with 39% of respondents having switched procurement technologies and another 42% considering it.

To minimize the risk of such failures, high-performing Procurement organizations are leveraging key vendor partnerships across the digital transformation to achieve their goals and avoid roadblocks.

During a recent Ivalua webinar, Alex Johnston, principal analyst of Procurement Leaders, shared key findings from his research on the role of partnerships in digital transformation. Alex was joined by two other experts, Alex Saric, CMO at Ivalua and Alex Zimmerman, System Director of Supply Chain Systems and Technology at Baylor Scott & White Health, who provided additional insights around how leading organizations can get the most value from partnering with internal stakeholders and third-party solution vendors.

Report Highlights the Importance of Partnerships

Johnston’s extensive research focused on the challenges Procurement teams face when implementing digital transformation initiatives, and what differentiates high performers from those who lag behind. The impetus behind the research, according to Johnston, was to understand some of the pitfalls and bottlenecks of digital transformation projects, and how to resolve them. A clear pattern that emerged was the importance of partnerships. “We find that the high performers are operating in a far more collaborative mode,” he said.

To that end, Johnston developed a 5-point framework for working with internal and external partners to bring about successful digital transformation. The panel discussed the 5 pillars of Johnston’s framework:

1. Identify Opportunities and Secure Executive Buy-in

According to Johnston, project failure begins early, with bad investments and lack of executive buy-in. True transformation requires identifying opportunities and establishing a clear vision for change with internal stakeholders and external vendors.

“What we’re really looking at here is the process of generating ideas, assembling the core project team and defining a strategic vision,” said Johnston, who added that betting buy-in typically works best if project teams can demonstrate how proposed changes are aligned

with the company’s key objectives. Top performers draw on ideas from practitioners and solution providers, as well as internal stakeholders, then collaborate to evolve those ideas and prioritize activities. In this way, they’re more likely to receive executive support and investment.

At Baylor Scott & White, positioning the supply chain digitization initiative in the context of a broader, board level digitization effort was key in gaining support and budget.

According to Ivalua’s Saric, it’s important to effectively articulate the overall ROI of the project, focusing on the value drivers that are most relevant to the business’s board-level objectives. “For example, if your revenues are being hammered because of the pandemic and cost is the focus, focus on the impact of increased spend under management,” he said. By building up the overall ROI one value driver at a time, the overall ROI, which is typically quite large, becomes clear and easier to accept.

Once you have their attention, Saric recommends providing examples of how other companies have accomplished their own digital transformation goals. “If you can tie in a competitor, that plays into their fear that they may be falling behind,” he said. This plays to

human emotions, complimenting the analytical argument of the ROI. Plenty of stories are publicly available and vendors are more than happy to share those from their customer base.

2. Fix the Foundations and Identify Roadblocks

Without a solid foundation, a project will fail. Johnston found that an organization’s readiness for digital transformation projects is usually highly focused on technical capabilities and architecture, but foundational aspects of a successful project, such as project management expertise, a communications plan and cultural considerations are often overlooked. Additionally, failing to clearly define roadmaps can result in capability gaps.

Johnston said that soliciting input from internal stakeholders and solution providers during this stage is essential. “In the past, organizations would build a highly optimized, over-engineered process, then reach out to a solution provider to automate it,” he said. “The structure has shifted toward a new partnership model of collaboratively designing more standardized processes.”

Investing time in understanding the requirements of all parties involved in a project pays off. “You may learn about a new criteria to include in your vendor evaluation process to generate more value. And at the same time, you can sell the reason behind your initiative to avoid potential pushback later on,” said Ivalua’s Saric. Ensuring you have a clear data strategy is also critical, yet often overlooked. Poor data management resulting from disparate systems, which are common, can present obstacles to supply chain visibility and complicate spend consolidation and vendor collaboration, he said. “It’s really important to do a thorough data assessment up-front as most can be addressed by the same source-to-pay technology being evaluated for other benefits. It’s critical to understand how, and if, your chosen solution will help improve your data foundation.”

3. Define the Scope

Scope creep, implementation delays and unavailable resources can derail a project. And when organizations lack standard project management frameworks, transformation projects can easily go over time and budget. Yet only 12% of the organizations Johnston surveyed had a framework that covered project scope, timescale, risk, quality, benefits and costs. “We found that high performers were making use of experienced project managers, and they were looking at project management expertise as a skills question for digital projects,” he said.

Johnston added that flexible practices for estimating costs was common among high performers. “Leaders considered best-case, realistic and worst-case estimates,” he said. Often, organizations are only focused on a best-case scenario, and they’re surprised when actual time and costs go over. A better practice is to schedule expenses. “Rather than calculating the cost for the entire project, leaders map out when teams will require resources and relate costs to certain milestones.” This, he said, provides the flexibility to scale up or down, as needed.

According to Baylor Scott & White’s Zimmerman, clear project objectives are critical for success. “If you don’t have clear objectives about what you’re trying to accomplish, you’re not going to have a successful implementation,” he said, commenting that people often underestimate the amount of change a project may initiate, as well as the complexity. “If your project has been funded based on timelines and resources outlined in your plan, and you find that the project is more complex than you expected, you may end up missing your deliverable dates, spending more money and putting a bad taste in everybody’s mouth.”

Particularly with large implementations, multiple teams throughout the organization can be impacted. Vendor relationships are essential here to pointing out potential oversights. “When you’re evaluating implementation partners, if they’re not asking the right questions, that means they may not understand the complete scope and complexity of the implementation.”

4. Achieve Quick Wins and Scale Up

It’s important to demonstrate success through quick wins, while simultaneously dedicating resources to change management. Johnston’s research revealed that organizations which lagged in digital transformation often put change management activities at a low priority, and as a result, adoption was slow. Small-scale deployments enabled teams to assess and measure success. Additionally, Johnston said that feedback mechanisms help to escalate user challenges and uncover other ways to increase speed of adoption.

According to Ivalua’s Saric, organizations should leverage vendor partners to support change management plans and help drive user adoption. They can also identify key metrics for success as well as early warning signs of potential problems. “A solution vendor can configure reporting dashboards based on your KPIs to track the project and provide information to help you escalate issues, should they arise,” he said. “Your partner should also be pushing for what needs to be put in place to help you get more value.”

According to Saric, while user adoption receives understandable focus, supplier adoption has actually been the top reasons companies have switched technologies. It is critical to ensure that supplier adoption is planned for and vendors effectively evaluated based on

what truly drives adoption – simplicity. Any potential fees, vendor conditions or limits on activity create huge impediments to rapid, efficient and widespread adoption. And communication should be routed via the customer, not vendors, so suppliers respond.

5. Continuous Improvement

Another key takeaway from Johnston’s research was that high-performing Procurement organizations maintain a project repository that includes everything from project documentation to roles and responsibilities, templates, a glossary of key terms and file

naming conventions. This improves collaboration and alignment among all internal and external project stakeholders. “Having that central resource to inform all projects and ensure everyone is aligned around the processes was a differentiator between high and low performers,” he said.

Baylor Scott & White’s Zimmerman noted that a project repository can support an agile approach to project management, which can be more effective than looking at digital transformation projects as discrete projects with a beginning and an end. “Organizations

should think about digital transformation as an overall evolution of its digital capabilities,” he said. “You can’t just let the project team evaporate after you’re done, because then what will you do when the next version comes out? What about all those bugs you have to fix after implementation?” Partnering with a solution vendor that offers a flexible platform can enable this agile approach, he said.

$150 Million in Savings and Counting

The Procurement organization at Baylor Scott & White is a high performer who has leaned on a collaborative vendor partnership with Ivalua to increase efficiencies, optimize spend and maximize value from its supplier management of relationships. Having launched a

digital transformation just a few years ago, they’ve already exceeded their goals for reducing spend by $150 million, by focusing on the people, processes and technology involved in the effort.

Zimmerman went into more depth about how they achieved such massive savings during the Q&A session at the end of the webinar. Their progress also enabled a more effective response to the Covid-19 pandemic, without notable supply disruptions.

Saric highlighted the importance of effective measurement to track progress and course and course correct, plus the importance of setting ambitious long term objectives. Expanding initial benefits across the full S2P process, all spend and all suppliers is viewed by some as the end goal but in reality should be an interim one. Once companies have benefited from automation, best practice deployment and other traditional levers, they need to think more creatively on how they can turn their spend and suppliers into a source of competitive advantage. Identifying strategic processes they can do differently can drive revenue opportunities and improve organizational agility, among other strategic benefits. Executing against such a vision is what gains procurement a permanent slot on the board agenda and can truly transform the business.

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