Why Digital Procurement Transformation Needs the Right Operating Model

Procurement teams face myriad issues today.

• Frustrated, skilled commercial practitioners treated like admin staff or overwhelmed with firefighting on tactical projects
• The opportunity cost of procurement not being involved during the specifications or supplier selection
• Independent stakeholders refusing to act in a federated way toward the supply market
• Gathering data and enacting procurement processes are laborious and rely on outdated tools and technology

And procurement leaders frequently struggle to secure the attention and investment they deserve to fix these underlying issues. Galvanizing the board or your leadership to move away from this status quo requires a convincing narrative.

Building The Narrative

Procurement has relied heavily on selling based on its ROI and savings promise.

These are 'hard' numbers, and it’s a mystery to many procurement leaders why appeals for investment fall on deaf ears given the obvious benefits and returns.

"We can simply cut budgets" to manage costs, they say. "Procurement only plays at the edges," say others.

Jaded C-suite executives are cynical towards investment in back-office activities and procurement's reputational stock in many companies remains low.

Any skilled salesperson knows that decisions are not based on numbers alone.

The secret to being successful is appealing to emotions first and then to logic.

The certain, fixed outgoings of any desired procurement, investment (in people or services or technology) are weighed up against the upside promise... and mostly, the arguments fall short. Why?

We offer up to procurement transformation executives the 'perfect' storyboard for a pitch for procurement investment. By applying what is considered good practice based on sales science, what should the procurement 'pitch deck' story be?

Your 6-Point Storyboard for the C-Suite

#1: The World Is Changing.

This is an external factor not controlled by the board. In procurement, this may be raw materials price inflation, the shift towards digital in marketing spend or the growing emphasis in every category toward PaaS and SaaS. The picture is made stronger if legal or regulatory changes demand the attention of the board.

#2: This Change Is Going to Impact Your Strategic Goals. Introduce A Hitherto Unknown Risk.

Big businesses will typically have strategic objectives that are a mix of growth strategies (innovation/market share) and trendy areas such as sustainability and digital transformation.

In procurement, there's plenty to worry about. Most of it can impact the strategic agenda directly and indirectly.

You need to position that the business is ill-equipped to face the coming storm. Without action now, the shifts in point #1 will damage us. If the case is for more procurement involvement, then argue that there is a lack of capacity and capability out in the business given the greater complexity of the purchases, for example.

#3: Make the Problem Real.

Through examples, benchmarks and data, demonstrate the quantum of the problem and what is lost by inaction. Procurement has typically sold itself on the promise of (uncertain) savings to be found. And on paper, the ROI usually looks like a 5x or 10x return. And positive in year one.

Loss aversion theory explains why relatively few procurement teams secure investments.

Buyers are skeptical of uncertain future benefits and heavily discount them, and conversely, inertia bias means they pay special attention to the more certain costs. So, the pain has to be evidenced as strongly as possible but it should also ideally encompass a wider value proposition, including risk mitigation and speed.

#4: Take Them to The Promised Land.

Having shown the C-suite a convincing array of surprising but significant pain points, help them envisage a future with those pain points solved. This may be an AI-driven automated future (do boards really want that?) or improved on-time delivery, fewer stock-outs or less time spent searching for suppliers.

Reflect on how the strategic goals will be enhanced by fixing the issues.

With both pain and opportunity understood, there, in the gap, lies value.

#5: Show Them the Journey, But with Options.

If they are baited so far, then present your solutions to get them there. Perhaps you are looking to build out your team. Perhaps it’s to hire a consultant or a BPO partner. Or perhaps technology is your aspiration.

But single option aversion theory requires that presenting a single way is unlikely to be successful.

Demonstrate that consideration has been given to multiple options (3 is a good number). Briefly describing the journey from and to each solution will help the business visualize.

Provide pros and cons of each in a balanced way with an overall recommendation. Do include ROI and financial claims but remember — decisions are made based on gut feelings.

#6: Show Them They Are Not Alone, But Inaction Means Falling Behind.

Tell them stories of other companies they admire and the journey they have taken and what they have achieved. Give them social proof that making a decision to invest in procurement is a safe option with a low risk of failure. Using a model to show what your competitors or local firms are doing provides intelligence and maintains will increase engagement.

#7: The Closing Argument.

Wrap up by summarizing the narrative from the previous five points with a compelling single sentence. "To address the [emerging threat/ opportunity], we are seeking approval for [option B] that will additionally address [strategic imperative 1 and 2]"

Then be quiet! Until the questions start... at which point, like the dragon’s den - know your numbers and rehearse your arguments beforehand.

Of course, there will always be competing projects and initiatives and procurement, as an enabling function, is rarely going to be at the very forefront of a CEO's investment priorities.

However, this 'perfect pitch' based on sales best practices and your political skills to pre-syndicate and gain support beforehand will provide you the opportunity to secure the funds you need.