Disruption in industries, heading towards major disruption in procurement too. Gabe Perez talks about the uber-ization of procurement.
We’re off to a flying start after lunch here at the Big Ideas Summit 2016. Sometimes a graveyard slot at conferences, Gabe Perez, Vice President, Strategy & Market Development at Coupa Software, got the audience energised discussing the disruption heading our way in procurement.
Gabe challenged our audience to start with the outcome, changing the way we traditionally look at going to the market as procurement professionals. The Uber-ization of procurement starts here, with a focus on value, rather than features.
Just What us ‘Uber-ization’?
Put simply, ‘Uber-ization’ is about being able to access value in real-time. In our personal lives, everything we need, we can get in real time – products within the hour from Amazon, cars from Uber, even setting up a site to sell our product on Etsy.
According to Gabe, you don’t have to do the same legacy tasks now in order to sell things. From selling or buying products, to driving a car for Uber, you just need to have a pulse! There is a new type of workforce, making money in ways that have never been imagined before.
In the real world, there’s little enablement. It’s totally the opposite in the business world, where we’re really just at the beginning in terms of this real-time penetration.
Issues in Procurement Technology
The biggest issue in procurement technology is that it is was originally developed and evaluated in a legacy way. That means is was evaluated on the features and functions, built for the organisational ‘power users’ years ago, and not with the best practice and innovation that is available in today’s economy in mind.
Gabe told the delegates that an RFP isn’t the best way to start. A better approach might be an RFV – a Request for Value. Procurement needs to start with the value proposition, and then work backwards, starting with who the best partner to achieve this outcome will be.
The issue for organisations is they are trying to do the same things over and over, not making any changes, and not making any difference. Features and functions shouldn’t be the focus, but the tools that allow procurement to get to value.
Organisations need to frame evaluations of procurement technology on the value delivered based on the business outcomes your organisation is looking to achieve.
Power of Networks
Gabe went on to talk about business networks, and involving more suppliers. The more companies, or “suppliers” procurement are connecting with, the more opportunities they have to leverage knowledge and expertise for innovation.
A lot of this innovation is coming from the suppliers in the ‘tail’, ones who are traditionally consolidated or ignored.
These smaller organisations don’t always have the opportunity to work with larger companies, thanks to traditional processes, protocols and business portals. All of this adds up to a higher business cost for small companies, making doing this work unprofitable.
There are so many processes and boxes to tick in most companies processes and evaluation, that small companies are out of the work at the beginning either because they did not get an opportunity, or did not see the value because of the cost of doing business.
Business networks have historically failed in the supply chain, as they have been designed by the software vendor, with the vendor’s priorities and strategies in mind. They are not designed to be open networks, and because of this, they don’t drive value on both sides of the equation.
The other problem is that they only cover a fraction of the total number of suppliers worldwide. There are close to 200 million suppliers in the world. Traditional procurement methods and business networks only enable access to approximately 1 to 2 million, which is a dismal result.
An open network turns this on its head completely. What suppliers need is the simplest way to connect with buyers, other suppliers and collaborate with them. This is the key to unlocking innovation and value creation in the supply chain.
In a perfect world, there would be no user interface at all, but we need to open up the networks before we can get to that stage. And then we will have found the path to the Uber-ization of procurement.