CPOs demystify the new value equation for procurement.

Multiple shifts in today’s business environment have led to the procurement function moving its focus from expense management to unearthing strategic value to its organization. In partnership with Infosys BPM, HFS recently surveyed 300 senior procurement executives for a research study on procurements’ unique position as the enterprise ecosystem builder. Recently, HFS and Infosys BPM co-hosted a digital roundtable with a diverse mix of 16 global procurement executives to discuss the study’s key findings.

Procurement plays the chief ecosystem officer role by expanding beyond its traditional value chain

Procurement’s purpose is moving from a traditional singular focus on expense to a multi-faceted set of disciplines with domain knowledge in process reengineering, risk, and governance across the ecosystem of internal and external parties. Performing successfully against this new norm can meaningfully reposition the broader enterprise around procurement to achieve its business goals.

A new mindset takes hold of ambitious procurement leaders to become ecosystem builders, however, the journey is not without its challenges

While some functions have embarked on this journey, most have yet to start on the path to becoming ecosystem builders. Exhibit 1 shows a greater realization among global procurement and business executives that procurement is uniquely positioned to perform this broader role and capture these new sources of business value. However, with greater expectations and self-ambition come challenges. It is not surprising, therefore, that in our study, suitable talent, conflicting goals, siloed structures, legacy systems, and a lack of digital adoption surfaced as common obstacles preventing procurement from elevating itself to this mantle of ecosystem builder.

Exhibit 1: Ninety-five percent (95%) of procurement executives believe that procurement organizations should act as ecosystem builders

Sample: 300 procurement executives across Global 2000 enterprises
Source: HFS Research in partnership with Infosys BPM, 2022

A delegate poll revealed that most procurement organizations are still in the “early stages” of their journey toward becoming ecosystem enablers, with fewer than 1 in 4 considering themselves “leaders of the pack.”

We are still not there yet. Our journey is 5 years, our talent needs to become business-minded and well-rounded people. How do we solve this?
The end state is how can you not be an ecosystem driver, you must speak the language, you must have the data, and digital capabilities, and be the best-in-class procurement organization.

– CPO of a global financial service firm

Examine how procurement leads the value capture for its function

Delegates offered advice for maneuvering the procurement function forward. The following themes resonated strongly within the discussion.

Getting the basics right remains the top priority

Procurement functions need to get the basics right in expense, category, and supplier management. At the same time, re-profile talent pools (internal and external) to align to differentiating and non-differentiating workloads. Lessons from our procurement delegates on talent, digital, and data.

• Proactively adjust workforce thinking to enhance employee experience. Procurement functions that initiate “talent swaps” within the enterprise and reward the “thinking differently” mindset shape
  procurement into a desirable destination in the organization chart.
• Examine current processes before taking on a digital-first approach. Evaluate current challenges so that you can deploy a “digital first” approach with an understanding of its business value contribution. Understanding is essential for procurement to sell its value across the multiple internal stakeholders’ functions, each with unique requirements of procurement. As one delegate stated, “slapping technology on top of an old process only handcuffs procurement to the view of doing the wrong things…faster.”
• Fuse data with business insights to supercharge procurement. The foundation for generating impactful business insights is to architect quality data from the traditional and new domain areas. Thus, expense management data is enriched with risk, finance, and performance data.

Exhibit 2: Only 30% of procurement leaders are functioning at the fullest potential as ecosystem enablers

Sample: 16 procurement executives across Global 2000 enterprises
Source: HFS Research in partnership with Infosys BPM, 2022

Proving and reproving the core procurement value on price negotiations, cost takeout and managing demand is key while balancing sometimes conflicting value-adding topics, such as driving ESG agendas or supplier-enabled innovations. Resources are finite, so it’s about finding ways to optimize and digitize the core activities, either in-house or with the help of service providers.

– Daniel Neurohr, Global Procurement Category Head—Corporate Spend P&O, Fleet, Novartis

CPOs should publicize and engage other functional leaders in the redesign of procurement.

In isolation, CPOs attempting to change their function will fail to create allies and support. Wanting to be the chief ecosystem builder means you must sell this to multiple functions that may lay claim to the territories of operating risk, financial planning and analysis, information security, regulation, and legal, among others. The CPO needs to self-assess its ability to sell internally. This is critical to gaining empathetic peer support and securing the funding needed for change.

Procurement should look at the big picture. We should not push for a few pennies but execute much faster and leaner. We learned from experts; most CPOs would want to raise their profile but not all of them have the right mindset. Ask what you should do differently to be there. Those companies that are at the forefront of best practices have earned their place.

– Janos Kis, Senior Director—Head of Global IT Procurement, The Coca-Cola Company

Achieving legacy goals won’t move you forward.

While the pandemic brought supply chains and expense management to the fore, procurement needs to unearth the plentiful array of business benefits from its ecosystem of relationships. The new talent competency must focus on establishing differentiation based on external third-party relationships.

Procurement teams can bring an ocean of ideas from ecosystems. Try to bring the best of the intellectual property from the outside world and bring it to the inside world.

– Joseph Martinez, Former Managing Director/ CPO of BNY Mellon

Shape the ESG question for the enterprise.

Environmental, social, and corporate governance (ESG) is perhaps the fastest-rising area of organizational value creation. The procurement function must lead the deployment of ESG selection models regarding the enterprise ecosystem.

The Bottom Line: Few enterprise functions have procurement opportunities for growth in scope and value delivery. The shift to embrace supply-side partners has opened the door for CPOs to demonstrate they can deliver the associated business benefits.

However, as with any major opportunity, the CPO needs to think and act differently. Not all can.

Deepening internal partnerships and capturing the benefits of external relationships go hand in hand with rebuilding the procurement operating model to apportion even greater amounts of non-differentiating work to sourcing partners. Those that become recognized for the talent (human and digital) they retain and have access to will become a welcome addition to any enterprise’s top leadership group.