Stop underselling procurement and view it as an ‘ecosystem builder’

Procurement’s value has progressed significantly over the last two decades: first, it was rubber-stamping spend, then we focused on cost take out, then spend reduction, then category management and planning, and then procurement turned to external forces and addressed risk, regulation and sustainability. So what have we learned from this evolution of value creation?

Procurement is now actively involved in building your company’s infrastructure, positioned at the heart of most significant business decisions, strategic shifts, and critical investments.

Most often, procurement lets the business be the boss and adds support only where it has specific expertise. But what if procurement changes its mindset and becomes proactive? What if procurement were the boss and took more urgency in all that it influences? Procurement leaders could tell themselves, “I am building the ecosystem of this company!”

HFS believes that ambitious procurement organizations of the future will act as “ecosystem builders” for the enterprise that drive collaboration across multiple organizations with common objectives to generate entirely new sources of value. Procurement itself also requires an “ecosystem mindset” to orchestrate a collaborative network of multiple interconnected elements to drive enterprise transformation. This point of view shows how procurement leaders from fast-paced organizations apply this ecosystem thinking with their organizations to build more influence and create more value.

Exhibit 1: Procurement needs an ecosystem mindset to be relevant as a strategic business partner

Source: HFS Research, 2021

How procurement can emerge as an ecosystem builder for the organization

Ecosystem thinking has become the model for today’s business leaders. HFS recently surveyed 150 C-level executives on the current state of their ecosystem and 95% agree that the potential value generated by an ecosystem working in balance will be exponentially higher than a single function can achieve.

Businesses exist in a web of interconnected relationships with their employees, customers, suppliers, partners, and even competitors creating an evolving and ever-fluctuating ecosystem.

Increasingly, a business’s success is determined by this ecosystem’s strength and the ability to adjust as the market and other conditions change, sometimes dramatically, as we saw with the pandemic shock in 2020. However, building a thriving and balanced business ecosystem is challenging. According to our research, the top five hurdles to establishing a successful ecosystem include security, privacy, incentive alignment, technology backbone, and a collaborative organizational mindset or culture.

While procurement has been mostly missing from this broader business ecosystem discussion, there is no other function within an enterprise with the skills, experience, exposure, or placement to help strengthen the enterprise ecosystem. Procurement in the future should act as the link between external expertise and internal business functions to maximize their co-creation potential.

By design, procurement is a reactive function. People in the organization will come to you and ask for help. When procurement gets these questions and requests thrown at them, you automatically turn into a reactive function and there is limited time to think, stop, and plan. That’s why, it’s important to build the right operating model and develop strategic talent to earn the trust of the organization and be proactive in your work. In this way, you can guide your stakeholders through the principles of procurement earlier.
– Alpar Kamber, Executive Leader, WNS Denali

Here are the traits for the future of procurement as the “ecosystem builder” for the enterprise:

• Brokers of capability: Procurement becomes the “broker” of competencies across ecosystem participants to drive the network effect required to make the ecosystem valuable for all.
• Change agent: Instead of fighting change, procurement professionals need to embrace and demand change from the rest of the organization to evangelize collaboration benefits – both internally and externally.
• Collaborative partnerships: Beyond negotiating the best deals for buying products and services, procurement focuses on developing partnerships that drive innovation, end customer experience, business outcomes, and enterprise demand.
• Ecosystem governance: Procurement expands beyond the siloed view of individual supplier relationships to set strategy and policies for enterprise-level governance of the ecosystem and focuses on incentive alignment across multiple participants
• Consultative business partner: Procurement works with businesses to find new sources of value that cannot exist without an ecosystem approach.
• Market awareness and alertness: Beyond spend and category intelligence, procurement becomes the home for collecting enterprise and competitive intelligence.

Our purpose is to champion people to be well and thrive. We do this by living our values. One value that sticks with me is ‘always do the right thing’ – and I always put people at the center as well. We show up to win with our head, heart, and guts. This means we must know where we are going, be determined to get there and help each other get there. We put all of the pieces together to live our purpose here. And we have worked with WNS Denali for a number of years now. We have always acted as one team. So, all of our stakeholders and end-users are used to working with our WNS Denali partners.
– Senior Procurement Manager, a global consumer and packaged goods company

Building an efficient and effective procurement ecosystem is a prerequisite to power the future role of procurement

To rise to the challenge of enterprise ecosystem building, procurement itself needs to take an ecosystem view to build its competencies to power our future procurement vision. The procurement ecosystem consists of interconnected stakeholders, technologies, processes, and data that are often invisible, misaligned, and unoptimized. Business stakeholders consider procurement a necessary evil while suppliers want to override procurement to deal directly with the business. Internal performance measures are cost and compliance-focused versus strategically aligned with enterprise priorities. Poor internal data visibility, lack of external market intelligence, and a patchwork of tools and technologies that don’t often talk to each other lead to inefficient and ineffective processes leading to frustrating stakeholder experiences. As a result, procurement professionals spend most of their time firefighting versus trying to use their skillsets to help the organization meet its strategic goals. It would be appropriate to refer to the following quote from a senior professional in procurement.

In Procurement Operations, you know everything is going well when you have the least amount of noise. Rarely do people tap you on the shoulder and say – ‘that process is awesome – you rocked it,’ which means the engagement with your stakeholders has been positive and that breeds trust. When you have trust, it helps you with change management so you can take an idea to the table with a proven track record and stakeholders are more likely to open up and listen – we have worked well with WNS Denali in that area and how we run our business.
– Head of Global Procurement Operations Infrastructure, a global high-tech company

Procurement needs an efficient and effective ecosystem that allows operations to run like “tap-water” and strategic resources to focus on value-added work. To build the ecosystems of tomorrow, procurement leaders today must prioritize these three areas:

1. Procurement needs a mindset shift to stop thinking linearly and start thinking of interconnected networks comprising internal stakeholders, procurement professionals, suppliers, internal and external data, processes and policies, and systems & technologies.
2. Procurement needs to invest in building a data infrastructure that provides internal visibility into spending patterns and external intelligence of market trends and risks.
3. Procurement needs to optimize operational frameworks by implementing emerging talent and technology strategies. Despite promising use cases, less than 5% of procurement and sourcing initiatives across most emerging technologies have scaled and industrialized. But it can’t rely on the talent and infrastructure of the past. Procurement organizations need to embrace new operating models and emerging technologies (see Exhibit 2).

Exhibit 2: Adoption of emerging technologies in sourcing & procurement

Sample: 28 analyst interviews with clients of procurement outsourcing
Source: HFS Research, 2021

The Bottom Line: Stop thinking linearly and conservatively and under-selling your procurement credentials

Procurement needs an appetite for change that can break it out of its silos. It requires creativity and problem solving to unleash its potential. According to LinkedIn behavioral data, creativity is the most in-demand soft skill in short supply – and a skill that machines can’t easily replicate. Procurement professionals also need data literacy and digital fluency to bridge the blurring lines between IT and business and understand ecosystem data flows.

Procurement refers to obtaining something that is of value to the enterprise. And increasingly, that value should go way beyond negotiating with suppliers to procure goods and services at the lowest possible price. While these qualities are the root of our function, we have evolved and mastered new skills. Procurement skills, experience, and competencies can be expanded to help the enterprise build hyperconnected ecosystems across many different organizations to potentially unearth entirely new sources of value. It would be appropriate to refer to the following quote from a Strategic Sourcing Manager in a global social media company.

The WNS Denali team has proven to be a great partner as they understand and share our passion for growing our organization. WNS Denali’s openness and willingness to address feedback has allowed us to enable great change and progress to continually expand WNS Denali’s role. WNS Denali continues to look for new ways to add value to our Sourcing organization.
– Senior Manager – Strategic Sourcing Program Manager, a global social media company

To reach this next step and once again recontextualize the organizational role of procurement, the function will need to undergo a dramatic mindset shift.

Regardless of their industry, CPOs of the future will move forward if they:

1. Stop resisting change. Demand it
2. Acquire new skillsets – creativity, data literacy, and digital fluency
3. Position procurement as strategic “ecosystem builder” for the enterprise

In essence, procurement will need to stop thinking of itself as a cost and compliance-focused back-office function and start thinking about itself as a center of an interconnected web of internal and external stakeholders, data, processes, and technologies.