The Common Obstacles to Adoption of Procurement Transformation

The Common Obstacles to Adoption of Procurement Transformation

The Common Obstacles to Adoption of Procurement Transformation

Increasingly driven by data and Artificial intelligence (AI), it is crucial for businesses to move away from paper-based procedures and embrace automation technology. Procurement teams, need to undergo digital procurement transformation to maintain competitiveness.

An effective procurement process involves multiple teams working together. This means successful digital procurement transformations require the support of the entire company and should be treated as ‘all-hands-on-deck’ initiatives. Teams resist the adoption of data-driven business mindset, it can disrupt the entire transformation effort.

On the path to success, there are various obstacles that one must be prepared to overcome. The good news is that when you gain buy-in from all key stakeholders and decision-makers, the transition becomes significantly easier.

While some obstacles may be minor speed bumps, there are a few major challenges that can derail your hard work. However, with adequate preparation, you can navigate through this transformation smoothly.

Challenges To Procurement Transformation

Below are the four most significant obstacles to watch out for during a successful digital transformation. Being prepared for these challenges will ensure a smoother transition.

  • Resistance to change

    Breaking old habits can be difficult, and resistance to change is often prevalent among middle management. However, this mindset is less common among C-suite decision-makers. Middle managers tend to be comfortable with the existing processes and are reluctant to change how things are done. It is important to note that this is not a generalisation about all middle managers, but rather an observation of a common mindset.

    This presents a significant obstacle when attempting to shift from conventional operational methods to digital ones. The prevailing “if it’s not broken, don’t fix it” mindset is a common stumbling block. Nevertheless, it is important to acknowledge that in numerous instances, these practices are indeed flawed, impeding competitiveness and the company’s progress. Recognising this hindrance can prove challenging, yet it frequently stems from the comfort of middle management with the existing processes.

  • Lack of access to comprehensive data analysis

    CEOs and executives expect their teams to provide complete data and analysis regarding procurement efforts. They require a comprehensive view of performance to make informed decisions for growth. However, they often receive incomplete data.

    According to PricewaterhouseCoopers’ annual CEO survey, there is a gap between the importance CEOs place on complete data and the actual data they receive. Here are some key findings from the survey:

    • 87% of CEOs consider data about risks to their business critically important, but only
      22% receive comprehensive data.
    • 92% consider data around revenue forecasting and projections critically important, but
      only 42% receive comprehensive data.
    • 84% consider benchmarking data on industry peers critically important, but only 18% receive comprehensive data.

    The lack of accurate data poses a significant challenge for successful digital transformation. Executives’ skewed perceptions of what drives the business and where the problems lie hinder their ability to make informed decisions.

    The solution relies on middle management to ensure the delivery of accurate data. Procurement managers must present executives with statistics and actionable insights to highlight the urgency and necessity of digital transformation. They also need to champion this transformation internally.

  • Discomfort with data and technology

    The younger generations of employees have a natural inclination towards data and technology. However, they are still a minority in executive positions, which poses a barrier to a successful digital transformation and hinders the recognition of the importance of adopting digital processes.

    Although experienced leaders can acquire new skills, it is a challenging endeavour. Research reveals that the majority of executives, roughly two-thirds, feel uneasy about making critical decisions based on data. Instead, they rely on subjective intuition. In contrast, quantitative data is objective and offers greater reliability.

    For a comprehensive digital procurement transformation to thrive, it is imperative that top decision-makers wholeheartedly support it. Their willingness to embrace and champion the utilisation of data and technology plays a vital role in enabling the transformation to occur.

  • Lack of a company-wide data culture

    The reluctance of some decision-makers to trust data and drive internal paradigm shifts is a significant obstacle. These individuals are unlikely to spearhead initiatives that require the entire staff to adopt a culture centred around data and analysis, which ultimately hinders the success of the business. Why is this an obstacle? A successful digital procurement transition can only occur when the entire company embraces it. Businesses that embrace a data analysis culture experience remarkable growth, while those that resist change often stagnate.Unfortunately, many organisations still lack the desire to make this change. According to a recent survey by Deloitte, companies with a data analysis culture significantly exceeded their revenue and business goals. They were twice as likely to exceed future revenue goals compared to companies that did not embrace data analysis. Additionally, an astounding 88% of companies in which every employee is trained on data analysis exceeded their set key performance indicators (KPIs) and business goals.

Final Thoughts

At CJV Partners, we believe that procurement is undoubtedly transitioning into a digital process, and progressive businesses that successfully undergo digital procurement transformations are more likely to thrive in the future. Conversely, those that resist these changes are more likely to fade away. It is essential to acknowledge this reality and recognise the numerous benefits of embracing digital processes, automation technology and Artificial intelligence. If your business has not yet embarked on this journey, there’s no need to worry. Let us support you every step of the way. Speak to us today!