The word “revolution” gets thrown about a fair bit at present (not least by me…) when discussing the new wave of automation technologies which are transforming the way organizations do business. But are we talking about “revolution” or “evolution” – sudden and dramatic, or gradual change? Well, it’s a bit of both: the technology itself is evolving. We can trace, for example, the evolution of IBM Watson back to the Deep Blue chess computer which beat Gary Kasparov back in the mid ‘90s...which can in turn be seen to have evolved from its predecessor Deep Thought...which itself was a successor to ChipTest (developed in the 1980s at Carnegie Mellon University)...and so on, back to Turing and beyond. While there have been revolutionary moments along this path – the transistor, the integrated circuit etc. – it’s clear that this is an evolutionary sequence, at a pace which may seem very far from “gradual” to those who’ve been alive to observe it but which, nevertheless, consists of successive advances built upon what’s gone before.
Amazon. The name alone makes you think of something big. So it makes sense that they might have something grandiose on the horizon.
With that in mind, I want to start a conversation about whether Amazon might be the next Ariba or Coupa. I heard a rumor that 10 or so Ariba people have gone to Amazon with the intention of making it the next and biggest B2B network in the world. Think about it, we all know how to use Amazon, they have a network that is massive, they have distribution and delivery capabilities, so why couldn't they host additional suppliers and be the purchasing platform for businesses? Amazon has the money, they know how to fill demand, they are nimble, they are constantly innovating...what is to stop them?! They could fairly easily add a feature that limits our searching to approved items with our company's contracted pricing (that it knows to show when we log on with our company credentials) and then check us out with a credit card or even link directly to our accounts payable systems.
Amazon is wildly successful, has a surplus of cash and has set the standard for online purchasing and customer service...so why not go a step further and move from the B2C to the B2B world? I was in the San Francisco Bay Area recently to speak at Coupa Inspire. I love being in the Bay Area surrounded by brilliant people with amazing thoughts and aspirations. After living there for 30 years, I should not be surprised by the number of new companies, ideas and appetite for innovation, however I always am. While there, I spent an evening with my oldest son and his girlfriend, both typical millennials working in Silicon Valley. We started "what iffing" and (since my son has grown up with me as a mom talking supply chain and sourcing and spent time working for Coupa) we convinced ourselves that this is distinctly possible. So was it the wine...or are you drinking the Kool-Aid and see the possibilities here too??
One-on-One is a new Q&A series with leaders in the SIG community. Cost savings. Process efficiencies. They're synonymous with procurement and among the terms most used to describe its role within the enterprise. And with good reason. Over the last decade, procurement has transformed itself from a back-room function to a strategic capability by delivering them. But a new term has entered the lexicon: innovation. There's no doubt that procurement today is a different game. It's more connected, informed and some might even say "social" than ever. Just as consumers tap into personal networks to learn, share and shop better, procurement is beginning to tap into business networks. To learn more on how these digital communities are transforming the function, SIG sat down with Dr. Chakib Bouhdary, President of Business Networks for SAP.
SIG: Social tools much like those used to manage our personal lives have infiltrated the enterprise. How is this changing procurement?
Bouhdary: There are officially more mobile devices than people in the world. More than a billion of us participate in social networks. Over 15 billion web-enabled devices connect us to the people and information we need to manage our daily lives. And data is exploding—doubling about every 18 months. So we are mobile, and apps on our phones and tablets give us new ways to discover and collaborate with our peers and trading partners. Just as consumers tap into social networks to keep tabs on their relatives and friends, procurement is now leveraging business networks to manage trading relationships and commerce activities.
SIG: There seems to be a complete shift in the way trading partners communicate, transact and collaborate. How are business networks driving this?
We live in a networked economy. As consumers, we tap into personal networks to learn, share and shop better. And with increasing frequency, companies are harnessing the insights and intelligence of business networks to break down the barriers to collaboration and drive innovation and competitive advantage. Like social networks, business networks are an efficient, effective way to connect with a global network of partners and transact business. And they have fast become the defacto standard for a number of key processes, such as sourcing. But the real power of business networks lies in what goes on inside them – all the interactions, transactions and commentary, and the massive amounts of insights and data that they generate. And innovative companies are leveraging this information to move beyond simply transacting and engaging with partners in new ways that give them a leg up on the competition. Take MSC Industrial Supply Co., a leading distributor of Metalworking and Maintenance, Repair and Operations ("MRO") solutions, services and supplies to North American manufacturers. More than a decade ago, MSC joined a network to provide its customers with a fast and efficient way to find and purchase the products they needed. Today, the company is taking things to the next level, mining the insights, intelligence and transaction data that reside on the network to help its customers run their businesses with greater efficiency and effectiveness. When MSC learned that employees at one of its customers' locations had to walk a mile to get to a centralized storeroom where supply replacements were housed, it suggested they install vending machines to put inventory closer to where the work was being done. In doing so, MSC enabled its customer to save time and money, making it a more strategic and valuable partner. In their initial phase, networks were all about connecting companies so that they could buy and sell more efficiently.
Dr. Chakib Bouhdary, President, Business Networks, SAP
Spend Visibility at the most granular level identifies what is being purchased and from whom it is being purchased. Taking spend analytics a step further - to see who is buying, how they are buying and why, and also comparing what an organization is spending as compared to the industry overall, will help leading organizations uncover previously untapped savings opportunities by looking at spending behaviors and identifying new and better ways to proactively influence demand. Today procurement organizations are swimming in data, in fact Capgemini Consulting forecasts that over the next 5 years, the growth of data – both structured and unstructured – is expected to grow at over 650%. So the procurement data is plenty "Big" – the problem is having real analytical visibility to do something with it. As Capgemini points out, most analytics provide aggregate visibility which is not actionable: "Aggregates in isolation provide very little actionable information. Analytics, on the other hand, can tell you what's happening in the business and how well you are servicing it." So to make sense of "Big" Data, first think "Small" by being able to interpret purchasing patterns through transactional level insights, something world-class procurement organizations are much more likely to be able to do than their counterparts. According to Hackett Group benchmarks, 23% more world class procurement organizations had a "significant amount" of spend visibility company-wide than the peer group in 2012, and the gap is getting bigger, more than doubling in 2013 to 47%, when 89% of world-class organizations achieved this mark overall. Procurement organizations will be putting their money where the mouth is by upgrading their investment in analytics during 2014.
Richard Waugh, Vice President, Corporate Development, Zycus Inc.
Who's watching you? What do they know about you? Are you worried your record in the Big Data database is wrong? Would you correct it if you could? What if you had a tool to manage your big data like you manage your spend? Around SIG, we've been talking a lot about Big Data, as you can tell from Sarah's two posts (which you can access here and here) and my earlier post on the topic. This morning I started a firestorm of emails when I blasted the team with a note about a new tool I just discovered. Although in beta, Acxiom, a company that supplies marketing data to organizations, has published an online tool that allows you to access your personal "Big Data" record. I decided to try it. For a few moments, I stared at the screen, convincing myself to input the necessary information required to produce my report. Naturally suspicious when prompted to enter any kind of sensitive information (from weight to address to social security number), I hesitated to experiment with the tool. I decided I wasn't giving up any personal information that wasn't already public, and for the sake of this blog, I'd try it. After a very quick login, the tool presented me with several categories of information, including data on my characteristics, home, vehicle, economic, shopping, and household interests. Once I click on these categories, I can view the data that this company has about me, and I can actually edit it. For example, I can change my gender, and then configure my data record so that my gender characteristic will be excluded.
Mary Zampino, Senior Director of Global Sourcing Intelligence, SIG
Two years ago, McKinsey & Company published an article on Big Data, calling it "The next frontier for innovation, competition, and productivity." I recently ran across the article and it struck me that in many ways it was spot on. Frankly, analyzing large data sets isn't a new concept...it just has a title now...Big Data. And now that it does, as I mentioned in my last Big Data post, I can't stop thinking about what it is and how it can be better used in the world of sourcing, outsourcing and supply chain. One of the things that really captured my attention in the McKinsey article was their reference to the issues that need to be addressed regarding Big Data, including privacy and security. Imagine the collective power of the information consumers give to various sources--banks, loyalty programs, online retailers, healthcare providers--most of the time, the information you provide in one place isn't meant to be accessed by another. We expect our information to be kept private and confidential. Disclosing personal data is a slippery slope. As Jeff Bertolucci recently said in InformationWeek, "...companies implementing big data strategies might consider this informal motto: 'Don't be sneaky.'" Be honest with how you plan to use the data you collect and don't share it without prior knowledge, unless you are ready for the mistrust that will follow. Ideally, Big Data should result in something that benefits both the company collecting the information and the consumer or organization providing it. Why else would people be willing to give freely of private information?
I have to admit, when I think about the power of Big Data, it is a little bit creepy. I mean think about it...it's a little like being stalked...and at times, by ourselves. I go to a website like Overstock.com and look at kitchen chairs. The next time I am on my personal email, an ad for those very chairs pops up. From a marketing perspective, it’s called “retargeting.” The chance of my purchasing those chairs increases when that same ad pops up again and again, following me from website to website. From a business perspective, it’s called Big Data. The company...in this case Overstock...can take the information that they’ve gathered on me, a consumer who is interested in purchasing chairs for my kitchen, and use it predictively.
By definition, Big Data refers to three Vs: volume, velocity and variety. But it’s what you do with all the data you have (volume), the speed at which you can access it (velocity) and the types of sources you pull it from (variety) that provides the real insight. One of the best known uses of Big Data analytics is Amazon...and they’ve been using it for years to suggest items you might want to purchase/read/etc., based on your search terms coupled with other people who viewed/purchased the same items. Sometimes I select an item just to find those that are similar. But Amazon goes one step further too and sends relevant emails down the road, just when you’ve nearly forgotten about that item. Talk about a good use of predictive analysis.
Big Data is a major topic right now. Let me give a little analogy here. Have you been to a chain store lately and used the same credit card you have used before at pretty much the same store? Have you noticed that the coupons that spit out with your receipt are becoming more and more relevant to your actual purchases? They assigned you a tracking ID, tracked your purchases, looked at other things relevant to you at that moment...like seasons, your wedding registry, your recent home renovations...and connected the dots to try and sell you wedding favors and landscaping lights and a hat for the upcoming Spring.
That's Big Data. The corporation you buy from has started tracking your regular purchases and figured out how to predict your spend. The same thing is happening in Sourcing as well, actually it has already been happening. As we automate more and more of the sourcing processes and procurement operations and we track consumables from the supply chain to the shelf to the consumers pocket, we learn a lot more about habits, trends, and purchasing power. We can therefore more easily address risk (inventory levels, supply interruptions), leverage pricing (issue discounts, take rebates) and innovate and collaborate. Of course, Big Data requires infrastructure, which is why companies are moving towards the cloud. Imagine all of those transactions being tracked that data warehouse just gets bigger and bigger and more and more traffic comes in as we've got to figure out how to mitigate that risk and have someone else carry the burden of addressing the risk and costs of it.
Mary Zampino, Senior Director of Global Sourcing Intelligence, SIG