Alex Saric is Chief Marketing Officer at Ivalua and has spent over 17 years of his career evangelizing Spend Management, shaping its evolution and working closely with hundreds of customers to support their Digital Transformation journeys. As CMO, Alex leads overall marketing strategy and thought leadership programs. At SIG's Eastern Regional SIGnature event on September 12, Alex will show you how to map a path that allows you to rapidly progress to best-in-class procurement to establish a competitive advantage in your company. He began his career in the U.S. Army Cavalry, leading tank and scout platoons through two combat deployments. Alex holds a B.S. in Economics from the U.S. Military Academy at West Point and an international M.B.A. from INSEAD.
How should success be defined when it comes to digital transformation?
The temptation, and what we see most often today, is viewing it as performance on a set of metric benchmarks. Falling in the top quartile or top 20% of metrics, like percent under management and a level of touchless invoicing can qualify companies as best-in-class, which is often viewed as a success. These metrics are good to track and work toward, but they should be interim objectives on a longer journey. If those are your goals, you are on a path to mediocrity, not toward being a strategic value driver.
Success shouldn’t be defined as bringing yourself in line with your top competitors, but being better to deliver a true competitive advantage. In that sense, digital transformation success should be measured by whether it is at the level that procurement is able to deliver a competitive advantage and recognized as such by the business. Digitizing 99%+ of transactions is great, IF you then take that extra capacity to work on more strategic value projects like driving innovation, growing revenue, etc. If the information being generated is empowering better decision-making, that is a success. These things can be measured by business-oriented metrics like an increase in profit margins, the number of new products introduced, revenue growth influenced, etc.
What areas hold the greatest potential for procurement to create competitive advantages?
It does differ somewhat by industry, but some of the top areas are in driving product innovation, improving overall business agility, increasing profit margins and growing revenues. There are great examples among our customer base that illustrate the potential better than I can.
Look at Meritor, who developed a unique, digital approach to new product introductions and managing their supply base, resulting in more profitable products being brought to market faster. Or Sprint, which configured our sourcing module to run mass volume, forward auctions on a global scale to maximize revenue on their used handsets, driving over $1B in revenue to the top line last year. That is the real potential of digital transformation. Great examples of real competitive advantage. It's possible when you have the right talent empowered with technology that lets them bring their best ideas to life.
What are some examples of roadblocks that procurement faces when trying to implement digital transformation solutions?
What is interesting is that the roadblocks differ by where companies are on their transformation journey, as found by a recent Forrester survey and from our own experience. Early on, executive support and budget are the biggest obstacles. That prevents lots of projects from getting started, or forces them to start small and limit their potential to expand. As companies progress supplier and user adoption become big obstacles. And for those procurement organizations looking to become truly advanced, resistance to change and S2P suite integration is the top obstacle. To become truly advanced and turn procurement into a real driver of competitive advantage, you have to have a team that is willing to do things differently. Ideally, one with creative ideas to do something strategic and better than the rest. You need technology flexible enough to bring those ideas to life. And if you cobbled together a patchwork of solutions with distinct data tables, either by buying from different vendors or buying from a single vendor that cobbled together a “suite” via acquisitions, you can’t realize the full potential. AI can’t mine data across all activity, process efficiency can’t be optimized because contracts don’t link to POs to invoices, etc.
What is your advice for overcoming these roadblocks?
Overall, the key to a successful transformation is to consider both your current and future requirements when mapping out your strategy. Don’t just focus on what you need for the first phase, or you are likely to hit a roadblock later and find you built the wrong team and selected the wrong technology for the long term. To be more specific, the top roadblocks companies hit are supplier and user adoption so as a minimum make sure your approach will support adoption. To ensure user adoption you need to both ensure users’ input is considered and communication of your initiative is clear and early, including the objectives and timing. And make sure your technology will support user adoption. That means not just selecting technology that is easy to use but also ensuring its model will support good content. A slick UI is useless if users have to punch out to other sites with different UIs to find what they want to buy, or items simply aren’t available in the system.
That brings me what is actually the top overall failure point of digital transformation according to a recent Forrester survey: supplier onboarding. Companies too often fail to consider suppliers or what really drives adoption. Things like network size sound important but the vast majority of your suppliers always need to onboard and what really drives adoption is making it easy for them: easy connection options, no fees, no limits of what they can do and no vendor-imposed conditions. That’s been why Ivalua customers have the highest levels of digitization in the world, with companies like CACI, Fannie Mae and Credit Agricole onboarding 99%+ of their suppliers.
In your opinion, what should procurement be prioritizing right now?
I’d say the biggest thing procurement leaders can focus on today is better aligning with business leaders. Understand their priorities and explaining how procurement can support them is critical to building procurement strategy and driving the type of strategic value possible. There will certainly be gaps in what can be delivered, but having that clear understanding will help optimize strategy, and also build the business case for changes required in terms of people, processes or technology.
You’ve been in the procurement space for over 17 years and have seen a lot of change impact the industry. Looking ahead, how do you think the role of procurement professionals will change in 10 years?
I honestly can say I’ve never been as excited about either the function or the technology supporting it than I am today. All the talk about becoming a strategic value driver and moving beyond costs has finally started translating into real change. And today’s dynamic market, with trade wars, Brexit, new regulations, supply chain scandals and other challenges need strong procurement and supply chain leadership to help companies thrive. Boards see that. So I think we will see the shift away from a cost focus begin to accelerate. Costs won’t go away – but all the other objectives will become as important and sometimes more.
With that, I see tomorrow’s successful CPO as a real change agent and ringleader or conductor, if you will. The best procurement leaders will be closely aligned with the business and attuned to the market. He or she can be thought of as positioned at the center of a complex web of diverse internal and external stakeholders, pulling together the relevant ones for each initiative. Pulling a lever here and there to adjust the company’s approach to constantly align with evolving strategy. And the technology will be quickly evolving to support this, providing the actionable insights needed and freeing capacity to plan and collaborate with those diverse stakeholders.
What is one thing that you wish more people knew or understood about procurement?
The function still needs to improve its image by building awareness of the business impact it can drive. Too few outside of procurement understand that the function is really at the epicenter of today’s global market and can really deliver strategic value. It's not about squeezing costs and enforcing compliance anymore, at least not as the primary driver. Procurement is there to empower the business, not be an impediment to it.
Procurement leaders need to get better at marketing their successes. I think a big catalyst for this improvement in the function’s brand will come when you start seeing more CPOs and supply chain leaders become CEOs. We have Tim Cook at Apple and it's just a matter of time until you see that become more common.
We invite you to learn from Alex at SIG's Eastern Regional SIGnature Event. His keynote session, "The Keys to Successful Procurement Digital Transformation," will be held on September 12 at The Harvard Club of New York City. Join the conversation, check out the agenda and register on our website.
Stacy Mendoza is a Digital Marketing Manager with Sourcing Industry Group (SIG). Stacy began her career in market research as an editor for Hart Research Associates in Washington, D.C. Since 2014, she has worked in marketing and public relations, specializing in content creation, media relations and crisis communications. Stacy is a passionate volunteer who donates her time to help nonprofits develop marketing strategies and awareness campaigns. Stacy holds a Bachelor of Arts degree in English from The Florida State University in Tallahassee, Florida. Follow her on Twitter and tweet at @SIG_Stacy.