The CIO's role has evolved, stimulating a transformation of the CPO organization, including Sourcing, Procurement, Supply Chain, and Commercial Management.
In this two-part article, we will examine how the CIO's evolving role is stimulating a transformational change in the role of the CPO and their organization. Let's get started, beginning with a look at the rapid pace of change facing all of us today in business.
The Pace of Change and Consumer / Stakeholder Expectations
We are in a period of significant change and disruption across the business world. This change is happening at an unprecedented pace in terms of velocity and depth, breadth, and impact of products and services delivered to the market. This pace of change has a profound impact on our roles as business leaders, including the transformation of our functions and the engagement model for our responsibilities. Our mindset needs to embrace the notion that whenever we find ourselves on the side of the majority, it is time to pause and reflect. Now, more than ever, our focus needs to be on Market Shifts rather than reacting to the competition.
Integration of technology into an effective platform of capability integrated across the eco-system of applications, networks, solutions all become an integral component of the evolving role of the CIO
A significant contributor to this change is the narrowing gap between customers' and stakeholders' expectations in terms of what they want from the business and what is possible. The gap between these points vanishes quickly, fueled by technology-based digital innovation and disruption happening around us. Figure 1 depicts this.
What is emerging from this is impacting our roles as business professionals. With respect to the CIO and CPO roles, this change is dramatic.
Disruptive Business and Technology Trends are Stimulating an Evolving CIO role.
No doubt, the CIO’s role has significantly evolved. Stimulated in large part by the emergence of disruptive forces impacting our companies from a business and technology perspective, and the pace these disruptive forces are having an impact is relentless and occurring at an unprecedented rate. A recent study conducted by Emissary shows 65% of IT executives surveyed said their organizations re-set / re-prioritized strategic initiatives based on new realities. These shifts in priorities impact the CIO’s role.
Emerging trends, examples in Figure 2, cause traditional lines of demarcation between business and technology to blur. Partnering with the business, taking an active role in delivering realization of business outcomes and process effectiveness across an integrated eco-system, becomes the CIO’s priority vs. the traditional role of driving transactional efficiency. The CIO now is “sitting at the table,” reporting directly to the CEO, responsible for realizing business outcomes. A clear focus on justifying IT investments (infrastructure and development) is now based on the “revenue of IT.” The CIOs messaging is centered around selling solutions to business problems they solve vs. simply selling a technology product.
As these business and technology trends emerge around us and have an impact on the role of the CIO, two further considerations. First, data. The CIO role today vs. five years ago has responsibility for providing the organizational glue for data and knowledge flows. Data and its conversion to information assets (customers, products, suppliers, the market, etc.) enable growth, speed, and competitive advantage. The CIO role has evolved to lead this charge, including managing data plus also mining and visualizing it in an actionable manner, creates opportunities, sets up decisions, drives business insights to further deliver realization of business outcomes. Focus is on one version of the truth, an enterprise-wide point of view with appropriate levels of transparency across the enterprise and its stakeholders. Second, platforms and integration. More and more, the best technology is defined not as "best in class" but the technology that works well together. Integration of technology into an effective platform of capability integrated across the eco-system of applications, networks, solutions all become an integral component of the evolving role of the CIO.
So, what implications does this have on the CPO role and the respective global Purchasing and Supply Chain organization as they deliver Sourcing, Procurement, and Commercial Management Services in support of the CIO? How does the CPO role and organization have to transform to keep pace?
Purchasing / Supply Chain Transformation – The Key is Precision Disruption
The evolution of the CIO role and disruptive changes happening in all areas of business are also causing the role of the CPO and their respective organizations across Purchasing and Supply Chain to transform. In particular, across Sourcing, Procurement, Supply Chain, and Commercial Management work activities. End to end, holistic transformation - what work is done, how that work is done, and how that work is consumed. Integration is also a critical component of delivering the realization of business outcomes. Pause on this for a minute. Integration of acquired materials, goods, and services across an eco-system of solutions, internally delivered as well as externally delivered by Suppliers, is an increasingly important element of the CPO's role and that of their organization with respect to sourcing and effective transition management that is gaining ground in its impact on the organization. This integration across people, processes, and technology is key to successful transformation across all components of the CPO role and organization. Figure 3 depicts this.
All components engaged across the CPO organization are being transformed - people, process, technology. The key is this disruption needs to happen in a precise manner, at scale, without business disruption. The impact is a shift in focus, from one historically input based, where the CPO organization is looked at as a cost center to one where it is looked at as an innovation center and ultimately a value center delivering outcomes to the business.
Let's next look at one of the key enablers of this transformation - the digitalization of the resident business processes.
CPO Transformation – A Digitalization Mandate
In 2020, the business has seen an aggressive mindset shift to acknowledging the need to automate the "back" and "middle" office work activities as part of an overall digital strategy. All of the major operating functions, e.g., Purchasing, Supply Chain, Manufacturing, Finance, HR, etc., are in play, including the associated end-to-end business processes (e.g., Request to Pay, Hire to Exit, Order to Cash, etc.). What we are seeing is a digital mandate. For Procurement, Sourcing, and Commercial Management related activities, this shift manifests into eight key mandates proceeding down the digitalization path. Figure 4 reflects this.
This is about precision disruption. Speed, efficiency improvements, and increased effectiveness are all benefits expected to emerge from this effort. The challenge is, although there is a keen sense of awareness of the need to automate at an accelerated pace, actual adoption is lacking. There are four primary reasons for this, as reflected in Figure 5.
Let's shift focus to transforming the CPO organization and related work activities, starting with Strategic Sourcing.
Strategic Sourcing Transformation
The Strategic Sourcing Process is full of automation opportunities. Starting with Scout to Source, through Source to Pay, Post Award Governance, and Supplier Management. Our objective is transforming the CPO function to keep pace with the evolving role of the CIO. Relevance, adaptability, anticipation in response to market shifts all factors to consider. Our focus when talking about Strategic Sourcing is on strategy, thoughtful engagement with the supply base jointly enabled outcomes that represent a "win-win" for the company leading the sourcing initiative and the supplier providing the product or delivery solution. This is the collaborative tone, spirit, and intent that needs to exist with our Suppliers, all an integral part of the CPO transformation across Sourcing, Supply Chain, Commercial Management, and Supplier Relationship Management. This represents a departure from legacy Strategic Sourcing definitions, which brought many evils that destroyed Supplier relationships and collaboration. In other words, a historical approach associated with an aggressive focus on compliance, one-sided terms, backward-looking savings measurement, etc., all acting as a barrier to conversations with IT and the Business. As noted at the top of this section, the Strategic Sourcing process is loaded with automation opportunities. Vendor Management, at the end of the process, represents an emerging area of automation potential. Digital capabilities in this area are fast evolving, in particular, to address the legacy problem around predictive analytics to better anticipate and manage “project” execution risk. Figure 6 walks through the Strategic Sourcing process.
Again, the Strategic Sourcing process is full of automation opportunities driving transformational change and improving cost efficiency and operational effectiveness. Let's walk through a number of these automation and digitalization opportunities leveraging the journey and experiences at GM.