The last blog post touched briefly on the popular phrase "no pain, no gain". Whether or not you read it, here are some possible gains for you. Gains acquired by digitizing your procurement and trade operations.
Much is being said about "digital transformation" these days. And for the most part, definitions seem "hazy" at best. So why don't we start off with a bit of clarity?
Digitization is the transitioning from analog to digital. The process of making information available and accessible in a digital format. Digitization relates to formats.
Digitalization is making digitized information work for you. The process of considering how best to apply digitized information to simplify specific operations. Digitalization relates to processes.
Digital transformation is taking advantage of digitalization to create completely new business concepts. It is the process of devising new business applications that integrate all the digitized data and digitalized applications. Digital transformation relates to fundamental changes on a business model level.
So how does engaging in this 3-step-process relate to gains?
Efficiency relates to the amount of resources needed to execute a process. A should be obvious, both digitizing and digitalization works wonders for the organizational efficiency.
However, most organizations rely on digital formats, but maintain manual or semi-manual processing. As we have discussed in an earlier blog post, Excel sheets are a perfect example. Data is trapped in a digital format and then sent via email back and forth between stakeholders.
That translates to people opening, reviewing and often making changes or additions to a digital format, which is then shipped back to sender. And so forth. Somewhere along the way, no only is the data quality obscured, but overview as well.
If you use Google document formats, an entire group of people can look at – and simultaneously edit – the same document. This process helps you maintain an easy overview, rids the group of the versioning issue of keeping track of which version is the "actual", newest one. As there is now ONLY one document and always in the most recent format. Also, a lot of emailing is saved. Efficiency goes up.
Digitalization would entail keeping data inside the systems in which they reside – as opposed to copying them from systems to Excel sheets. By keeping all processes digital, you can now exchange data internally – and whenever it makes sense – externally with customers.
This not only affects your efficiency, but also your ability to provide what would usually be termed "Customer Experience Management". Giving customers access to data and interfaces that allow them to interact with you in a more convenient way.
Effect relates to the ratio between actual and theoretical output/outcome of spend.
The easier and more convenient it is for customer to interact with you – the larger chunk you get of their purchases. And while standard or top on the agenda in all B2C operations, B2B seems to be lagging.
Thus, effect relates to impact. The ability to a greater reach for a smaller investment of resources.
And while digitizing is somewhat easy to do, digitalization requires a bit more work. Especially, it requires a lot of mental work – if not outright innovation. Whether you are in B2C or B2B the same principles apply. It's all customers. There is no real reason why you should buy and exchange things as a private person in a different way than when you are at work.
As we have stated before, one implication of technology is the blurring of the distinction between the 2. It's all B2C. Once you realize that, spotting potential for optimization should be obvious. While you wait for this to sink in, you need to establish high-quality stem data and a process for seamless exchange and integration.
PLAY TO YOUR STRENGTH
We hear all the time that trading and business relationships is about personal contacts and people. We couldn't agree more.
Playing smart however, is doing what you do best. Playing smart in a world of exponential technologies is to let software do, what software does best. In that way, you get to do what you – the human – does best: Search, establish, grow and nurture business relations.
The above figure is from a study by Ernest & Young looking at AI use in different areas.
For some odd reason, one of the more popular use areas for AI is in customer service. The application of chat-bots. If you have 10 or 100 people working in a service-center, getting rid of the headcount might seem like an easy way to save some money. But why would anyone want to speak to a piece of software? If you ever felt trapped inside a system, the only way to re-introduce sense is to have a human help you navigate the hoops, loop-holes and systemic weirdness.
Rather you should engage in digitizing and digitalization of all the mundane tasks because it allows you to transfer and spend more resources on speaking to customers, to provide personalized support and up your stakeholder relation game.
Digital is not an enemy of personal contacts – it's an enabler.
JUST ONE MORE THING
More surprisingly, the report from E&Y states a 0-4% AI application in procurement. That's blue ocean potential right there for you. With 36% use in logistics and other operations, procurement outfits might (probably should) start giving thought to how they keep their seat at the table.