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Leading Through Disruption—The Case for New Operating Models

As the world comes to grips with the Coronavirus disease (COVID-19), the industry is already seeing the next wave of change for procurement.
By Keith Hausmann
April 14, 2020

The financial crisis of 2008 was the trigger for drastic changes in the way that procurement teams managed their businesses. As revenue streams for many multinational companies began to dry up and spending behaviors became front-page news, procurement was invariably thrust into the spotlight as a means of preserving the reputation and profitability of these organizations. The wave of change led to many companies outsourcing key aspects of their procurement functions to reduce risks, manage costs and increase productivity. Others started the journey toward better data management and analytics.

As the world comes to grips with the Coronavirus disease (COVID-19), the industry is already seeing the next wave of change for procurement. This time around, the shift toward automation and artificial intelligence (AI) enables companies to manage through uncertainty and ensure business continuity while simultaneously building new capabilities and ways of working that deliver exponential value to customers, partners and shareholders.

Unprecedented times require unprecedented change

The immediate and dramatic impact of today’s situation on global business, including the service economy, is a wake-up call—the traditional way of doing procurement no longer works. While tragic, past pandemics and other crises have almost always been more limited in reach. When specific countries or regions were affected, businesses were able to turn to another region. This pandemic is different, as the widespread global impact is affecting B2B and B2C services as deeply as their core supply chains.

Priorities for procurement leaders and their teams have instantly shifted from running sourcing processes and negotiating contracts to partnering with business leaders to immediately understand their requirements and bring in new suppliers to ensure short- and long-term continuity.

Service-based firms like telecommunications are seeing an immediate spike in demand during this time of change, with global workforces shifting from office-based routines to remote working practically overnight. We are seeing long-standing implications on how companies and employees work, making the ability for businesses to quickly secure suppliers to meet new or spiking requirements and supplement internal capabilities more critical than ever. Utilizing AI-powered smart sourcing, one leading Fortune 100 company was able to immediately find a provider to design and deliver distributed, remote training in multiple languages for its regional operations. In this case, the ability to shrink the time from the scoping to selection of the supplier by 75% while reducing cost by 46% provided the company exactly what it needed for its ongoing business requirements.

The level of change introduces many new challenges for procurement:

  • Working with a largely remote workforce of procurement teams, business stakeholders and suppliers who are quarantined or ordered to stay at home.
  • Finding new ways to work with service suppliers around the world who are unable to work on-site or affected by the same restrictions, likely a network of suppliers across multiple countries and locations.
  • Identifying new service suppliers in categories that are unchartered territory, such as health and safety services for employees affected by the global pandemic.
  • Executing risk-mitigation plans to ensure disruption is minimal across the value chain, with alternate suppliers who can step in when one supplier is affected.

Many leaders are taking this opportunity to look at how they can build new capabilities that will provide immediate relief for today’s crisis as well as be sustainable and deliver value indefinitely. One global aerospace firm recently sourced a COVID-19 crisis management service provider in approximately nine business days, from initial concern about the pandemic to award and agreement. The traditional weeks-long sourcing process simply would not have been an option when needing a supplier who can begin work almost immediately to ensure business continuity.

Additional opportunities for sustainable capability investment include the following:

  • Operationalizing capabilities for agility and quickly adapting to different situations.
  • Adopting processes and systems that provide immediate information access and visibility for all stakeholders.
  • Improving and streamlining execution of workflows and key tasks from management throughout the workforce.
  • Promoting cohesive, cross-organizational collaboration and communication across all business functions.
  • Building reliable, self-service business processes that can be run securely and safely from anywhere.

The best times for change are times of disruption

One of the most interesting aspects of the global isolation efforts to curb the spread of COVID-19 is how quickly people have been adapting to the rapid change in the way business is being conducted. Digital communication alternatives such as Everbridge, Zoom and Dropbox are seeing spikes of enormous proportion as business leaders, employees, workers, trading partners, students and people of all demographics are utilizing new technologies to stay connected and operate in different ways.

The same is true for procurement. “Business as usual” approaches are no longer enough for procurement functions if they want to do their jobs effectively and achieve the right results. Team members are hungry, willing and wanting the changes that automation and AI can bring as they have come to expect the same immediate, user-friendly experience at work as they have in their personal lives.

Technology like AI and machine learning can dramatically change how procurement and sourcing are done:

  • Eliminating or minimizing process steps that are archaic and out of sync with how consumers have come to experience commerce.
  • Automating the procurement life cycle and workflow using intelligent search capabilities and chatbots to process transactional requests.
  • Utilizing broader, richer, deeper sets of data for faster and better decision-making.
  • Providing visibility into a greater set of decision-making variables beyond expenses, including historical delivery, performance and sustainability criteria.
  • Enabling the organization to make better, more effective decisions such as risk analytics, price forecasting and spend optimization.

What comes next

With any disruption, the first priority will always be ensuring your people, operations, customers, partners and suppliers are safe. Once that has been done, leaders must shift to getting their services back online as quickly as possible to minimize disruption to customers and their overall business. While leaders are doing this, it is an opportune time to challenge how things have been done traditionally and to look for new and innovative ideas and ways of working that can deliver long-term value to the business.

Leaders thrive on challenge, and procurement executives are the most resilient and resourceful leaders I know. This situation is no different, and it’s best to use this point in time to get businesses back up and running while driving transformative innovation that will have a lasting impact long beyond this immediate crisis.

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Keith Hausmann is Chief Revenue Officer at Globality.