Digital is Decades Old. Don’t Get Fooled (Again)!

When se said that Digital. Digitized. Digitization. Digitalization. Are the New Buzzwords for Outdated Tech we were actually understating the reality. Digital may have been the buzz of the 90s … yes … the 90s (three decades ago), but, in reality we entered the digital age in the 70s – FIVE FULL DECADES AGO!

The first digital electronic watch prototype was developed in 1970 by Hamilton Watch Company and Electro Data and it hit the market in 1972. And while the first digital watch had a price tag of over $2,000, by the end of the decade, they were readily available for under $10 a unit and universally used. And they were … that’s right … DIGITAL!

It was only five years later that the world’s first digital camera was invented by an employee of Eastman Kodak. And while the first digital camera was not sold until 1989 in Japan and 1990 in the US, it existed. Since it used digital storage, it represented the move from digital to digitized. Again proving our point that the 90s is when we really entered the digital age.

The first digital mobile phone debuted two years after that, paving the way for Digitization … almost 30 years ago!

And then four years after that, digital satellite dishes 18″ in diameter hit the market, which were the best selling electronic devices in history at the time after VCRs. We were truly in the age of digitization by 1996. Almost 25 years ago.

Then, in 2000, we saw DVDs hit the market, and we truly hit digitalization as everything was not just transmitted, but stored, in 1s and 0s across all mediums. Two decades ago.

So, do you REALLY want to buy digital technology from a vendor that could be two decades old? Think about that before you start singing along to Laura Clark!

Remember, you’ll get what you sign up for … and you won’t necessarily like it!

So the next time you hear the word Digital or any variation of it, we recommend blaring The Who at full volume! Won’t Get Fooled Again!

… And No Modern Platform Will be “Our Way or the Highway”

You’ve all heard one of the following lines from either your current or prospective vendor:

  • we do it this way because that’s the way all our customers want it
  • we studied dozens of customer processes and this is the best practice
  • it works better for everyone when we use one process we can collect standard metrics on and guide you
  • the more flexibility you have, the more chances of error, so it’s better this way
  • without a standard taxonomy, we can’t cultivate community intelligence

In other words, they know best, and if you’re not happy with their way, it’s the highway, but they are convinced that you won’t take the highway, because, well, as far as they’re concerned, they’re right.

But they’re wrong.

With the exception of the needs to:

  • maintain security and authenticity and audit trails
  • support any necessary regulations
  • enforce process integrity and organizational rules

NO process is fixed across all organizations and all situations. Nor does it need to be. Elements might need to be fixed. Key data elements might need to be fixed. Audit logs and security requirements might need to be fixed. Access might need to be limited by role or responsibility. But other than that, the number of steps the organization desires to undertake. The number of approvals. The order of each, that’s up to the organization. And to be told you cannot do it your way when there’s nothing wrong with your way is ridiculous.

And a modern vendor realizes that. That’s why they will offer you a platform that can be configured to your processes, your taxonomies, and your needs. If the vendor needs a standard taxonomy to support the community intelligence, insights, or metrics they offer up, they will map your taxonomy to theirs. If the vendor needs to track standard steps or actions for metrics or KPIs, they will map your steps to theirs. And so on. And the platform they offer will not only support the configurability you need to model your processes, but that they need to map the steps and metrics backs to what they need.

Configurability. Workflow. Apps/PaaS. These are among the core foundations of a modern platform. Don’t settle for anything less.

Furthermore, No Modern 2020 Platform Will Be Without What-if?!

As you may have noticed, the doctor has been on a bit of a bent lately defining what a modern S2P platform is as he’s completely fed up of all of the “digital” bullshit where marketers are trying to sell everything old like its new again and technically advertising solutions that are less powerful than the doctor could code on his 8088 three decades ago! (It had a 2400 baud modem so the requirement of network connectivity was even met.)

And if you think the doctor is being a bit extreme, go back and re-read the definitions of “digital” and “analysis”, ask some pointed questions to these vendors about what their solutions can really do, and you’ll find that maybe, just maybe, he’s not being that extreme at all. It’s sad how many vendors believe that a fancy new UX on a weak Procurement 2.0 solution all of a sudden makes it 3.0 and 4.0 ready when all they are really doing is putting lipstick on a pig (and no self respecting pig wants to wear lipstick)!

Yesterday we defined the levels of analytics and hopefully made it clear that there shouldn’t be a single platform on your consideration list that doesn’t have at least basic prescriptive capability and that you should also make sure the vendor is on a permissive journey before signing on the bottom line!

But that’s not all you need to demand in a platform. You also need to demand a platform with embedded What If? capability.

It’s going to be a while before the predictive analytics work across all the situations a procurement specialist need them to work in, and even longer until the platform supports the insights needed for permissive analytics. But, in the interim, the procurement specialists still need to extract value from analytics — and that value is going to come from What If?.

What If? the demand next year is the same as this year, what will the total cost be if the cost stays flat? What if demand rises 10%?

What If? the delivery is late by a day? By 3 days? By a week? What if the order is routed to the backup supplier? The backup location?

What If? the supplier’s financial woes get worse? What if the supplier goes bankrupt?

What If? the contract milestone isn’t hit? What is the impact? What is the risk?

The procurement professional needs to be able to ask What If? throughout the platform and, more importantly, throughout the analytics. Some Reports should be interactive and allow the user to project the next quarter, year, etc. of data using current data and advanced What If? algorithms. Anything less won’t be enough.

… And Advanced Analytics Should Be a Must in 2020!

Just like any vendor can claim to have a digital procurement solution because, as we clearly explained last week, email and spreadsheets technically count, any vendor can claim to have analytics. Consider the definition:

the analysis of data, typically large sets of business data, by the use of mathematics, statistics, and computer software

And then consider the common definition of analysis:

a presentation, usually in writing, of the results of this process

This means that any software that provides a canned report summarizing a data set (average, mean, etc.) qualifies. MRP software from four decades ago had canned reports that did this and qualify. Thus, since computers are modern in the grand scheme of human history, any vendor can tell you with a straight faced that they have a modern platform with a modern analytics solution if it runs on a computer, supports bid collection in a spreadsheet, and contains a canned report summary — especially if they were an English or Arts Major (especially since we are in the post-modern phase in their worldview).

DO YOU REALLY WANT TWO-PLUS DECADES OLD TECHNOLOGY?

Think carefully about this — because if you don’t ask the right questions and use the right measuring stick, that’s precisely what you might get if you don’t get beyond this “digital” and baseline “analytics” crap.

What you have to know is that there are levels to analysis. And while the number of levels might very depending on how granular you want to get, there are at least five in today’s technology platforms, and these are the seven levels the doctor likes to use.

1. Classificative
At this level, data is classified into buckets for the purpose of basic analytics.

2. Descriptive
At this level, basic statistics are run to compute summary, typically canned, reports on the data.

For decades, this is all you got, and many vendors still try to pass this off as sufficient.

3. Diagnostic
At this level, the user is either given the ability to define their own reports to drill in and find the potential root causes of issues identified in the reports or to run more advanced statistics (beyond just average and mean) to identify correlations between data to find potential root causes of issues.

Most platforms developed or upgraded in the last five years in S2P, Sourcing, and Spend Analysis have this capability. But this is not enough any more, especially when there are do-it-yourself software packages for under 1K that can allow you to get to the next level, which has been around in specialized demand planning and analytics for decades.

4. Predictive
At this level, the platform employs statistical trend analysis, advanced clustering, and/or machine learning to identify trends and predict future costs, risks, performance, etc.

A few platforms are starting to incorporate this, but this should be a baseline requirement considering ERPs, demand planning, and advanced BI tools have had at least some capability here for close to 2 decades

5. Prescriptive
At this level, the platform is not just identifying and computing future trends, but providing advice on what to do as a result of those trends.

Leading platforms are starting down this path, but given that the foundations of prescriptive analytics have been around for over two decades and that best practices in sourcing and procurement have been around almost as long, if a platform can’t provide not only insight and recommendations what to do with that insight, it will never even achieve 3.0 objectives … meaning 4.0 will never be a reality.

In other words, any platform without some prescriptive capability is behind and not one you should be investing in.

6. Permissive
At this level, the prescriptive analytics is used to power automatic actions based on embedded rules. If the platform determines a commodity that is typically on a one year contract is at an all time low, it might initiate the renewal event two months early to lock a rate in if a rule is defined that says events can be initiated up to three months early if prices drop below contracted rates and are projected to be within 2% of the projected low.

Few platforms are here, but you should be looking for a configurable platform with rules that permit simple automation based on both entered and derived data values from the application and the data it contains. Permissive analytics is a cornerstone of the Procurement 4.0 promise so make sure your chosen vendor is building in permissive analytic capability. It can be fledgeling to start, but something needs to be there or it won’t be there when you need it.

7. Cognitive
At this level, the platform embeds machine learning and advanced AI techniques to not only make good predictions but choose the right actions to take on those predictions without any user intervention for run-of-the-mill sourcing and procurement processes and events. When we reach Procurement 4.0, such systems will not only eliminate 98% of tactical work to allow buyers to focus on the strategic, but eliminate 90%+ of strategic work identified as relatively low value (at the time) and allow buyers to focus on strategic efforts that present the greatest opportunity to provide value … truly optimizing the limited Procurement resources available.

Insight is Good. Actionable Insight is Better!

In our last post we talked about how important insight is in a modern platform now that we’re in the third decade of the century and how any platform that delivers anything less should NOT be on your radar!

But you want more than insight. First of all, you want actionable insight. As per our last post, just knowing that an invoice doesn’t match a PO isn’t enough. You need to know why, and more importantly, what the typical action should be. Extra units? Over-billing? Unexpected Taxes? Higher-than-anticipated surcharges? Approve? Send it back for clarification? Send back a revised version for acceptance (that will result in instant payment)?

However, the ability to take instant action would even be better! If the platform gave you the ability to flip back with request for information, flip back with suggested alterations, or approve with one click, that’s good.

But this ability should be across the platform. When an event is selected, the platform should not only recommend the best set of suppliers, but allow them to be added to the event, and invited, with a single click. This recommendation should take all factors into account — incumbency, performance history, risk scores, environmental data, etc.

When the award is selected, the system should not only identify a template but automatically fill in all the relevant award data and meta-data, alter the clauses as necessary, and bring up an editable contract for buyer review with a single click.

Every insight should lead to one or more courses of action and the platform should provide a mechanism to immediately take the courses of action identified — with a single click if at all possible.

A modern platform doesn’t just provide insights in canned, or customizable, reports — it provides insights embedded in the platform that allow the right actions to be easily taken at the right time … without having to search for the way to make it happen deep inside the depths of the platform where few will ever have the patience to drill into.

Considering that this decade should see the emergence of Augmented Procurement Platforms based on Augmented Intelligence that not only provide insight into the right action to take, but learn to make better recommendations over time in more scenarios, the last thing a buyer should settle for is a platform that still provides “insights” in the form of one-off canned reports in a dark corner of the platform.