Digital doubts for CPOs

BY Richard Summerfield

Procurement has continued to deliver solid savings and manage risk, according to the eighth annual 'Global Chief Procurement Officer Survey' from Deloitte.

While most procurement leaders feel supported by their executives, they are, however, unsure about whether they are contributing significant strategic value, the report suggests.

However, more procurement leaders believe that their teams have sufficient capabilities to deliver on their procurement strategy – 49 percent of those surveyed, compared to 40 percent in 2017. The survey also indicates that while many CPOs have high hopes for the potential of analytics to transform their profession, only a third of them are utilising such technology.

Though many organisations have identified digital skills as a major area of focus, the majority of companies are neglecting to prioritise digital functions. Just 3 percent of CPOs believe that their teams possess the skills required to maximise digital capabilities. Only 16 percent of procurement leaders surveyed were focused on enhancing these skills. Seventy-two percent of procurement leaders are spending less than 2 percent of their budget on training, compared to 66 percent in 2017. Furthermore, 17 percent of procurement leaders do not have a digital procurement strategy.

“With today's global supply chains, risk exists across geopolitical and economic disruptions," said Brian Umbenhauer, principal and global head of sourcing and procurement at Deloitte Consulting LLP. "There are demonstrated techniques to help drive value, reduce risk and meet goals – from digital transformation to increasing visibility and properly training teams – but CPOs right now are struggling to make the most of them. Major benefits and competitive advantage await those who do.” 

Despite uncertainty around issues such as Brexit, NAFTA, weakness and volatility in emerging markets, rising geopolitical risks in the Middle East and Asia, as well as the spillover effects of a slowdown of China, many procurement leaders remain cautiously optimistic about the future.

“Lack of visibility is a major concern for CPOs as they look to navigate global headwinds and prepare their teams for the future of procurement and innovative technologies,” said Mr Umbenhauer. “Visibility throughout the supply chain is a key tool for meeting regulatory and corporate social responsibility requirements while mitigating risk.”

For most respondents, cost reduction, product and market development and managing risk are the top business priorities. Despite concerns, 61 percent of CPOs delivered better year-over-year savings performance than last year, with the highest-performing leaders excelling in executive advocacy, leadership, talent and digital.

Report: The Global Chief Procurement Officer Survey 2018

Wallet watchers: consumer spending under the spotlight in new report

BY Fraser Tennant

Providing businesses with deeper insights into consumer behaviour across the globe and pinpointing the drivers of choice that open and close the customer wallet is a new report released by KPMG.

In the inaugural ‘Me, My Life, My Wallet’ report, KPMG  analyses how the seismic influences of sociopolitical and economic shifts, accelerated mass adoption of new technologies and mobility are upending fundamental beliefs around what drives consumer behaviour.

The KPMG report also unveils a new customer engagement framework designed to help businesses understand the increasingly complex and multidimensional forces that influence decision making and preferences of today's and tomorrow's consumer. 

The framework is based on what KPMG calls the ‘Five Mys’ (which focus on five behavioural drivers – My Motivation, My Attention, My Connection, My Watch and My Wallet), Customer Wallet (fresh thinking on our changing relationship with money) and Generational Surfing (a new perspective on how those life event drifts can help businesses anticipate changing needs and preferences). The customer engagement framework goes deeper than just the analysis of data through a single lens.

From millennials to baby boomers, the framework helps businesses to assess the drivers of consumer decision making by looking at the multiple factors that influence people's everyday lives. Together, the three dimensions of the framework – behavioural, financial and demographic ─ help deliver a more comprehensive, 360-degree view of a consumer.

“Every day, new influences impact consumer motivation, behaviour and consumption and these forces are upending the conventional predictors of when, why and for what the customer wallet opens,” said Willy Kruh, global chair of KPMG's consumer and retail practice, and a partner with KPMG in Canada. “Transactional data, traditional market research and demographic profiles alone are proving inadequate to explain not just what customers are doing, but why.”

The report is based on a survey of 10,000 people across the US, UK, India and China,  using comprehensive, customer-focused research methodology.

Mr Kruh concluded: “It is time for an industry reset that re-orients us to understand what drives consumer engagement today. This calls for a new, intelligent, multi-dimensional model that uses predictive insights to help companies understand the customer journey and who their customers truly are.”

Report: Me, My Life, My Wallet

AI to drive GDP growth – PwC

BY Richard Summerfield

Across a wide spectrum of industries there is burgeoning excitement around the implementation and applications of artificial intelligence (AI). While there will be myriad challenges with properly leveraging AI, a new report from PwC suggests that global GDP could be up to 14 percent higher in 2030 as a result of AI – the equivalent of adding an additional $15.7 trillion to the global economy.

Though AI is, in some respects, a mystery for many organisations, in terms of how it will impact them and alter their business models, it is important for companies to embrace AI where possible. AI can enhance many different areas of organisations’ businesses, according to PwC, which, in turn, will drive economic gains.

Productivity will be boosted by companies automating processes using robots and autonomous vehicles. Companies will also be able to augment their existing labour forces by installing AI technologies, including assisted and augmented intelligence. Consumer demand will also be altered by AI. Personalised and higher-quality AI-enhanced products and services will drive consumer activity.

The report notes that all regions of the global economy will experience benefits from AI, including North America, China, Europe and developed Asia. China will see GDP grow by 26 percent to 2030, and North America will receive a 14.5 percent boost. However, emerging markets will see more modest growth in the coming years, at less than 6 percent of GDP, due to lower AI adoption rates forecast for Latin America and Africa.

According to the report: “The ultimate commercial potential of AI is doing things that have never been done before, rather than simply automating or accelerating existing capabilities. Some of the strategic options that emerge won’t match past experience or gut feelings. As a business leader, you may therefore have to take a leap of faith. The prize is being far more capable, in a far more relevant way, than your business could ever be without the infinite possibilities of AI.”

On a sectoral basis, the industries most likely to benefit from the emergence of AI will be retail, financial services and healthcare, thanks to improvements in productivity, product value and consumption.

Report: PwC’s Global Artificial Intelligence Study: Exploiting the AI Revolution

Uncertain world forcing global technology leaders to rethink strategies, says new survey

BY Fraser Tennant

Unprecedented political and economic uncertainty across the globe is forcing technology leaders to rethink their strategies, according to a survey carried out by Harvey Nash and KPMG.

‘Navigating Uncertainty’ is the largest IT leadership survey ever undertaken and includes 4498 responses from chief information officers (CIOs) and technology executives across 86 countries. In the main, the survey finds that technology leaders believe that the level of change they are experiencing has reached unprecedented levels and is increasingly coming from unexpected corners.

That said, many technology executives are turning this uncertainty into opportunity and are helping their organisations to become more nimble and digital, a strategic rethink they feel will help them navigate through unpredictable change and thrive in an uncertain world.

“Few would have predicted the seismic shift caused by recent political change in many western countries”, wrote Albert Ellis, chief executive of Harvey Nash Group. “And few would have predicted the astonishing advances that have been made in data analytics, cloud, or – as this year’s survey reveals – automation."

The survey’s key findings include: (i) two-thirds of organisations are adapting their technology strategy because of unprecedented global political and economic uncertainty; (ii) 89 percent of organisations are maintaining or ramping up investment in innovation, including in digital labour; (iii) digital strategies have been embraced by businesses at an entirely new level; (iv) cyber security vulnerability is at an all-time high; (v) female CIOs are far more likely to have received a salary increase than male CIOs in the past year, although the number of women in IT leadership remains low at nine percent; and (vi) weak ownership, an overly optimistic approach and unclear objectives are the main reasons why IT projects fail.

The survey (now in its 19th year) also found a clear divergence between organisations that are effective at digital transformation and those that are not. CIOs at these ‘digital leader’ organisations are almost twice as likely to be leading innovation across the business and their organisations are investing in cognitive automation at four times the rate of others.

“Whilst the future might be difficult to predict, what is very clear is that many technology executives are turning this uncertainty into opportunity”, wrote Lisa Heneghan, global head of technology at KPMG. “They are helping their organisations become more nimble and digital, to navigate through unpredictable change and thrive in an uncertain world.”

Report: Navigating Uncertainty

Asian growth slower and profits elusory, says new EY/HBR Analytic Services report

BY Fraser Tennant

Opportunities for companies in the Asia-Pacific region to grow are fewer and profits more elusive, according to a new report by EY and Harvard Business Review (HBR) Analytic Services.

In ‘Asia: Time to Refocus’, EY/HBR Analytic Services note that despite Asia having been a major source of growth for multinationals and private equity firms for 20 years, expected profits have not materialised and the current outlook is that the land-grabbing strategies of old are no longer sustainable.

Moreover, the Asia-Pacific companies that once relied upon an almost unlimitless potential for growth but that are now struggling to adapt their products and value propositions, are being advised to adopt a ‘depth-over-breadth’ capital strategy in order to re-engage with the region’s complex business environment. 

“Asia today is not the Asia of 20 years ago, or 10 years ago, or even five years ago," said Vikram Chakravarty, EY’s Asia-Pacific capital transformation and operational transaction services leader. “It continues to grow faster than most developed economies, but more slowly than it did in the past.

“It remains a region of great opportunity, but also one where profitability remains elusive for those unwilling to invest the resources necessary to tailor their offerings and business models to its individual markets.”

The challenge for companies in the region, says Chakravarty, is for them to identify how and where they should be focusing their capital and other resources, and also where they should be taking a step back.

To do this, the EY/HBR Analytic Services report advises companies looking to transition to a new capital strategy in Asia to: (i) conduct a portfolio review; (ii) launch a large-scale cost-cutting initiative to improve profitability; (iii) right-size their go-to-market models; (iv) reorganise to emphasise country over category; (v) plan a path to exit, and limit losses, where market leadership and profitability are not realistic; and (vi) double down in priority countries by undertaking transformative deals — big-bang M&A transactions and partnerships — to boost market share quickly.

Chakravarty concluded: “Companies that have yet to see Asia’s promise cascade to the bottom line must determine where they have a path to profitability and focus their attention there. Depth, not breadth, will win the day.”

Report: ‘Asia: Time to Refocus’