“The world is changing and you have a choice. You can either hide from it and let change happen around you or you can embrace it,” said Stephen Wiehe, CEO at SciQuest, to delegates at the company’s Next Level conference in Nashville, Tennessee.
“How can you take advantage of it? Change isn’t easy, it’s like exercise: firstly, you don’t want to get up in the morning and do it, when you start doing it it’s painful and you want it to be over, but then at the end you feel good for having done it.”
Change is all around us at the moment: The decision by the UK to leave the European Union (EU), the upcoming US presidential election as well as a shaky global economy.
Today the average lifespan of a company listed on the S&P 500 Index is just 15 years, down from 67 back in the 1920’s. Just 12% of the Fortune 500 firms in operation in 1955 were still in operation in 2015. As markets have changed, companies have emerged that have disrupted traditional ways of working and those that haven’t embraced the change have been left behind.
But disruption isn’t necessarily something to fear, it is something that should be seen as an opportunity. And that is the point that Wiehe was making. Rather than simply adapting to change, businesses and their procurement functions have to be the instigators of change.
Some businesses are already pushing this agenda and reaping the rewards.
Take General Electric (GE) as an example. Wiehe explained that when he started his career at the firm, the latest innovations and new product designs were kept under lock and key. Today, he explained that this couldn’t be further from the truth. Projects are developed by cross-functional collaboration teams and the doors are also open to the general public to get involved, who can walk in off the street right into the heart of R&D and play around with new products.
No industry is immune to disruption and, Wiehe said, functions should be using those examples to learn best practice.
He pointed specifically to Uber, the online taxi firm.
Wiehe said we should look at Uber as the ultimate example of a procurement success story and a how-to guide for procurement executives to use disruption to their advantage.
Looking at its operating model it is clear to see the parallels between the role of procurement and Uber’s methodology. The customer sources the driver in a similar way to how procurement sources a supplier, using reviews and feedback scores to filter out ones that are unreliable. Once the driver is selected, then comes the contract management and supplier management stages, with complete transparency on both sides in terms of real-time access to the mobile application.
The Uber system also has a fully automated source-to-settle process and has eliminated the traditional operator of the taxi rank; procurement too is looking to drive these back-office roles out of its function, in order to boost efficiency and value in the competitive market.
Uber has looked outside the existing model entirely and built a new disruptive supply chain from the ground up.
Disruption is all around and will continue so the question every procurement function will have to answer is whether they are going to be disrupted or the disruptor?
The SciQuest Next Level 16 conference is taking place in Nashville, Tennessee. To find out more click here.
This article is a piece of independent writing by a member of Procurement Leaders’ content team.