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In this latest in a series of posts, Procurement Leaders once again invites Ernst & Young's Carlos Alvarenga to evaluate what might be some of the key levers for the function, a decade in the future. Previous posts include: Risk, Sustainability, Globalization, Innovation, Transparency.
The preceding five sections attempted to make a case for a very different procurement function in 2025. Even if only half of these predictions fully emerge, it is clear that the procurement leaders of tomorrow will have to be different people in many ways than the procurement leaders of today.
In considering this evolution, the best CPOs are already thinking about the need to change where and how they build their next generation of leaders. These changes can be summarized in the following four people dimensions.
New blood: There will be an increase in the number of educational and professional backgrounds in procurement in the future. A field that already includes engineers and chemists, for example, will also add statisticians, financial risk specialists, social scientists and physicists. This influx of new backgrounds will bring new ideas and change to procurement teams, but it will also create a new people-management challenge for CPOs as procurement becomes one of the most intellectually diverse organizations in the enterprise.
New cultures: Just as new skill sets will enter procurement, the geographical shifts noted above will mean that a more globally diverse procurement workforce will also emerge. As one high-tech CPO stated: "In the future, procurement executives at global companies will come from any field and any place. This will mean that buying strategies, which are often products of local social and cultural structures, will become much more diverse as well."
New mindsets: As noted earlier, the arrival of the under-20s into their first wave of business and consumer power in 2025–2030 will bring with it the emergence of the transparent society and the circular economy. These changes will require not just "corporate social responsibility" reports posted on corporate websites but, in many industries, a wholesale reevaluation of the corporate-social relationship.
This mindset change will be forced on an older generation of managers by the new arrivals, wanted or not. Already, this change has started in certain sectors such as entertainment, fashion and food, and it will expand as the first social media generation enters maturity.
New profiles: There is hardly anyone working in procurement in 2014 who has not run into the "traditional buyer profile", which is a person focused solely on price and who considers all other factors to be secondary or even meaningless. This type of procurement professional, who sees all negotiations as zero-sum games and considers any "money left on the table" a failure, will exit the best procurement teams as the new century continues to evolve.
This is not to say that cost will not always be a major consideration; it is to say that the way cost is defined will change and become multi-dimensional. This shift will require multi-dimensional thinkers and new profiles in procurement leadership, and this change has already started to take place in the best procurement organizations in 2014.
When taken together, the four new people dimensions noted above, plus the five broad high-level social and technological dimensions discussed earlier, paint a future for procurement that is both exciting and challenging.
Clearly, the operating mindsets and models of the last few decades will not drive procurement leadership in 2025. What will succeed is a CPO and procurement team who collectively understand social changes, technological evolution and the multi-dimensional nature of the procurement challenges to come in 10 years' time.
Carlos Alvarenga is a principal in Ernst & Young LLP's Advisory practice, a senior research fellow at the Robert H. Smith School of Business at the University of Maryland, and the author of a blog on economics and risk (reconnomics.com). He is based in Washington, DC.
The views expressed herein are those of the author and do not necessarily reflect the views of Ernst & Young LLP.