Digital Transformation is much more than implementing software. Here are 5 signs to look for to see if your organization should consider undergoing a digital transformation:
- Frustration within your team
- Lack of data visibility between functions
- Low confidence in data
- Your team struggles to keep up with the workload
- Weak relationships between your Sourcing, Procurement, and/or AP teams
5 Signs Your Source to Pay Organization Needs to Undergo a Digital Transformation
Most organizations today utilize technology in some way to automate their sourcing, contracting, supplier management, procurement, and accounts payable departments. However, the presence of technology does not mean that your organization has truly been through a digital transformation.
Digital Transformation is much more than implementing technology. It is the journey of aligning your people, processes, and technologies. Processes are optimized and aligned to critical KPIs, as well as to your organizational culture. Technology is then used to enable people and processes at scale, eliminating bottlenecks while providing better, more actionable data.
All too often organizations focus on one or two of these areas but neglect the third. Here are 5 signs that signal a need to start a Digital Transformation journey.
- Your people are frustrated with the way things work:
User frustration often sparks the need for digital transformation. If the people who do the workday in and day out are unhappy, that’s a strong indicator that you have gaps in your technology and/or processes.
Manual tasks can take up too much time. Technology’s goal is to automate and speed up tasks so your team can focus on higher value-add work like analyzing spend, strengthening supplier relationships, and optimizing working capital strategy. But beware, automating a broken or incomplete process will create bottlenecks of manual touchpoints that erode the benefits of any technology implementation.
Things to Look For:
- Excessive use of spreadsheets
- Team performance has plateaued
- Multiple processes exist to achieve the same task
- Reduced or low employee morale
- Increasing or high turnover rate
A successful Digital Transformation should empower your people, remove/reduce manual tasks and alleviate frustrations. Implementing technology without proper alignment of your people and process can create bottlenecks and frustrations that were not present before.
- You have multiple applications that do not talk to each other
There’s a debate in the procurement industry around the use of best-in-breed solutions versus solution suites. While this debate is healthy, best in class status can be gained using either approach.
Regardless of what solution(s) you use, it is critical that master data is identified, the source of truth is cataloged, and that data set is available to all applications throughout the source to pay process.
It is equally important to ensure that transaction data flows step-to-step from sourcing, to contracting, to supplier onboarding, to procurement to AP and finally to payment.
When data is siloed, it requires manual intervention to gain meaningful visibility to critical Key Performance Indicators (KPIs). These can include process cycle times, areas of improvement, critical data for reporting, etc.
Things to Look For:
- Manual intervention for information exchange with other source-to-pay functions
- The lack of an end-to-end data map
- An incomplete system of record catalog
- Complaints from users about a lack of data
- Conflicting data or reports between departments
Data silos should be eliminated at the completion of a successful digital transformation and allow departments to easily access information and track KPIs.
- There is a lack of confidence in your data
Typically, a lack of data confidence stems from the knowledge that there are missing or inaccurate data points that affect the overall outcome. This results in hesitation to make important decisions, even when the data supports the decision. Oftentimes, data accuracy issues stem from one of two key causes:
- Your existing technology or process is cumbersome, and users find ways to work outside the existing solution. For example, orders that are placed directly with the supplier instead of going through a requisition process because the requisitioner thinks the existing solution is hard to use or too time consuming.
- Data is collected by more than one department using different syntax and data structure, resulting in disparate conflicting information. For example, sourcing identifies a supplier as being diverse, but during onboarding procurement does not, therefore their spend has not been labeled as part of the ESG initiative.
Things to look for:
- Unwillingness of executives to make decisions based on reports or analytics
- Long turnaround times for report requests
- Large swings in results on a report from period to period
- Reports that show data that seems too good to be true based on knowledge of the business
A successful digital transformation provides the visibility needed to build trust in your data.
- Your team struggles to keep up with the workload
All businesses have busy periods and lulls. These could be seasonal, or due to the capital expenditure initiative, acquisition, new product lines, etc.
Organizations who have effectively gone through a digital transformation are able to scale their capacity to meet increased demand much more efficiently than organizations who have merely implemented technology.
Things to look for:
- Deadlines are often missed
- Consistently hiring to keep up with demand, or replace employees who have left
- Employees complain about the workload they’re expected to complete
- The quality of work diminishes during busy periods
After a successful digital transformation your team will be better able to ride the waves of changing workload.
- Sourcing, Procurement and Accounts Payable are not on the same page
There are organizations where procurement and accounts payable literally sit next to each other, but they do not communicate or collaborate. In most cases, the lack of collaboration between departments stems from misconceptions about what one another does, what their goals and motivations are, and in some cases a lack of willingness to share data.
In a digital transformation, your end-to-end source to pay process is mapped and aligned within each department. The goals of each source to pay stage are defined, and information is shared leading to better visibility at each step. Sourcing gains visibility to the results that come from their sourcing efforts and procurement can better track purchasing compliance against contracts and catalogs. Accounts payable gain all the critical information they need to simplify invoice matching, approval, and payments.
Things to look for:
- Conflicting KPIs across departments
- Lack of communication between departments
- Real or perceived cross-functional mistrust
A successful digital transformation can bridge the gap between departments and allow each to benefit from and support the other(s).
As you begin to look deeper into your organization, some of the points above may become abundantly clear to you. As you begin to understand the gaps in your people process and technology, you will begin to see ways to quantify the benefit of addressing more than technology through a true digital transformation.
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