What sets Digital World Class procurement organizations apart from their peers? A discussion with Principal Kurt Albertson, Senior Director Elizabeth Zucker and Benchmarking Director Travis Werner.
Welcome to The Hackett Group’s “Business Excelleration Podcast,” where week after week we hear from experts on how to avoid obstacles, manage detours and celebrate milestones on the journey to world-class performance. This episode will discuss what sets Digital World Class procurement organizations apart from their peers. Our guests are The Hackett Group’s Principal Kurt Albertson, Senior Director Elizabeth Zucker and Benchmarking Director Travis Werner.
Leading the discussion today, Elizabeth begins by defining The Hackett Group’s Digital World Class level, and explains how that is measured by business value and operational excellence with an eye for digital enablement. Then Kurt provides examples of the success gap, which Digital World Class procurement organizations have enjoyed. Factors contributing to their excellence include a reduced operational spend by 21% less on average. Investments in technology that leading organizations are making is positively impacting their operational efficiency overall. Digital World Class leaders also demonstrate an efficiency gap in areas like sourcing and supplier management, but it is nothing compared to the efficiencies in the areas of operations and compliance. The Hackett Group observes Digital World Class leaders investing 11% more in resources for these most strategic areas. A key differentiator between Digital World Class and nonworld-class peers is that they are more efficient, have fewer full-time equivalents, their costs are significantly less and they are making more investments in technology.
Then Travis highlights a few more key performance indicators to support Kurt’s claim. We do see additional investment in technology in both doing things more efficiently and being able to reinvest technology dollars into more strategic planning and processes. Digital World Class leaders have 17% shorter processing times, which gets goods and services to the organization even faster. Next, Kurt shares how Digital World Class organizations translate performance into greater business value. Business value is defined by more than just cost savings; Digital World Class leaders are more likely to be viewed by their stakeholders as more mature organizations at the top of the pyramid. They are 86% more likely to be viewed as a valuable business partner. Leaders also do a better job of utilizing knowledge management environments to capture and reuse intellectual property, big data, lessons learned, market insights, etc.
The Hackett Group has declared six key dimensions that Digital World Class leaders focus on. These include technology enablement, data and spend analytics, and migration to cloud architecture. In The Hackett Group’s 2024 Key Issues Study, improving analytics and insights was again a top 10 procurement function property. These companies were able to spend 11% more on planning and strategy functions, which resulted in more strategic planning activities. Moving to the cloud is one of the most impactful aspects of the procurement journey. To be successful, procurement organizations have to fine-tune their operating model. When we think of the evolving operating model that we are seeing procurement move to, many trends from the Procurement Key Issues Study are the ones we have seen in the past.
Business partnering refers to engagement with internal stakeholders to influence at a greater degree. As organizations move up the value pyramid, they have to form deeper relationships with their internal stakeholders in order to be perceived as more strategic.
The final element is the talent management approach. The No. 1 transformation initiative that companies have right now includes getting the right roles and people in place, and developing talent management resources. This is dependent on the type of training done and the investment in both internal and external training. The better talent is managed, the easier turnover will be in our organization. Digital World Class leaders have a lower turnover rate by 26% for management employees. In closing, Travis adds a few final points around analytics, excellence and business partnering.
- 0:49 – Welcome to this episode hosted by Gary Baker.
- 1:29 – What is Digital World Class and how is it measured?
- 1:59 – Kurt unpacks the operational excellence of Digital World Class organizations.
- 7:19 – Travis adds more key performance indicators.
- 9:42 – How Digital World Class organizations translate performance into greater business value.
- 16:23 – Key dimensions Digital World Class leaders are focusing on.
- 22:14 – Data and spend analytics.
- 30:14 – What is business partnering?
- 33:25 – The No. 1 initiative organizations in the procurement space currently have.
- 36:27 – Travis adds a few final points.