procurement dilemma

When you promote automation of category strategy, one of the most tricky things is to explain to a client that data integration is NOT the key to success. At least not at the beginning of the “digitalization of category management” journey.

It might not sound logical, as data integration is a prerequisite for any automation initiative. But the truth is that many procurement organizations struggle with basics like category classification, category organization, and governance.

We have heard the sentence “we must first sort out and improve our category tree, and then we will be ready to approach digitizing category strategy creation” hundreds of times over the last decade. Engagement with some clients was a struggle as they insisted on integration beforehand, and we were then stuck in many unnecessary early discussions around addressing that challenge.

Once we start a pilot introducing Cirtuo Guided Strategy Creation technology, the requests for data integration fall mostly silent.

Here are our observations in a nutshell. I could do a Ph.D. out of it after a decade of supporting thousands of category strategies.

1) Unclear category classifications become even more visible only once starting to develop a category strategy. Early strategies provide fresh insight to review the category structure to better fit for strategic purposes. For that reason, many (AI-enabled) category classification efforts fail, as there is a disconnect from a strategic perspective. Your category tree needs to be aligned with the business/stakeholders, and this can be done only through strategy generation.

2) Poor data quality becomes easier to detect only after the digitalization of the category management journey has begun. HINT – Some poor data quality does not even need to be improved. Because what matters is identifying genuine business requirements and challenges and turning them into the right category, supplier, and risk strategies. This can be achieved without any integration whatsoever. What truly matters is first analyzing the situation, identifying complications, and determining what is needed to resolve them for each key category. More often than not, this requires the right storytelling to the right stakeholders and not the perfection of the data. REMEMBER – progress over perfection!

3) The need for integration becomes more silent once a client understands that it is more important to sort out basics like organization, resources, and skills rather than digitally replacing inefficient processes (and corresponding data).

Technology will, in the future, more and more define and drive the right process.

Yet, which comes first in the “process-or-technology” debate will become more challenging to answer as a digitized process still requires a skillset and attitudes greatly missing in today’s procurement function.

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