CPO Strategy

Roland Berger: placing procurement at the heart of digital transformation

By Dale Benton

In a world awash with digital transformation stories that see companies restructuring or even dispensing with old business models to usher in the new era of digitalisation, the notion of understanding and sifting through noise in the marketplace, in order to head down the right path, requires a level of expertise that even some of the world’s leading organisations do not possess. This is why they turn to consultancies such as Roland Berger. With more than 2,400 employees working across 35 countries around the world, Roland Berger is a consulting partner of choice because it boasts a deep understanding of diverse cultures and markets.

One such industry space known for its ever-changing complexity amid a radical transformation the world over, is procurement. Michael Pleuger, Senior Partner at Roland Berger is an experienced procurement professional, focusing on large scale procurement and supply chain transformation programs. Having spent his entire professional life working in the business transformation space, he has seen first-hand the shifting nature of procurement and more importantly, the shifting perspective of organisations. Getting his start in the industry as Head of Procurement in a German M-DAX listed rail technology company, Pleuger soon found himself working on a major supply chain transformation program. Here, he worked closely with a number of different consultants, looking at technology implementation and change management. His consultants convinced him to move to the other side and to advise other clients as a management consultant himself. In this new consulting role, Pleuger delivered global procurement transformation programs for large European Blue Chips.

Later Pleuger joined Vodafone to bring in his experience to help integrate their global procurement activities and to establish a corporate procurement in the telco’s HQ in Newbury, UK and subsequently in the Vodafone Procurement Company in Luxemburg. After an almost four year stint in Vodafone, Pleuger returned to Berlin and to the consulting industry. He continued to serve globally-leading companies to transform their procurement and supply chain functions into a competitive differentiator. In this role he returned to Vodafone as a consultant and it was this time with the company that opened his eyes to a new wave of digital transformation in procurement.

“I was asked to look at digitalisation within the procurement company and it was, in my humble opinion, that the company was already fully digital because they were already working with new technologies in sourcing, P2P, invoicing,  contract management, supplier collaboration and supplier performance management,” he says. “With this large existing digital footprint in place, we looked at it differently together with our client and saw that through RPA for example, a lot of P2P suites and e-sourcing suites would be potentially fully automated and therefore eliminated.” Pleuger identified that procurement needed to take on a new role in the future; a move determined by the unique positioning of procurement. As the function with the most interfaces, both internally and externally with the supply base, procurement is the ‘spider in the web’. All the data coming from all the nodes within the network, pass through procurement, presenting a unique opportunity for procurement to become the primary provider for business insight and foresight. It requires procurement to being able to make meaningful information out of this avalanche of data.

“This is a completely new currency of procurement, from savings to business to business intelligence,” explains Pleuger. “Today, as a senior partner with Roland Berger, my role is working with leading procurement organisations to help them prepare for the future of procurement.” To achieve this, Roland Berger uses a framework,  they have branded “the procurement endgame”. The procurement endgame describes how certain mega trends, one of the biggest being digital innovation and  industry specific disruptors, are turning companies and procurement upside down. Pleuger cites the emergence of 5G technology and how it’s enabling industry 4.0 and the Internet of Things a disruptor in the telco industry. In the automotive space, the emergence of autonomous driving is clearly a disruptor.

“What we see is that our clients respond to these external challenges by defining a new corporate strategy and business model,” he says. “Procurement aligns with these new business models and is key to operationalising these by providing business insight and foresight. Procurement is buying different content, such as digital content but also needs to buy differently, e.g. in collaboration with start-ups or emerging eco-systems.”

As the spider in the web, procurement has a responsibility like no other business unit. It has to be able to break down the complexity of its function and communicate it to the wider organisation in a language that makes sense. For some, the perspective remains that procurement is simply writing purchase orders and signing off invoices, but this is shifting and new business models are now opening the doorway to new capabilities. “In order to fulfill its role, procurement has to have connectivity to all the nodes in the network. Behind the digital glue, however, is collaboration,” he says. “That digital glue is an intuitive collaborative workflow, one that brings everybody into this flow of analysing the internal demands, the external market and then developing a strategic response in the shape of a better procurement strategy or category strategy.”

As an example, Pleuger looks at artificial intelligence and its role within procurement. “If all the IOT devices and the industry 4.0 devices and the consumers online around the world are connected and capturing data and feeding it into the procurement sweet spot, that’s going to overwhelm the category managers,” he explains. “So, we look to feed AI into managing that data as it comes their way. Then, they can use this AI to prioritise, digest and summarise all of the sources available and provide an executive summary and predictions that can be used to stay ahead of the game. This is but one example of the capabilities that the category managers require in order to succeed in procurement today.”

The key component in the middle of transformation is the procurement professional and the category managers that are shifting their way of working in this new era of procurement. In order for organisations to embrace innovation, implement new digital tools and unlock greater value, the people controlling and accessing this digital glue need training to join these journeys. Roland Berger has recently released a white paper on 21st century skills in procurement, which breaks this down into two dimensions; the need for collaboration and the complexity of the task at hand.

“If the complexity and collaboration is low, then this is a task that can be automated and it requires a basic understanding of what the digital tools can do,” explains Pleuger. “If the complexity is high, but the collaboration is low, something like AI can be used to analyse that complexity and solve the problem. However, if the complexity is high and the collaboration is high, this is where we look at human intelligence and our best people. Very often I hear up-skilling is a shift from lower value tasks to higher value ones and this is correct. But I think that, unfortunately, due to it being a hard discussion, we will lose people along the way. Automation for example could reduce the overall demand for procurement professionals. It’s too hard a discussion to simply say up-skilling organisations need to break down exactly what these digital tools will bring and takeaway.”

The challenge Pleuger sees here is one that stems from something he experienced himself; what does digitalisation mean to people? This is a question that Pleuger loves to work with organisations to try and answer. Pleuger, through his career, has learned that digitalisation is different from implementing standard IT software packages, for it opens the door to innovation. “If digitalisation means what we always associate it with, being agile and disruptive, then this in itself determines that it cannot be a standard software bought from the shelf,” he says. “If you want to be super disruptive, you have to invent something completely new. You have to be bold and adopt a failing forward attitude.” He points to a quote that states that all experts are experts in what was, no one is an expert in what will be. “If you want to be an expert in these innovative technologies and digitalisation then there are three things that must replace experience: vision, leadership and collaboration,” he says. In order to achieve this, an entrepreneurial, agile and creative environment is key.

Roland Berger’s Spielfeld, located in Berlin, is such an environment. over recent years, the former mail sorting office in the central Berlin neighbourhood of Kreuzberg has been transformed into ‘Spielfeld Digital Hub’. The three-storey hub comprises 2,500 square metres of workspaces, meeting rooms, technology areas and kitchens. It is a breeding ground for collaboration, brainstorming and innovation between people from companies of all shapes and sizes, from start-ups to corporates. Spielfeld Digital Hub was founded by consultancy firm Roland Berger in conjunction with Visa. “It’s a place where tech firms, start-ups and venture capitalists come together,” explains Pleuger. “They form an ecosystem in which teams of people from different disciplines and different organisations can innovate together and where their innovations have the chance to mature. “This is the new way of working,” says Pleuger. “In an environment like our Spielfeld we can find out together with our eco-system partners what it means to collaborate in the very spirit of vision, leadership and collaboration. It will ultimately lead to innovation, as it did when Pleuger and his team have spearheaded the digitalisation of category management and thus addressed a white space in the landscape of digital procurement systems and tools. A ground-breaking innovation.

Trying to determine what digitalisation means to each and every one of us links back to Roland Berger’s concept of procurement endgame, a series of frameworks that prepare organisations for the future, whatever it might look like. The Endgame is built around an organisation’s strategic response to industry trends and industry specific disruptors and how that in turn defines new requirements for procurement. The challenge is, and ultimately always will be, navigating this future in a way that will achieve success. Pleuger points back to the idea of failing forward, being bold and collaborating. “I look at the quote again around no experts in what will be. This means that we don’t need to look at people who have done this for 10 or 20 years. We can look at young, fresh and driven individuals,” he says. “Develop these young and hungry individuals and they can bring a massive impact and change into the way procurement works. This can help create a culture that will truly enable digital transformation for any organisation.”

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