The most innovative procurement teams in the industry are driving outsized results, achieving 1.5x greater savings per year than their peers, greater spend under management and better reputation across business stakeholders. Everest Group did a deep dive into the core drivers of success and discovered 6 distinctive drivers: innovation strategy, analytics adoption, strategic sourcing, risk management, talent management, and alignment with corporate initiatives. The results from the Everest Group Sourcing Innovation Pinnacle Model® study were announced at the Sourcing Industry Group Conference Fall 2019 in Del Mar, CA where CDK Global and VSP Global procurement teams were recognized as Pinnacle Enterprises™ for their excellence in sourcing innovation.
We just returned from the Sourcing Industry Group (SIG) Executive Conference Fall 2019 in Del Mar, CA. These SIG Signature Events happen twice a year and are always a great mix of networking and education. Dawn Tiura and her team at SIG (affectionately dubbed the SIGlets) do a fantastic job hosting the industry on a recurring basis.
One session really stood out for me this year: Everest Group’s The Key Practices and Technologies Your Peers Are Using to Get the Best Outcomes.
Who are the Sourcing Innovation Pinnacle Enterprises?
Everest Group’s Chief Research Guru and co-founder, Michel Janssen, and Vice President, Shirley Hung, partnered with SIG to conduct an analysis on what are the most innovative AND effective procurement teams doing differently from others. In Michel’s own words, he is looking for “capabilities (that the top and most effective procurement teams) are putting in place to get better, more robust outcomes.” In typical research analyst fashion, they published their research along with their Everest Group version of the Gartner Magic Quadrant called the Everest Group Sourcing Innovation Pinnacle Model®, with the Pinnacle Enterprises located in the upper right of the below diagram. A key takeaway is that there are a limited number of Sourcing Innovation Pinnacle Enterprises in the study, given the maturity of the procurement industry. That being said, there are key differentiators from the standpoint of best practices and technology for the industry to achieve comparable results.
What Outcomes Do Pinnacle Enterprises Achieve?
Cost reduction and spend consolidation are the top two priorities from the Everest Group survey. Sourcing Innovation Pinnacle Enterprises are able to achieve 1.5x the annual savings targets at 7.8% per year, compared to the rest of the enterprises surveyed and had a greater percent of spend under management at 70%. Additionally, 100% of Pinnacle Enterprises have improved their reputations as key business partners with their stakeholders because of their innovation initiatives. Innovation has also yielded a 6x improvement vendor satisfaction, which leads to true competitive, strategic advantage for the enterprise as well.
What Are Pinnacle Enterprises Doing Differently to Achieve Results?
Everest Group analyzed various capabilities across the procurement teams that completed the survey: Vision and strategy, technology, process management, talent, organizational design and culture. Within those capabilities, the key differentiators are having a true innovation strategy, analytics adoption, strategic sourcing, risk management, talent development and alignment with corporate initiatives. See below graph from Everest Group.
Analytics Adoption Drives Success
Technology adoption is a challenge among the procurement industry, but Procurement Innovators prioritize technology and particularly analytics adoption. When we dig deeper, procurement innovators have strong capabilities in basic analytics, like the spend cube and have a path to deeper, AI-driven insights from their data. As you can see and Michel points out below, there is significant room for the procurement industry to adopt analytics as a whole.
Alignment with Corporate Objectives Is Table Stakes
Michel Janssen and Shirley Hung ended their discussion highlighting the work of VSP Global in their spend reduction initiatives. VSP Global CPO, Greg Tennyson, (a Suplari customer) needed to effect organizational change at VSP Global to drive corporate-wide spend reduction. He enlisted marketing to drive spend reduction across the company. Procurement was the spark, but they enlisted stakeholders across the company in their transformation and they made it fun. Greg’s team created the “Spend It Like It’s Yours” Mascot Moolah to evangelize the “Fiscally Fit” program. They also created awesome viral videos of Moolah supporting the business in negotiations with vendors like this one.
Recognition of Sourcing Innovation Pinnacle Enterprises
At the lunch on Day 2 of the SIG Conference, Dawn Tiura of SIG and Michel Janssen of Everest Group recognized the SIG members attending the conference who were Pinnacle Enterprises: CDK Global and VSP Global. CDK Global is the largest provider of software to the dealer industry. The CDK Global Procurement Team is lead by VP Mike Morsch. Focused on a mission of helping people see, VSP Global provides access to eye care and eyewear for nearly 90 million members. CPO Greg Tennyson leads the organization’s procurement team.
Both VSP Global and CDK Global are Suplari customers and are leveraging Suplari to drive spend management, supplier renegotiations, and strategic partners with internal stakeholders and vendors.