Episode 1: Diving into the procurement skills for the future

[00:00:00] Host: Hi there. Welcome to the Amazon Business Podcast, the podcast that helps you stay up to date with the latest trends, tools, and stories in smart business buying. I'm your host, Brit Moorer. And today I'm excited to have Vaibhav Sahgal, the principal and editorial strategy lead at The Economist Impact and Oloyede Olumide, Senior Manager of Global Integrations at Amazon Business joined me on this podcast. In today's episode, we'll dig into the findings behind the Procurement Skills for the Future report. This report was based on the groundbreaking research from The Economist Impact that highlights the critical competencies procurement leaders must cultivate today. The Economist Impact surveyed over 900 C-suite executives in director level positions across nine countries to get a 360 view on procurement to understand where skill gaps exist. 

[00:01:00] Host: So to begin, Vaibhav, I see that you're from the Economist Impact. I'm sure more people are familiar with the Economist, I know I am, but could you briefly share what the Economist Impact is all about?

[00:01:12] Vaibhav: Yes of course. Thank you for having me on the podcast today.  Economist Impact is the research and analysis arm of the Economist Group. It is a sister company to the Economist newspaper, which I'm sure that nearly all of our listeners are familiar with, so here at Economist Impact, we work with leading corporations, foundations, NGOs, governments, to develop research, insights, studies, and calls to action across three key areas of expertise, including sustainability, health, and globalization. The idea with our bespoke research and massive reach as kind of a global media organization is to drive the important change in the world across these areas of expertise.

[00:02:02] Host: Thank you for sharing that, Vaibhav. Now turning our focus to this research, looking at procurement skills that are really critical for the future, Oloyede, what do you think makes this research interesting and so very important?

[00:02:15] Oloyede: First of all, thank you for having me on the podcast. Think this research has been super important because when you think about how procurement has evolved at such a fast rate recently, there are definitely more focus areas for procurement, right? Procurement is not just focusing on the financial aspect or cost savings and efficiencies. Procurement now has to get up to speed quickly with new technologies, understanding sustainability and how it drives their business, and also the complexity of managing global supply chains. These new skills are really important for the future and the ability to leverage these new technologies and tools effectively will be critical to the success of any organization. One thing that stood out to me when I read the report was that procurement priorities are shifting. It's now all about what is going to be, impact competitiveness for these companies, and how they're going to be able to thrive in the coming years. Vaibhav, based on the research, what are the types of shifts we might be seeing in the near future?

[00:03:17] Vaibhav: Thanks, Oloyede. Before I move into some of the key changes that the industry is is seeing right now, I do want to note that nearly three quarters of leaders in our survey named things like cost management and strategic planning as the most essential skills for procurement professionals, both today and in the medium term, so five years from today. All of this to say that there is no question that core capacities, traditional skills will remain essential for the function even in the future.

[00:03:49] But the change that we're seeing in the procurement function today is that these older priorities are being joined by newer ones. So, two key areas I want to call out here one digital transformation management. It was about 38 percent reported level of importance off this area as a today. But when we asked procurement professionals, what the likely importance of this is going to be five years from today, they reported a 16 percentage point increase to about 54%.

[00:04:19] Then we have environmental sustainability. The importance now was reported about 49 percent today, but we saw a nearly 10 percentage point increase there to about 58 percent when you consider this five years from today. So I think the key message here is that core capacities, they remain essential, but they are being joined by things like digital transformation, technology skills, environmental sustainability focus, to be seen as similarly critical skills.

[00:04:50] Oloyede: I really appreciate that. So basically, if I would summarize what you've said, the fundamental role that procurement plays in organizations today is not going to change. The foundation has to be very strong, but at the same time, we're seeing an increase in emphasis on digital transformation and sustainability, new focus areas within organizations and focus areas that will grow over time.

In addition to that, we're seeing that technology is obviously playing a growing role in procurement today.  We hear a lot about artificial intelligence, machine learning. We know that these technologies are gaining significant attention in the field, and we would expect to see some creative ways for organizations to leverage these technologies in the future.

[00:05:33] Obviously, to do that, and to increase the adoption of these products and features. It will potentially transform what procurement is going to look like in the future. From your perspective, from an adoption perspective, what are the levels of adoption levels of AI and machine learning that you're seeing in procurement today?

[00:05:50] Vaibhav: Yeah it’s a really interesting story, technology adoption across the procurement function. It seems to be a lot more accelerated, in terms of its value creation potential as of today than it is across a range of other functions. So when we ask procurement leaders in our survey, where is your organization currently investing the most time and resources, around the development of procurement related capabilities. Our top three were actually technological proficiency, digital transformation and, of course, supply relationship management, which is kind of always ongoing. In addition, procurement leaders in our survey reported, that it was a huge central priority for them to increase their investments,  in AI and automation. The positive story here is that the vast majority of our survey respondents, about two thirds of our survey respondents agreed that AI tools are already helping procurement professionals at their organizations, do a better job, do their jobs  more effectively. And,  interestingly enough, again, two thirds of procurement, leaders or heads of business units, reported personally using AI and machine learning tools for procurement activities within their own organizations.

[00:07:05] Oloyede: That's interesting to see that organizations are already getting value from AI today. I think it really emphasizes the point that it is a number one skill that's going to be required for the future. A comment you made about the top three things that they were focusing on today when you talked about technology usage, digital transformation, and supplier relationships.

That supplier relationship part really stood out to me because as Amazon Business, as a supplier for organizations of all sizes, I think it's important for us to understand how our customers are leveraging technology today, so that we can build tools and products that are servicing them the right way.

So thank you for sharing that. I think it's good for us to reflect on. So coming back to what we've been talking about so far, we've identified that technological skills in artificial intelligence and machine learning are super important for organizations to be successful. I have to assume that there has to be some type of skills gap that exists today, considering it's such a new technology.

[00:08:04] Can you talk a little bit about some of the skills gaps that are existing today between the current capabilities of organizations and what the future requirements are going to look like for the procurement function?

[00:08:17] Vaibhav: Yeah, absolutely. There was a huge kind of data driven investigation on our side here. So three of the key things that we look to analyze here were one. What are the most essential skills? Five years from today. What are the critical skills for your function today? And what is the level to which you have access to these skills as of today? And this, of course, exposed a number of gaps. Frankly, there were gaps in almost every one of the 10 or 12 areas that we analyzed.  But I would say the most profound gaps that we noticed were across one, technological proficiency, two digital transformation management and three around strategic.  Further, we actually noted that there was pretty much zero correlation between the identification of an area as kind of a core skill for the future versus current investments in training or upscaling around those skill areas

[00:09:15] Oloyede: To your point about the gap between acknowledging that there's a need for those experience in those technologies and closing that skill gap there might be a scenario where organizations may not necessarily be sure of what to do. I think addressing these gaps and increasing these skills is not an overnight task, right?

There has to be a lot of planning that goes into it and prioritization of where organizations are spending time and also training their middle management and junior employees. What are some strategies that organizations might already be taking to address this existing skill gaps?

[00:09:49] Vaibhav: Think to address your fundamental point first, Oloyede, I think you, you pointed towards a very important thing. None of this is going to happen overnight. It is very fundamental systemic change essentially. So the first step in this process to be kind of to champion the right kind of change at your procurement organization would be to start by evaluating the core competencies that currently exist within your procurement to map that then, and I'm making this sound overly simple, but it's, it's absolutely not. But to map that against what you think the core priorities for your procurement function are going to be five years from today.

[00:10:34] And then to develop your entire kind of training apparatus around this, it may be external training, internal training, it may be hiring, recruitment, talent acquisition strategies, so on and so forth. There are a range of kind of what I would call stop gap solutions that procurement functions leaders are employing today.

[00:10:55] One relatively simpler is accessing that talent internally, looking to other functions, collaborating more with other functions and tapping into the skills that that they deem necessary as of today.  The other, of course, is for things like technology skills, which are really hard to tap into because given the level of complexity and the rate of change as well would be to hire external partners, vendors, consultants in the area that are able to kind of come in, offer feedback, implement or help you implement new solutions, and bring your people up as well. 

[00:11:32] Oloyede: That's interesting, and I think there's so many valuable nuggets and what you just shared. It's only logical that before you can move forward and take your company where it needs to be, you definitely have to do an analysis of where you are today, and I think that will help a lot of organizations at least identify where they're lacking today.

[00:11:49] Your second point to that where you talked about the company strategy and what the company wants to do in the future is super important because ideally that's the gap analysis that needs to be done. And I think the fact that organizations are proactively doing that today to address that skills gap is really important and good to hear. Looking ahead, to close these skill gaps, it obviously is going to require support from the wider organization, right? Given that procurement touches everyone in an organization, all the way from senior leadership, all the way to the most junior employees. Procurement is part of an organization's DNA.

How do you see organizational support for procurement looking right now and meeting the needs of the changes that are happening in the current environment and ecosystem of procurement?

[00:12:36] Vaibhav: Thanks Oloyede. A lot of brain power was spent investigating this exact question. I would say it’s a two-part story. First part overwhelming positive in my opinion. Organizational leadership sees procurement today as a business-critical function. So seven out of ten procurement leaders from our survey reported strong support for their function from their CEOs or equivalents, depending on the type of organization they operate within. The more alarming part of the story, in my opinion, would be that the support from, say, the mid-level management or the more junior employees, particularly those sitting outside of procurement and also the support from buyers outside the procurement function was between one to 2%. So an overwhelmingly low number there.

Now historically or traditionally, the procurement function would be seen as self-sufficient independent, able to kind of steer the ship, obviously working with different teams, but self- contained.

[00:13:43] However, today, given the world in which we operate, there is a huge elevated risk off rogue buying, which I think is incredibly important.

And you know, it's the story is quite simple, right? If junior employees, mid-level management and especially non procurement buyers. are not seeing procurement as a critical function, a critical part of the process, they may be acquiring different services, solutions, so on and so forth in a manner that doesn't align with the organization's principles, goals, sustainability metrics, criteria for buying, things like that, which then can be, fairly devastating and creates Almost a business continuity risk if it blows out of proportion.

[00:14:26] Oloyede: Absolutely. You covered a lot there, and I think it makes perfect sense.

And when I reflect, if you think about an organization today, for them to really get buy in from parts of the organization outside of procurement, whether or not it's middle management or junior employees, if the company doesn't have a very clear strategy and a plan to execute and also get buy in from other employees, I can see how that would be a problem.

 [00:14:50] With the newer generation that's coming into the workforce today, I think it's going to be paramount to meet them where they are, but also have a strategy and plan that is leveraging the existing technologies today, while also talking about key environmental factors that are important to the newer generation coming into the workforce.

[00:15:10] Vaibhav, thank you for sharing these key insights. There was a lot in this discussion. And for me, I took from this discussion, three essential skills that procurement leaders need to focus on and start developing now. Number one is obviously, like you said, strategic planning. I think organizations need to step back and look at their future and figure out how they're going to get there and actually have a very clear strategy to get there. You talked about digital transformation skills. That's going to be crucial for the future. And I think with the way sustainability is becoming a part of the digital transformation strategy, having the skills within the procurement environment and also the mechanisms within the companies to match that digital transformation that's taking place through either tools and technologies is becoming obviously super important.

[00:15:57] The last and definitely not the least is going to be cross functional collaboration. You know, like you talked about earlier, if there's any gap in alignment within the organization or cross functions, there is no way to be able to meet that strategy that these organizations are shooting for the future. But definitely from the research, something is very clear that for organizations to stay competitive and procurement leaders to prepare for the future, these three things need to be taken into consideration.

Thank you.

[00:16:24] Host: Well, thank you both.

It sounds like we're in the midst of a major moment of opportunity here. So, it was great to hear those nuggets of information throughout this discussion. Thank you for sharing this research and thank you all for tuning in to the Amazon Business Podcast. If you want to read the full research, head over to amazonbusiness.com/podcast.