CPO Strategy

Frank Vorrath’s predictions for procurement in 2020

Part 1 of Frank Vorrath, Executive Partner, Supply Chain, Gartner, exploration of his predictions for the procurement business landscape in 2020.

The focus for CEO’s and business leaders will remain on business growth and new business models

There’s been an enormous amount of focus from companies on growing their business, and creating more shareholder value. Roughly 63% of all CEOs will change their business model going forward over the next few years. That’s being triggered by a shift from traditional business models to new business models, from selling products or services to potentially selling outcomes. CEOs will look at growing and positioning the company successfully in the marketplace to be able to grow further. That will remain a strong focus for CEOs and business leaders in 2020. There’s an ongoing shift to becoming successful in selling different things, outcomes, solutions and driving growth.

Technology and Platform driven Ecosystems will further disrupt traditional business models 

Over the next 10 years the financial performance of approximately 25% of enterprises will be weakened because of competition which does or does not exist today. 2020 will be the perfect storm. 

In recent years traditional companies were disrupted from technology driven companies or platforms. We will probably see that happen even more in the future. 

An old traditional business model was absolutely required to be successful in the marketplace. Now, that’s not necessarily a competitive advantage anymore and a lot of disruptions came from technology providers or from companies who are offering platforms.

There is a strong focus on building cross industry ecosystems.You need to look wider, into your ecosystems and go deeper and you need to understand that when you look at the competition which is there today and see it will be different in the future. 

In essence, every company needs to reflect and look into what is my ecosystem? How will my ecosystem develop or extend in the future? And also am I a participant in that ecosystem or am I a leader in an ecosystem? Or do I want to be a leader in the ecosystem? And what is that ecosystem? What does it consist of? 

A culture of discipline of execution and speed over perfection will be the key differentiator to go through the next economic cycle

If you look into what makes companies very successful. At the end of the day, it’s all about people, but it’s also about a company’s culture and discipline to execute. There’s always a trade off when you look into going faster, or being perfect in what you’re doing. Increasingly, we see that companies are making the trade off in a way of saying, perhaps it’s better to have speed over perfection. When you combine that all together you have a culture and a discipline to execute and you have chosen to make the trade off for speed over perfection, and you can accelerate on that, that can and will be a key differentiator. We believe that we will see an even bigger gap between leading companies and laggards, which are falling more and more behind.

Digitalization and Emerging Technologies will further drive organizational and structural change

You need to understand the driver of digitalization in your current and future business models. When it comes to emerging technologies, there’s always hype and there will always be hype, and that’s why we also have to have the hype cycle. Sitting on top of that is the structure of an organization in the future. When you look further into the digitalization of a supply chain, we’re talking about automating certain business processes and that will trigger off organizational change, structural change and it will trigger off new roles for supply chain functions.

This will continue to increase in 2020 because companies are very busy in either deploying their digital strategy or designing their digital strategy and there is pressure coming from the senior leadership to get on it fast. That will drive even more change and more complexity in the beginning because they still have to figure out how they’re going to execute on that and it will drive structural change.

A war for talent, new data and technology driven supply chain roles will see leading  companies investing to build diverse talent pools and strategic partnership to share talents

You need talent in your organization to be able to execute or to even accelerate digitisation. Looking across the access to and the availability of talent related to the new data or technology driven supply chain roles, you’ll see that leading companies are investing to build diverse talent pools, which means they’re really using positives from globalization. There is a scarcity, so you need to build from the inside as much as you’re looking on the outside. The leading companies are building strategic partnerships across different industries to share talents. These are roles such as analyzing data, preparing data, and give it to you as a company to make a decision.

Pressure on OPEX and CAPEX spending, working capital improvements and cost optimizations will set the tone in most companies

Within many companies there’s an enormous amount of pressure on OPEX and CAPEX spending as a result of that. When you run an organization, you have to act, which means you have to read the signals, what the market and your customers are telling you, and then you have to act. The pressure in 2020 will be on OPEX and CAPEX spending, but also on working capital improvements, and that’s really all around the cash you have in an organization. Cash gives you the ability to invest into your future growth.

In 2020, the focus will be on how can we optimize our cost? How can we improve our working capital? You have to have cash otherwise it will hinder you in future to actually grow again when we come out of that cycle.

Look out for Part 2 of Frank Vorrath’s predictions coming soon!

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