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Poole College of Management 
Supply Chain Resource Cooperative

Procurement Must Transition into an R&D Based Organization to Exploit Big Data!

September 23, 2016

I had the opportunity to spend some time at IBM’s Research Triangle Park facility, (the actual hosting site for the Watson computer) this past week.  IBM hosted a roundtable for the Center for Advanced Purchasing Studies, with executives from P&G, US Steel, CB&I, Mastercard, and others attending.  In that session, Dan Carrell from IBM shared a number of key perspectives that is driving IBM to diversify into the world of analytics.

Three major shifts are driving the new economy:

  1. Data is foundational to everything we do. Data is a natural resource – those who capture data and learn how to exploit it will be those who succeed in the new economy.
  2. The Cloud is transforming information technology and moving business processes into digital services.
  3. The shift to Cognitive computing is unlocking new insights and enabling optimized outcomes. Cloud Platforms and Cognitive Solutions will take companies like IBM into the future.

An amazing fact is that 90% of the world’s data has been produced in the last two years – and 80% of this data is unstructured! The massive amount of data found in the form of speech, text, articles, videos, digitized images, and graphics is exploding. But organizations and individuals have never had tools to put their arms around this massive flood of data, which is constantly changing and morphing, and increasing in scale. This is changing with the emergence of cognitive computing which creates an ability to take this data and impose a structured format over it which is dynamic and able to adapt and learn. Research shows that 77% of organizations are implementing technologies to begin to exploit this capability.

Cognitive systems have the ability to

  • Understand unstructured data and natural language.
  • Reason and provide confidence levels around the reliability of predictions
  • Learn and adapt through feedback, a process which is sometimes called “supervised learning”
  • Interact in a natural way with users, sometimes through voice recognition and computer-generated responses (such as Siri on the Apple Phone)

Cognitive systems have the potential to help procurement executives make better decisions, bring to bear the expertise of the most experienced individuals to other parts of the organization, discover new insights, and prove th quality, consistency, and compliance around sourcing processes.

IBM Watson is building capability around four primary sourcing processes:

  • Sourcing and market analysis (Buying Assistant)
  • Understanding of price movements in the market (Pricing IQ)
  • Deep insights into specific suppliers (Supplier IQ)
  • Managing contracts across the supply base (Blue Hound)
  • Managing supplier risk (Risk Insights)

These developments will be coming online in the next few years, and are likely to have a major impact on our working environment and the roles we take on in the supply chain.  However, a key theme that comes up in our discussions is the notion that the capability to exploit “big data” and derive key predictive  analytics from the broad world of social media, digital images, and internet chatter involves more than just “buying technology”.  Developing this capability, like many other other organizational capabilities, involves REAL WORK!  Organizations that are successful must begin by establishing an approach to data governance, and then begin to launch pilot studies that target specific business problems and issues. In the process, they are likely to hit dead ends, roadblocks, and unsuccessful outcomes.  But they will also learn “what works”, and understand how to employ many of the analytical tools in the context of their own organizational culture, mindset, and desired outcomes.

We are really in the very early stages of this incredible transformation.  To be successful in the years ahead requires leadership support, a willingness to accept failure, and most of all, the mindset and attitude of a Research and Development -focused organization.  This is where procurement and supply chain leaders need to start to change their culture, which is a tough thing to do in an environment of cost-cutting priorities.  But to overlook this now will put you way behind your competitors in three to five years from now.