How Enterprises Like McKesson Digitize Procurement and Automate Spend Management to Slash Waste

Transcript of a discussion on how leading enterprises are digitizing procurement and automating spend management to reduce inefficiencies, cut manual tasks, and streamline the entire source-to-pay process.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: SAP Ariba.

Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you’re listening to BriefingsDirect. Our next intelligent enterprise innovations discussion explores new ways that leading enterprises like McKesson Corp. are digitizing procurement and automating spend management.

Gardner

We'll now examine how new intelligence technologies and automation methods help global companies reduce inefficiencies, cut manual tasks, and streamline the entire source-to-pay process.

To learn more about the role and impact of automation in business-to-business (B2B) finance, I’m pleased welcome Michael Tokarz, Senior Director of Source to Pay Processes and Systems at McKesson, based in Alpharetta, Georgia.

Tokarz: Thank you.

Gardner: There’s never been a better time to bring efficiency and intelligence to end-to-end, source-to-pay processes. What is it about the latest technologies and processes that provides a step-change improvement?

Tokarz: Our internal customers are asking us to move faster and engage deeper in our supplier conversations. By procuring intelligently, we are able to shift where resources are allocated so that we can better support our internal costumers.

Gardner: Is there a sense of urgency here? If you don't do this, and others do, is there a competitive disadvantage?

Tokarz: There's a strategic advantage to first-movers. It allows you to set the standard within an industry and provide greater feedback and value to your internal customers.

Gardner: There are some major trends driving this. As far as new automation and the use of artificial intelligence (AI), why are they so important?

The AI advantage 

Tokarz

Tokarz: AI is important for a couple of reasons. Number one, we want to process transactions as cost-effectively as we possibly can. Leveraging a “bot” to do that, versus a human, is strategically advantageous to us. It allows us to write protocols that process automatically without any human touch, which, in turn is extremely valuable to the organization.

AI also allows workers to change their value-quotient within the organization. You can go from someone doing manual processes to working at a much higher level for the organization. They now work on things that are change-driven and that bring much more value, which is really important to the organization.

Gardner: What do you mean by bots? Is that the same as robotic process automation (RPA), or they overlapping? What’s the relationship?

Tokarz: I consider them the same technology, RPA and bots. It’s essentially a computer algorithm that’s written to help process transactions that meet a certain set of circumstances.

Gardner: E-sourcing technology is also a big trend and an enabler these days. Why is it important to you, particularly across your supplier base?

Tokarz: E-sourcing helps us drive conversations internally in the organization. It forces the businesses to pause. Everyone's always in a hurry, and when they're in a hurry they want to get something published for the organization and out on the street. Having the e-sourcing tool forces people to think about what they really need from the marketplace and to structure it in a format so that they can actually go faster.

E-Sourcing, while you have to do a little bit of work on the front end, you enable the speed of the transaction on the back end because you have everything aligned from all of the suppliers in one central place, so that you can easily compare and make solid business decisions.

Gardner: Another important thing for large organizations like McKesson is the ability to extend and scale globally. Rather than region-by-region there is standardization. Why is that important?

Tokarz: First and foremost, getting to one technology across the board allows us to have a global standard. And what does a global standard mean? It doesn't mean that we're going to do the same things the same way in every country. But it gives us a common platform to build our processes on.

It gives us a way to unify our organization so that we can have more informed conversations within the organization. It becomes really important when you begin managing global relationships with large suppliers.

Gardner: Tell us about McKesson and your role within vendor operations and management.

Tokarz: McKesson is a global provider of healthcare solutions -- from pharmaceuticals to medical supplies to services. We’re mainly in the United States, Canada, and Europe.

I’m responsible for indirect sourcing here in the United States, but I also oversee the global implementations of solutions in Ireland, Europe, and Canada in the near future. Currently in the United States, we process about $1.6 billion in direct transactions. That’s more than 60,000 transactions on our SAP Ariba system. We also leverage other vendor management solutions to help us process our services transactions.

Gardner: A lot of people like you are interested in becoming touchless – of leveraging automation, streamlining processes, and using data to apply analytics and create virtuous adoption cycles. How might others benefit from your example of using bots and why that works well for you?

Bots increase business 

Tokarz: The first thing we did was leverage SAP Ariba Guided Buying. We also then reformatted our internal website to put Guided Buying forefront for all of our end users. We actually tag it for novice users because Guided Buying works similar to a tablet interface. It gives you smart icons that you can tap to begin and make decisions for your organization. It now drives purchasing behavior.

The next thing we did is push as much buying through catalogs and indirect spend that we possibly could. We've implemented enough catalogs in the United States that we now have 80 percent of our transactions fully automated through catalogs. It provides people really nice visual cues and point-and-click accessibility. Some of my end users tell me they can find what they need within three minutes, and then they can go about their day, which is really powerful. Instead of focusing on buying or purchasing, it allows them to do their jobs, their specialty, which brings more value to the organization.

We use the RPA and bot technology to take the entire organization to the next level. We're always striving to get to 90 touchless transactions. If we are at 80 percent, that means an additional 50 percent reduction in the touch transactions that we're currently processing, which is very significant.

The last thing we've done is taken it to the next level. We use the RPA and bot technology to take the entire organization to the next level. We’re always striving to get to 90 percent touchless transactions. If we are at 80 percent, that means an additional 50 percent reduction in the touch transactions that we’re currently processing, which is very significant.

That has allowed me to refocus some of my efforts with my business process outsourcing (BPO) providers where they’re not having to touch the transactions. I can have them instead focus on acquisitions, integrations, and doing different work that might have been at a cost increase. This all saves me money from an operations standpoint.

Gardner: And we all know how important user experience is -- and also adoption. Sometimes you can bring a horse to water and they don’t necessarily drink.

So it seems to me that there is a double-benefit here. If you have a good interface like Guided Buying, using that as a front end, that can improve user satisfaction and therefore adoption. But by also using bots and automation, you are taking away the rote, manual processes and thereby making life more exciting. Tell us about any cultural and human capital management benefits.

Smarts, speed, and singular focus 

Tokarz: It allows my procurement team to focus differently. Before they were focused on the transactions in the queue and how fast to get them processed, all to keep the internal customers happy. Now I have a bot that processes that three times a day, it looks at the queue, and so we don’t have to worry about those any more. The team is only watching the bot to make sure it isn’t kicking out any errors.

From an acquisition integration standpoint, when I need to add suppliers to the network I don’t have to go for a change request to my management team and request more money. I can operate within the original budget with my BPO providers. If there's another 300 suppliers that I need added to the network, for example, I can process them more effectively and efficiently.

Gardner: What have been some challenges with establishing the e-sourcing technology? What have you had to overcome to make e-sourcing more prevalent and to get as digital as possible?

Tokarz: Anytime I begin working on a project, I focus not only on the technology component, but also the process, organization, and policy components. I try to focus on all of them.

So first, we hired someone to manage the e-sourcing via an e-sourcing administrator role. It becomes really important. We have a single point of contact. Everyone knows where to go within the organization to make things happen as people learn the technology, and what the technology is actually capable of. Instead of having to train 50 people, I have one expert that can help guide them through the process.

From a policy standpoint, we've also taken the policies and dictated that. People are supposed to be leveraging the technology. We all know that not all policies are adhered to, but it sets the right framework for discussion internally. We can now go to a category manager and access the right technology to do the jobs better, faster, cheaper.

As a result, you have a more intriguing job versus doing administrative work, which ultimately leads to more value to the organization. They're acting more as a business consultant to our internal customers to drive value -- not just about price but on how to create value using innovations, new technology, and new solutions in the marketplace.

To me, it’s not just about the technology -- it’s about developing the ecosystem of the organization.

Gardner: Is there anything about Guided Buying and the added intelligence that helps with e-sourcing – of getting the right information to the right person in the right format at the right time?

Seamless satisfaction for employee

Tokarz: The beautiful thing about Guided Buying is it’s seamless. People don't know how the application works and that they are using SAP Ariba. It’s interesting. They see Guided Buying and they don't realize it's basically a looking glass into the architecture that is SAP Ariba behind the scenes.

That helps with transparency for them to understand what they are buying and get to it as quickly as possible. It allows them to process a transaction via a really nice, simple checkout screen. Everyone knows what it costs, and it just routes seamlessly across the organization.

Gardner: So what do you get when you do e-sourcing right? Are there any metrics or impacts that you can point to such as savings, efficiencies, employee satisfaction?

The biggest impact is employee satisfaction. Instead of having a category manager working in Microsoft Outlook, sending e-mails to 30 different suppliers on a particular event, they have a simple dashboard where they can combine all of the answers and push all of that information out seamlessly across all the participants.

Tokarz: The biggest impact is employee satisfaction. Instead of having a category manager working in Microsoft Outlook, sending e-mails to 30 different suppliers on a particular event, they have a simple dashboard where they can combine all of the answers, or questions, and develop all of the answers and push all of that information out seamlessly across all the participants. Instead of working administratively, they’re working strategically with internal customers. They are asking the hard questions about how to solve business problems at hand and creating value for the organization.

Gardner: Let's dig deeper into the need for extensibility for globalization. To me this includes seeking a balance between the best of centralized and the best of distributed. You can take advantage of regional particulars, but also leverage and exploit the repeatability and standard methods of centralization.

What have you been doing in procurement using SAP Ariba that helps get to that balance?

Global insights grow success 

Tokarz: We’re in the process of rolling out SAP Ariba globally. We have different regions, and they all have different requirements. What we've learned is that our EMEA region wants to do some things differently than we were doing them. It forces us to answer the question, “Why were we doing things the way we were doing them, and should we be changing? Are their insights valuable?”

We learned that their insights are valuable, whether it be the partners that they are working with, from an integration standpoint, or the people on the ground. They have valuable insights. We’re beginning to work with our Canadian colleagues as well, and they've done a tremendous amount of work around change management. We want to capitalize on that, and we want to leverage it. We want to learn so that we can be better here in the United States at how we implement our systems.

Gardner: Let’s look to the future. What would you like to see improved, not only in terms of the technology but the way the procurement is going? Do you see more AI, ML, and bots progressing in terms of their contribution to your success?

Tokarz: The bots’ technology is really interesting, and I think it's going to change pretty dramatically the way we work. It’s going to take a lot of the manual work that we do in processing transactions and it's going to alleviate that.

And it’s not just about the transactions. You can leverage the bot technology or RPA technology to do manual work and then just have people do the audit. You're eliminating three to five hours’ worth of work so that the workers can go focus their time on higher value-add.

For my organization, I’d like us to extend the utilization of the solutions that we currently own. I think we can do a better job of rolling out the technology broadly across the organization and leverage key features to make our business more powerful.

Gardner: We have been hearing quite a bit from SAP Ariba and SAP at-large about integrating more business applications and data sets to find process efficiencies across different types of spend and getting a better view of total spend. Does that fit into your future vision?

Tokarz: Yes, it does. Data is really important. It's a huge initiative at McKesson. We have teams that are specifically focused on data and integrating the data so that we can have meaningful information to make more broad decisions. They can be made not by, “Hey, I think I have the right knowledge.” Instead insights are based on the concrete details that guide you to making smart business decisions.

Gardner: I’m afraid we’ll have to leave it there. You have been listening to a sponsored BriefingsDirect discussion on new ways that companies gain improved visibility, analytics, and predictive responses across their supply-chain activities.

And we have learned how new tools and methods are coming together to help organizations be more intelligent by using such new technology as bots to improve not only the outcome from procurement activities -- but the satisfaction of those doing the procurement.

So a big thank you to our guest, Michael Tokarz, Senior Director of Source to Pay Processes and Systems at McKesson in Alpharetta, Georgia. Thank you so much, Michael.

Tokarz: Thank you.

Gardner: And a big thank you to our audience for joining this BriefingsDirect intelligent enterprise innovation discussion. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host throughout the series of SAP Ariba-sponsored BriefingsDirect interviews. Thanks again for listening -- and do come back next time.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: SAP Ariba.

Transcript of a discussion on how leading enterprises are digitizing procurement and automating spend management to reduce inefficiencies, cut manual tasks, and streamline the entire source-to-pay process. Copyright Interarbor Solutions, LLC, 2005-2019. All rights reserved.

You may also be interested in:

• SAP Ariba COO James Lee on the best path to an intelligent and talented enterprise
• How a Business Matchmaker Application Helps SMBs Impacted by Natural Disasters Gain New Credit
• The New Procurement Advantage-How Business Networks Generate Multi-Party Ecosystem Solutions
• How Data-Driven Business Networks Help Close the Digital Transformation Gap
• Building the Intelligent Enterprise with Strategic Procurement and Analytics 
• How SMBs impacted by natural disasters gain new credit thanks to a finance matchmaker app
• The new procurement advantage: How business networks generate multi-party ecosystem solutions
• SAP Ariba's chief data scientist on how ML and dynamic processes build an intelligent enterprise
• SAP Ariba’s President Barry Padgett on building the intelligent enterprise

SAP Ariba COO James Lee on the Best Path to an Intelligent and Talented Enterprise

Transcript of a discussion on how chief operating officers must not only seek out automation and data-driven intelligence but at the same time create new people-first strategies to unlock concerted innovation.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: SAP Ariba.

Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you’re listening to BriefingsDirect. Our next enterprise management innovations discussion explores the role of the modern chief operating officer (COO) and how they are tasked with creating new people-first strategies in an age of increased automation and data-driven intelligence.

Gardner

We will now examine how new approaches to spend management, process automation, and integrated procurement align with developing talent, diversity, and sustainability.

To learn more about the leadership trends behind making globally dispersed and complex organizations behave in harmony, I am pleased to welcome James Lee, Chief Operating Officer at SAP Ariba and SAP Fieldglass. Welcome, James.

Lee: Good afternoon, Dana. Thanks for having me.

Gardner: James, why has there never been a better time to bring efficiency and intelligence to business operations? Why are we in an auspicious era for bridging organizational and cultural gaps that have plagued businesses in the past?

Lee: If you look at the role of the modern COO, or anyone who is the head of operations, you are increasingly asked to be the jack-of-all-trades. If you think about the COO, they are responsible for budgeting and planning, for investment decisions, organizational and people topics, and generally orchestrating across all aspects of the business. To do this at scale, you really need to drive standardization and best practices, and this is why efficiency is so critical.

Lee

Now, in terms of the second part of your question, which has to do with intelligence, the business increasingly is asking for -- not just reporting the news -- but making the news. What does that mean? That means you have to offer insights to different parts of the business and help them make the right decisions; things that they wouldn’t know otherwise. That requires leveraging all the data available to do thorough analysis and provide the data that all the functional leaders can use to make the best-possible decision.

Gardner: It seems that the COO is a major consumer of such intelligence. Do you feel like you are getting better tools?

Make sense of data

Lee: Yes, absolutely. We talk about being in the era of big data, so the information you can get from systems -- even from a lot of devices, be it mobile devices or sensors – amounts to an abundance and explosion of data. But how to make sense of this data is very tricky.

As a COO, a big part of what I do is not only collect the data from different areas, but then to make sense of it, to help the business understand the insights behind this data. So I absolutely believe that we are in the age where we have the tools and the processes to exploit data to the fullest.

Gardner: You mentioned the COO needs to be a jack-of-all-trades. What in your background allows you to bring that level of Renaissance man, if you will, to the job?

Lee: As COO of SAP Ariba and now SAP Fieldglass, too, I have operational responsibilities across our entire, end-to-end business. I’m responsible for helping with our portfolio strategy and investments, sales excellence, our commercial model, data analytics, reporting, and then also our learning and talent development. So that is quite a broad purview, if you will.

I feel like the things I have done before at SAP have equipped me with the tools and the mindset to be successful in this position. Before I took this on, I was a COO and general manager of sales for the SAP Greater China business. In that position, during that time, I doubled the size of SAP’s business in China, and we were also involved in some of the largest product launches in China, including SAP S/4HANA.

Before that, having been with SAP for 11 years, I had the opportunity to work across North America, Europe, and Asia in product and operating roles, in investment roles, and also sales roles.

Before joining SAP, I was a management consultant by training. I had worked at Hewlett Packard and then McKinsey and Company.

Gardner: Clearly most COOs of large companies nowadays are tasked with helping extend efficiency into a global environment, and your global background certainly suits you for that. But there’s another element of your background that you didn't mention – which is having studied and been a concert pianist. What do you think it is about your discipline and work toward a high level of musical accomplishment that also has a role in your being a COO?

The COO as conductor 

Lee: That’s a really interesting question. You have obviously done your research and know my background. I grew up studying classical music seriously, as a concert pianist, and it was always something that was very, very important to me. I feel even to this day -- I obviously have pursued a different profession -- that it is still a very key and critical part of who I am.

If I think about the two roles -- as a COO and as a musician -- there are actually quite a few parallels. To start, as a musician, you have to really be in tune with your surroundings and listen very carefully to the voices around you. And I see the COO team ultimately as a service provider, it’s a shared services team, and so it’s really critical for me to listen to and understand the requirements of my internal and external constituents. So that’s one area where I see similarities.

Secondly, the COO role in my mind is to orchestrate across the various parts of the business, to produce a strong and coherent whole. And again, this is similar to my experiences as a musician, in playing in ensembles, and especially in large symphonies, where the conductor must always know how to bring out and balance various musical voices and instruments to create a magical performance. And again, that’s very similar to what a COO must do.

Gardner: I think it’s even more appropriate now -- given that digital transformation is a stated goal for so many enterprises – to pursue orchestration and harmony and organize across multiple silos.

Does digital transformation require companies to think differently to attain that better orchestrated whole?

Lee: Yes, absolutely. From the customers that I have spoken to, digital transformation to be successful has to be a top-to-down movement. It has to be an end-to-end movement. It’s no longer a case where management just says, “Hey, we want to do this,” without the full support and empowerment of people at the working level. Conversely, you can have people at the project team level who are very well-intentioned, but without senior executive level support, it doesn't work.

The role of the COO is to orchestrate across the various parts of the business, to produce a strong and coherent whole. This is similar to my experiences as a musician, in playing in ensembles, and especially in large symphonies.

In cases where I have seen a lot of success, companies have been able to break down those silos, paint an overarching vision and mission for the company, brought everyone onto the same bandwagon, empowered and equipped them with the tools to succeed, and then drive with ruthless execution. And that requires a lot of collaboration, a lot of synergies across the full organization.

Gardner: Another lens through which to view this all is a people-centric view, with talent cultivation. Why do you think that that might even be more germane now, particularly with younger people? Many observers say Millennials have a different view of things in many ways. What is it about cultivating a people-first approach, particularly to the younger workers today, that is top of mind for you?

People-first innovation

Lee: We just talked about digital transformation. If we think about technology, no matter how much technology is advancing, you always need people to be driving the innovation. This is a constant, no matter what industry you are in or what you are trying to do.

And it’s because of that, I believe, that the top priority is to build a sustainable team and to nurture talent. There are a couple of principles I really adhere to as I think about building a “people-first team.”

First and foremost, it’s very important to go beyond just seeking work-life balance. In this day and age, you have to look beyond that and think about how you help the people on your team derive meaning from what they do.

This goes beyond just work and life and balance, this has to do with social responsibility, personal enrichment, personal aspiration, and finding commonality and community among your peers. And I find that now -- especially with the younger generation -- a lot of what they do is virtual. We are not necessarily in the office all together at the same time. So it becomes even more important to build a sense of connectivity, especially when people are not all present in the same room. And this is something that Millennials really care about.

Also for Millennials it's important for them, at the beginning of their careers, to have a strong true-north. Meaning that they need to have great mentors who can coach them through the process, work with them, develop them, and give them a good sense of belonging. That's something I always try to do on my team, to ensure that the young people get mentorship early on in their career to have one-on-one dedicated time. There should always be a sounding board for them to air their concerns or questions.

Gardner: Being a COO, in your case, means orchestrating a team of other operations professionals. What do you look for in them, in their background, that gives you a sense of them being able to fulfill the jack-of-all-trades approach?

Growth mindset drives success

Lee: I tend to think about successful individuals, or teams, along two metrics. One is domain expertise. Obviously if you are in charge of, say, data analytics then your background as a data scientist is very important. Likewise, if you are running a sales operation, a strong acumen in sales tools and processes is very important. So there is obviously a domain expertise aspect of it.

But equally, if not more important, is another mentality. I tend to believe in people who are of a growth-mindset as opposed to a closed-mindset. They tend to achieve more. What I mean by that are people who tend to want to explore more, want to learn more, who are open to new suggestions and new ways of doing things. The world is constantly changing. Technology is changing. The only way to keep up with it is if you have a growth mindset.

It’s also important for a COO team to have a service mentality, of understanding who your ultimate customer is -- be it internal or external. You must listen to them, understand what the requirements are, and then work backward and look at what you can create or what insights you can bring to them. That is very critical to me.

When we talk about procurement, end users are increasingly looking for a marketplace-like experience. They are used to a B2C experience. And for Millennials, they are pushing everyone to think differently. They expect easy, seamless access across all of their different platforms.

Gardner: I would like to take advantage of the fact that you travel quite a bit, because SAP Ariba and SAP Fieldglass are global in nature. What you are seeing in the field? What are your customers telling you?

Lee: As I travel the globe, I have the privilege of supporting our business across the Americas, Europe, the Middle East, and Asia, and it's fascinating to see that there are a lot of differences and nuances -- but there are a lot of commonalities. At the end of the day, what people expect from procurement or digital transformation are more or less very similar.

There are a couple of trends I would like to share with you and your listeners. One is, when we talk about procurement, end users are increasingly looking for a marketplace-like experience. Even though they are in a business-to-business (B2B) environment, they are used to the business-to-consumer (B2C) user experience. It’s like what they get on Amazon where they can do shopping, they have a choice, it's easy to compare value, and features -- but at the same time you have all of the policies and compliance that comes with B2B. And that's something that is beginning to be the lowest common denominator.

Secondly, when we talk about Millennials, I think the Millennial experience is pushing everyone to think differently about the user experience. And not just for SAP Ariba and SAP Fieldglass, but for any software. How do we ensure that there is easy data access across different platforms -- be it your laptop, your desktop, your iPad, your mobile devices? They expect easy, seamless access across all their different platforms. So that is something I call the Millennial experience.

Contingent, consistent labor

Thirdly, I have learned about the rise of contingent labor in a lot of regions. We, obviously, are very honored to now have Fieldglass as part of the SAP Ariba family. And I have spent more and more time with the Fieldglass team.

In the future, there may even be a situation where there are few permanent, contracted employees. Instead, you may have a lot of project-based, or function-based, contingent laborers. We hear a lot about that, and we are focused on how to provide them with the tools and systems to manage the entire process with contingent labor.

Gardner: It strikes as an interesting challenge for COOs -- how do you best optimize and organize workers who work with you, but not for you.

Lee: Right! It's very different because when you look at the difference between indirect and direct procurement, you are talking about goods and materials. But when you are talking about contingent labor, you are talking about people. And when you talk about people, there is a lot more complexity than if you are buying a paper cup, pen, or pencil.

You have to think about what the end-to-end cycle looks like to the [contingent workers]. It extends from how you recruit them, to on-boarding, enabling, and measuring their success. Then, you have to ensure that they have a good transition out of the project they are working on.

SAP Fieldglass is one of the few solutions in the market that really understands that process and can adapt to the needs of contingent laborers.

Gardner: One more area from your observations around the globe: The definition and concept of the intelligent enterprise. That must vary somewhat, and certain cultures or business environments might accept more information, data, and analytics differently than others. Do you see that? Does it mean different things to different people?

Intelligent enterprise on the rise

Lee: At its core, if you look at the revolution of the enterprise software and solutions, we have gone from being a very transactional system -- where we are the system of bookings and record, just tracking what is being done -- to we start to automate, what we now call the intelligent enterprise. That means making sense of all the information and data to create insight.

A lot of companies are looking to transform into an intelligent enterprise. That means you need to access an abundance of data around you. We talked about the different sources -- through sensors, equipment, customers, suppliers, sometimes even from the market and your competitors -- a 360-degree view of data.

Then how do you have a seamless system that analyzes all of this data and actually makes sense of it? The intelligent enterprise takes it to the next level, which is leveraging artificial intelligence (AI). There is no longer a person or a team sitting in front of a computer and doing Excel modeling. This is the birth of the age of AI.

Now we are looking at predictive analytics, where, for example, at SAP Ariba, we look for patterns and trends on how you conduct procurement, how you contract, and how you do sourcing. We then suggest actions for the business to take. And that, to me, is an intelligent enterprise.

Gardner: How do you view the maturity of AI, in a few years, as an accelerant to the COO’s job? How important will AI be for COOs specifically?

Lee: AI is absolutely a critical, critical topic as it relates to -- not just procurement transformation -- but any transformation. There are four main areas addressed with AI, especially the advanced AI that we are seeing today.

Number one, it allows you to drive deeper engagement and adoption of your solution and what you are doing. If you think about how we interact with systems through conversations, sometimes even through gestures, that’s a different level of engagement than we had before. You are involving the end user in a way that was never done before. It’s interactive, it’s intuitive, and it avoids a lot of cost when it comes to training.

Secondly, we talk a lot about decision-making. AI gives you access to a broad array of data and you can uncover hidden insights and patterns while leveraging it.

Thirdly, we talked about talent, and I believe that having AI helps you attract and retain talent with state-of-the-art technology. We have self-learning systems that help you institutionalize a lot of knowledge.

And last, but not least, it’s all about improving business outcomes. So, you think about how you increase efficiencies for your personalized, context-specific information. In the context of procurement, you can improve approvals and accuracy, especially when you are dealing with contracts. An AI robot is a lot less prone to error than the human working on a contract. We have the statistics to prove it.

At the end of the day, we look at procurement and we see an opportunity to transform it from a very tactical, transactional function into a very strategic function. And what that means is AI can help you automate a lot of the repetitive tasks, so that procurement professionals can focus on what is truly value-additive to the organization.

Gardner: We seem to be on the cusp of an age where we are going to determine what it is that the people do best, and then also determine what the machines do best -- and let them do it.

This whole topic of bots and robotic process automation (RPA) is prevalent now across the globe. Do you have any observations about what bots and RPA are doing to your customers of SAP Fieldglass and SAP Ariba?

Sophisticated bot benefits

Lee: When we talk about bots, there are two types that come to mind. One is in the shop floor, in a manufacturing setting, where you have physical bots replacing humans and what they do.

Secondly, you have virtual bots, if you will. For example, at SAP Ariba, we have bots that analyze data, make sense of the patterns, and provide insights and decision-making support to our end users.

In the first case, I absolutely believe that the bots are getting more sophisticated. The kinds of tasks that they can take on, on the shop floors, are a lot more than what they were before -- and it drives a lot of efficiency, cuts costs, and allows employees to be redeployed to more strategic, higher value-added roles. So I absolutely see that as a positive trend going forward.

When it comes to the artificial, virtual bots, we see a lot of advancement now, not just in procurement, but in the way they are being used across sales and human resources systems. I was talking to a company just last week and they are utilizing virtual bots to do the recruiting and interviewing process. Can you imagine that?

The next time you submit your resume to a company, on the other end of the line might not be a human, but a robot that is screening you. It's now to that level of sophistication.

The next time that you are submitting your résumé to a company, on the other end of the line might not be a human that you are talking to, but actually a robot that’s screening you. And it's now to the level of sophistication where it’s hard for you to tell the difference.

Gardner: I might feel better that there is less subjectivity. If the person interviewing me didn’t have a good sleep the previous night, for example. I might be okay with that. So it’s like the Turing test, right? Do you know whether it’s real bodies or virtual bots?

Before we close out, James, do you have any advice for other COOs who are seeking to take advantage of all the ways that digital transformation is manifesting itself? What advice do you have for COOs who are seeking to up their game?

It’s up to you to up your COO game

Lee: Fundamentally, the COO role is what you make of it. A lot of companies don’t even have a COO. It’s a unique role. There is no predefined job scope or job definition.

For me, a successful COO -- at least in the way I measure myself -- is about what kind of business impact you have when you look at the profits and loss (P and L). Everything that you do should have a direct impact on your top line, as well as your bottom line. And if you feel like the things that you are doing are not directly impacting the P and L, then it’s probably time to reconsider some of those things.

Gardner: I’m afraid we will have to leave it there. You have been listening to a sponsored BriefingsDirect discussion on the role of the modern COO and how they are tasked with creating new people-first strategies in an age of increased automation and data-driven intelligence.

And we have learned how new approaches to spend management, process automation, and integrated procurement align with developing talent, diversity, and sustainability.

So a big thank you to our guest, James Lee, Chief Operating Officer at SAP Ariba and SAP Fieldglass. Thank you, James.

Lee: Thank you, Dana.

Gardner: A big thank you as well to our audience for joining us for this BriefingsDirect business management innovations discussion. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host throughout this series of SAP Ariba-sponsored BriefingsDirect interviews. Thanks again for listening, and do come back next time.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: SAP Ariba.

Transcript of a discussion on how chief operating officers must not only seek out automation and data-driven intelligence but at the same time create new people-first strategies to unlock concerted innovation. Copyright Interarbor Solutions, LLC, 2005-2019. All rights reserved.

You may also be interested in:

• How a Business Matchmaker Application Helps SMBs Impacted by Natural Disasters Gain New Credit
• The New Procurement Advantage-How Business Networks Generate Multi-Party Ecosystem Solutions
• How Data-Driven Business Networks Help Close the Digital Transformation Gap
• Building the Intelligent Enterprise with Strategic Procurement and Analytics 
• How SMBs impacted by natural disasters gain new credit thanks to a finance matchmaker app
• The new procurement advantage: How business networks generate multi-party ecosystem solutions
• SAP Ariba's chief data scientist on how ML and dynamic processes build an intelligent enterprise
• SAP Ariba’s President Barry Padgett on building the intelligent enterprise
• GDPR forces rekindling of people-centric approach to marketing and business