Digital transformation in procurement has become a central topic in modern organisations seeking greater efficiency, transparency and strategic value.

Starting with digitisation, through digitalisation, and eventually digital transformation – a term that emerged roughly fifteen years ago – digital technologies have not only changed the way we live and work but continue to generate entirely new outcomes.

While some organisations have not yet fully digitised their data, others are already questioning whether the concept of digital transformation itself has become outdated and whether, with the rise of generative AI, it should be replaced with the concept of business reformation.

The answer to this question may lie in a misunderstanding of what digitisation, digitalisation and digital transformation actually mean.

If digital transformation is equated merely with digitisation – or perhaps with the digitalisation of individual processes, which is not uncommon – then the era of digital transformation should already be behind us. For that reason it is important to clearly distinguish between these concepts.

Digitisation refers to the conversion of information from a physical into a digital format. A simple example is scanning a physical document and converting it into a PDF file.

Digitalisation, according to Gartner, refers to the exchange and processing of data through digital technologies in ways that fundamentally change how business processes operate and enable the creation of new business models. The objective of digitalisation is therefore the improvement of business processes and business outcomes.

Digital transformation, as a concept, represents the comprehensive process of digitalising business activities with one key outcome: transformation.

Although most organisations are making efforts to digitalise their operations, questions remain. Why is this process often uneven or slow? Why does resistance occur? Why do doubts arise about the outcomes, even though in everyday life most activities have already become digital?

One possible explanation is the absence of true transformation. In many cases digitalisation has in fact been reduced to digitisation.

Digitalisation as an Opportunity for Procurement Transformation

Let us return to digitalisation and its key outcome: improved processes and the creation of new and more successful business models.

When digitalisation is viewed as an opportunity to transform procurement and maximise value creation, we immediately encounter significant complexity. Procurement connects organisations with a broad external environment of suppliers while simultaneously linking numerous internal stakeholders. At the same time it orchestrates complex exchanges of data across organisational boundaries.

This combination of complexity and strategic importance makes procurement an ideal candidate for transformation, particularly given the capabilities of modern digital technologies.

The critical question, however, is how transformation should be approached so that it does not merely result in the digitisation of existing ways of working without delivering the expected benefits.

Procurement transformation should therefore be viewed through the lens of opportunities to:

• increase operational efficiency

• reduce costs

• improve and develop supplier collaboration

• strengthen risk and sustainability management

• enable informed decision-making

The objective of digital transformation in procurement is not simply the digitalisation of existing processes. Doing the same things in a slightly more modern way is not the primary goal. The true objective is the complete transformation of procurement, creating the conditions for increased competitiveness through procurement initiatives.

As a result, the future transformed procurement function must be shaped by the key individuals and teams within the organisation who understand both the internal context and the broader external environment.

Digital solutions are therefore an instrument of transformation, not its objective.

How to Conduct Procurement Digital Transformation

The starting point in procurement transformation is to map existing processes, activities and outcomes, particularly within the context of the organisation’s current technological environment.

This includes identifying data sources and databases, analysing data quality, and establishing standards for data governance.

Processes should then be divided into groups and analysed in detail.

The first group includes procurement processes that take place between the organisation and its external environment, primarily suppliers.

The second group includes internal procurement processes that take place within the organisation.

The result of this phase should be a clear understanding of existing constraints as well as opportunities for improvement within the current system, together with opportunities for further system development.

The next and most critical step involves designing new processes capable of supporting the strategic objectives of procurement. Through this step the organisation develops a clear picture of the gap between the current situation and the desired future state.

This phase defines the intended outcome of the digital transformation project.

Following this, a preliminary project plan should be developed that addresses key questions:

• What is the expected project outcome?

• Why is the project being initiated?

• What are the project phases and main activities?

• What is the project scope?

• What assumptions and constraints exist?

• What is the estimated budget and project duration?

• How will the success of the procurement digital transformation project be measured?

The next step is to present the project and its intended outcomes in order to secure executive sponsorship for the strategic transformation of procurement.

Finally, the organisation proceeds with the selection and implementation of technology, typically an appropriate e-procurement software solution that will improve procurement processes and enhance overall performance.

Leadership as the Key to Transformation

Every transformation requires strong leadership and commitment to its objectives.

One thing is certain: digitalisation and digital transformation are creating new and more successful business models.

The future of procurement will be characterised by informed decision-making, developed and enhanced supplier relationships, and a high level of resilience and sustainability.

Achieving this future will be difficult without comprehensive digitalisation and the transformation of existing business models.

Our role is to support organisations in designing modern, transformed procurement functions and guiding them through the transformation journey.