Make data-driven decisions in the board room

A recent McKinsey study, “The data-driven enterprise of 2025,” describes seven characteristics that define the new data-driven enterprise. McKinsey predicts that by 2025, human-machine interaction will have become standard through the use of smart workflows and seamless interactions. Just about all aspects of work will use data to optimise work, including the work of procurement and finance professionals. Organisations making the most progress can get the highest value from data-enabled capabilities.

Seven characteristics of the new data-driven enterprise:

1. Data is built into every decision, interaction and process;
2. Data is processed and handled in real-time;
3. Data centres enable you to have integral and ready-to-use data;
4. The business model considers data as a product;
5. he role of a Chief Data Officer (CDO) is expanded to generating value;
6. Participation in data ecosystems is becoming the norm;
7. Data management is prioritised and automated from privacy, security and resilience perspectives.

In applying these features, a data strategy is desired. Many organisations, however, cannot afford this due to a lack of knowledge, capacity and financial resources. Yet organisations can take very concrete steps to use data from the procurement process for decisions and process optimisations. As a CFO, how can you make your procurement function data-driven?

Start by gathering structured data in digital form. Digitise is the magic word in this. Without digitisation, you cannot unlock data and take it to the next level. Make spending transparent in a spend analysis, for example, for each business unit, purchasing category and supplier. Is the data difficult to access or difficult to interpret? Or are you struggling with the structure of the data? Using a spend analysis application such as Spend Analytics makes it easy to link the data. Expenses are clearly displayed in predefined dashboards, KPIs and reports.

From this baseline measurement, an improvement plan can already be drawn up to:

• improve processes;
• create policies for unauthorised expenditures;
• realise savings;
• form new agreements and negotiations with suppliers;
• mitigate risks by knowing with whom you are doing business.

With a spend application in the cloud, it becomes possible to extract data in real-time and automatically from an ERP or financial system so that the data is always up-to-date. Connections to such systems are now plug-and-play systems and can make things completely easier. In doing so, privacy, security and changeability are immediately met with such cloud software.

Now that the organisation is familiar with performance on the procurement side, you want to be able to apply it to your processes. Do you want to make data-driven decisions in every aspect? Then other procurement processes, such as contract management and invoice processing, will also have to be digitised. By digitising, you can standardise and optimise processes and then automate them.

An important step in the maturing of the procurement function is the holistic approach. Don't use stand-alone point solutions to digitise procurement processes. Opt for a Business Spend Management (BSM) platform instead. This allows insights and outcomes from one application to serve as a basis in the other applications. This avoids complex integrations, encourages collaboration and ensures data is displayed in a structured way. The modularity of a platform such as ISPnext makes it possible to use the functionalities that are important to your organisation. This includes supplier ratings, sustainability and credit scores used in the process to provide real-time insights or automatically make data-driven decisions for you.

Digitising procurement processes makes more data available in shorter time. As an organisation, make sure you know what is going on in the business and make decisions on the right grounds. The importance of accurate, timely and complete data is more important than ever. Don't opt for a point solution. Choose a BSM platform.

This article was posted on Executive Finance.

Other source: 
* https://www.mckinsey.com/capabilities/quantumblack/our-insights/the-data-driven-enterprise-of-2025?cid=soc-web