artificial intelligence

3 Misconceptions About AI In Procurement


Being in the AI procurement business means that our team gets an inside view into how business leaders across the industry are thinking about implementing AI in their enterprise. Across the board, we see people caught between curiosity about what’s possible and caution against snake oil. Embedded within this crosscurrent of excitement and skepticism about AI, we hear the same misconceptions over and over again, many taken from the popular media. Here are the top three:

1.    AI is better at X business process than the best human. This is likely the misconception that we come across the most. It springs from the tendency to conflate AI circa 2019 with futurists’ popular science hypotheses about what a “strong” or “general” AI would be like (which does not yet exist (and which would, theoretically, replicates human intelligence). Let’s think about this in the context of autonomous driving. Do we believe that AI driving cars on the street today is better than the best race car driver? Heck no. However, if it’s better than the average driver and doesn’t need to eat, sleep, use the toilet (or get a paycheck) then there remains a pretty obvious business case around autonomous vehicles. The same holds true for business process AI.

2.    AI only makes sense after we get our company’s data in pristine condition. This one gets a lot of airtime on the Internet blogs, so I’d like to unpack carefully. While true that “garbage in, garbage out” can apply to some AI analysis of *incomplete* or *inaccurate* internal datasets, there are now a ton of great platforms that will help cleanse and format data that may have duplicates or be missing rows. I’d actually say that it’s reasonable to expect any leading provider of AI services to offer data cleansing, aggregation and re-structuring as an enabling service for whatever their core value prop is. If you’re contemplating a “data lake” strategy as your company’s endgame, I’d suggest checking out Tamr CEO Michael Stonebreaker’s excellent talk about why “data lakes” are just the beginning. Cleaning and integrating datasets can produce enormous value, but much of what AI can help with today is data labeling and pattern recognition to assist with that taxonomy. Ultimately, this is an iterative, nonlinear process rather than a “first clean data, second AI” process, and will run concurrently in most organizations that successfully implement these platforms.

Do we believe that AI driving cars on the street today is better than the best race car driver? Heck no.

3.    AI only works in specific domains, such as computer vision, image recognition, etc. While the state of the AI market itself remains a subject of controversy, there is no doubt that the advances in computer vision are certainly impressive (and will likely be responsible for disruptive innovation in manufacturing over the next decade). However, these are not the only places that AI applications can cause substantial improvements in process efficiency and outcome optimization. For example, many AI theorists point to the moment that Google’s DeepMind won at Go as a kind of “Sputnik moment” for renewed excitement about AI. Consider that this breakthrough moment occurred around a wave of so-called “gameificiation” where tasks in business, education and tradecraft professions are being recast as games with optimal pathways and rewards and punishments. How unreasonable is it to imagine that if AI can win a game as complex and nonlinear as Go, that AI might be able to win a game as simple as, say a price negotiation?

The truth is that AI in the workplace will inevitably be caught between the overpromises of visionary optimists and the bitterness of skeptics who see the rise of AI thought leadership as snake oil. Our approach to these hot and cold reactions is simple: what are your savings goals, and would they become more achievable if your team could negotiate with twice as many counter-parties over the next year? What about 10x many counter-parties? If having a procurement team that could work 10x tempo is an exciting proposition, then there’s probably a low-commitment way to run an experiment in your own organization and see the value for yourself.


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Bid Ops Interviews Rich Eggers on #TheFutureofProcurement

rich eggers.jpg

Edmund Zagorin: All right folks, today, on the interview, we have Rich Eggers who is a leader in the Chamber of Commerce here in Cincinnati, also a mentor at Ocean Accelerator, and has spent some time as a business leader in the procurement world in his role in raw materials procurement for Mars at the senior Director level. So we are lucky enough to be able to grab a few of his minutes today and ask some questions that we've been asking folks who really know their way around the industry. So Rich, a first question for you is just- what do you see changing over the next five and 10 years in procurement generally? Where do you think the biggest shockwaves are going to come?

Rich Eggers: First of all, thanks for having me and giving me an opportunity to share a little bit about my story. So, I think Purchasing is moving more towards a business integration and really playing a key role with the leadership team and in driving value for their customers.  I see Purchasing’s unique external focus on the supply chain really starting to leverage a couple of different things. One is mega data sets -- and where they're looking to find a unique insights from those data sets. I think this is going to be a continuing theme into the future -- how can you look at the broader collection of data, both within the company and also external to the company to find unique capabilities and connections that you can leverage. I also think that efficiency is going to continue to be an important driver. Coming up with tools and approaches and work processes that make the process more efficient is going to be super important as we try to do more with less every year.

Edmund: Fantastic. Yeah. I think we definitely see the theme of doing more with less across the board, especially given how many companies are trying to hire more folks in the procurement department as workloads increase in what is, of course, a very tight job market. So I want to just ask kind of on that topic - where do you see leadership priorities in procurement moving today? What do you see today, or even the new leaders who will be rising through management ranks over the next 10 years? Where do you see their priorities really focusing?

Rich: Yeah, I think the thing that's unique for Purchasing as a skill set, it's really about linking those business needs that are ever changing more directly with the marketplace in which you're trying to procure your goods and services. And so I think the one thing that is a challenge in that is not knowing exactly where the business is going to go, but still having an important priority to come up with the right strategies to deliver against that. I think in order to do that, what's going to end up happening is they're going to have to do a better job of looking at overall spend. Some of the big dollar amounts will have more strategic focus and more time put into where the long tail of other things that need to be bought are going to have to be automated. So I think the leaders are going to be looking to drive that clarity around what is in the tail that needs to be automated and then what is kind of in the core that needs to go through a tool-enabled approach for strategic sourcing. I think that kind of ties through the two main pieces - really continuing to stay focused on strategic thinking, tied to the business needs that are ever changing and as well, putting a strong focus on those top priorities and systematizing of the tail.

Edmund: I think that comment about tail spend is really profound, especially as you see a certain types of spot buys and smaller purchases increasingly  managed through a more delegated and decentralized framework, particularly in very large organizations. There are some tools that a procurement department to use today that won’t be used ten or twenty years from now in their current form, kind of like the kind of manual calculator once was prevalent and now that same calculator exists as a virtual machine or a set of abstract commands in Microsoft Excel. Are there tools that are used in procurement departments today -  I mean one perhaps could say something like a fax machine or something, but, maybe even heuristics or cognitive tools - that we’ll see phased out over the next ten years of changes?

Rich: Yeah, I think the marketplace is evolving more rapidly every day. So tools that require a lot of time in order to implement are going to fall out of favor, if you will. Tools that are restricting the boundaries of the marketplace are also going to be less important as you look to leverage the relationships that you have. It's about being able to share those unique needs as efficiently and with the level of clarity that's needed, so that you can collaborate and partner with external capability or drive even competition in a way that makes it really clear what the deliverable is that you're looking for. So I think a couple of things are gonna change. One thing is if you're working in processes right now that are kind of email focused, I think that's going to have to change in the future.  You're not going to be able to deliver the full scale of requirements with a standard email type of solution. So I think that's going to be a thing of the past. It's going to be more of a relationship management tool that you’re going to have to use. If you're doing a lot of your work on paper, that's also gonna be a tool of the past. We just don't have the time or the ability to touch that many pieces of paper on a regular basis. Not to mention the environmental impact as well. I think finally a piece that's going to be important for the future is recognizing that the change happens daily and, and with those changes, a lot of volatility in the market places, a lot of volatility in relationships and you're going to have to be much more responsive to that. And so I think tools that also don't take into consideration those market movements and what your requirements are, are going to also fall out of favor. So it will be important in the future that's your ERP systems are integrated with real time market information so that you can make the best decisions over the short run and the long run.

Edmund: Wow. I love that last point you made. I think enterprises talk a lot about creating very large repositories of data. You hear the term “data lake” thrown around. I think it's always interesting to ask the question - is that data actually a) accurate and b) actionable?  How recent is it? How relevant is it to the decisions that are being made every day? And I think as those questions get asked more and more, it will put increasing pressure to, as you said, to make sure that data is relevant, make sure that it's coming from the market, and that people can use it to be more adaptive and responsive. So this is the final question, and I'll admit that there's perhaps a certain bias on my part in asking it,  but I think it's those real $64,000 questions in the procurement world today: where do you see artificial intelligence and machine learning playing a role in a procurement’s future?

Rich: So I think it's going to be really an important part of the future for several companies that are really focused on fast paced industry change. If I think about procurement, some of the pressure for the strategic procurement organizations, is to be more tactically efficient with large data sets. Artificial intelligence is going to help move to a more efficient execution. So for them it's going to be incredibly important.  I think for teams that are more tactically efficient, and that's where they spend a lot of their effort. I think they need to be pushing more towards a strategic mindset. And those businesses, what's going to be really important is to be able to get rich feedback out of the data sets, which they don't have today. And so I believe where your company is today and where your strengths are, it's going to change how you need mega data or artificial intelligence. It'll be interesting to see as we go forward where the innovation occurs. Is it that they both occur at the same pace in both sides, or is one gonna lead the other? And depending on the advancements of mega data understanding, in or out of artificial intelligence, it'll drive a competitive advantage you want versus the other. So I think this will be something that'll be important for the purchasing organizations to consider in their business interactions in the future, to the point where if artificial intelligence ends up dominating the path in the future, it may have an implication on what your organizational design and what you're buying approach in the marketplace. And I think as well, if a mega data analysis and that kind of strategic insight gathering comes out to be in the forefront, pushing beyond the artificial intelligence capability from a speed and delivery standpoint, then if you don't have that insight into the business then you're going to have to really probably modify the way which you're purchasing organization comes forward and does its work. So I think it will be a profound impact in the organizations. And so it'll just be interesting to see which ones respond to those external capabilities as they get to create in the marketplace.

Edmund: Rich, terrific insights here. Alright, folks. Well that's it for the interview. Thanks for checking in to learn about the future of procurement with Rich Eggers and the Bid Ops team.