Stan Garber, Alex Yakubovich and Greg Tennyson can see the future. In this episode we discuss technology's role in procurement and negotiations, where we are, where we're going, how do we get there. Stan and Alex started Scout, which is an intuitive Cloud based platform which encompasses everything from project intake through sourcing pipeline to contract and supplier management, RFX, and reverse auction tools. This conversation blew my mind.
Guests: Stan Garber, Alex Yakubovich, Greg Tennyson
Mark: Good morning, good afternoon, good evening, and thank you so much for joining us, listeners. We've got a real treat for you today. We've got Stan Garber, president of Scout RFP, Alex Yakubovich. Alex, I'm sorry if I pronounced that very poorly.
Alex Y.: No, that was good.
Mark: Was it? Awesome. CEO of Scout RFP. And obviously Greg Tennyson, who you all know as CPO at VSP Global. Thank you, gentlemen, so much for joining us today.
Stan Garber: Thank you for having us.
Mark: Yeah. I've been chatting to Greg very briefly over email and back and forth, and we've been trying to figure out what we should talk about in terms of technology as it relates to procurement and negotiations. I've been putting a lot of thought into where are we going with technology. It's changing the way that we do business, literally. So, I thought this would be a great opportunity to get you guys on the phone to discuss where we are going.
I mean, as the founders or co-founders of Scout RFP, you guys are sort of in the thick of it when it comes to technology and negotiation and procurement. And so I'd like to focus our discussion today around procurement and technology, negotiations technology. Where we are, where we're going, how we're gonna get there. So, I guess I'll start off with, you know Alex, I was reading an Entrepreneur Magazine article where you said, and I'm gonna quote this, and it says, "While effective technology is the clear way of the future, and indeed the future is now, many organizations still aren't up to speed. In fact, new research from Harvard Business Review analytic services, in partnership with Scout RFP, found that a large number of companies are lagging in the use of advanced digital technologies for non-customer facing operation activities. One of the most prominent areas where digital transformation lacks is sourcing and procurement, which is especially problematic due to increased pressure on business to increase efficiency, strategic thinking, and collaboration."
So, I think that really sums up sort of where we are in the procurement and negotiations space. So, Alex, maybe I'll start off with you. Where are we now? I mean, we think of these large, bulky on prem ERP systems. Where are we now in the scope of procurement technology?
Alex Y.: Yeah. And this is obviously a place where we're very passionate, and the one reason that we went into this is because we thought that for as much innovation as there is in technology overall, the way that a lot of procurement teams are still operating is, especially on the sourcing side, is still leveraging the same tools that they were using 20 years ago, which is Word, Excel and Email and I think there are numerous studies that, depending on which ones you read, it's somewhere between 15 to 20 percent adoption rate on the sourcing. So, despite all of the companies that exist that kind of try to move all of this into a digital platform and despite all of the digital transformation efforts, there's still a really long way to go from where we are today. Yeah.
So, I think that's the overarching issue and certainly the thing that, the one problem or the one area that Scout would really like to help customers and companies tackle.
Mark: Interesting. And so when we talk about adoption rate of being 15 to 20 percent, what does that mean? Does that mean the employees are, only 20 percent of the employees that are using it are actually using it?
Alex Y.: Yeah. So, that's exactly right, and then also just the, depending on the study, too. Some look at the parts of the team that are using it, who on the team is leveraging the e-sourcing platforms. Other studies looked more at, like as a percentage of sourcing events that are run, how many of them leverage a platform as opposed to do it offline. So, it's really both, whether you look at volume or adoption rate across the team, it's very low.
Mark: That's super interesting. Greg, given your experience, I mean, in multiple technology companies now and really being on the front line when it comes to technology adoption and procurement and negotiations, why do you think the adoption rate is so low?
Greg Tennyson: Well, it's interesting. You look at some of the on prem sourcing tools that are out there, they're just, they're cumbersome to use, highly configured from an implementation standpoint. The UI, user interface, is terrible. And then you look at tools like Scout RFP that are very intuitive, quick to implement, the ease of use is there. I've often said that the quickest path to adoption is to put a simple, and what I mean by simple user, having an easy, clean UI, quick to implement, very intuitive tool in front of the user, you'll drive adoption. The more difficult, the more complex, the more cumbersome the tool, the poorer the adoption. So, it all comes fundamentally down to how the tools function for the user, and that will drive the adoption.
Mark: Interesting. Super interesting. Go ahead.
Stan Garber: Oh, I was gonna say that that is spot on. And to Greg's point, and this is echoed across CPOs throughout the industry, and pretty much regardless of the vertical, it's not a lack of like bells and whistles and not a lack of features that exist out there, 'cause there's certainly a lot of very capable platforms out on the market. The bigger issues and the reason for the low adoption rate, and Greg's nailed it, is just the usability of the tools haven't caught up to the rest of it, and there hasn't historically been really an option to have ... you know, you could pick either ease of use or enterprise grade. So, not as many companies focusing on really making sure that the usability is there along with the capabilities that enterprises really need. So, that's the, that's our kind of prediction for why that is.
Greg Tennyson: And just to, Mark, just to add to that point, I think what a lot of companies fail to do is consider their audience, right? Gen X, Millennials have different user expectations, UI expectations than the Baby Boomer generation. I mean, if it's, you can't collaborate, if it's overly complex to those two groups, the Gen X and the Millennial, you won't drive the adoption. It's just a fundamental fact that the more difficult the tool, the poorer the adoption.
Mark: That is an interesting comment. So, do you feel like these large, and I know I keep going back to ERP, because that's probably the most common example, but the large ERPs of today have lost touch with who the market is, or who the demographic is?
Greg Tennyson: You know, it's interesting. It's been some time since I've been at one of the high tech companies I've worked for, and admittedly, I've lost touch. But I can tell you back then, roughly eight years ago, that they had over-engineered the solution. Their primary audience was finance, it wasn't the user community, it wasn't procurement. It wasn't the supply base. They just had designed a solution that missed the match from an audience perspective, and I don't know to what extent that still exists today. But it is interesting. If you start looking at Gartner, Forester, Aberdine, the various results, they'll tell you that knowing your audience is equally important. To Alex's point, the future's in functionality of the tool.
Mark: Yeah. I think, and I know we've talked about Cloud for a really long time, but I think especially with everything moving towards the Cloud, having these bulky on prem, or for our listeners, on premises systems, you know, that makes customization really difficult or requires very cumbersome system maintenance, or it's more expensive to rip and replace. The benefits of having something that's on premises versus something that's Cloud based is certainly [inaudible 00:11:56]. I was trying to think of what the benefits could be to having an on premises system versus a Cloud based system, and one of the things I thought about was I guess, maybe it's easier to manage patch releases in a more controlled manner, but I mean, that's really the only thing I can come up with.
Mark: Stan, what do you think about the benefits and the pros and cons of having a Cloud based system versus a on prem system?
Stan Garber: Yeah. When you think about the on prem idea, the only big pro that we've seen in just a company that's super sensitive to data, that doesn't want anything outside of the world to touch it, but in today's world, pretty much everybody's going to the Cloud via private Cloud where you can have your own instance. But still, even the government's put everything on Amazon at this point. They have the Fed Gov, they actually have a gov dedicated just to [inaudible 00:12:53]. With regards to actually being in the Cloud, the big advantage is agility. And that's sort of a word that you hear a lot in sourcing. We were just at CPO Rising this past week, and everybody's focusing on like how can we be more agile, how can we get, with regards to being able to involve the platform, we at Scout within our team, within three years have been able to scale out a product that touches 110 customers incredibly fast. Like, we're able to inundate a launch so quickly that our customers some times tell us to slow down a little bit from a feature standpoint, 'cause we are, we're able to add so many different things into a tool. So, when you go into a Cloud tool, it just gives you so much flexibility on growing the actual technology infrastructure and allows you to scale up really quickly. One thing that you lose when you go to on prem is when you have big situations with a lot of in flux users, a lot more actual usage at any time. With the Cloud, you can scale up really, really fast on a business and you can deploy that, which you can't do other ways.
Stan Garber: And it's considerably cheaper, at the end of the day. Don't forget that it's in the Cloud. You're not actually buying hardware. You're not actually installing patches. You don't have to worry about any of that. And you don't have to do a huge capital outlay from your own team to do something like that. With Cloud, you just get up and running. There's really little implementation cost.
Mark: Yeah. You're moving all of those dollars from a cap ex to an op ex, which is certainly more beneficial for sure. Okay. So, you know, I listened to a podcast interview that you actually did with Phil Ideson very briefly on sales and how to incorporate sales practices into your business. But at the beginning of that podcast, you spoke a little bit about how this business came to be, how Scout came to be, and you spoke about going through all the RFP processes on Word and Excel, and some physical paper that you've had to go through in the past, and that's sort of what spawned the Scout movement.
Do you think that going to something that's more automated, and I was thinking about this when I was thinking about this interview today, but do you think that going to something more automated is gonna help people focus more on the sourcing and the negotiation process as opposed to actually trying to build out that process? And what are the benefits there?
Stan Garber: Yeah. Good question. Today what we found is, like when we started thinking about this space and we started thinking about developing Scout, it became really quickly how much manual processes were in today's ecosystem with regards to actually running, reviewing. CB just came out with some data showing 36% of individual sourcing managers' time are spent doing tactical things for the business, and only 6% looking at cost drivers themselves. And that just has completely flipped. And those manual steps do suck up a lot of the time and prevent you from getting stuff done, and you're spending wee hours into the night trying to catch up, but at that point, you don't even have the business to actually go talk about those cost drivers.
So, when you flip that model, and you can only be, you're only spending six percent let's say, or ten percent on manual things, and then spending thirty plus percent of your time looking at the business on the cost drivers, that's gonna get to this whole idea of, and every time we go to show this, it's like how do we get more ... how do we actually get in front of projects? How do we talk to the business more? Like, remove the things off your calendar that are requiring you to not be able to actually go talk to those stakeholders, to actually engage them in real conversation, to really do a plan, a map, to what you can help with, versus always sort of looking at receiving these at the last minute. So, an automation is such a critical piece of that.
Mark: Wow. 36%. That's huge. So, you know, Greg, I think this relates to a comment that I've heard you make before, as we push towards a more robust technology framework in which we can operate our negotiations and our procurement process, the role of procurement will become more consultative and advisory to the business instead of the opposite of that. Maybe you could comment on that a little bit. What do you mean by that?
Greg Tennyson: I had a conversation with Alex and Stan around how to, for their leverage Scout RFP. We've implemented their intake and pipeline technology, so the business has the ability to introduce a project, an opportunity if you will, to the procurement team through intake, and they start to describe what the project consists of, they identify where they're at in the process. Have they already selected a supplier, what the base is, and our involvement therefore is just at the tail end in consummating the deal.
But there's also some prioritization questions that are built into the intake tool to help us prioritize the work, the opportunity that they're giving us. And then the sourcing, the head of the sourcing uses that technology from a capacity planning standpoint to prioritize the work within the team and potentially jettison some of the work into the operations group. So, when you think about consultative and advisory, it's really thinking about how to engage the business. So, certainly Scout's done that from the intake and opportunities pipeline technology. So, the system is queuing up those opportunities.
So, now the category commodity manager's no longer doing all that heavy lifting. The technology is doing it for you. So, think about how time is spent. Well, now the category manager, let's say, is more focused on reviewing as opposed to doing all that heavy lifting, allowing them to better engage with the business, you know, be more consultative with the business, going deeper into what are their challenges. So, it essentially comes down to where does the category manager spend the time, and the technology is helping redirect that effort into more value add strategic initiatives, the better off procurement can be, and the greater value add that we can deliver to the business.
Mark: Interesting. Okay. Let's switch gears a little bit and start thinking about where are we going. In another article on Entrepreneur Magazine, Alex, I read that you believe that machine learning, AI, 2018 is sort of the year of machine learning, and the more and more that we incorporate machine learning and AI into our processes, the more and more we're gonna be able to realize more benefits from that process. Where are we going, in your opinion, in terms of machine learning? And I think you mentioned block chain, as well. I'm interested to hear your thoughts about that.
Alex Y.: Yeah, so we at Scout see huge, huge benefits to machine learning AI, and block chain as well in some areas, but to a lesser extent than we're excited about machine learning and AI. But we do, for us, whenever we talk to our customers about it, the part that we always like to stress though first is the starting point for machine learning and AI isn't like how can we get the computers to do the work for us or the thinking for us. The first step is really how do we get digital transformation down, because that's really the building blocks of any machine learning initiative or any kind of like more intelligent automation initiative is really to start with the data. 'Cause that's as good as, your learning is only as good as the data that you feed into it.
Anyway, so we really focus on like how do you get the digital transformation project successful in the first place, like how do you get that initiative really off the ground, make sure that you have really quality data, and complete data going in in the first place. And then we focus on how do you get the positive business outcomes that you're looking for, and then how do you leverage the data and the tools to drive those positive business outcomes your way.
So, that's kind of like just on the high level start, we always tell our customers, "Let's start with the data and let's make sure we have a really good data set to work with." And then as far as where things are going from a machine learning and AI initiative, and I'll just say that we think of AI the same way, or the machine learning initiative, the same way that we think about any of the other automation efforts that we take with Scout, and every other functionality that we build in the platform, and that's to say you start with what you would like to see, and then you go to what's possible with the tools that you have, and what parts of the workflow could Scout automate so that the humans, the customers, the end users can spend their time doing more and more high value added tasks.
So, a couple of things that just, you know, machine learning can help us to do that we know will be coming out in the not so distant future is how do you make the, right now a lot of the work flows around picking which project to work on next and figuring out where the biggest opportunities are, and then actually running the sourcing event. A lot of those work flows are really human driven and really take a lot of human horsepower, and can be automated through some intelligent tool that tells you, over time learns the way that you do things and can kind of automate a lot of those processes.
A couple of examples. One is it knows what's going on in terms of the commodities and what categories are being run more frequently throughout and if it sees an uptick in certain categories being run more frequently, letting customers overall, like putting those sourcing events on the, prioritizing those in front of the queue, and then also not just prioritizing them, but also queuing up all of the details behind the sourcing event, updating the questions that should go into that particular sourcing event based on more recent information, and then getting it ready to go out and maybe even going out to a relevant subset of suppliers right away so that you have data sets to review and make a decision on right in real time.
All of that can really be at some point automated as long as you have the data and there's a broader set of data that you could leverage to make that happen. And you can keep going with that, just even that one workflow to where you can even automate a lot of the negotiation points in every RSP or every sourcing event as well, just by leveraging the data and making decisions based on previous events and your acts there. So, yeah. A lot of, that's just one thing that we've seen that we know, kind of like the self-driving sourcing team.
Mark: Holy smokes. So, I want to paraphrase back what I think I heard you say, and I think this is sort of a game changer for me sitting here on the other side of the phone, is there's an opportunity in the future where you think that predictive analytics are gonna get so good that they're gonna be able to understand what's going on in the business, what needs to be stored, prioritize those to the front, and actually run the sourcing event for you without you having to necessarily be involved.
Alex Y.: Exactly.
Alex Y.: So, think about just what that does for organizations that are lean and don't necessarily, wouldn't normally get down to their long tail, which is a lot of organizations. I mean, if you could just automate a lot of those long tail sourcing efforts, you could wring a lot more out of, really get some great positive business outcomes.
Mark: I think with the evolution of companies like FairMarkit.com giving that price transparency in the marketplace, getting access to that kind of data makes your ability to automate that long tail sourcing process a lot easier. Do you find that, or do you think that there's gonna be, with the evolution of technology, more transparency in pricing that will help you guys to integrate that stuff and be able to formulate potentially the front end? Not necessarily the long tail, but the big spend as well?
Stan Garber: Definitely. There's definitely some companies already putting out, but part of what we're trying to do is also build out our own knowledge base as well as more and more customers come on, as more and more categories are run. 'Cause you start indexing, reviewing, and then you're starting, you're able to see maybe spikes in certain types of even indirect stuff which you aren't even thinking about. 'Cause companies will, we don't actually look at your end of pricing from any of our clients, we look at more of an aggregated view where we can sort of do some reviews and suggestions from there. So, as sort of the data sets grow, as Alex was talking about, as long as the data's all there and you've got a strong structured data set, you can do a whole lot with that.
Mark: Wow. So, the feature of procurement and negotiation looks to be very bright in my opinion. I mean, the ability to add in more technology, to make the process more seamless and easier will give and really provide time to buyers, category managers to become a lot more strategic in how they approach their spend management and how they think about the business and providing value to the business. You know, we've seen a couple of things come on in terms of mobile, in terms of PO approvals, things like DocuSign and those types of items. Do you see mobile playing more and more of a part in the sourcing event or negotiation process overall?
Alex Y.: Yeah.
Stan Garber: Go ahead Alex.
Alex Y.: I was just gonna say, I think just like with everything else, people more and more want to be mobile and you see more folks working on ... It started with iPads, but then you also have the Microsoft surface tablets, which seem to be really taking off, especially across enterprises, where it's almost kind of like the line between mobile and desktop is really getting blurred. So, I think you'll only continue to see that more and more. I mean people, at this point, especially our customers, they just expect to be able to work on whatever device that they want to work on at the time.
Alex Y.: And then, Mark, I also wanted to mention some things to you. So, what you said on the discussion around intelligence and the tools that exist out there. I just really like the point that you made about the fact that it's all about getting the strategic sourcing managers to continue to be more and more strategic. A lot of companies are still not really utilizing and leveraging the sourcing managers. A lot of category managers are still doing a lot of things, too many things manually, and not spending their time being a real asset to the company, which they want to be and they definitely want that seat at the table, and a stronger influence and a stronger voice in the company. But they're just drowning in Excel and manual work.
And a lot of these tools, it's not about moving a sourcing manager out of doing work period, it's just moving them out of doing work that's lower value add to work that's higher value add. So anyway, I like that point that you made and just wanted to reiterate that.
Mark: Yeah, no. I totally agree with you. I think people get scared about technology, right? They're like, "Oh no, the machines are gonna replace us," and that's just not true at all, right? I mean, essentially what we're heading for is just to become more strategic. If I'm focusing 80% of my time on administrative things that can be done by a machine, why wouldn't I do that? I mean, it just seems like a no-brainer. I'd rather be spending 80% of my time focusing on big, strategic problems that the business is facing and helping them solve those problems as opposed to spending my time formatting an Excel sheet.
Alex Y.: Exactly.
Mark: I 100% agree with you. Covered a lot of ground today in terms of where are we now, where are we going, how are we gonna get there. In terms of the adoption rate, I think that's a key point, you know. If we're only experiencing 15 to 20% adoption on some of the existing systems that are out there, focusing on why that is, I think, is big. A lot of companies promise more ease, more control, and not having that UI, that user interface, is surely probably one of the lowest hanging fruits that people can focus on, or companies can focus on to make it an easier adoption for companies.
I think what you guys have shared today has been truly valuable for the listeners, and I think for the listeners, you know, something that I want you guys to start thinking about is how can you integrate technology into your jobs to make your jobs easier? What are some very easy things that you can do? Like even learning something as easy as building a basic macro in Excel to formulate your analysis so that you're not spending hours and hours doing your analysis over and over again, because you're pulling it generally speaking from the same systems all the time.
And then for the leaders that are listening to this call, the CPOs, what are some things that you could be doing to integrate more technology into your business to free up time for your team? Because essentially, that's what you're trying to do. You're trying to deliver more value to the business, and the only way to really do that is to create more time for your teams, and one of the ways you create more time for your teams is to implement technology that frees up their time.
So, I think what you guys have helped us to discover today is that the future is bright when it comes to procurement and negotiation technology. I thank you for the time that you spent with me today. I know you're both, and Greg, I know you're very busy as well. So, thank you so much for spending time with me.
Stan, if people want to find out more about what Scout is doing and what you guys are doing, where do people find out more?
Stan Garber: Yeah. If they want to head over to just ScoutRFP.com, we've got a ton of content about what we're doing, but then mainly I would actually recommend to the quote you mentioned earlier, we have the Harvard paper right on our website you can download, which literally talks about how to supercharge in high performance with technology, regards to just sourcing, that Harvard did a big study on recently. So, I highly recommend anybody to jump on the website and download that white paper.
Mark: Awesome. Awesome. And Greg, if people want to find out more about what you're doing at VSP Global, where can they find out more about you?
Greg Tennyson: I'm on LinkedIn, but they can also email. My contact details are in my LinkedIn account. I would love to have a conversation. Thanks, Mark.
Mark: Wonderful. Again, gentlemen, thank you so much for your time today. I really appreciate it. For the listeners, I'll be linking out all of these resources that we've spoken about today in the show notes, so you won't have to go digging for them. Thanks so much for listening. I really appreciate it and look forward to hearing from you soon.
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