On March 6, the world was presented with an interesting new alliance to consider between Salesforce’s Einstein and IBM’s Watson. The ‘global strategic partnership’ will bring together Salesforce’s customer relationship data and Watson’s data on weather, healthcare, local shopping patterns, and financial services. Their joint solution(s) are expected to be available in the second half of 2017.
‘How wonderful’ many readers of this news may have thought to themselves. ‘This is truly the beginning of a bright new journey for Artificial Intelligence (AI)…’
Once casual interest wears off, procurement and supply chain professionals must regard this news a second time with professional eyes, as has been the case with so many other technological advancements. What does the rollout of AI mean for the buy-side players in commercial interactions? Let’s think about this from the point of view of the people who will have to face this well-informed army of AI empowered sales reps.
Just as procurement centralizes spend and contract information, sales teams collect data about their current and prospective customers. Procurement has been applying analytics to improve the quality and speed of our decision making for years, and sales does the same. But the addition of AI to each of these scenarios may lead to changes in strategy and tactics that others don’t expect. The information that procurement thinks of as ‘enrichment’ may soon expand to include real time feeds regarding risk, weather, finance, and the news. Assuming both teams are on roughly the same AI adoption trajectory, sales teams will soon be able to incorporate broad trends and factors in the decision-making process such as localized events and buying patterns or the impact of weather/seasonality on demand.
Three of the areas where sales stands to gain the most by applying AI are lead generation, opportunity evaluation and account management. Each of them has a corresponding discipline in procurement that will be disrupted by AI if we are not prepared.
Lead Generation – translated to procurement: Qualification
Business development is expensive. When a sales team is presented with a lead, they must assess its potential upside for the organization. How likely is it to convert into a deal? How much might that deal be worth over how many years? How high maintenance will the company be as a customer? Are there PR opportunities associated with the company based on their industry, geography, or brand? A sales AI could use historical data to predict how likely the conversion is and make recommendations about the best way to convert the lead based on the relevant contact point, industry, and need.
Impact to procurement: Some sales people may prove harder to discourage if they have access to additional information suggesting that your company is the ideal target for them. Alternately, new suppliers may have to be persuaded to participate in the sourcing process if their internal data categorizes your organization as less than likely to convert.
Opportunity Evaluation – translated to procurement: RFx Bidding and Negotiation
For every hour procurement spends looking for competitive suppliers, understanding the cost drivers, and evaluating alternative solutions, you can be assured that a sales team spends two. Even companies that are not large enough to be ‘market makers,’ invest time and effort to create competition between prospective suppliers. The end goal is to maximize the value created in exchange for the spend committed. Each sales team in the mix is trying to achieve the same for their organization. Actual data can make the RFx participation process a calculated rather than ‘emotional’ decision.
Impact to procurement: Just as with Lead Gen, new prospective suppliers may be harder to engage in the sourcing process. The sourcing team will have to be earnest and specific about the opportunity each supplier has to win the business. Procurement should be prepared to address targeted questions from new but well-informed suppliers early in the sourcing process. Our responses will likely be the final factor in whether each supplier decides to participate.
Account Management – translated to procurement: Relationship Management
Once the deal is done, both sides want to make sure everyone is meeting the terms of the agreement. This particular area of AI enabled sales may be of the most interest to procurement. Having more automation in a supplier’s CRM solution may improve supplier responsiveness and their performance against contract metrics. On the other hand, this is also when a supplier’s predictive understanding of demand could well bust the budget, even while keeping internal stakeholders satisfied. Do weather conditions or local shopping patterns suggest that a device will need to be serviced sooner than usual or suggest that demand for an input supply will be higher? Sales teams will have access to the information needed to recommend additional levels of service and supply.
Impact to procurement: Prepare for needs to be met proactively – and in some cases before we intended to make a purchase. If the supplier’s predictive abilities contribute to internal stakeholder happiness, procurement will have to walk a fine line between demand/spend management and customer satisfaction.
AI is here, and new applications will be identified every day. When procurement evaluates the opportunities associated with new technological capabilities, we should remember that our counterparts in sales are doing the same. Each procurement or sourcing process (from our perspective) is a single lead or opportunity in another company’s sales funnel.
The combination of Salesforce and IBM Watson will put powerful decision-guiding information into the hands of salespeople, raising the stakes for the procurement teams involved in their sales and account management processes. Only time will tell if there is as much advantage as hype in this partnership.
Perhaps it is procurement that is best positioned to provide perspective as to the true upside of this joint effort. No one knows better than procurement how much is always needed in addition to technology when something ambitious is attempted. Futuristic technology notwithstanding, we are still in the era of collaboration and relationship-driven business. Losing focus of that in the face of exciting technology is risky for the organization that makes the mistake: whether it happens in sales or procurement.
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