AI can enhance procurement function of consulting firms
The rise of artificial intelligence (AI) is initiating a plethora of opportunities across industries. In consulting, the successful adoption of AI allows consultancy firms to enhance their offerings, and streamline their internal operations to better meet stakeholder demands. Diego Barilla, a former McKinsey & Company partner and now Chief Customer Officer at Globality, on how AI can enhance the procurement process of consulting firms.
Services are about people – their experience, their work styles and their personalities. It can be challenging for consultancy firms to accurately evaluate whether a new IT vendor, marketing agency or HR services firm will be a good fit if they have never worked with them before. The quality of the service experience can also vary, depending on the providers’ incentive to serve the firm. Do they see it as a one-time deal, or are they interested in building a relationship? Realistically, service providers chase opportunities, so keeping them motivated to give firms their best effort every time can be a challenge.
In recent years, many consulting firms have significantly increased external spend on marketing, technology, and hiring and development to meet competition, productivity and business demands. Consequently, enterprise service procurement is now a highly complex and expensive undertaking. Partners tasked with procurement have to juggle precise requirements for scoping, creating a request for proposal, evaluating proposals, vetting candidates and negotiating contracts across multiple business stakeholders and budgets.
While relying more on external service providers’ expertise to achieve their desired outcomes, companies are also facing several major challenges. For one, as consultancy firms know well from their own line of business, each project is delivered differently; teams adjust the work product to match specific customer requirements and circumstances. After agreeing to the scope of work, firms often don’t know enough about the service they are buying to evaluate differences among providers, and traditional procurement processes struggle to generate a comparable set of proposals.
It’s quite common to run a complicated, competitive bid and end up with two or three proposals that are so distinct that decision makers end up just going with their first instinct, wasting everyone’s time and effort.
The AI revolution in procurement
The advent of artificial intelligence (AI) presents a significant shift in the service procurement dynamic for consultancy firms because it saves a lot of resource hours while enabling better decision-making and return on the money spent. For example, whenever a service provider is briefed using a digital scoping tool, the accuracy of the brief allows for clearer and more comparable proposals from bidders and eliminates many of the clarification rounds typically required during the proposal creation phase.
Some AI tools allow users to choose from a library of relevant templates so buyers can more precisely scope needs and write briefs more efficiently. Some sophisticated tools go even further, using dynamic questions that guide companies to create a customised brief by using prior knowledge from similar projects. This increases the quality of proposals and enables consistency among even bespoke proposal formats, which makes submissions easier to compare and assess. It also inherently shortens the decision-making process; what previously might have taken weeks or months can now be done in a few days.
AI can also readily match the best service provider candidates to a bidding opportunity. Most of the time, new service providers are sourced when the consultancy firm is extremely unhappy or disappointed with an incumbent. Because incumbents can be so deeply entrenched in these partnerships, businesses must expend a lot of time and effort to change them, even if their performance has been just mediocre. Better providers might often go unnoticed simply because corporate buyers have no knowledge of their performance.
Transforming the sales process
In the digital era, online reviews and feedback have the greatest impact on consumer decisions. This now also applies to the B2B sector because many AI-based systems learn from customers entering real-time feedback about their experiences with providers throughout the service engagement process. This allows companies to comment on how previous assignments went, like they would do as consumers on eBay or Amazon. The AI engine can use that input to rank providers and propose the ones that are most likely to be the best fit for each project’s unique requirements. The continual feedback serves to motivate and manage service provider performance.
Better transparency on actual performance and skills matching can also be a bonus for the best service providers because the expertise of team members can be recognised. Service providers will be rewarded for quality or value, not sheer scale, administrative efficiency or marketing prowess. Incumbent suppliers might also be more likely to up their games – they may even see increases in revenue and profit from a given customer account because digital sourcing will improve their sales pipeline and enable them to become visible to decision makers who don’t yet know them, so they will win more projects faster and with fewer resources.
The future of AI for procurement is incredibly exciting because it allows IT vendors, marketing agencies and HR service providers to focus on what they do best and for consultancy firms to focus on the work that needs to be done. There are plenty of opportunities to reap the rewards of AI and turn procurement from a back-office activity to the heart of the business – while also ensuring companies consistently work with the best-performing provider for each project and business requirement.
