Applied AI - A Category Management Perspective

In the past two decades of my career in and around Enterprise Procurement, a common refrain has been the challenge of procurement's role within the higher echelons of corporate decision-making - i.e. getting a “seat at the table”. Despite its critical importance, procurement organizations often struggle to assert their strategic value to those in the C-suite. However, the advent of Artificial Intelligence (AI) has the potential to change this narrative, positioning Procurement Leaders to significantly elevate their function's stature within the organization.

Applied AI is not a distant, abstract technology; it is here, and its integration into business operations is rapidly becoming a differentiator in corporate strategy. The emergence of Applied AI offers Procurement Leaders a once in a generation opportunity to raise the credibility and visibility of the Procurement organization by helping the broader business vet and implement technology to enhance decision-making, optimize operations, and contribute meaningfully to the overall business objectives.

Corporations today find themselves at various stages and entry points with respect to AI adoption, which I categorize into three primary cost buckets: 

1. They are developing in-house AI capabilities. (R&D + Payroll Costs)
   
   
2. They are acquiring necessary AI assets. (CapEx or M&A Costs)
   
   
3. They are subscribing to AI services. (Direct or Indirect Expense)

Show me a company that thinks they are NOT in the subscribe bucket, and I will show you a company whose employees are experimenting with AI using personal or burner email accounts.

This organic, informal adoption of Applied AI represents a strategic opportunity for Procurement Leaders. By instituting a robust Category Management approach for Applied AI, akin to methodologies employed in managing other IT categories, procurement can assert itself as a critical driver of innovation and efficiency.

The distinction between procurement professionals that merely follow trends and those that lead will be marked by their approach to AI:

• Procurement Followers will spend their time thinking about how to get AI to work for their own function.
  
  
• Procurement Leaders will spend their time thinking about how they can help the entire business adopt AI in a responsible and cost disciplined manner.

For procurement to truly gain a "seat at the table", it must transition from a support function to a strategic partner, guiding the organization through the complexities of adoption. This involves not only a deep understanding of the respective capabilities and limitations but also an ability to navigate the broader implications for the business.

The process is multifaceted, beginning with the identification of use cases and business needs, progressing through detailed vendor evaluations, and extending to thorough security assessments, accurate forecasting of expenses, and comprehensive contracting and risk management. Moreover, it includes the ongoing measurement and reporting of AI's impact on the business, ensuring accountability and continuous improvement.

In crafting a Category Management vision for Applied AI, Procurement Leaders must focus on five key areas:

1. Strategic Alignment:   Ensuring that AI initiatives are in lockstep with the company's strategic goals and contribute to competitive advantage.
   
   
2. Vendor Management:  Building relationships with AI vendors that go beyond transactional interactions to foster innovation and collaboration.
   
   
3. Risk and Compliance:  Developing frameworks for the ethical use of AI, while also addressing data security, privacy, and regulatory compliance concerns.
   
   
4. Cost Management:  Exercising fiscal discipline in AI investments, ensuring that expenditures are justified by tangible returns.
   
   
5. Change Management:  Leading the charge in organizational readiness for AI, from upskilling the workforce to revising internal processes.

In conclusion, Applied AI represents not just a technological upgrade but a pivotal moment for procurement professionals to redefine their roles within their organizations. By approaching AI through a strategic, disciplined category management lens, procurement can become an indispensable ally in the enterprise's journey towards digital transformation.

This new era demands a shift in mindset from procurement practitioners: from cost centers to value generators, from policy enforcers to strategic advisors, and from transactional managers to innovation catalysts. As AI continues to evolve, the procurement function's ability to adapt and lead in this domain will increasingly become a barometer for its overall strategic contribution to the enterprise.

The path forward requires a blend of technological acuity, strategic foresight, and operational excellence. For those prepared to embrace these challenges, the rewards will be a stronger influence within the C-suite, a more dynamic role in shaping corporate strategy, and a front-row seat in steering the enterprise towards a future defined by intelligent, data-driven decision-making.