See what experts from The Smart Cube and Cirtuo had to say during our expert-led Q&A exploring the past, present and future of category management.
Category management has undergone a great deal of transformation over the last decade or so – and as technology, category management tools and techniques continue to advance, there’s no doubt more change is on the horizon.
We recently sat down with Prerna Dhawan, Global Head of Solutions at The Smart Cube, and Drasko Jelavic, Chief Executive Officer at Cirtuo, to get their expert insights into what this change might entail.
They talked to us about why the procurement function might be in danger, what’s needed to elevate its role and why modern technology can provide the perfect platform for category managers wanting to embrace a truly strategic way of working.
Q: In recent years, procurement as a whole – and category management – has evolved significantly. What does truly strategic category management look like today?
Drasko: I’d say the interest in reviewing category and supplier management strategies has definitely evolved, especially since the beginning of the recession. But that doesn’t necessarily mean that category management itself has evolved. Often, while the idea and the appetite is there, many companies lack the requisite skills and leadership to really execute it properly. So, right now, I’d say strategic category management is still heavily under development.
Prerna: I’d agree with that. Category management still hasn’t reached its full potential in most organisations – even in some of the bigger, more progressive procurement teams. One thing we’ve noticed when talking to the companies we work with, is that a lot are still confusing strategic sourcing tactics with strategic category management. But strategic sourcing is just one tool, and there’s so much more that can be done.
However, I think if you compare where the function was ten or twelve years ago, it’s moving in the right direction.
“In the last few years, the procurement community has been talking strategy but walking tactics.”
Q: Then what are the major challenges preventing category managers from fulfilling this strategic role?
Prerna: Being a strategic category manager requires you to truly understand three things: One is the category itself, second is the business requirements, and third is the art of procurement.
Many category managers have come from a procurement background, and they don’t have a great understanding of the wider business context. A truly strategic category manager will have a firm grasp of this, and understand the nuances of their category, including the suppliers operating in that landscape and their strengths and weaknesses.
The other big issue is time. Category managers spend a lot of time trying to build their understanding of the external supply markets and prove their credibility to stakeholders. But their time should actually be spent working closely with suppliers and business teams – and truly understanding what value looks like.
Drasko: For me, the major challenge is a lack of skills. For the last ten years I’ve delivered coaching and training sessions in category management, and I’ve noticed how difficult it is to develop people’s skills to the next level.
There are three major layers to procurement activities: operational, tactical and strategic. Across these layers there are hundreds of competencies you need to have. Historically people have been trained to fulfil the operational and tactical requirements rather than the strategic ones, so in the last few decades the procurement community has been talking strategy but walking tactics.
To put that problem in context: I believe the future of procurement is a high-level of automation in a tactical and operational sense. We’ll need fewer and fewer people in that process. So, if we don’t improve strategically as a procurement community there may be no reason for us to exist.
“We worked with one Fortune 50 company that had seven different methodologies for category strategy development.”
Q: Recently, your businesses have joined forces, with The Smart Cube’s market insights being incorporated into Cirtuo’s Guided Strategy Creation™ solution. What does this allow people to do that they couldn’t before?
Drasko: From our perspective, The Smart Cube provided the missing part of our solution. Our technology makes category management processes more efficient, incorporating AI to help people gain insights and address challenges in the best way possible. But our technology is based on user inputs, and many of the people we talked to asked for the addition of market insights.
With The Smart Cube, we can now provide human intelligence, artificial intelligence, and market intelligence combined, in a powerful ecosystem that system that oversees the development, validation and execution of strategies in one place.
Prerna: Cirtuo’s tool, powered by MI from The Smart Cube enables category managers to create robust strategies quickly, in a consistent manner across the organisation. This saves them time which they can use for managing relationships, both internal and external. The fact that our insights are incorporated means we are not adding more complexity for them – in fact we are removing complexity. With this tool, we can provide people with a single, consistent way of doing things. It’s basically everything you need for great category management in one place.
Q: Customers are already using this new combined solution. What has the feedback been like, and what have they been able to achieve?
Prerna: We’re currently running around five pilots with some of the biggest companies in the world. What’s great is that these companies recognise this solution will deliver a step change in the way they approach category management. They can do things faster, they have the market intelligence to develop real strategies, and the AI helps them discover new approaches.
Drasko: Agreed. The early feedback and interest has been overwhelmingly positive. The Smart Cube’s market intelligence helps users to ask more precise questions, while we provide the guidance, and our AI engines deliver the output. It also helps procurement leaders to see how people are using the insights available, which can result in more consistent processes and results across the board.
Q: Finally, a big component of The Smart Cube’s work is uniting human intelligence and artificial intelligence. As technology continues to advance, what does the future of category management look like to you?
Prerna: I think category management will be hugely driven by technology and automation. For me that means the role will change from spending a lot of time creating strategies, to spending more time engaging with stakeholders and suppliers and really fostering those relationships. That’s always been the goal for us; technology isn’t there to replace humans, but to free us up and enable us to do our jobs better.
Drasko: I also think the future will be heavily automated. What we call ‘guided strategy creation’ is just a step on the way to fully automated category management. Ultimately, we’ll see systems produce strategies on their own for category managers to review. As Prerna said though, it’s about augmenting the human effort. You will always need a combination of human and artificial intelligence, no matter how advanced technology gets.