879: The AI Pilot Phase is Over: How to Move From AI Investment to Genuine Business Impact W/ Joseph Postiglione, Sr.

0:05Hi there, my name is Philip Ideson. I want to welcome you to the Art of Procurement podcast, the podcast that helps you, a forward-thinking procurement professional, position yourself and your team to proactively take advantage of the revolution that's taking place in procurement today. By interviewing industry trailblazers and sharing insights from our own experiences, my team and I pull back the curtain and shine a light on the strategies, tactics, and tools that procurement teams are using to elevate their impact. And today on the show, I'm delighted to welcome back Joe Postiglione Sr. Joe has written a new book, Protecting Expected Outcomes in the Age of AI, Why AI Implementation Must Evolve, and the Emergence of Commercial Control.

0:50It's something that I think is top of mind for all procurement leaders at the moment. and we're going to discuss today some of the ideas within it. So first of all, Joe, welcome back to the podcast. Always good to be with you, Phil, and I'm happy to share my thoughts with the listeners and, of course, with you. So thank you for having me. No, you're welcome. I'm looking forward to digging into this. So the first question is, really, what led you to write the book? What made you think, you know what, there's a story that needs to be told here or some perspectives that need to be shared? And I'm going to dedicate a huge big chunk of my next few months to put this together because I know this isn't easy to write a book.

1:32Yeah, I mean, this is, you know, as you know, this is the second book I wrote, the first one in a completely different area from my life and executive coaching experience. And this was more about a culmination, I think, of my management consulting experience and my procurement practitioner experience. And so I think about things. I have a very diverse view of the sales table and buying and selling. And I started to think about all the things that I was reading, which is why AI implementations aren't scaling. Yeah. Why expected outcomes aren't being developed. And so I took somewhat of a deep dive into this and I looked at it and I'm thinking, well, traditional methodology, technology methodology wasn't intended to do anything other than implement the technology.

2:20And the business case that actually got the project launched was left on its own. And once the project went live, executives today are facing this reality of how do I ensure that my expected outcomes are being delivered? and other than reporting and trend analysis and looking at things from a past view forward, I really don't have any planning and design for how to expect my outcomes are going to be delivered. And so that got me thinking a little bit more about how can this change? There's nothing wrong with traditional methodology. It's been perfectly fine for the years, but it doesn't contain a planning and design component for establishing expected outcomes.

3:10And so I think this is one of the major reasons why projects haven't scaled, along with the basic blocking and tackling things that don't happen. Workflows are not completely optimized. Master data hasn't been normalized. These are things that have been rabbit holes, as we talked about earlier, that completely derail projects. But in addition to the basic blocking and tackling, the idea of commercial control came to my mind, which is developing a complementary component to traditional implementations that focus on planning and designing how those expected outcomes can be monitored and humans can be involved or escalated to when those things are developing, that significant outcomes are not coming along the way that we thought.

4:00So this is a major breakthrough in my mind about traditional implementations. And I think the audience for the book is really twofold, right? It's for the practitioner who can help think, who I can help think through the business case modeling, and also for the implementation partner, who if they haven't heard from the executive, then what are you folks going to do to help protect my business outcomes? they're going to be hearing about that very very soon so i think that this is a dual audience that brings together the idea of commercial control where both sides of that equation can be helped yeah i think we've all probably got lots of horror stories as have many of the people listening today about business cases that um i will say of course i inherited them didn't put them together because that would uh that would you know throw myself under the bus so i'll say i inherited business cases where you look at and think three years later, how the heck was that ever going to succeed?

4:57Because, you know, it's kind of built on a hope and a wish rather than grounded in reality. As we go to, you know, back to this kind of idea of planning for success, is that something that you feel has to be in place before you even start on a journey of, for example, going and looking for a technology partner? Or is it something that runs kind of in parallel to what a traditional process might look like? Yeah, that's an interesting question, right? So I think it depends on the awareness of the enterprise. And again, my intention is to bring awareness to the possibility of this as solving a problem that is evolving, but maybe not quite front and center to everyone.

5:44So when I think about this, again, I think about the chief procurement officer being involved in business case development. So as the enterprise is starting to consider, whether it's via a PMO or wherever the initiative started, about constructing the business case itself, this is the first time that the business is going to get an opportunity to think about what specifically is it that we're expecting. And of course, there's cost savings and there's cost avoidance and there may be some efficiencies and maybe even some attrition, God forbid, but all of those things come into play here. And so what does that mean specifically?

6:21So just as I do really in my executive and life coaching thinking, I think about three things, getting clear, getting focused, and then getting results. So let's get clear about expected outcomes. If it's savings, what is the generation of the savings? If it's the contract that I negotiated, if my demand in the business decreases, my savings estimates are going to run down. If there's a change in the business, in our business in general, even in the supplier side of the house, my demand could go down, my cost could increase. And so there's specificity to where those savings calculations that are dependent upon demand and that are dependent upon not having significant business changes, we have to have a place to go to to be able to balance that.

7:14And so by clarity, I'm talking about that. Specifically what we're expecting, where can those metrics be baselined and maintained as after we go live, that those things are going to continue to accumulate or perhaps devaluate, right? So it's that kind of specificity that has to come into the planning and design function at the onset of the business case. um you mentioned some of the metrics there that you know would typically go into a business case it could be around savings or cycle times or compliance or uh you know kind of elements like that now do you think that those are appropriate value measures or um we should be as we as we're building business cases we should be looking to bring in kind of um more more measures of success that go beyond those traditional areas that we typically would look at and say whether something's been a success or a failure.

8:13Yeah, I mean, I think that's exactly right. And the age of AI is leading us down that path. Now, AI didn't create it, but I think it's exposed it, right? So truly, when you think about a business case, again, this is where the clarity comes in. What are we really expecting for the enterprise over the next five years? Aside from the basic blocking and tackling of savings and efficiencies. And even in the sense of efficiency, if we're saying that we're going to save, pick a number, 10 ,000 man hours over the course of this implementation, how are you going to evaluate that? What did we do with those 10 ,000 hours that you're saying that you're going to save?

8:51And how does that manifest itself into value to the enterprise? These are very deep questions that absolutely have a root in the business case design and planning component. I think that's a really important one. And I think that it's something we've been talking about this year on Art of Procurement in the context of procurement leaders thinking around, you know, their implementation of technology and efficiency gains they may gain from technology. This idea of it's all well and good freeing up capacity within a team, which kind of speaks to what do we do with these 10 ,000 hours if you don't necessarily know what to do with them when they become available.

9:26and if you don't really know what to do with them once they become available then most likely they get taken away from you rather than actually being able to be additive and and deployed to this higher value work that we talk of which then you know compounds the business case but if we don't think about that up front we're probably looking at these as an efficiency play and then we we've kind of back to square one in terms of the value that we can deliver because you just have you know ai doing the work that people did before and the people have gotten. And then you see this then, you know, my original thesis for the title of the book was avoiding the CFO hot seat.

10:05You might recall, I had showed you that, you know, when I read one of my original drafts for the title of the book, which I've changed, but I think that that still holds true, right? So at the end of the day, the CFO up to and including the board is going to be saying, okay, well, so you approved a 2 million or a$10 million investment in this project. where's the returns? And that's going to become an increasingly more difficult question for the executive sponsor to answer simply via reports or trend analysis. It's going to be important to know not that I'm missing my target, but why have I missed my target?

10:42What's actually happened that's caused me to miss this target? And does the investment that was granted for this initiative still hold true, or is the plug potentially going to get pulled, which is the worst eventuality because money has been wasted, time has been wasted. And everybody in the beginning with AI has always been interested in, we've got to do something with AI, we've got to have a pilot. I think actually when we had the event in San Francisco just recently, one of the folks on the consulting side, death by a thousand pilots, right? And all of the things that never got to scale. And I think when you peel back that onion, you're going to see exactly what we're talking about as being one of the major causes of it.

11:26A lot of procurement leaders I talked to, you know, are pretty risk averse when they are looking to invest in technology, for example, because they feel like they only have one shot at getting budget. And so they're afraid of taking that and it being shown to not drive the ROI that was initially anticipated. You know, as we've laid up, you know, I think that being as deliberate as you can be in the business case, the development of the business case and what you include in the business case is one part of it. But it's also how do you track that so that in two years time when you reflect, you have a strong, not a story because the data is what tells the story, but that you're still, you're kind of managing this investment very closely to ensure that when you do that reflective, the ROI has been achieved.

12:22Or if it hasn't, there are very good business reasons why it hasn't. What needs to be in place to be able to do that, which you see is often missing from the management post, we did the business case, we've gone live, how are we going to make sure that this works like it's supposed to work? Yeah, and that's really not magic, right? So this is where the intentional planning and design comes into play. And so again, we talked about the level of detail that needs to happen in the business case. But now you're taking that level of planning and design during the implementation and essentially empowering agents to monitor, detect, evaluate, escalate, and potentially intervene at some point when we have more confidence in AI.

13:12But those steps, those steps for what I call the commercial control operating center, after we go live, if the planning and design was sufficient upfront, we have created through intake and orchestration and autonomous agent movement, those components to monitor, detect, evaluate, escalate, and intervene at a time where the business case, given boundaries, is moving in a significant direction other than what we intended. Yeah. That, to me, is going to become a holy grail. Do you feel that in the context of AI and investment in AI, and we mentioned pilots, I think a lot of experimentation with AI is done with trying to experiment with the technology as opposed to having that defined.

14:12This is what I'm going to do. This is the business case behind it. This is what success looks like. How do you balance that need for, we're experimenting with something that we don't necessarily know yet and so we have an idea of what we think the roi might be based on things we believe is achievable versus this is hard and fast you know the planning the outcomes how we're going to manage the outcomes um because i wonder if a lot of the the the ai pilots that do stall is because it was more of an experiment in the first place than uh you know something that was a bit more structured and, and, and I don't want to say thought through, but intentional perhaps is the right word.

14:56I mean, I think that's a hundred percent correct. And I think the need for speed drives a lot of these decisions that you just mentioned. And it's absolutely the prescription for mediocrity, if not failure, if you don't take the time, if you're not completely sure about what you want to try to achieve, how will you know you ever achieved it. And then, you know, you're constantly looking back and say, geez, I should have done that. And I'm sure everybody that's in a failed pilot has come to that realization. So what do I think is a potential solution to that? Well, implementation partners have a wonderful opportunity here to expand the business requirements definition side of the implementation, which is the most critical part of any project.

15:45How clear are your requirements? And again, we talked about this a little bit, right? It's not just technology. It's just not the intake and the orchestration. It's about what are my objectives and how after I go live, can I feel comfortable that I'm gaining or I'm losing ground on these objectives such that I have enough time to adjust and continue to have the project succeed? You can't do that with reporting. You can't do that as a result of knowing what's happening and not knowing why it's happened And how did I miss that during the implementation? And I think that's the sad reality of where lots of them are today.

16:26I think a part of really what you believe the role of the CPO can evolve into is helping our organizations at large think about business case design. And, you know, we're not talking about this in the context of just going and buying procurement technology. we're talking about this as the role of the CPO and the procurement departments across the enterprise. Often we as procurement struggle to not interject ourselves in that process, but to be a part of that process. We're not seen as being able to fulfill that role. I wonder if you could just share a few thoughts on how we can ensure that we are in that room when those conversations happen.

17:10Yeah, I mean, I think that's really the million dollar question, right? And so I think this comes to an individual approach to things. My own happens to be that I'm a constant seeker of truth and inviting myself in one way or another to a critical conversation that's going on in the business. And invite by inviting, I mean to say that someone says, they happen to mention that, look, we're having a conversation next week on this particular thing. And I said, you know, I have some ideas about this. I'd be happy to share them with you if you think that they're going to be helpful. And so it's sort of like a backdoor inviting myself into a conversation, but the more you could become, the more than you can participate in those levels of conversation, given your background and your skills and the things that people know you possible to share, I think is one of the surest ways into that conversation.

18:11I think the other is, if you're a direct report to the CFO, and you are involved in capital planning and budgets, you're almost by default going to know about these major projects that are coming down the line. And then as an example, now I'm an author of a book that talks about commercial control and the benefits of realizing, planning and designing, realizing expected outcomes. Almost by default, as people become aware of that, they may be curious about your opinion about things. And so the road to getting a seat at the table has never been easy. And I think it's one that every CFO, CPO that is part of Art of Procurement and elsewhere has become to realize that.

18:57And so you have to put yourself into the fire a little bit, risk a position that may not be the easiest to try and espouse, only to get your point across. And once you have a win in your column, the road gets a little easier. Yeah. Yeah. When you see that, what's our responsibility to highlight when something isn't going to achieve what we set out to achieve? What I mean by it, we can see early, so you have early warning systems in place as we become more involved in the tracking and monitoring of outcomes versus business cases. and you see that you need to do a pivot, what's our responsibility as procurement leaders to drive that when a business leader may feel as though they're the people who, they may even be trying to hide the fact that things are not going to plan because either they believe that it will, everything will work out, trust the process, work out in the end, or because they don't necessarily want it to be seen that something that they believed would occur has not occurred?

20:11Like what's our responsibility in that situation? I mean, that's a tricky one, right?

20:18I think it comes back to the capacity for change in an organization. If an organization is not risk averse, they want to do the right thing and they realize that, you know, mistakes are, I even hate to use the word mistakes. things didn't work out exactly the way we planned and the key word is planned right so if you planned it properly and it didn't work out as expected you can pivot because you know what you had expected you know by virtue of commercial control why it didn't work out and now you're able to pivot more accurately to correct it absent that you now have the potential for somebody to feel exposed Yeah.

21:00And that's a dangerous position to be in. And so for the CFO, CPO's role, I don't know that there's an active role to that. The more that we could participate in a PMO kind of a focus, then I think we're going to be involved fundamentally with everything that happens as a result of that significant investment. That, I think, is the key. So I would try today as a CPO to certainly align myself to the PMO side of the house. And if I'm a direct report to the CFO, I should have a pretty open channel to being able to discuss these things in the best and creative way that I could. I want to come back just to thinking of, because the frame of the book is around AI implementations and bringing commercial control to AI implementations.

21:53What in your mind does an optimum AI implementation or implementation of AI technology process look like that maximizes the likelihood that you will get the business case that's been set out, you'll achieve the business case? Yeah. I mean, I think saying it plainly is to expand into the planning and design of implementation, the expectation of outcomes. Yeah. I mean, that's the key. Going into the nitty gritty detail of that is probably not, we're not going to be able to do that here in this call. But I think just coming to the mindset that I have to plan and design my expected outcomes, and that has to be a part of the implementation plan, is the very first step.

22:44And then depending upon where the business case development is, and depending upon the implementation partner who has the understanding and the wherewithal to implement commercial control, And that's going to be an ongoing evolution, I think, as part of my awareness campaign. I think that puts the enterprise in the very best position to plan, design, and actually achieve them. Yeah. Now, as I start to wrap up, when I think about AI and the use of AI, and where competitive advantage comes from, there will be some organizations who are fast adopters. and so they'll have a period of time when they have a competitive advantage over their peers because they were a fast adopter of AI.

23:30But ultimately, over a period of time, it's likely that all organizations kind of catch up to that. So in a world where everybody has access to the same AI technology, the question then is, where do you continue to get that competitive advantage from? And I think one of the ways is like, how do you use it? Are you using AI for an efficiency player using it for a value added, like what's the outcomes you want to drive. But I'm interested in, you know, how else should we think about how we can drive competitive advantage from the use of AI and tie back to, you know, the ideas that you talked about today and the ideas that you talk about in the book.

24:10So to be sure that I'm clear on your question, is it about what additional expected outcomes could there be? I think it's how do you manage the

24:25implementation and use of AI so that it drives the outcomes that you want to drive, that you have identified up front, and ensuring that you actually get what you wanted to. Can that become a discipline that drives competitive advantage? I mean, I think 100 % it can. And I think, now let's talk about the competitive advantage from two perspectives. The competitive advantage internally to the enterprise is to invest the time and the energy into the business case planning component and to make sure you have the right implementation partner that understands the importance of both sides of that, technical and commercial control.

25:07and how does that, I think the competitive advantage is really going to lie more on the implementation partner side the more that they begin to understand and come to this conclusion because the buyer, the executive buyer is already asking for it. So from the internal perspective, I think the requirements gathering conversation for the business plan itself is the first competitive spot internally that allows the enterprise to think about things differently and to begin to plan for things differently so that the plan and the design for the expected outcome is, again, clear, and it's absolutely going to be included in the overall implementation plan itself.

25:48That, I think, is the single biggest thing that can enhance the ability to develop and deliver expected outcomes. Well, Joe, I want to thank you so much for joining me on the podcast today. And my last question, I think, is because a lot of procurement leaders right now are going through this process, one of their own operating model and the implementation of AI across their own operating model and how they ensure that, you know, they manage the risks associated with going asking for investments and carrying that through into outcomes. But also the role that we play as procurement in helping the rest of the organization figure out that as well.

26:27So if anyone's interested in reaching out, discussing this a little bit more, going and finding the book. Again, the title is Protecting Expected Outcomes in the Age of AI, Why AI Implementation Must Evolve and the Emergence of Commercial Control. Where's a good place for them to both find you and to find the book? Yeah, so the book should be in publishing before the end of this month, and Amazon and IngramSpark will have primary housing for the book itself. To reach me, you can reach me through LinkedIn, or you could reach me at joeatclearpaththinking.org. Okay, well, thank you, Joe. What we'll do is we'll put links to the book and to your LinkedIn profile on our show notes page.

27:17If we put your email address out there, you'll be inundated with spam, I'm sure, who bought spam, sending stuff over to you. We'll get that LinkedIn profile on the book on our show notes page, which will be at a procurement dot com slash podcast. That's a procurement dot com slash podcast. And you'll search. You'll see all of our podcasts there, including this one with Joe. So one last time. Thanks for joining me today. you're very welcome phil thanks for having me and i'm happy to have been able to express a little bit of what i think is the future thank you

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