The ROI Rules of AI: Procuring Success (Sponsored Content)

Summary

Masters in Business: The ROI Rules of AI: Procuring Success

Release Date: December 16, 2024

In the December 16, 2024 episode of Bloomberg’s Masters in Business, the sponsored series “The ROI Rules of AI” delves into the transformative impact of artificial intelligence on procurement processes. Hosted by Edward Adams and featuring insights from Gary Kodowitz, Chief Data and Analytics Officer at Dun & Bradstreet, the episode explores how AI-driven solutions are revolutionizing supplier management and risk assessment in large organizations.

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1. Introduction to the Procurement Challenge

The episode opens with a portrayal of the intricate challenges faced by procurement professionals in large corporations. Edward Adams sets the stage by illustrating the exhaustive process of vetting suppliers, which involves assessing financial health, legal standings, ESG (Environmental, Social, and Governance) scores, and vulnerability to geopolitical or natural disruptions. “[...] It could take you days to thoroughly investigate just one potential supplier” (00:00).

2. The Efficiency Problem in Procurement

Gary Kodowitz highlights the core issue: inefficiency. “[...] every one of these tasks are pretty time-consuming” (01:15). He emphasizes that the traditional methods of supplier evaluation are not only labor-intensive but also slow, hindering companies from making timely and informed decisions.

3. Dun & Bradstreet’s AI-Powered Solution

a. Building Ask Procurement

To address these challenges, Dun & Bradstreet collaborated with IBM and Bloomberg Media Studios to develop “Ask Procurement,” an AI-powered natural language interface. This tool leverages IBM’s WatsonX platform to allow procurement officers to swiftly research and evaluate suppliers. “Give me everything I need to know about company ABC” (04:04) is an example of the type of queries users can input, enabling comprehensive and rapid data retrieval.

b. Features and Capabilities

Ask Procurement integrates extensive data on over 590 million private companies, encompassing supply chain management, credit decisioning, and ESG metrics. Users can perform multifaceted searches, such as identifying widget manufacturers with strong credit ratings, low debt-to-equity ratios, and minority ownership. This holistic approach streamlines the supplier vetting process, significantly reducing the time required to assess potential partners.

4. Measuring Return on Investment (ROI)

Gary Kodowitz outlines two primary metrics for evaluating the ROI of AI implementations:

1. Accuracy in Decision Making: Ensuring that procurement professionals have immediate access to comprehensive and accurate information to make informed decisions. “[...] Do I have all the information readily available to me in order to make the right decision?” (04:42).

2. Efficiency and Productivity: Enhancing the speed and effectiveness of procurement workflows. Early users reported a reduction in vendor vetting time by 10 to 20%, allowing procurement teams to focus on more strategic initiatives (06:03).

5. Collaborative Development with IBM

The partnership with IBM was pivotal in the creation of Ask Procurement. Gary Kodowitz praises IBM’s multifaceted role: “IBM is an amazing partner [...] they have a build team that helped us gather the requirements as well as actually develop” (06:37). IBM provided not only the technological infrastructure but also expertise in developing and fine-tuning the AI solution to meet Dun & Bradstreet’s specific needs.

6. Insights and Lessons Learned

Dave McDonald, General Manager of the US Industry Market for IBM, shares valuable lessons for organizations embarking on AI projects:

• People, Process, and Technology: Successful AI transformations require a balanced focus on people and processes, not just technology. “AI shouldn’t be an IT only led initiative [...] you always need to have a line of business sponsor” (07:31).

• Competitive Advantage through Data Integration: Combining proprietary data with advanced natural language processing capabilities is crucial for creating unique and competitive AI solutions. “Being able to combine private data that others don't have access to with the traditional large language model capabilities” (07:31).

7. Future Developments and Phase Two

Looking ahead, Dun & Bradstreet is advancing to phase two of Ask Procurement, which involves integrating customers’ proprietary supplier data into the platform. This enhancement will allow more departments within organizations to leverage the tool, further increasing efficiency and reducing redundant tasks. “[...] the stakeholders are able to ask and get the questions answered themselves” (09:07).

8. Conclusion

The episode concludes by underscoring the significant impact AI-driven tools like Ask Procurement can have on large organizations' procurement processes. By enhancing both the accuracy and efficiency of supplier evaluations, AI not only mitigates risks but also frees up valuable resources for more strategic activities. Edward Adams wraps up by encouraging listeners to subscribe and engage with the content, highlighting the ongoing exploration of AI’s role in transforming business operations.

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Notable Quotes

• Gary Kodowitz [01:15]: “Every one of these tasks are pretty time-consuming.”

• Gary Kodowitz [04:42]: “Do I have all the information readily available to me in order to make the right decision?”

• Gary Kodowitz [06:37]: “IBM is an amazing partner and they partner with their customers, I think from multiple different dimensions.”

• Dave McDonald [07:31]: “AI shouldn’t be an IT only led initiative [...] you always need to have a line of business sponsor.”

Timestamps

• 00:00: Introduction to the podcast and procurement challenges.
• 01:15: Gary Kodowitz on efficiency issues.
• 02:18: Overview of Dun & Bradstreet’s data capabilities.
• 03:26: Specific data points used in procurement.
• 03:48: Introduction to Ask Procurement.
• 04:04: Examples of user queries.
• 04:42: Defining ROI metrics.
• 05:03: Understanding customer workflows.
• 05:30: Educating customers on generative AI.
• 05:37: Customer “aha” moments with AI.
• 06:03: Early ROI results.
• 06:37: Partnership with IBM.
• 07:17: Insights from IBM’s Dave McDonald.
• 08:41: Plans for phase two of Ask Procurement.
• 09:07: Expanding product usage across departments.
• 09:27: Conclusion and sign-off.

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This summary encapsulates the key discussions, insights, and conclusions from the podcast episode, providing a comprehensive overview for those who haven't had the chance to listen.

Transcript

[Edward Adams]

Since you're a subscriber to this Bloomberg podcast, we thought you'd be interested in a new four episode sponsored podcast called the ROI Rules of AI. Produced by IBM and Bloomberg Media Studios, it explores how business leaders are thinking about the return on investment of artificial intelligence projects. You can subscribe wherever you listen to your favorite podcasts. Here's a recent episode Imagine you work in the procurement office of a major company. You've been assigned to find a supplier for a key component of your flagship product. You need to limit your company's risk, so you begin by asking, is a potential supplier financially healthy? Are they being sued? How do they score on environmental, social and governance metrics? What are the odds the supplier could be temporarily shut down by a war or a hurricane? And those are just some of the questions you'd have to answer. It could take you days to thoroughly investigate just one potential supplier.

[Gary Kodowitz]

The problem was efficiency. What we found is that every one of these tasks are pretty time consuming.

[Edward Adams]

That's Gary Kodowitz, Chief Data and Analytics Officer at Dun Bradstreet. His company is just out with a new product powered by artificial intelligence that enables procurement professionals to research suppliers quickly. This is the story of how they built it and what they and their clients learned along the way from IBM and Bloomberg Media Studios. This is the ROI Rules of AI and I'm your host Edward Adams. On this podcast, we're exploring how organizations of all sizes are using AI to transform their operations, aiming to increase their return on investment and that of their customers. There's no more storied company in financial data than Dun Bradstreet.

[Gary Kodowitz]

Dun and Bradstreet is a data and analytics company that's been around for almost 200 years. We collect data on over 590 million private companies and we provide our customers insights into supply chain management, credit decisioning, lending decisioning, and sales and marketing.

[Edward Adams]

Whether you're buying or selling, you need the kind of information Dun Bradstreet collects. Sales staff use it to prospect for potential customers. Banks use it to assess the creditworthiness of a company applying for a loan, and procurement professionals use it to de risk their supply chains. And if the pandemic taught companies anything, it's that supply chains have a host of risks, both foreseen and unforeseen. It's the job of the procurement staff to anticipate what could go wrong and mitigate those risks. Dun and Bradstreet has long provided access to its data cloud through its own digital interface and through third party procurement applications. A Procurement staffer researching a potential supplier.

[Gary Kodowitz]

Might I want to look at their ESG score, I want to look at their credit score, I want to look at their supply chain profile, or I want to look at where they're physically located. So all those lookups that you would typically do take time.

[Edward Adams]

To save procurement staff time, Dun and Bradstreet worked with IBM and its WatsonX AI and data platform to create a new natural language interface called Ask Procurement where procurement officers can ask questions as.

[Gary Kodowitz]

Simple as give me everything I need to know about company abc.

[Edward Adams]

Or staff can search for all their specific procurement criteria at once, such as asking for widget manufacturers which have strong credit, low debt to equity ratios and are minority owned. From an initial list of suppliers generated by Ask Procurement staff can further narrow the prospects by asking additional questions. The product took about six months to build and began being offered to customers in early November. It's already paid dividends. For Dun Bradstreet, according to Kotovitz, the.

[Gary Kodowitz]

Return on investment is two things. Accuracy as it relates to their decision making. Do I have all the information readily available to me in order to make the right decision? The second is efficiency and productivity.

[Edward Adams]

In the process of working with customers to build the product, Dun and Bradstreet learned a lot about customer workflows.

[Gary Kodowitz]

You start to understand do you typically look for an ESG score and a credit profile, or do you typically look for an ESG score and let's say corporate ownership? And are those two questions the most important to majority of our customers or is it something else? So that starts to over time give you a lot of sort of intelligence around how your customers interact with your data and the kind of workflows you need to design.

[Edward Adams]

And the customers also got an education about what generative AI can and can't do.

[Gary Kodowitz]

Genai itself, as we know, is a brand new concept for many customers. And I think one of our biggest challenges as we were building it is getting people to understand the kind of value it can provide them. Now that you know what it can do, customers have this sort of aha moment and then from there they start to kind of say, okay, well I understand it now, so this is everything I want out of it.

[Edward Adams]

Early users of the product have found that they are reducing the time it took them to vet potential vendors by an average of 10 to 20%. Kotavets says in sizable companies where the procurement team can number in the thousands, that's a significant savings which can be used to address more strategic procurement issues. Dun Bradstreet chose IBM because it could play multiple roles in the process of creating the product.

[Gary Kodowitz]

So IBM is an amazing partner and they partner with their customers, I think from multiple different dimensions. One is they are a obviously technology provider. IBM is also a customer. They are a consumer of this procurement product. There's certain expertise that they brought. So as we started to use WatsonX platform and the tech stack related to it, they have a build team that helped us gather the requirements as well as actually develop.

[Edward Adams]

Dun and Bradstreet's experience building asset procurement holds lessons for other companies starting their AI journeys. According to Dave McDonald, General Manager of the US Industry Market for IBM First.

[Dave McDonald]

I would say most transformational projects like starting with generative AI are all about people, process and technology. So let's start with people and process. AI shouldn't be an IT only led initiative because it kind of becomes a science project and rarely gets to that business benefit and the return on investment that people are looking for that drive the value. So our suggestion is you always need to have a line of business sponsor who is going to directly benefit from the outcome of the AI project. And it can't just be kind of a simplistic. Ask a question, get an answer. It's got to impact and change a business process. So people in process are number one. Number two is a large language model. If you're using one that everybody has access to, is giving everybody the same answers, it doesn't really give you competitive advantage. So being able combine private data that others don't have access to with the traditional large language model capabilities of natural language processing and speech, that is what's going to drive it.

[Edward Adams]

Dun Bradstreet is now turning its attention to creating phase two of Ask Procurement, which will enable customers to integrate their own data about suppliers into the data that Dun and Bradstreet provides. Kotovitz believes that increasingly procurement departments will allow staff from other departments to interact with the product, saving them yet more time.

[Gary Kodowitz]

The stakeholders are able to ask and get the questions answered themselves. That alleviates a lot of the unnecessary tasks that a procurement professional is engaged with today, which is answering questions about where's my order?

[Edward Adams]

This has been the ROI Rules of AI, a podcast from IBM and Bloomberg Media Studios. If you like what you hear, subscribe and leave us a review. I'm Edward Adams. Thanks for listening.