Episode 264: Cultivating Innovation at the Intersection of Academia and Industry with Mary Lacity and Remko Van Hoek

February 21 , 2024  |  By Brent Williams

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This week on the podcast, Brent sits down with two Walton College colleagues, Dr. Mary Lacity, David D. Glass Chair and Distinguished Professor of Information Systems and Dr. Remko Van Hoek, Professor of Practice in Supply Chain Management to discuss their co-authored recent work on research that is working in real-time with industry partners. During the episode they discuss their collaborative research exploring emerging technologies like artificial intelligence and blockchain, much of which is conducted in partnership with industry. In particular, Mary and Remko highlight a recent study that was done in partnership with Walmart analyzing AI applications in supply chain management. Their paper on the topic was also featured in the Harvard Business Review. They also share how they integrate learnings from collaborations directly into the classroom by bringing in industry partners to share experiences. 

Podcast Episode

Episode Transcript

Remko Van Hoek  0:00  
A phrase that Michael Lewis from Walmart taught me is, what's different about the 1990s versus now is that the future is here, the future is not the future it we're in it. We're living it today.

Brent Williams  0:12  
Welcome to the be epic podcast, brought to you by the Sam Walton, the College of Business at the University of Arkansas. I'm your host, Brett Williams. Together, we'll explore the dynamic landscape of business, and uncover the strategies, insights and stories that drive business today. Today, I have two colleagues with me, I have Dr. Remko Van Hoek, from the Department of Supply Chain Management. And I have Dr. Mary Lacity from the Department of Information Systems. Mary, Remko, thank you for joining me today.

Remko Van Hoek  0:49  
Thanks so much for having us.

Mary Lacity  0:50  
Yes, we're delighted to be here. 

Brent Williams  0:51  
Well, one reason why I asked you to be on the podcast was about some of the really interesting research that you two have been doing together. So I want to spend most of our time there. But before we do that, I'd love for everyone in our audience to get to know you a little bit. And you both have really interesting backgrounds, and how we're making really large contributions to the Walton College and maybe Remko, could I start with you, just if you'd introduce yourself, love to hear about your background? Because it's an interesting one of this mix of academics and industry. 

Remko Van Hoek  1:28  
That's correct. Yeah, I started teaching and researching in Europe, and then stayed involved with the Cranfield School of Management as a visiting professor. Over the years while I went into industry to practice blockchain in procurement held a number of roles in a number of industries and was grateful for the opportunity that the Walton College provided to come back to academia on a more full time basis to help develop leaders of the future while staying involved in industry as an advisor and as an educator.

Brent Williams  1:59  
Yeah, primarily the, your, your teaching procurements, probably a little more broad than that. But that's really kind of the primary expertise that you're bringing to that department and curriculum. 

Remko Van Hoek  2:09  
Yep, that's correct. across all levels undergrad, graduate. We're teaching our masters in supply chain this semester, great program, and executive ed as well. 

Brent Williams  2:19  
Yeah. And Executive MBA. Right? 

Remko Van Hoek  2:21  
Correct. Yeah. 

Brent Williams  2:23  
So yeah across all of those. Well and Mary how about you?

Mary Lacity  2:28  
Well I have been in with the Walton College now for five and a half years, I can't believe how fast it goes. And I was initially brought here to be the Director of the Blockchain Center of Excellence. And in as an information system scholar, I've studied for a very long time how enterprises adopt emerging technologies, blockchain, just being one of them, have also studied artificial intelligence for about the last 10 years looking at organizational adoption. And so then I was really excited to meet Remko, because he was studying blockchain when I first got here and supply chains. And then he brought me in on this project of how enterprises are using artificial intelligence.

Brent Williams  3:05  
Well, the you all in your own right, are fantastic researchers. And then I've just seen this synergy that you two have created. That's made you even more productive. I think, Mary, you told me nine papers that you either have published together, I believe. And what's really interesting about those, some of those where your publishing, three in the Harvard Business Review, two in the Sloan Management Review, and those are read and consumed not only by academics, but also an industry audience. So why the you two are clearly attracted to that industry and academic audience? What makes that? I don't know such a fit for you, too.

Remko Van Hoek  3:54  
I think so first of all, procurement and supply chain is a very applied field, one of the many things I love about our field is you can turn things really, really concrete in a business setting. If you think of desire to become a more sustainable business. Well, if you turn to procurement, you can make it very very concrete quickly. That's number one. And then number two, it's a young field, you know, there's so much in so much potential so much to innovate. And what's been really, really exciting about engaging with the companies that have partnered with us in our research is to travel to very much the frontier of knowledge and practice, to try and learn from those, but learn from those in a way that others can benefit from it as well, so that you can make modest contributions towards progressing both the thinking to science as well as to practice. 

Brent Williams  4:44  

Remko Van Hoek  4:44  
of supply chains.

Brent Williams  4:45  
Yeah. Well, you know, Mary, I remember I don't know if it was five years ago, it's probably close to that. Maybe one of the first conversations you and I had about the blockchain center was, you said Brent, technology is moving fast and If we're successful, we're gonna move through this technology fast, and then we're gonna move to the next one. And that's sort of that's really played out in a fairly short period of time.

Mary Lacity  5:10  
Oh, yes, absolutely. So I I've now I'm researching and teaching metaverse, right. And in addition to AI, so that's, I think one of the reasons why I love being a scholar and a teacher, and doing this practice based research because I get to learn along with everybody else. And I'm never bored, something's always new. And the other thing, just to piggyback on what Remko was saying, because we study early adopters who are successful, I think our research has a lot of impact, because the first question everybody asks about new technology is, who else is doing it? 

Brent Williams  5:41  

Mary Lacity  5:42  
What kind of business benefits are they getting? And so we come up with what we call action principles on how you can leverage these technologies to get business value.

Brent Williams  5:51  
And in one of these articles, and Remko, you were the lead author on this. It's one thing that stuck out to me it was it was the article, how Walmart automated supplier negotiations in the Harvard Business Review. And the piece of it that really stuck in my mind. I mean, there's a great story there. But you had, I don't remember if it was four or five points that like, you know, if you're thinking about this, do these things. And it just took the research and the story and made it very actionable. So we're talking about this research, and I'm gonna get you all and Remko might start with you. As I look across it, it's this intersection of AI automation, a procurement focus that broadens the supply chain and certain of the papers that you've written. Am I anywhere close to describing it correctly? 

Remko Van Hoek  6:44  
I think you're spot on. I think it's a really, really fast moving field building on Mary's point from a few years ago, there's so much interest in in in AI. And there's so many questions being asked by researchers about what is the potential in supply chain? And what is it going to do? What's it going to do for the future of work? What is it going to mean for our students that are going into this field in terms of what their day to day will will look like? And, you know, it's it's a very, very bright future. It's, it's really, really incredible what potential it can bring for procurement specifically to grow its business contributions and to grow the coverage of spend the impact on supplier relations on business resilience, there's a ton of potential there. And what's really, really cool is that we've been privileged to be able to work with a few innovators that are really pushing the thinking into practice, who have generously shared with us to let us learn from them and let us together with them. Because that piece, your reference is co authored with Walmart executives, in fact, to share that, to advance the thinking and help others as well.

Brent Williams  7:51  
Yeah, that piece co authored by the two of you, but Michael DeWitt, he's a co author from Walmart and Travis Johnson. 

Remko Van Hoek  7:58  

Brent Williams  7:59  
It is a is a co author. Tell us a little bit about that study, if you don't mind, because I, you know, I'm a supply chain professor so I found it pretty interesting.

Remko Van Hoek  8:07  
So it the technology in there is it's an AI chatbot that will over chat, negotiate terms and conditions with existing suppliers of Walmart. And that's very counterintuitive, right? Because when people think of a procurement professional, you think of something that somebody that can do a lot and probably is really good at negotiating. Well, here's an example of don't let the buyer do that. Let the bot do it. And you can get incremental savings and business value. That was the counterintuitive element to that, if you dig into the story, part of why this is augmentation of procurement rather than replacement of buyers, is that the bot is able to target suppliers that buyers don't necessarily have sufficient time to properly negotiate with. So the truth of the matter is that when you look at a procurement organization, typically you have 1000s of suppliers, and quite a large number of those falling with so called tail spend. So they are relatively small when you look when you look at the amount of money you spend with them the number of transactions you have with them. And so they're not necessarily an area where professional buyers can spend a lot of time developing relationships and negotiating terms and conditions. What this technology does is let the bots take care of it Yeah, let the bot take care of it so that you can negotiate with those that you normally don't have time to negotiate with.

Brent Williams  9:33  
Allowing the buyer to spend more time on the things that are most important to that business 

Remko Van Hoek  9:38  
Exactly. There's two elements to what does it mean for the buyer, number one, you can focus on more on strategy and you can focus more on critical, most critical relationships number one, but number two, the bot doesn't it's controlled AI. So the bot doesn't just come up with what am I going to negotiate with whom, the buyer has a key role into selecting the suppliers to target, providing data on who to approach in what way and developing the negotiation scenarios, as well. So the bot can then execute. So it is true, a perfect example of procurement augmentation to make the buyer more impactful, and to help procurement grow to value at generating in key relationships as well as in the business. 

Brent Williams  10:25  
You know, one thing that interested me in the article was, I don't know if you use the term adoption rate from the suppliers. But that term I'm using, and it was really high the number of suppliers in the in the pilot 

Remko Van Hoek  10:39  

Brent Williams  10:39  
that that adopted. So clearly, they're seeing benefit, What benefit do you think the supplier is getting from this?

Remko Van Hoek  10:47  
So there's a couple of benefits. First of all, they are in a negotiation with Walmart. So rather than just having to accept the terms and conditions that Walmart normally applies, there's an opportunity to discuss those, and there's an opportunity to make decisions which they previously might not have had. So that's one benefit. Number two, the technology which is pactem, that they use allows the supplier to think to go back into so there's lots of flexibility in the hands of the supplier to put control over the negotiation in their hands. And that's that's a real, a real benefit. The other thing that it has to do with how Walmart approaches negotiations, if you have a deal with Walmart, you have to deal with Walmart. So the follow through on those agreements, is very high as well, which is a real benefit to suppliers, like a pitfall in procurement is I negotiated with you yesterday. But today, I want to talk to you a little bit further. And that's highly frustrating and can be borderline, you know, unethical in terms of how you approach suppliers. There's none of that in this. There's none of that is that negotiation ends with an agreement with a commitment, a contract, crystal clear, super transparent, I'll let you add on those are just some of the points. 

Mary Lacity  12:06  
Well, they're they're, they're pretty much all of them.

Brent Williams  12:10  
Well, you know, you you all have focused in procurement. But then the about a year later, you published a paper about the use of AI to prevent supply chain disruptions. And what a what a timely topic, you know, and it's been timely for probably forever, right? We've experienced supply chain disruptions forever. But we all were hyper aware of the disruptions in COVID. But, you know, as we as we sit now, you know, we're seeing severe disruptions in shipping lanes across the world, and, you know, driving costs. So while AI doesn't solve that, exactly. Tell us a little bit about, you know, just kind of where this research.

Mary Lacity  12:57  
Let me tell you, can I just share where we were this research actually started? 

Brent Williams  13:00  

Mary Lacity  13:00  
and where it ended up. So Remko has incredible context, also with the Harvard Business Review, and after we've had a couple of successes now he's getting asked to, you know, basically commission articles. And so he was asked to what is the role of small to mid size suppliers in helping derisk supply chains? So he called me so do you want to partner on this? And I said, yes, so we spent the summer focusing on the role of small to midsize enterprises. And it was almost like trying to fit a square peg in a round hole. Because the interesting stories that kept coming up, were related to these new tools of artificial intelligence. And so we decided, let's just write the article we want to write. And the editor was very pleased with it. So that's the background story on that one. And this one, I thought was really interesting, because we also look at other adopters of pactum. So Remko, just explained how Walmart is using it. But we also have a smaller company that has used it and also Maersk. So we have that story in there. And then we have two other tools that are doing different things. So maybe you want to talk about one of the some of the other things that we're looking at 

Remko Van Hoek  14:08  
Yeah, absolutely. So Scout Visa technology that's featured in there. And you're right, by the way on Pactum. I'm helping several companies explore how can I potentially use it, which is just great in terms of how research leads to research and opportunity? 

Brent Williams  14:21  
Would you tell us a little bit about Pactum? 

Remko Van Hoek  14:23  
Yeah, so it's a it's a really cool young tech company, that the article that you referenced features one of the several use cases that they have and journey of adoption has progressed including in Walmart into other into other use cases and they're squarely focused on using AI to drive supplier interaction so that the buyer doesn't have to do it so and but there is applications in logistics, different industries, different markets. I'm helping several companies kind of think through how could that work for me. And so there's a lot more innovation to have there. It's really kind of cool. The other one you mentioned was Scout B. Scout B is service that can help you identify supply options faster using AI, then a buyer might if they didn't use the technology, and that has real premium value if you think of supply chain disruptions, right, because what happens when a supply chain disrupts? Well, you're not the only company suffering from it. Your competitors are probably facing very similar issues. And what happens, we start scrambling for is there any spare inventory? Is there any spare capacity, can I call on somebody else? Everybody goes through that scramble. But you're, you're all after a tiny bit of incremental capacity that may be left. And so the value of using AI is dead, it can put intelligence in the hands of buyers faster, you'll know about those options faster than your competitor. And that gives you an edge when you're all rushing to the last little bit of capacity that's left in the market. 

Mary Lacity  16:09  
And for and for now. Because what this is why you have to constantly innovate, right? So the early adopters are going to have that strategic advantage. And then it's going to become a level playing field when everybody starts adopting it. And they'll have to go to another innovation.

Brent Williams  16:22  
Yeah, but but also it could, I'm thinking out loud here. But while it could give you that competitive advantage and getting the capacity, there is an advantage in alright, maybe you found out you didn't get it, you know, but you found it out faster, right and increased your efficiency of what's the next solution?

Remko Van Hoek  16:40  
Correct, correct. There's two added points, if I may. The first one is, we also feature an example of Unilever, who actually uses that technology to support its efforts to grow supplier diversity and inclusion. So what Supplier Diversity and Inclusion teams in a procurement organization typically do, and I had a team like this, when I ran procurement at Disney, they help buyers find options that are with diverse suppliers that they could consider in their sourcing efforts. And so Unilever has used is to very rapidly grow the pool of supply options as inputs to buying decision. So it has a use case that is more in the ESG space, as well. So AI can help you drive progress in ESG, as well. And a second point, we also spoke to Arkestro, which is a predictive procurement technology. And one of the things that they shared on was that sometimes when they go through the existing supplier master data and all the transactions, you think of the massive data lake that companies typically have, they very often can uncover supply options within existing suppliers that have that are untapped. Right. So I'm scrambling for product A, but I didn't realize that, you know, the supplier of product B could also provide product A, I just never have asked him. And so that's another area where you could improve resilience, if you put AI in and so buyers.

bThe other really cool thing about that tool is it scrapes details right down to I think the SKU level, it'll generate a request for proposal based on historical data, email it to the supplier, and the supplier says yes, bang they go or the if the supplier counteracts it iterates. So it's more than just here's a list of potential people to look at. 

Brent Williams  18:38  
Yeah. When when you all have worked with companies, as they implemented such technology. Talk a little bit about the people side of it. Because you know, you're right, you think about like, 

Remko Van Hoek  18:50  
Thanks for bringing it up 

Brent Williams  18:51  
data technology, process people. And people always a really big part of the change management. 

Remko Van Hoek  18:57  
No, You know, Mary was the one that taught me a lot about blockchain. And the main thing that she taught me that technology is the easy part. It's about considering it wisely. And being able to approach potential adoption of mindfully as well. And that very much applies to these like these technologies. Yes, buyers get savvy in them, but they don't have to. They don't have the code. They don't have the development. They've got very capable, you know, solutions providers for that. The MIT Sloan article, actually features a very old technology that you'll remember from the 90s. It's called E auctions. 

Brent Williams  19:36  

Remko Van Hoek  19:37  
And it was actually it was Michael Lewis from Walmart international that brought this up because he actually works for one of the original e auction companies in the 90s. And brought that technology many many years later into Walmart when he when he started running procurement internationally there. And so a lot of the article is not only about on how to adopt new technologies, but also are there further opportunities to benefit from proven tried and tested existing technologies. And that's all about people and change and, and leadership?

Brent Williams  20:12  
Well, if you're listening to this, we will put a link these articles in in the notes so that you can find them. Because I think, I think after listening, you're going to want to read these. Let me let me switch gears with you for just a moment. So you know, one thing that is really interesting in listening to all of these stories, think about the number of companies you all have just mentioned to me. So industry, you are deeply engaged with all kinds of companies in your research. And when I think about the Walton College out, you know, I will say, I think our single biggest competitive advantage is our relationships and connectedness to industry. I think it is, it's pervasive in the classroom, you know, in the events that we're doing, but it's also pervasive, particularly in your research. So well, I guess, maybe, you know, talk a little bit about how you develop those relationships. And companies need to get value out of doing this. And clearly they are because they've been doing it with you multiple times. 

Remko Van Hoek  21:18  
Yeah, I mean, I'm very grateful for all the the research that we're able to do with with really cool companies, I think you've referenced a Walmart example, that's just a really cool relationship that I'm very continue to be very grateful for, which is larger than just the research. Because we actually do executive ed, for that organization. We do some coaching and out of that has grown the opportunity to also learn with them at the frontier of practice. What's cool about Walmart and the executives that are working with in particular is that they're really motivated to innovate and to think forward and do it collaboratively as well, which I think is very rare. Plus being able to willing to share learnings so that together we can drive a little bit of progress. Obviously, they're increasingly recognized for the innovator and a leader in the space that they that they are, and they're asked to talk a lot about some of the things that we research together in industry and good for them and good for the field.

Brent Williams  22:21  
Absolutely. You know, Mary, you've been working with industry, I think your whole career.

Mary Lacity  22:26  
30 years. Yeah, yeah, people talk about a virtuous cycle between your research aligning with your teacher, but I like to think of it as a cyclone, because it's that much more impactful. Probably a recent example is, you know, when I was the director of the Blockchain Center of Excellence for five years, we had 12 Executive Advisory Board member firms, including including, Walmart, and JB Hunt, and Tyson. And we did research in those companies as well as others. And then we had blockchain curriculum. And I noticed we there is no such thing as a blockchain textbook. So I went and wrote it. And it's mostly based on all of the case study work that we have done. And now that textbook is used at 14 other universities around the world. And I do want to say I get no royalties, because I didn't. I just like to say that I always waived my royalties, because I don't want to make students let be lining my pockets. But I think that's a good example. And now that I'm teaching this Metaverse, I don't have a book out yet. But some of the early papers that we've done that those are readings in our classroom, and we also bring those, we also bring those executives into the classroom. They love to guest lecture. And our students want to know well, what kind of careers can I get in metaverse? So we brought in Accenture and, and what their career paths look like. So our cyclone, our virtuous cyclone.

Brent Williams  23:41  
I mean, the teacher scholar model, you know, where, where you're it's synergy is really happening amongst everything you're doing. And I particularly love how I think this is I think I'm catching the phrase right that you said that you're learning with these companies at the frontier of practice. And what's interesting Remko, Mary, as you do that, let's say, you know, you're writing papers all week and working on this research. Well, next Monday or next Tuesday. You can't help but talk about that in the classroom. Right? It's just it's what's on your mind. And so students are actually seeing that well, in some ways before it's published. It's because you're researching and teaching at the same time. 

Remko Van Hoek  24:27  
That's correct. I know you do this I do. They say also bring, you know, my industry partners into the classroom as guest lectures to tell what wasn't in the paper, but they should also know one cool thing that we're going to do both in my master's in supply chain as well as in my EMBA class this semester. We're going to actually have the CEO and founder of Pactum come in for a session where he'll open up about to technology, or we're going to have our master students negotiate against a bot in the classroom. So we're going to really bring that technology to life and have them live it through. And I can't wait for that session.

Mary Lacity  25:09  
I hope you invite me.

Brent Williams  25:14  
Well, you've mentioned Metaverse, but I just kind of mentioned I was thinking for the two of you kind of what's next what, what's got you interested and the curiosity of research questions that you're thinking about for the future.

Mary Lacity  25:29  
I still think AI has a lot of legs. And I started studying this technology in 2014, primarily with IBM's Watson, which at the time would cost an enterprise I mean, 10s of millions of dollars. And the price point of these technologies combined with the massive amount of computing power, I think we finally reached that tipping point of AI adoption in enterprises. I mean, we've been saying this since the 1950s. You know, AI is coming AI is coming, AI is here. So that's I think we'll we'll continue to do research on that.

Remko Van Hoek  26:02  
Yeah, I agree. I mean, there's a paper just published by some prominent European scholars about AI and supply chain, and they kind of looked at the inventory. And they only found one paper, you know, on AI and procurement. And it's the one you just brought up. So clearly, we have a lot more to learn, we have a lot more to learn. And it's moving really, really quickly. phrase that Michael Lewis from Walmart taught me is, what's different about the 1990s versus now is that the future is here, the future is not the future. It we are in it. We're living it today. And, and this is one of the many things I love about working with Mary, like she's an incredibly accomplished scholar. And despite being distinguished and endowed, she is still very curious. And she's always interested in learning, learning more and, and great and engaging with industry to do just that. And so what what I'm interested in doing more work with the really cool companies we get to work with and hopefully doing more work with Mary.

Brent Williams  27:03  
Well, when I think about you two, and I'm thinking about our vision as a college, you know, I always just boil it down to we want to be thought leaders in business and catalysts for transforming the lives of our students and, and clearly you're doing both. So thank you for the amazing work you're doing pushing the boundaries of knowledge working with companies and impacting students every single week in the Walton College. I appreciate both of you. Thanks for joining me. 

Mary Lacity  27:30  
Thanks, Brent. 

Brent Williams  27:32  
On behalf of the Walton College thank you for joining us for this captivating conversation. To stay connected and never miss an episode. Simply search for be epic on your preferred podcast service.

Van Hoek, R., and Lacity, M. (2023). How Global Companies Use AI to Prevent Supply Chain Disruptions, Harvard Business Review.
Van Hoek, R., and Lacity, M. (2023). Procurement in the Age of Automation. Sloan Management Review, 65(3), Fall Issue.
Van Hoek, R., DeWitt, M., Lacity, M., and Johnson, T. (2022). How Walmart Automated Supplier Negotiations, Harvard Business Review.
Lacity, M., and Van Hoek, R. (2021). What We’ve Learned So Far About Blockchain for Business, Sloan Management Review, 63(3), pp. 48-54