All posts by Hugo Britt

Generating Big Ideas Through Hackathons

Generating tangible big ideas within organisations can be a difficult activity. More and more organisations are using ‘hackathons’ to facilitate big idea generation.

Picture of Tech Hackathons

It’s interesting how language evolves to turn a word with negative connotations into something positive. The word “hack”, for example, has traditionally put fear into the hearts of the staunchest CEO. Just ask the management of hacked dating website Ashley Madison, or any of the big banks that channel a significant amount of their budget into building hacker-proof systems.

Yet large corporations all over the world are now embracing the concept of the ‘hackathon’. It’s something of a deceptive term, because rather than actual hacking (subverting computer security), the activity involves organisations making enormous amounts of data available to competing teams of analysts who then brainstorm solutions to specific problems.

Why Call Them ‘Hackathons’?

There are three possible reasons. Firstly, the word ‘hacker’ has come to symbolise a generation of intelligent and disruptive young people who know how to leverage technology to create meaningful change. Secondly, the activity itself usually involves a significant amount of data mining.

Finally, the phrase “there’s a hack for that” means that someone has come up with a smarter way of doing something, demonstrated by the increasing usage of terms such as ‘life-hacking’ or even ‘parenting hacks’.

Hackathons generally take place over a whole day or even longer, usually in a big space buzzing with engineers, analysts and other boffins. Participants leave their corporate attire at home and come dressed for comfort rather than style, prepared for a long and exhilarating day fuelled predominantly by coffee and sugar.

Every organisation runs hackathons in their own way, but the concept usually remains the same. The participants (hackers) are organised into teams with mixed skill sets, then are given a list of key technical challenges that the organisation currently faces.

The organisation then gives access to any data or information required to solve these problems, and the hackers get to work. At the end of the hackathon, the teams present their solutions and the organisation picks the winners.

Corporate Hackathons

One of Australia’s major corporate hackathons, Unearthed, is a 54-hour event run by some of the region’s largest resource organisations. Competing teams are given access to Big Mining data – specifically, transport, logistical, geospatial and geological proprietary data.

At the most recent Unearthed event, one of the teams worked out a way to integrate technology into tray trucks that detects when boulders are too large for rock crushers and sounds an alarm to prevent potential blockages. The organisers estimated that this idea alone would save millions of dollars for the sector, with the problem analysed and solved in a mere 54 hours.

Perth-based CPO Jackie Harris is hosting an internal hackathon in her organisation to solve some key challenges for 2016. “It’s all about understanding the barriers to innovation and stimulating ingenuity in the team. There are so many small-scale changes we can make in our supply chain that will have a huge impact on our bottom line.”

Harris gives the example of the complexities involved in working out the optimal deck space utilisation on a cargo ship. Through a hackathon-type event, there is now a piece of software that maps deck space and provides the solution for you. “Our organisation is lucky in the sense that we are data-rich and have a strong analytics team”, says Harris. “Hackathons are a fantastic way to showcase this team and bring their ideas to the fore.”

In the Procurement space, a hackathon is a fun and effective way to engage your suppliers and generate innovative solutions. Invite your suppliers to send their best and brightest to compete ‘live’ against their peers, come up with the most innovative solution to your operational challenges, and win the contract.

Not convinced? What you need to know is that hackathons:

  • create solutions to ‘unsolvable’ problems.
  • are fun, engaging and social events.
  • provide a focused environment to solve operational challenges without any distractions.
  • encourage a culture of healthy competition.
  • (most importantly) stimulate innovative thinking in your organisation.

Hugo Britt is a Research Consultant at The Faculty, helping to support The Faculty Roundtable, an influential group of Australian procurement leaders, who gather to share their experiences and insights. The Faculty will be hosting their ninth Asia-Pacific CPO Forum, the region’s premier procurement event dedicated to accelerating commercial leadership at the highest level.

For more information on The Faculty Roundtable or CPO Forum, contact Program Manager, Belinda Toohey.​

If you’re interested in finding out more about the Big Ideas Summit on April 21st, visit www.bigideassummit.com, join our Procurious group, and Tweet your thoughts and Big Ideas to us using #BigIdeas2016.

Don’t miss out on this truly excellent event and the chance to participate in discussions that will shape the future of the procurement profession. Get Involved, register today.

Stories from The Source – Part Two: Sanne Gruter

The Source Recruitment Consultant Sanne Gruter gives Hugo Britt her top tips for procurement professionals to excel in their next interview.  The Source Interview Tips

Read Part 1 of this series here.

In more ways than one, Sanne Gruter is the international face of The Source. As part of her portfolio she looks after the fast-growing international sourcing part of the business, reaching out to potential candidates in markets including the UK, China and Singapore. Sanne is also ‘international’ in that she hails from Holland, has a partner from Uruguay, and has found a fulfilling and exciting career here in Melbourne, Australia.

Sanne’s academic history is impressive – she holds a Bachelors degree in Applied Psychology, and an International Masters of Culture, Organisation and Management which integrates anthropological, sociological and psychological approaches to identity, politics and cross-cultural co-operation with management and organisation theory. She enjoys the challenges involved in recognising, qualifying and nurturing top talent.

What made you decide to come out to Australia?

I love to travel, and still take every opportunity I can to see the world. I was out here in Australia travelling as a tourist, and of course I loved the sunshine. Melbourne, in particular, really appealed to me as the home of the Australian Open! So when the opportunity came up to join The Source, I took it.

How do you use your qualifications in your day-to-day role as a recruitment consultant?

My knowledge of psychology helps me be aware of the subjective element in almost everything I do. Recruiters need to remember that they’re dealing with real people, who have emotions and agendas. When I work with candidates I always let them know if they’re coming across as too aggressive or lacking in energy. Usually, people don’t know they’re doing it. Basically, I try to teach people to be convincing in interviews.

Is there anything unique about recruiting for the procurement profession?

Absolutely. I’ve found that procurement professionals are master negotiators – candidates want a lot, and they play hard on the salary negotiations. The clients we recruit for are excellent negotiators as well, and we generally find that they’re prepared to wait for the right talent to become available.

Where do you find your candidates?

Mainly through headhunting and networking. We reach out to people we believe are relevant for a specific role to have a very general career discussion. Usually people are happy to be courted and to join our network even if they’re not ready to move until the right opportunity comes along. This ‘hidden market’ has proven to be very valuable, since the focus is on the candidate.

We’ve also found quite a few people through Procurious, both inside and outside Australia. So be sure to log onto Procurious and connect with me! One of the exciting trends we’re starting to see is more and more people making a conscious choice to come into procurement from other professions, such as finance and law. Procurement functions can always use these diverse skill-sets.

What are the challenges in Australian procurement recruitment?

There’s a huge amount of change going on amongst our client companies. Restructuring and redundancies take place all the time, which means we have to keep on top of what’s happening in a fast-changing environment. Another challenge is that Australia is a relatively small market, which is why it’s important for procurement professionals to know the right people and reach out to organisations like The Source.

What sort of salary levels do you recruit for?

Personally, I mostly look after the mid-level space, which could range from $80,000 to $130,000 (AUD), but The Source team works collaboratively across all salary levels. And of course there’s the international recruitment angle too. UK professionals are in high demand in Australia, along with candidates from China and Singapore.

Can you share some tips for creating a winning resume?

Don’t just describe your role when you write your resume. Make sure you keep track of your achievements, and back up your claims with hard figures. Procurement employers like to see proof. For example, if you’ve achieved some excellent cost savings, make sure you include the dollar figure or percentage.

Start with a succinct personal introduction explaining your background, key strengths, and what makes you stand out for the role. You’ll never be shortlisted if you don’t communicate your strengths.

Frequently changing roles can indicate a lack of commitment, so try to stay in a business for a minimum of three years. Of course, sometimes it’s out of your control. If you are made redundant, don’t be afraid to put it in your resume – recruiters and employers won’t penalise you for redundancies because they’re so common.

Can you share some interview tips?

Make sure you’re well-presented. Read up about the organisation and find out about the people who will be interviewing you on LinkedIn. It’s important not to over-prepare and create a “script”, because it comes across as fake.

Remember to back everything up with examples. Think about the key competencies you’ll be asked about, and be prepared to talk about how you’ve demonstrated these in the past. You need to be able to explain what you do.

Do you have any stories of disastrous interviews?

We had a candidate who was asked to give an example of how she can balance priorities. Unfortunately, the example she gave was how she was juggling three boyfriends at once!

Another candidate took the advice to provide clear “evidence” of her achievements much too literally, and turned up at the interview with an enormous stack of printed-out reports and emails. She’d rummage through the pile to find evidence whenever she was asked a question.

Did either of them win the role?

Unfortunately for them, no!

What’s your advice for graduates considering procurement as a career?

Procurement is a good career. It’s growing fast, with heaps of opportunity to add significant value to a company. It’s a really diverse job. From the analytical side of things, to the sourcing experts, stakeholder relationship management experts, risk gurus – there are so many aspects to being a procurement professional.

The Source - Sanne GruterThanks Sanne, and all the very best for an exciting career in procurement recruitment at The Source!

 

 

The Source is a boutique mid to senior and executive recruitment and search consultancy with national reach specialising in the procurement market. For more details, visit The Source.

Corruption Perceptions Index – A Procurement Must-Read

The Corruption Perceptions Index (CPI) is a must-read annual report for procurement professionals that source internationally.

Bribery

Why? Because with a greater focus on risk, you need to know if your supply chain is contributing to the serious corruption problems, endemic in so many of the world’s poorest countries.

Clean vs. Dirty

There’s a running joke in Paraguay about the country’s entrenched corruption problem, exposed and broadcast year after year by Transparency International’s Corruption Perceptions Index (CPI). With a score of 130 out of 168, it’s one of the most corrupt countries in the world, but locals say that the reason it didn’t come in last is because “somebody must have bribed the judges”.

Corruption-Map

Transparency International ‘Corruption Heat Map

Highlights from the report include the top ten “cleanest” countries. It’s important to note that no single country anywhere in the world is corruption free:

  • 1. Denmark
  • 2. Finland
  • 3. Sweden
  • 4. New Zealand
  • 5. Netherlands, Norway
  • 7. Switzerland
  • 8. Singapore
  • 9. Canada
  • 10. Germany, Luxembourg, UK

It’s no surprise that the lowest-scoring countries include war-torn states that have suffered from decades of conflict, such as Iraq, Syria and Afghanistan.

  • 150 – Burundi, Cambodia, Zimbabwe
  • 153 – Uzbekistan
  • 154 – Eritrea, Syria, Turkmenistan, Yemen
  • 158 – Haiti
  • 159 – Guinea-Bissau, Venezuela
  • 161 – Iraq, Libya
  • 163 – Angola, South Sudan
  • 165 – Sudan
  • 166 – Afghanistan
  • 167 – North Korea, Somalia

Other interesting results include the USA in 16th place; Australia slipping to 13th place; Greece improving its performance to reach 58th place (in all likelihood due to international scrutiny during the Greek financial crisis); and China in 83rd place.

Exporting Corruption

Northern European countries were ranked as the “cleanest” states, most free of corruption. However, Transparency International suggests that their records aren’t as clean as the scores would indicate, and it’s all down to sourcing from corrupt countries:

“The OECD Anti-Bribery Convention, adopted in 1997, requires each signatory country to make foreign bribery a crime for which individuals and enterprises are responsible. The Convention is a key instrument for curbing the export of corruption globally because the 41 signatory countries are responsible for approximately two-thirds of world exports and almost 90 per cent of total foreign direct investment outflows.

“Foreign bribery is not an abstract phenomenon; it has damaging consequences in the form of contracts not going to the best qualified suppliers, prices often being inflated to cover bribe payments, environmental requirements not being enforced and taxes not being collected.”

The CPI report shows, however, that half of all OECD countries are violating their international obligations to crack down on bribery by their companies abroad. This includes the cleanest countries identified in the report, such as Sweden (3rd place), which is facing allegations that it paid millions of dollars in bribes in Uzbekistan (153rd place).

Procurement’s Role

Procurement professionals who source internationally have the power to halt the flow of cash moving from the cleanest to most corrupt countries, feeding the corrupt states and locking the world’s most vulnerable people into a cycle of impoverishment.

Here are three steps you can take, as a procurement professional, to ensure you do not source from a corrupt state:

  1. Be informed – read reports such as the annual CPI and research the countries you are dealing with.
  2. Understand the OECD Anti-Bribery Convention, and remember that individuals can be held responsible.
  3. Lobby your government to put in place legislation that will steer the profession away from corrupt, immoral or illegal sourcing activities. There has been some excellent progress in this area internationally, such as the US Congo Conflict Minerals Act 2009, or the UK Modern Slavery Act 2015.

Reusability – Getting to Space Just Got a Whole Lot Cheaper

Take a fresh look at the consumables in your supply chain.

SpaceX Falcon9

On December 21, 2015, SpaceX’s Falcon 9 made history. After successfully delivering 11 communications satellites into low-Earth orbit, the nine-engine booster rocket returned safely to Cape Canaveral, landing dramatically on a jet of fire.

Less than a week later, SpaceX founder Elon Musk tweeted that the Falcon 9 was “back in the hanger … no damage found, ready to fire again”.

Reusability the Key

Placing satellites into orbit is no mean feat, but the astounding, history-making part of this operation was landing the booster. It’s all about reusability. Until now, putting a rocket into space has been prohibitively expensive due to the single-use aspect of launching. In his detailed explanation of Musk’s vision, Tim Urban of the website Waitbutwhy compares single-use spacecraft to air travel:

“Imagine the current air travel industry with one key difference: an airplane works for one flight only. Each flight is on a brand new plane, and after the flight, passengers exit into the terminal and the plane is broken down into scrap metal and possibly-reusable parts that are sent off to be refurbished for use in a future plane.

An airplane costs around $300 million to build. So in this new model, in addition to paying for the crew’s time and fuel, airlines have to spend $300 million extra each flight to build a plane. How would that change things?

First, there would be very few flights available—the schedule would be limited by the pace of plane production. Second, the price of a round-trip ticket between Chicago and San Francisco would now cost about $1.5 million per person. For economy.”[1]

Musk himself has stressed that reusability is the key to making human life multi-planetary:

“If one can figure out how to effectively reuse rockets just like airplanes, the cost of access to space will be reduced by as much as a factor of a hundred.  A fully reusable vehicle has never been done before. That really is the fundamental breakthrough needed to revolutionize access to space.”[2]

Here’s how they did it: https://youtu.be/sSF81yjVbJE.

Reducing the Costs

So how will SpaceX’s achievement affect the costs of getting to space? With a human mission to Mars as the ultimate goal, back in 1989 NASA estimated it would cost $450 billion to send 4-6 astronauts, about $100 billion a seat. This was upgraded in 2004 to $50 billion, or $10 billion a seat. Musk has a per-seat goal of $500,000, 20,000 times less than NASA.[3] That’s less money than an average home loan in Australia.

The huge reduction in costs will be brought about through a combination of revolutionary improvements, including low-cost propellant, making the return propellant on Mars,[4] and having approximately 100 paying passengers per flight. The biggest saving, however, will be through the rapid reusability of rockets, where the only costs involved are maintenance, life-support and refuelling.

The closest NASA has come to reusability was through the now-retired Space Shuttle program, which was able to land the spacecraft itself but not the booster, costing over $200 million per astronaut.

What About Your Supply Chain?

The Falcon 9 story is inspirational in the sense that SpaceX has achieved something that the world’s best aeronautical engineers said could never be done. The single-usage problem has been unsurmountable for decades, but SpaceX solved the puzzle and other organisations will soon follow suit.

The message here for procurement professionals is to take a fresh look at the consumables in your supply chain that could possibly be reusable. Whether the article is as expensive as a rocket booster or as cheap as office paper, it’s worth reconsidering whether items really are only suitable for a single use. Reusability is good for the bottom line, good for the planet, and will help put humans on Mars sooner than we think.

[1] http://waitbutwhy.com/2015/08/how-and-why-spacex-will-colonize-mars.html/4#phase2

[2] http://www.spacex.com/news/2013/03/31/reusability-key-making-human-life-multi-planetary

[3] http://waitbutwhy.com/2015/08/how-and-why-spacex-will-colonize-mars.html/4#phase2

[4] Propellant can be created using Mars’ CO2 atmosphere and the H2O frozen in the soil.

Stories from The Source – Part one: Tony Megally

The Source General Manager Tony Megally speaks with Hugo Britt about how to get yourself noticed by a top recruitment firm.

Albert Street

As with most 21st-century offices, we have an open-plan layout here at The Faculty. The team is spread across the first floor of a sun-filled, goldrush-era building in the heart of Melbourne. We have minimal partitions and senior management sits right in amongst their teams. One notable exception to this layout, however, is The Faculty’s sister organisation – The Source.

The Source is a boutique recruitment firm specialising in procurement and, due to the intriguingly confidential nature of their work, sits in a corner of the building separated from the rest of us by a glass partition. The small team beyond the wall always look incredibly busy, and when they do emerge, it’s usually with a phone glued to the ear, carrying out intense-sounding conversations in hushed tones as they pass my desk.

What goes on behind that mysterious portal? What are the particular challenges involved with recruiting for procurement? I interviewed three members of The Source team to find out, beginning with its new General Manager, Tony Megally.

So, Tony, tell me about yourself. How long have you been in recruitment?

My career in recruitment kicked off in 1999, and let me tell you, things were very different back then. We didn’t have smartphones, barely had email, no voicemail to reach people, and you were very lucky if you had any kind of database to work with. I remember the majority of my time being spent faxing resumes through to clients.

What’s “faxing”?

I’m going to assume you’re joking. Recruitment back then was nowhere near as proactive or strategic as it is nowadays – it was highly reactive and transactional. I initially worked in a volume market with the focus on recruiting for short-term, temporary assignments. I’d get a call from a client on a Friday night, for example, asking for 10 temps by the following Monday. Not easy.

What exactly has changed in recruitment over the past 15 years?

Recruitment has become a more sophisticated industry. It’s no longer so transactional and is now highly relationship-focused. We support clients to build their businesses through great talent and increasingly act as guides to candidates throughout their entire careers. That’s the beauty of recruitment – you get to follow people’s careers and watch them grow. I placed graduates back in 1999 that have now become senior and executive leaders, and in the best cases they’ve become clients themselves.

What about changes in the procurement space?

Just like recruitment itself, the procurement profession has moved away from its traditionally transactional function and is increasingly commercial-focused and strategically positioned. Things are evolving fast – the challenge for us at The Source is to keep ahead of the ever-changing expectations that organisations have in regard to the role of their procurement functions.

What levels of seniority do you recruit for at The Source?

We recruit from CPO down to the specialist level, but personally I look after the senior to executive space. This involves a broad salary range: about $150k to $350k (AUD). Clients work with us typically when it’s a hard-to-fill role, or when there’s a confidential restructuring going on and they can’t advertise. We’re in the mix – we’re searching for and networking with procurement talent all the time. Basically, clients want to partner with us to gain access to our talent pool.

How can candidates get the best out of their relationship with a recruiter?

It’s important for both sides to be as transparent and upfront about their expectations. We’ll share all the details about the client’s brief to help you secure the perfect role, but we need candidates to share as much as possible to help us promote them. It’s good to be aware that recruitment takes time. While an analyst-level could be placed within one to two months, executive placements can take six to twelve months.

Do you work mainly with advertised roles, or “headhunting” top talent?

Most of our time is dedicated to nurturing what we call “passive talent”. That means we get in touch with professionals who may not necessarily be active in the job search but are open to considering opportunities in the near future. It’s all about developing and maintaining relationships – we take a very long term view.

What makes a stand-out candidate in your view?

I look for evidence of commercial acumen, strategic agility, a relationship focus and of course a strong people focus. These soft skills make people stand out. Candidates need to be good networkers (through organisations such as The Faculty) and be able to demonstrate strong business partnering both internally and externally.

Stability is important, for example in Category Management you’ll need to prove you’ve been through an end-to-end strategic procurement lifecycle or in the case of Senior Leaders, you’ll talk to your strengths in change management and business transformation. Both of which usually take about two to three years.

So two to three years is the minimum period you should stay in an organisation?

In my view, yes. But the flipside of that is when we see someone who has sat in a role for ten years and hasn’t progressed their career, that doesn’t usually suggest drive and ambition.

Got any tips for preparing a CV and attending an interview?

The best CVs are kept simple and list stand-out quantifiable achievements. Keep track of the things you’ve accomplished.

You can never do enough research before an interview. Read everything on the company website, search for key individuals on LinkedIn, review company financial statements (easy to access for publicly listed organisations), reach out to networks. There’s no excuse for not being prepared for the “what do you know about us” question. Interview preparedness is an indication of how organised you will be on the job.

Thanks Tony. It sounds like you’re a key person to know in the Australian procurement profession.

I’d encourage anyone who’s interested in a confidential career discussion to get in touch with The Source, whether you’re actively seeking a new role or would just like to start the conversation about your career future.

The Source is a boutique mid to senior and executive recruitment and search consultancy with national reach specialising in the procurement market. For more details, visit The Source.

The Procurement Professional Twelve Days of Christmas

What do you want from your suppliers for Christmas?  12-days-of-christmas-thumb1-f

In the spirit of the season, here’s a Procurement professional’s Twelve Days of Christmas:

On the twelfth day of Christmas, my suppliers gave to me:

Twelve new-signed contracts

Eleven costs avoided

Ten tenders pending

Nine on-time deliveries

Eight service improvements

Seven ways of working

Six demand reductions

Five innovative ideas!

Four value-ads

Three free pens

Two risks assessed

And a brand new SRM strategy!

Merry Christmas!

Five Gems from Eva Wimmers’ Innovation Workshop – Part 2

The Faculty’s Hugo Britt recently attended a one-day workshop with Eva Wimmers, former CPO of Deutsche Telekom, on innovation in Procurement.productivity-innovation

Last week I shared the first two of five ‘gems’ I took away from Eva Wimmers’ thought-provoking working on Innovation in Procurement. Read on for the remaining three insights from this world-class CPO:

  1. Make time to discuss innovation with your “ideas suppliers”

As part of her “dialogue rich” approach to Procurement, Eva recommends that category managers make the time with suppliers to talk exclusively about innovation. That means there’s no talk about contracts or pricing; just ideas and brainstorming. Visit your suppliers and make an effort to personally meet the brains of the operation.

This means you’ll be making valuable direct contact with engineers, programmers and other boffins and can chat with them directly about their ideas. Importantly, making this contact will start them thinking about what they can do for you. The key, Eva tells us, is to think of your vendors as “ideas suppliers”, make time to discuss innovation, and always be willing to listen and learn.

  1. Diversify your supply base to include SMEs and startups

Deutsche Telekom is an enormous organisation, and before Eva’s tenure as CPO it had fallen into the same trap as many similar-sized companies: big only deals with big. This mindset is driven by concerns that only large organisations have the capacity to meet your needs, while risk-mitigation policies around team size and insurance are often put in place that limits Procurement’s ability to engage with smaller organisations.

Eva reversed this mindset at DT by declaring that innovation Procurement requires vendors of every size and shape. The benefits of working with SMEs and startups include:

  • faster provision of products and solutions
  • new idea generation (“ideas suppliers”)
  • customised and specialised solutions
  • getting a glimpse of future disruptive technologies
  • app solutions to fix your legacy IT problems
  • cost control and cost savings
  • savings in personnel costs
  • relationships with individuals at the supplier.

In Eva’s words, “We do not care how big an organisation is, as long as both the solution and the organisation are scalable and financially solid’”. She uses Dropbox.com as an example of a small organisation with less than 50 staff that wouldn’t even have shown up on many organisations’ radar, yet now it has world-wide take-up.

  1. There are risks, but they can be managed

We know that small vendors are often faster, more flexible and more cost-effective, but what are the risks? Eva says that CPOs need to equip their teams to work with SMEs and startups to overcome the following negatives:

  • Higher financial risk than big suppliers
  • Risk of takeover slowing down the process
  • Smaller account teams
  • Often no international linked account team and support
  • Under-developed processes
  • Lack of scalability
  • Increased risk of bankruptcy through illiquidity
  • Change of key people endangers product
  • Continuity of solution depending on engineers and programmers/individuals.

Eva worked with her team to mitigate the risks of interacting with SMEs and startups at DT by implementing the following:

  • Requesting financial due diligence including detailed revenue overview. Invite the CFO to explain the finances in detail to ensure full transparency.
  • Requesting an overview of concurrent projects with other customers.
  • Using incentives rather than penalties to ensure you don’t cripple your suppliers.
  • Spending significant time on explaining your product needs and definitions as SMEs may be unused to the needs of large organisations.
  • Requesting counter-proposals from vendors, such as “What would you change to save 30 per cent on cost? What would you change to gain speed?”
  • Locking-in the availability of key individuals from the vendor teams by name in the contract.
  • Contractually requesting key engineers’ availability by name.
  • Including a first right of refusal to buy company (in case of bankruptcy) – sometimes buying is cheaper than migration to any supplier (talk to your legal team about insolvency law).
  • Defining termination rights in case of a supplier takeover.
  • Reducing the amount of interfaces at the supplier.
  • Defining one overall point of escalation at the supplier.

In summary, Eva argues that CPOs can’t afford to limit their supply base to large organisations if they wish to drive innovation. Use risk mitigation strategies to protect your operation and focus on having the right level of contractual protection for each innovative supplier. Make the time to convince your risk-averse stakeholders of the benefits of working with smaller suppliers of products, solutions and disruptive ideas.

Procuring innovative products and profiting from the ideas of innovative companies requires behavioural change in your Procurement teams. Concentrate on driving early involvement, deeper knowledge of your products and vendor landscape, closer alignment with business stakeholders, and true dialogue where you see eye-to-eye rather than just pressing for the best price.

Innovation needs to be driven with and by smaller new companies as much as by larger incumbent organisations. In short, it’s about having “an idea that pays”.

Five Gems from Eva Wimmers’ Innovation Workshop – Part 1

The Faculty’s Hugo Britt recently attended a one-day workshop with Eva Wimmers, former CPO of Deutsche Telekom, on innovation in Procurement.

Innovation1

How many of the CPOs you know would you describe as ‘glamourous’? Not many, I bet. That’s because Procurement still isn’t seen as a particularly glamorous career, despite having all the ingredients that should make it so: world travel, high-stakes negotiations, and rubbing shoulders with C-level decision-makers.

Procurement’s understated profile is most likely a legacy of its back-office beginnings, but things are starting to change. Eva Wimmers, the confident, sharp-dressing, eminently capable former CPO of Deutsche Telekom, is glamour personified. She’s a striking departure from the stereotypical ‘back office’ CPO, and in my opinion the profession needs more leaders like her if it’s going to attract talented Gen-Y professionals looking for an exciting and fulfilling career.

Innovation in Demand

It’s a cool spring morning at The Faculty HQ in Melbourne, and I’m balancing a cup of coffee in one hand and a muffin in the other while chatting with fellow attendees at Eva’s workshop on innovation in Procurement. I’ve met senior and mid-level professionals from National Australia Bank, Realestate.com.au and even from Perth-based Rio Tinto, who have flown an impressive 2700km to join us today.

Why make the trip during one of the busiest times of the year? I’m told there are two main reasons – firstly, insights from the stellar career of someone like Eva are not to be missed, and secondly, Australia’s largest organisations are increasingly turning their attention to innovation in Procurement.

Eva is a knowledgeable and highly successful modern Procurement leader. During her time at Deutsche Telekom, she was responsible for overseeing €27 billion in purchasing value and managed 1500 employees across 50 countries. The workshop today came about as a result of a unique opportunity – Eva is finishing up at DT and moving into an exciting new role (currently hush-hush), meaning she had a rare gap in her calendar.

This is very good news for Procurement professionals in Australia – normally we have to travel overseas to hear from international Procurement stars of Eva’s calibre, and the prospect of an entire day with Eva generated a lot of excitement amongst Australian CPOs and their teams.

In this two-part blog post, I’ll cover five gems that I’ve taken away from Eva’s workshop, namely:

  1. Innovation is an idea that pays
  2. Procurement innovation is both a philosophy and a program
  3. Make time to discuss innovation with your “ideas suppliers”
  4. Diversify your supplier base to include SMEs and startups
  5. There are risks in working with startups, but they can be managed.
  1. “Innovation is an idea that pays”

This quote was the catch-cry of the day. It’s the basis of Eva’s philosophy around Procurement innovation, and it should be the foundation of every CPO’s business-case to invest in startups.

Eva illustrates how Procurement professionals work on the frontlines of innovation. We talk to vendors all the time, and if we know how to listen, this means that we are exposed to a constant flow of new ideas. Other functions, such as IT or even R&D, will only go looking for innovation when they start a new project.

Eva makes the distinction between incremental and disruptive innovation, or “evolutionary” versus “quantum leap” ideas. She illustrates the difference with a description of tall ships; with a millennium of incremental innovation behind them, early nineteenth-century sailing ships were the epitome of luxury and humankind’s harnessing of wind and weather – but they were made obsolete within a few decades by the disruptive technology that led to ocean-going steamships. Our challenge is to keep as informed as possible to try to predict the next big disruption steaming towards us over the horizon.

Eva’s message is to seek out “ideas suppliers” in the form of SMEs and startups. Even if 80 per cent of their innovations are irrelevant to you, the 20 per cent could be absolutely crucial to your business’ competitive advantage.

  1. Innovation in Procurement is both a philosophy and a program

Eva describes her two-tiered approach to driving innovation at DT through changing both the culture and the process. She created cultural buy-in through:

  • Introducing the tandem system – procurement staff are partnered with someone from the functional side (such as an engineer) to encourage the sharing of ideas, leading in turn to innovative thinking.
  • Cross-functionalising by having a variety of functional expertise, professions, backgrounds, disciplines, hierarchies, nationalities and cultures working in self-directed teams.
  • Encouraging Dialogue-rich Procurement – Eva encouraged her staff to greatly increase their communication with both internal stakeholders and with vendors. You’ll find that vendors in particular are eager to share their ideas if you are willing to listen and learn.
  • Celebrating accomplishments – if someone in the team has an innovative idea that leads to a positive change, publish it in a newsletter and share it with your whole team. This will help people realise “I can be innovative too”.

Eva changed the existing process to encourage innovation through:

  • Having vendor meetings to discuss innovation exclusively.
  • Holding regular internal meetings on innovation to plan three years ahead.
  • Diversifying the supply base to include SMEs and startups.
  • Introducing an innovation review panel.
  • Creating an ‘Easy Department’ program by cutting new contracts down to a 5 pages.
  • Incentivising Procurement-driven innovation through a suite of KPIs.

Stay tuned for Part Two of this article on Eva Wimmers’ Procurement innovation workshop.

5 Key Findings from the ‘Making It Stick’ Research Literature Review – Part 2

Have you read The Faculty’s Making it Stick report yet?

Sticky-Glue-Works-in-Space-Too-2

Our researchers undertook a literature review to understand the present state of play for CPOs worldwide. This is the second part of The Faculty’s article on the key findings from the literature review.

In the previous article, we discussed:

  • How benefits realisation levels are poor and remain an enduring challenge for CPOs around the globe.
  • The need for organisation-wide change management programs to address poor benefits realisation.

To wrap up the final three findings:

3. Business alignment and shared goals are integral to winning stakeholder support for identified benefits

As mentioned above, Procurement can’t drive savings all the way to the bottom line in isolation from the rest of the business. Shared goals across the organisation are absolutely essential for stamping out the culture of “somebody else’s problem” when it comes to poor benefits realisation.

Noah Costelloe (Ernst & Young) wrote in 2014: “The procurement team should not be the ‘sole owners’ of savings. Instead the focus of the team should be on facilitating and driving initiatives. They should also be accountable for the governance function through recording, measuring and reporting savings.”[1]

So, what’s the first step to creating shared goals? The answer is to ensure Procurement’s targets are aligned to those of the wider business. A report from Proxima (2015) stated that “Success in the procurement field … is a nebulous concept [because] procurement’s objectives aren’t usually clearly defined. Or perhaps, more accurately, it’s because procurement’s objectives are defined quite differently by its practitioners and the business leaders they serve.”[2]

The Managing successful programmes report already quoted above gives excellent guidance on alignment: “[Procurement must] provide alignment and clear links between the programme [benefit], its vision and desired outcomes, and the strategic objectives of the organisation involved.”[3]

4. Procurement teams are expanding their strategic footprint beyond costs through the identification and realisation of additional value opportunities.

What do additional value opportunities have to do with benefits realisation? Everything. In the Making it Stick report, “costs” are identified as the base of the pyramid, or the essential piece that must be in place before the function can move beyond transactional benefits, through commercial to strategic benefits.

If you can’t make savings stick, you won’t have the base necessary to successfully expand the value you contribute to the organisation. In ProcureCon Europe’s 2014 survey of 2,000 procurement professionals, “Total Cost Savings” still retains its place as the most popular metric for measuring the value of procurement (85%).[4]

KPMG’s The Power of Procurement (2012) reports: “Significant opportunities still remain to drive sustainable bottom line and top line value …. Procurement will need to stretch beyond savings to become a centre of value creation throughout the organisation. Executives will also need to play a part.”[5]

5. Clear definitions and categorisation of savings and other benefit types drive cross-functional understanding, shared measurements and realisation.

Without rigorous benefits definitions in place, other parts of the business with dispute Procurement’s wins. Benefits should be:

  • categorised by type
  • agreed upon with Finance
  • clear and concise
  • in plain English (not “Procurement lingo”)
  • aligned to business targets
  • linked to a clear set of measurement and validation methodologies.

To illustrate the importance of a set of definitions, consider the term ‘savings’. If you were to tell a roomful of colleagues from various departments that Procurement is focused on savings as its primary benefit, it’s more than likely that there will be multiple interpretations of what a ‘saving’ actually involves. Andrew Bartolini wrote in 2014 that “Savings [is] an inherently complex metric [with] greater disparity among the definitions used by procurement teams today”.

A 2006 report from CAPS Research found that, “Crucial to [Procurement’s] mission is the proper categorisation of the various types of cost reduction and their application to the company’s operating budgets and profit and loss measures.”[6]

The Making it Stick report contains sample definitions and measurements employed by participating organisations. Reproduced to give readers a broad set of examples to adapt for their own organisations. A concise set of definitions aids cross-functional understanding and should be developed in partnership with the wider business.

If you haven’t done so already, you can download the ‘Making It Stick’ research report here.

[1] Costelloe, Noah. Five things: getting the basics right in Procurement. Ernst & Young, 2014, p.4.

[2] Cooper-Bagnall, Jonathan, “Defining procurement success”, Proxima, June 2015

[3] Great Britain Office of Government Commerce, Managing successful programmes, Norwich, The Stationary Office, 2003, p.32.

[4] ProcureCon Europe 2014 Benchmarking Survey.

[5] KPMG. The Power of Procurement: A global survey of Procurement functions. KPMG, 2012, p.14.

[6] Ashenbaum, Bryan. “Defining cost reduction and cost avoidance”, CAPS Research Critical Issues Report 2006, p.2.

5 Key Findings From The ‘Making It Stick’ Research Literature Review

Making it Stick

Have you read The Faculty’s Making it Stick report yet? As part of the investigation into the challenges and opportunities presented by benefits realisation, our researchers undertook a literature review to understand the present state of play for CPOs worldwide.

There’s some excellent material out there on benefits realisation, predominantly in the IT space where organisations want to ensure they extract the full value from significant investment in technology and systems. The amount of literature confirmed that this topic is front-of-mind for CEOs, CFOs and CPOs in procurement functions all over the world.

Boiling down the literature review to a handful of key findings produced the following five recurring themes:

  1. Globally, benefits realisation levels are poor and remain an enduring challenge for organisations.

Four years ago, Aberdeen produced a stand-out piece of research that contained an assessment of benefits realisation levels across 130 organisations.[1] The Aberdeen Worldwide CPO survey found that the industry average (middle 50 per cent of aggregate performance scorers) achieved an average of only 8 per cent realised contract savings. The best-in-class (top 20 per cent) organisations had an average of 17 per cent, while “laggards” (the bottom 30 per cent) realised only 4 per cent of contract savings.

Eight per cent is a truly alarming figure and by all rights should have sent the procurement profession into a panic. To illustrate, imagine you have a staff member who works hard, seems extremely productive, yet at the end of the year, someone from Finance taps you on the shoulder and informs you that only 8 per cent of the staff member’s claimed achievements have actually made their way to the bottom line. You’d be furious, and that person’s job would be on the line. The same applies to procurement teams as a whole – this statistic brings the effectiveness and credibility of the function into question.

Findings from an earlier survey published by Gerald Bradley (UK, 2006) estimated that 10 per cent to 25 per cent of potential benefits are achieved from investment in change, costing the UK over £50bn per annum.[2] The Faculty’s own 2015 survey found an average of 50 per cent in unrealised savings across our research participants [3] – an improvement on Aberdeen’s 2011 figures, but still representing a lot of money being left on the table.

  1. Benefits realisation is inextricable from change management

The Making it Stick report makes the point that there’s no quick fix to improve benefits realisation. It requires an organisation-wide change management program to encourage shared ownership of procurement’s targets, drive cross-functional collaboration, improve end-user compliance and build a cost-conscious culture. C-level support is integral to this process to mandate change from the top.

A report from the Great Britain Office of Government Commerce entitled Managing successful programmes (2003) defined the necessity for change very succinctly: “The fundamental reason for beginning a programme is to realise benefits through change”, [4] while Gerald Bradley also framed his definition of benefits around change: “A benefit is an outcome of change which is perceived as positive by a stakeholder.”[5]

Stay tuned for part two of this article, and be sure to download Making it Stick if you haven’t already.

[1] Limberakis, Constantine G. Procurement Contract Lifecycle Management: Assessing the value of contract automation, Aberdeen Group, December 2011.

[2] Bradley, Gerald. “Why more CEOs are turning to Benefit Realisation Management”, CEO Magazine, August 2006.

[3] The higher figure is likely to be due to the relatively small number of research participants drawn from The Faculty Roundtable, with higher-than-average functional maturity across the group.

[4] Great Britain Office of Government Commerce, Managing successful programmes, Norwich, The Stationary Office, 2003.

[5] Bradley, Gerald. Benefits Realisation Management: A practical guide to achieving benefits through change, Hampshire, Gower Publishing, 2006, p.102.