ARTICLE
20 NOV 2015

Five gems from the Eva Wimmers Innovation Workshop

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

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.

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 article, 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% of their innovations are irrelevant to you, the 20% could be absolutely crucial to your business’ competitive advantage.

2. 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.

3. 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.

4. 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.

5. 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% 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”.