Welcome to Thriving at the Crossroads Episode 11. On today’s episode I am pleased to welcome Pierre Lapree from Per Angusta. Per Angusta is a procurement start-up based in Lyon, France. This is the first start-up from France I’ve had the opportunity to interview. Pierre, tell me about the business problem Per Angusta solves and the market opportunity you recognized?
Sure. Procurement as a function is a relatively young one and is such it has some challenges of maturity, methodology and also being recognized as a strategic and critical business partner in the organization. During my tenor as a procurement director, I realized we often have two issues. The first one is to first get the structured approach to what we do- raising the skillset of our buyers and making sure that we apply a consistent and adequate methodology. That’s one part. And the other part is how do we make sure that what we do as procurement the value we deliver is recognized, understood and accepted by the rest of the organization? This is important because only when this value is recognized are we able to collaborate with the stakeholder and with the suppliers to generate even more value. Today procurement as a function has more work to do to improve that. One of the ways to handle this kind of thing is to have a structured approach. Just like the sales people would manage sales in a sales pipeline, procurement needs to organize their sourcing activity in a sourcing pipeline. They will very clearly and in a structured way define what the buyers will do with whom, when, and with what targets. And this is very important to set this roadmap and to follow it throughout the year. We have felt that this was a gap in procurement and in the procurement systems field and that’s what we tried to solve by creating Per Angusta. We are building a SAAS solution, a Procurement Performance Mgmt. solution to help the buyer be better organized and give better visibility on what they do.
This is an interesting concept you are raising as we think about our organizations and our strategic plans. As companies we sit down particularly on the sales side we set our goals, accounts we will go after, and what we want to accomplish for sales. But you are talking about this for procurement, which is different. It isn’t something I’ve heard a lot of people talk about. We’re saying let’s be more strategic about our procurement spend throughout the year and let’s get the same visibility to the procurement spend as the year goes on. What does that look like for a buyer and a procurement organization? If a team is going to work to do that, how does it work in your software?
It’s all about having a very systematic approach to this. If you look at spend a company incurs, third party spend, this is basically the playground for procurement. Once you look at the 100% of the spend, you can’t tackle that all at one time. One reason is that you have contracts over 1 ,2 3, years so you won’t just renegotiate something like that. But then for all the rest you need to find opportunities in your contracts, those that are about to expire, be renegotiated or terminated.
The opportunities also lie in the analysis of your spend. You might find in some categories, you have 50 suppliers, where only two would be better.Because it would give you more leverage or be easier to manage. On the contrary, you might have two suppliers which could represent a supply risk. And so you might need to diversify or build your supply base. This is another source of opportunities. And there are a lot more. One simple thing I am a fan of, talking to your stakeholder. These people have a budget to spend and projects. As a procurement person, you should talk to them and help them make the most out of these budgets. All of this is how you identify your opportunities. Believe me, there are a million ways to optimize spend!
Absolutely. I resonate with your comment that you have to actually go talk to people. I shouldn’t laugh. But I’ve worked in IT for 15 years so I can poke a little fun at my own function. Sometimes it’s about picking your head up out of your desk and go have a conversation. Or pick up the phone or talk to your stakeholders to find them. People have money to spend, but if you can’t trust or work with your procurement function, there’s no way to get your arms around that spend.
No clearly it goes even further than that. If you don’t talk to people you will only be seen as one of my former colleagues says, a burger flipper. I mean, you just flip the cheeseburgers! You will place Purchase Orders and that’s it. You will not influence the spend or bring value. Being a human being, that helps.
The burger flipper- I just can see the tweets from the burger flipper for our episode- don’t be the burger flipper!
It’s about delivering more value- are you the order taker, the burger flipper, or are you working with them to better leverage their spend. Or, I like your comment about how I can go from 50 to 2 suppliers, or vice versa. It’s about the best management of that risk. And a strategic choice, right?
Yes, and the best choice can only come out of the conversation.Your perspective in procurement might be different than operations, and from other functions. Only when you combine the perspectives do you end up with the right solution. This is why you need a structured approach and the right tools to facilitate the process. And that’s the first step. And its like the typical creativity process. You first need to identify all the opportunities and only later will you set targets and priorities on all these. You can’t go after everything, you need to prioritize.
Exactly, you can’t boil the ocean. You have to have a platform that lets you identify the opportunities so you can decide what to pursue. You’re picking off a certain amount and getting that spend under control. In your experiences, are there particular industries that are having more problem with this than others, or are you seeing this across the board? What are your experiences?
Clearly, we see the same things across the board. Meaning we have customers in retail, industry, services, healthcare- we always have the same issues. The difference is in maturity of the procurement organization. For organizations with low maturity you will need to start from scratch and lay the foundation to grow. When you look at more mature procurement organizations it is a question of efficiency. How will the process be set, and absorbed by the buyers, do they understand and embrace, and need to industrialize the process, and that is where the tools become important. How do you raise the cogs and make sure the machine is running efficiently? The real differentiation is in terms of maturity.
So let’s talk about that more- looking at the maturity of the organization. If you’re not in a procurement function, and you are trying to figure out procurements maturity, what are some of the tell-tale signs of a low versus more advanced maturity that someone from the outside might assess?
There are some things you can tell by observation. When you ask others in the organization about procurement, this is the most telling sign of the maturity of the organization. There are classic maturity models where you start from nonexistent functions, to those a little more advanced with a transactional approach. Further down the spectrum, procurement organizations start to negotiate but mostly within the procurement organization. Then they start to open up to other areas of the organization, the extended enterprise. The telltale sign is how integrated the procurement function is with the rest of the organization. They are involved upfront, that means they have built the trust and relationship- it is probably a mature organization. If they are always chasing stakeholders to be involved in the negotiation, this means they have some room to improve.
Yes, and in some organizations, am I the 800 pound gorilla that is simply going to try to drive down cost? And I have to chase people to get them to respond? Or they have to chase me because all I do is flip burgers and set them up in the system. Tell us about your success stories- how have you been able to take some of these organizations and transform it. Give us some success stories on your wins.
We’ve recently had an interesting win with a large public transportation operator in UK and US. These organizations are very mature. But they had buyers scattered in 10 locations throughout many countries. They were struggling with many things, including reporting. Reporting was very inconsistent because it relied on Excel files. We started to help them with putting everything under one roof. When someone in the US reports a project, it is done the same way as someone in Scotland. We started with an approach where we focused on the tool. But the consequences were interesting. The first was that close to $10 billion of company and had not reached scale, because procurement was so scattered around the globe. So we helped them get visibility on what was happening in procurement. When someone in Canada was negotiating stationery, they could see others in other units were doing the same. This creates a lot of opportunities. Instead of doing three times the job, you only do it once and do it with much more leverage. Not only do you get more value for your project, but you free up the time of two buyers to focus on something else. The return on investment for these kinds of things is tremendous. And that’s only the first positive return on the solution. The second it helps build the credibility with Finance. Then you start discussing on common grounds. You agree on methodologies up front and tool is a reflection of that, so when Finance and Procurement talk, they share the same basis and vocabulary for conversation. You are not focused on counting beans anymore- we have a lot of food related metaphors!
But seriously, now you can focus on the meaning on the numbers and how to improve. One thing I will clarify, we give them benchmarks on how well they do by how early their stakeholders involve them. And we know that if you are involved late in the process you will probably save 1%, but when you have more upfront involvement where you discuss together, you are closer to 15%, so when you bring these elements to a CFO or manager, they understand immediately, and it automatically repositions the discussion on the topics that matter. It’s okay- we understand procurement is much more efficient when they are involved upfront, now what’s the action plan to make sure we do it every time and not 50% of the situations?
All of this was enlightening for us, and we see that it is completely changed the relationship with Finance within the procurement community. Hearing this is extremely pleasing and we are proud of that! We’re trying to bring the best practices on how the organization should work. We try to translate this into a tool, and when we see sourcing taking the tool, it creates a lot of value for the buyers.
I like your concept of gathering low hanging procurement fruit, or things that are non value add activity. It’s not about getting rid of people, but looking at the activities where I should have had more negotiating power. I can free my buyers up to go after other opportunities. It becomes instead of technology adding to the workload, it is relieving workload by centralizing to go after more value add. It’s a nice concept instead of becoming one more headache procurement has to deal with for software. Are you seeing people really redeploying workforces yet to more value added activities? Are you far enough on adoption for that to happen? How is that working for the organizations that are using your software?
I’m taking from a slightly different perspective. Initially we started as a saving tracker, but we only realized that tracking savings is the consequence of something much bigger- managing activity of the buyers. If you ask buyers what they feel about tracking savings, they will say it is a necessary evil. And so as you say it’s a constraint, it is added workload and not productive. We’ve tried to shift the focus upfront. If you give the buyers the tool to keep track of what they are doing, to provide visibility, to capitalize and share the knowledge that they acquire- sharing documents, sharing ideas, etc. They would start seeing the benefit of the tool. Yes, they report the saving in the end. That is just putting one more number into a process where they have created and received a lot of value. Our clients love if they embark on a new project they know if someone else in the org has done something similar they can see it to find inspiration, templates, etc. When you can start to say everything I contribute I will benefit 10X this will create a completely different dynamic.
At this stage it is still a bit early to see people being redeployed. But judging by how people contribute to the tool they are clearly getting value and possibly spending less time on reporting and more time on contributing. Now that we realize that having everything and identify opportunities and better prioritize. We are seeing organizations use the same number of staff to manage 10% more spend.
So the maturity point you are seeing with the first organizations is rethinking and reimagining your processes. It sounds like more of your clients are starting with collaboration and freeing individuals from collection time to more analysis time. It’s still about getting your arms around spend and being strategic in those areas. Is that a fair statement?
Yes, clearly. Our oldest customer is Adecco group, the global leader in staffing services. They have been using the tool the longest. Clearly, the dynamic for the project is very different. They are not yet to a place where one person is buying globally, but you see some of this type of activity where multiple countries are working together in a more collaborative way with one person leading the activity. This emerged spontaneously.
We talk about it in Finance as it relates to data and analysis of data. How long does it take you to gather the data, if you can even gather it? And do you spend all your time collecting the data so there is no room for analysis. So this concept of having a collaboratively tool in one place that starts to track it, you get your arms around the spend and taking the extra human element, ie burger flipper, not engaging the brain. It’s taking and shifting to more of the analysis. You made a comment earlier about how organizations can measure savings of procurement by being involved earlier in the process. Do you have some success stories here you can share? What kind of savings do you see?
The typical benchmark we have from last minute involvement to upfront involvement, it is 1-15%. You only save 1% at the last minute, which means you get the contract and all you can do is flex your muscle for cost savings, which is just useless. It just destroys value more than anything else.
But we also se when you involve upfront it’s where you get a constructive conversation. You might start with I need to buy a BMW when really you just need to go from point A to point B. Maybe you don’t really need the BMW. But that the conversation with the stakeholder you need to have and will generate the most value. Then you put the spend at the right level of the needs and you find the most creative approaches to sourcing. It’s interesting because this early involvement thing- every buyer will tell you they are involved too late. To some extent is true. We did a blog post recently, “In God we Trust, all others must bring data”. It’s true you can complain about being involved too late, but you need to bring data to that conversation. So you first need time to try to measure in a simply way they measure how early they are involved at four or five different levels. Then you start to collect the metrics on the cost. Then you have a factual set of information to have the conversation. In front of this you put the savings number and yield from the project depending upon stage of involvement. It’s now about why are you involved at the stage you are and how can we improve that? And that’s very critical, because you move from a situation where you complain to a situation where there is actionable, information. You can tie it to the objectives of the organization and the value you contribute.
In absence of data you can’t move forward because what is the incentive. We all talk about wanting to make more decisions on data. We read survey after survey of how we want fact based decisions being made on this data. I think you are right that unless procurement brings data for their functions to demonstrate the value, they won’t be involved. The data makes a huge difference to your negotiating power in the conversation.
The company has been around for several years now. We like to ask because all our listeners might not know who Per Angusta is. Can you share where you are at in terms of customer base? I have a simple rating scale- ABC- Alpha Beta Customers, working for their first customer, D- Done it at least once but up to 5 customers, and E- Existing customer base (over 5 live customers). Where is Per Angusta?
Right now we are clearly at the “E” category. The solution is 5 years old, the company is 4 years old. Because I created the solution when I was still a practitioner. But really sales development started 2 years ago. In 2 years we have added 15 customers. We are a 3 person company as of today, but our largest customer is 20 billion Euro company, and smallest is 300 million Euro company. It’s amazing to see large companies trust a small start-up to make a difference, and that’s very comforting.
I’ve learned that yes that are organizations that discounts start-ups due to the risk. But in a lot of organizations, it’s really about solving the problem and just planning accordingly. Oh okay, you are early in the process, so we plan extra milestones or more checks and balances to the process. I think companies are now more than ever just looking for solutions. I think it’s great you mention that you are small yet value is recognized by the large companies.
So now, at this point in the interview I have my one fun question. I love to travel and so do my guests. I am always looking for ideas for travel. My final question is- tell me your favorite travel destination and why.
Oooh! I love New Zealand. My honeymoon was in New Zealand. I love New Zealand- tell me more!
Part of my honeymoon was in New Zealand as well. I was amazing by the landscape.Life seems to be so easy there. This is exactly the opposite of the globe from France, so not a trip you can take often, but I will definitely go back there. So the other part of the honeymoon was New Caledonia, which is a French island four islands from New Zealand. If you like snorkeling, clown fishes, this is a great place to go.
Fantastic- wonderful! I will definitely have to add that to my list. Thank you so much for joining us today. It has been a pleasure having you on the podcast today Pierre!
Thanks for having me Amber.