Is Procurement Living Up to the Challenge?

Apr 23, 2015

Mike Straw looks at how pharma Boards can help their procurement functions deliver on their strategic goals

At a time when pharmas are under pressure on many fronts, procurement functions have become more important than ever to the organization’s success. Mike Straw, Achieve Breakthrough

So what should the board be looking for from procurement and how, in turn, can procurement deliver against those expectations?

Undoubtedly, a board’s overriding goal is to deliver returns to shareholders.  But beyond that, they also want the organization to provide the next great medicine, quite simply to deliver brilliant science that helps patient and wider society. After all, it’s what they’re in the business for.  Fundamentally, all pharmas want to be leaders in healthcare.

To do this, they need to spend as much as possible on R&D and get drugs and new products to market as quickly as they can.  Balanced against that though, they need to ensure absolute rigour around risk and compliance.  Trust has become a key issue, both with regulators and the public at large.

So the value of an outstanding procurement team is clear. By helping set up the right relationships with the right third parties, they have a major role to play in reducing costs so that more can be invested in R&D, innovation in all areas and in ensuring speed to market.  They are also important guardians of an organization’s reputation, in terms of who they partner with and how.

This is especially relevant right now when big pharmas are increasingly outsourcing parts of the business in order to gain cost efficiencies.  Anywhere between a third and a half of a pharma’s cost base now lies in external spend.

But is procurement living up to the challenge?

More can be done. For example, the 2015 ProcureCon Healthcare benchmarking survey found that less than half (48 per cent) of the pharmaceutical professionals surveyed saw procurement as a strategic partner in their organization. This follows a recent Deloitte survey that declared only 28 per cent of CPOs felt their procurement function was highly regarded internally and seen as a key business partner.

A key issue for pharma procurement professionals is that 58 per cent of CPOs feel their team does not have the skills required to deliver their procurement strategy.  As a client once told us “procurement professionals are hired for their procurement skills and fired for their behavioural skills”.

This lack of love for pharmaceutical procurement functions and the wider procurement industry has resulted in a lack of confidence in the difference procurement can make.  While speaking at a recent conference I found that procurement professionals are faced with an increasingly pressured organization and find getting airtime even harder — so the need is even greater to create an impact and be able to stand as equals in order to deliver the huge potential that the function has to offer.

The challenge they are faced with is to demonstrate their strategic value to the organization — to leverage their technical competence to inspire greater confidence in their colleagues and become more appreciated for the real value and insights they can provide.

To shift perceptions four key changes need to be made. These are often partially recognized by pharma boards, but are rarely crystallized or discussed with their peers in procurement:

Permission and confidence

Firstly, procurement needs to stand up as an equal within the organization. They have hugely important roles and until they respect that themselves the rest of the company will underplay it too.

Shift perceptions

The procurement team needs to start challenging the status quo, not just accepting things because “that is the way they have always been”. Their perceptions need to be shifted just as the organization also needs to shift its own perception to give procurement the respect it deserves.

Leading the agenda

Through more strategic thinking and being organizationally savvy, the procurement team can start to contribute more to leading the agenda, instead of just following it. This occurs when you start thinking big and can switch between modes: facilitator (simply helping to get contracts in place), expert (a source of knowledge to be consulted by the business) and coach (helping the business to improve by offering advice and guidance based on previous learnings).

Executing the agenda

The more ambitious you are the more pitfalls you are bound to encounter. So procurement teams should not become dispirited if, in making the three changes above, they experience setbacks.  The key to executing the agenda is navigating such roadblocks and turning resistance into momentum.  Don’t take the path of least resistance and revert back to old ways at the first sight of trouble. Instead, expect some setbacks and look for solutions so that you can execute what you are trying to achieve.

The results can be truly surprising.  Imagine unleashing these brilliant professionals where they can bring innovation, expertise and creativity to the returns that you can get from your external spend — these people have the key to support businesses and boards in the challenges they face organizationally.

So from the board’s perspective, the question they need to be asking themselves is: is procurement delivering the strategic value we need – and if not, what can we do to help it realise its full potential?

Mike Straw is CEO of Achieve Breakthrough, a consultancy that has worked with a number of pharmaceutical companies including Novartis, Roche and AstraZeneca.

 

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