Relationships are the route to innovation
Interview with Michelle Baker
The 140-year-old telecoms company is used to change and now it is transforming again to find the suppliers of tomorrow.
Working in a telecommunications business, CPO Michelle Baker and her team have to develop relationships with everyone from worldwide tech giants to two-person start ups. To understand how and where they dedicate their efforts, they divide their direct supply base into three tranches – tech suppliers, labour suppliers, and the suppliers of tomorrow. “It’s about segmenting your providers into the ones that make a difference, and importantly for us, the ones that will make a difference in future.” And when it comes to technology, that means identifying who you may need or want to work with in anything from three to 10 years’ time.
Dutch telecoms company KPN has been through much change over its 140-year history. In the past 25 alone it has, like many telcos, transitioned from being a state-owned company to being sold off and publicly listed. Next it witnessed the introduction of the internet, invention of the smartphone, rise of China and more recently, the shift to providing infrastructure to support a wider network. “In the past decade we’ve seen the arrival of ‘over the top players’ such as Apple TV, Netflix and Amazon Prime, who are using our bandwidth to delight you the consumer with cheap as chips entertainment. And your demand of us is bigger bandwidth and smaller phone and internet bills. Wherever you are in the world, all telcos are in pretty much the same boat. It’s an industry in flux. One that is asking itself ‘do we grow up to become a utility business or a digital company?’ That’s the existential question every telco has been asking themselves for the past 10 to 15 years and we are no different.”

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Fundamentally, the people who do the work are the differentiators as to whether you end up with a relationship or not, and the people part is absolutely the most difficult.
Baker joined KPN three years ago to help the business address this challenge. She brought with her a vast wealth of experience particularly in technology procurement and pedigree from previous roles at companies including SABMiller, Rio Tinto and Adidas.
The way she sees it, since a considerable proportion of KPN’s costs are with its suppliers, that’s where they might expect to find most of the opportunities, and her team has been restructured to assist in mining for these. “The lion’s share of our organisation is technology, so we work with some of the bigger names in the business, the Ciscos, Googles, Oracles and Microsofts. In addition, we need to be working with smaller organisations, more frequently, and we need to build a relationship that allows us to work with those smaller parties on innovation because that’s where a lot of the smart stuff will come from.”
KPN currently juggles maintaining partners of very long standing, such as its 125-year relationship with Ericsson, as well as linking up with emerging tech companies that could provide for future needs. A division has been set up specifically to ‘prospect’ for these new suppliers. “The Dutch marketplace is attractive to many organisations because we’re considered a very good test ground for a number of demographically similar countries,” says Baker. “And last year, we were the most recognised brand in the Netherlands, so that cachet gives us an enormous amount of very attractive opportunities.”
There’s a huge amount of innovation happening in the Netherlands too, she says. “For example, a spin off that’s just come out of Eindhoven University with Philips is very active, and ASML, another technological giant out here, is very active too. The KPN brand here in the Netherlands also gives us the chance to work in a very collaborative way with some very smart two or threeperson companies before they become sufficiently large to attract the likes of Amazon, Apple, Google, Facebook and Microsoft.”

Procurement’s evolution

To make the most of these potential and pre-existing relationships, Baker restructured her 70 strong department. Its makeup now includes a team of around 25 dedicated to strategic sourcing, while another 25 concentrate on her version of SRM: ‘strategic relationship management’.
It is part of a transformation effort that has been underway since not long after she joined. Her first move to bolster SRM at KPN was to get the right people on the journey with her, with tools and processes to follow. “We’ve flipped the typical transformation process,” she says, “we’re now in year three and we’re putting tool selection and process in as the last thing, which we’re talking to State of Flux about. Fundamentally, the people who do the work are the differentiators as to whether you end up with a relationship or not, and the people part is absolutely the most difficult. That’s why I started there, to identify those willing and able to embrace a new way of working. Our transformation journey has been convincing the business we can change, convincing our people we can change, and then making the change.”
And now that people’s minds are there, they are eager to get going. “Covid has frustrated a lot of my team members; they are keen to move at a far more accelerated pace. From a change perspective, that’s a luxurious position to be in. Speed of execution is a bugbear of mine too, but someone once told me you’ve got to go slow to go fast. He meant have a plan for how you intend to go fast.”
The ambition and vision for procurement is for it to increasingly act as an ‘air traffic control function’ pulling together disparate sources of data and feeding them into various dashboards to help drive decisions. “We’ve got about 39 data sources being crocheted together, feeding into a variety of dashboards – that gives us a data lake and a huge advantage from a data-driven perspective.” And it is now looking to draw in sources of external data too.
KPN procurement already focuses its attention on its top 20 suppliers who cover about 65% of spend, with performance management expanded out to cover the top 200, which takes it to almost 90% of expenditure. In parallel with this, it considers plans, that are ideally built in conjunction with the business, for specific categories and strategic relationships. Part of the transition has already seen improvements in standardisation and consistency in the way executive-level meetings with suppliers are handled.
While the top 20 are targeted for “hyper-care relationship maturity”, in other cases KPN wants to increase automation to boost efficiency. “There’s a slide in my mind about procurement and contract management of the future, that says machines will do the transactions and humans will do the relationships. So it’s about how you develop your human capital. It’s how you focus less on transactional work and more on relationship work.”
With key partners it considers who are of strategic relevance today and how an enhanced relationship could help them both. “A huge amount of the focus of the transformation effort we’ve been running has been about how do we get to a point where we can become that innovation engine room for the business. Not to produce it, but to facilitate the right kinds of dialogues, conversations and relationships that can bring innovation.”
When you see somebody jumping to help you, you truly see the power of collaboration as something no procurement contract could ever offer.

Pandemic procurement

While the pandemic may have impeded plans in some areas, it has expedited progress in others. “Financially we have been relatively spared,” says Baker. “Our network is working well so people aren’t generally looking to change providers. From a business perspective, we shut up shop early on a Wednesday and by the Friday we had 9,000 people working from home, so the power of operating digitally worked well for us.” And business clients who were not able
to transition so smoothly looked to KPN for advice and support.
In the Netherlands as elsewhere, healthcare is a sector that has been hit hard by the pandemic. Fledging unit, KPN Health, which has been set up to cater for the ageing demographic, stepped in to help where it could. “Going through government procurement is not a trivial exercise anywhere in the world, but during Covid, we saw medics saying to IT, procurement and security professionals ‘get out of the way, I have old people in frail care who now cannot talk to their families so I need iPads in here ASAP and I need secure connections, and KPN are going to do it for me and quickly’. So, together with many of our suppliers who could assist quickly, we mobilised to support hospitals wherever we could.”
Not only did it assist with getting tablets to patients, KPN also ensured wifi signals were strengthened at hospital locations by, together with suppliers, installing event rigs to improve mobile coverage that are more usually used at music festivals. “ That was a cohesive effort from suppliers and supply chain expeditor’s massively pulling together,” says Baker.
And as south east Asia came out of the first wave of coronavirus it was able to use its connections with KPN as a channel to market to supply medical grade PPE to those who needed it. “When you see somebody jumping to help you, you truly see the power of collaboration as something no procurement contract could ever offer. It is evidence of the power of relationships. 

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