A procurement joint venture

By Volker Pyrtek

By Volker Pyrtek

“Necessity is the mother of invention and BuyIn was born out of necessity. There was a strong need and desire at Deutsche Telekom (DT) and Orange board level for disruptive transformation. One enabler of this transformation was founding a procurement joint venture which would create tremendous scale.

Both companies have independently high supply market power and their combined purchasing strength has proved game changing. With BuyIn, we’re talking double the purchasing power, coming close to the limit of anti-trust regulations. In a scale business, size matters.

BuyIn has delivered value in terms of savings and driving innovation, the underlying business rationales proving correct, but why are we succeeding where other procurement joint ventures have failed? Well, there are several preconditions for success. Fundamentally, telecoms firms have a large volume of direct spend, and this spend has a big impact on companies’ profit and loss. Also, DT and Orange are buying the same goods but have different customer footprints, so we avoid competition on the sales side.

Look at the automotive industry. Can you imagine two automotive giants forming a procurement joint venture to buy their key components like gearboxes? No, because this kind of direct spend is invested on key differentiators, aimed at a strongly overlapping customer bases. I believe, however, that there are a number of ingredients for a successful procurement joint venture, regardless of the industry in which you operate.

Fresh talents

Procurement is a people-driven business. From the beginning, BuyIn was triggered, driven and observed by top management from its mother companies, and the BuyIn leadership team was carefully selected to ensure equal representation from both parties. We are a true extension of our shareholders’ procurement organisations, with a combination of the best purchasing expertise from DT and Orange, balanced with fresh talents.

At last count we had more than 24 nationalities in our team, and we make sure that we leverage these cultural differences. If you look at the French and German cultures in particular, they are big, strong and very proud. The first 18 months were certainly difficult for the management team, but we have evolved our multicultural power. It sounds a little bit crazy, but thanks to this multicultural mix, I have developed a much stronger ‘outside in’ perspective when working with our shareholders. It’s this semi-external element which allows BuyIn to act as an internal challenger. We place a high value on attracting and developing our people and have our own procurement academy, which contributed to us winning the Procurement Leaders Best Procurement Employer 2014 Award.

Another important ingredient of BuyIn’s success has been powerful ambition underscored by expectation management. From the beginnings of its feasibility study, BuyIn was approached as a sustainable joint venture, not just an opportunistic co-operation. To reach a stage of full operations took a significant investment in time and effort but we anticipated this. Nevertheless, I believe the most important element for achieving procurement excellence in a joint venture is the successful integration into the shareholding companies. Integration is critical to overcoming third-party perception.

Our offices are located next to DT and Orange’s in Bonn and Paris, but integration goes beyond physical proximity. When you move into a joint venture, you can lose the emotional attachment with your shareholding companies. In procurement, perhaps more than in any other profession, trust is key. BuyIn had to remain on the agenda of the CEOs and CFOs in order to have strategic impact and deliver savings. To achieve this we have to be trusted and respected at the highest executive level at both DT and Orange.

True ambassador

If there’s one thing I have learnt over the past three years, it’s not how to be the best negotiator in the world; it’s how to be a true ambassador. DT and Orange are aggressive competitors – each has a 50% stake in the joint venture, but when I am with either company I give them 100%. I am completely focused on them and their business, they are my only customer. I invest the majority of my time developing these personal relationships, building trust. This commitment to developing the right relationships is reflected in my decision to remain in France. When BuyIn was formed, my family and I moved to Paris to be closer to Orange and better integrate myself into the French professional and social culture. Three years later, I decided to continue living here because the experience is personally enriching and necessary for me to perform professionally at the highest level.

The initial set-up phase of BuyIn is behind us and we will continue to focus on driving simplicity, efficiency and enabling the continued transformation of DT and Orange. For BuyIn it truly is the case that ‘the whole is more than the sum of its parts’, and we will further leverage the power of our mother companies.”

This article is an adaptation of a piece that appears in Issue 53 of Procurement Leaders Magazine. For more information, click here.

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