The Profession comes of age - Raise your game, Raise your voice (Inaugural Speech)

Speech at the assumption of CIPS President in November 2014 

Ladies and Gentlemen, 

Thank you for welcoming me today on this auspicious occasion of my assumption as the Global CIPS President headquartered here in the UK. It is a pleasure to be here.

My name is Babs Omotowa and I am speaking in my capacity as President of CIPS – the Chartered Institute of Procurement and Supply.

I took over as President on 1st November. However, my involvement goes back to 1994 when I began studying for CIPS qualifications while with Shell in Nigeria.

By 1996 I was a qualified member and went on to serve as an examiner for two years from 2002.  In 2006 I was honored to be made a fellow. So, as you see, I am strongly grounded in CIPS as well as in procurement.

Some of you may also know me from my current job as MD and CEO of Nigeria LNG Limited, which currently supplies 8% of the global liquid natural gas market.

Today I’ll be talking about my vision and ambitions for the procurement function. And to do that I need to focus on you – the people who work in the profession.

We have come a long way since the founding of CIPS in 1932 as The Purchasing Officers Association. The professional framework and training now available, and the sharing of best practices have transformed not only what we can achieve as individuals but also the impact the profession has on global trade and business.

The role of procurement has changed remarkably since 1932, from that of buying goods and services to overseeing an integrated set of management functions. Procurement decisions are increasingly intertwined with strategic management and are core to many organizations. Standards are high and the profession has truly come of age.

On a personal note, the tools and techniques I’ve gained from CIPS have enabled me to reach the heights of CEO of a multi-billion dollar company. I think this shows that the sky’s the limit because CIPS and the profession enable you to aspire to the very top.

So, the profession has reached a good place. But this is not our final destination. Far from it. As President of CIPS, my message to procurement professionals is: “Well done for what you have achieved – but now it’s time to raise your game, and to raise your voice”.

What does this mean in practice? Firstly, by raising your game I mean develop your full potential.

Think about a young footballer who has worked hard and made it into the first team. He has all the skills to shine, but is he the finished article? No. He must push on and develop his importance to the team – perhaps by scoring more goals or by stopping the other team from scoring. He must continually hone his skills and always be looking to develop new ones.

In procurement, development is also about adding value to your team – in other words, to your employer’s business. As procurement professionals, we pride ourselves on having the essential skills to control costs and make informed purchasing decisions. But if we confine ourselves to saving money we limit our potential to add value. I’ll return to this point in a moment.

The second part of my message is “Raise your voice”. Our young footballer is shy and in awe of the more experienced players around him. He has ideas for how to score more goals but is reluctant to speak up. He needs to make himself heard.

The same thing applies to business. I know that people in procurement often have great ideas for improving the business – not just by cutting costs but also by transforming processes and opening up new revenue streams. In my organization the CPO reports directly to me, so there is a clear channel for communication of these ideas.

To give you just one small, simple but effective example, our CPO raised the issue of building maintenance in one of his regular meetings with me. He said it was costing us too much because of the day rate charged by our contractor, which placed most of the cost risk on Nigeria's LNG. I encouraged the CPO to engage with our maintenance team and with the vendor. So he negotiated a new contract with a single all-inclusive rate that saved us money.

But this kind of communication between CPO and CEO is still relatively rare in business. Booz and Co in a recent report highlighted that less than 5% of Fortune 500 companies have a CPO in their C-suite. In a separate report, Ardent Partners Supply Management Experts highlighted that less than 20% of CPOs globally report to their CEOs.

So, if you work in one of the 80% of companies where procurement has no direct line of communication to the top, you need to find a way to make yourself heard. This is not easy, but take my word for it – a smart CEO will always listen to great ideas. I’m a CEO and I know that I do!

Before you raise your voice, ensure that you understand the language of your business. And particularly how it defines value and growth. This goes way beyond the terminology and knowledge you need for your day-to-day job. It extends to learning what is important to customers and to the other people who work in your organization – particularly in areas that generate the most revenue.  It sounds obvious I know  – but it is surprising how few people take the trouble to do this.

In my own career, I have taken every opportunity to work in cross-functional teams, learning about the work of other departments. While at Shell I spent two years widening my experience within the Production Operation in the UK. I also worked as Regional Shipping Manager across Europe i.e. in the UK, the Netherlands, and Norway.

However, it is not essential to go abroad to learn the language of your business. Listen, read, and take advantage of training opportunities. Above all, ask a lot of questions. Your colleagues won’t mind, especially when they see how much value your curiosity adds to the business in the longer term.

This brings us back to the importance of raising your game and providing genuine leadership. No other function in an organization has so much opportunity to add value like procurement.  It is involved right from concept, to designs, to tendering – through to execution, disposals, etc. It has a pivotal position and a 360-degree view of resources, challenges, and opportunities – right across the value chain.  These are inbuilt advantages. But they only matter if procurement professionals, from the CPO downwards, are willing to seize the opportunity, take the lead, and actively drive value. This starts within the business but extends outwards in all directions along the value chain.

Driving value requires a positive attitude toward suppliers. Procurement’s job should be to act as an enabler, not merely as the keeper of contracts. Encourage your suppliers to think beyond the boundaries of their contractual obligations and to offer new ways to serve your business. Help them to visualize the opportunities and potential benefits.

Global logistics companies are particularly good at this kind of innovation. By continually offering new and better services they sometimes open up whole new markets that their customers barely knew existed.

Take the example of Federal Express. Before the company began in 1971, the air freight industry in the United States was slow, cumbersome, and bound up in red tape. Founder Fred Smith came up with a network of lightweight aircraft providing overnight delivery across the country. Within a few years, companies were basing their entire business models on the availability of the service, particularly in the burgeoning microelectronics market. That’s a great example of innovation in the value chain.

There are also stand-out examples of procurement professionals who have transformed businesses by driving value. An obvious one is Tim Cook at Apple. Recruited by Steve Jobs in 1998 from a procurement role at Compaq, Cook came in as head of operations and quickly cut inventory times from one month to six days. Within another year they were down to an amazing two days. He also reduced production time for making an Apple computer from four months to two.

Could he have achieved these things if he had limited himself to cost-cutting? No, because the changes he introduced in the value chain involved vision and radical measures, such as closing underperforming factories and warehouses, and replacing them with contract manufacturers.

By the way, Cook could only make those radical changes at Apple because Steve Jobs recognized his talent and potential. Jobs was a technology and business genius, but he also deserves immense credit for his ability to hire the right people, nurture them and give them the space to fly. All CEOs must hire the best people available and invest in them and nurture them. For any organization or leader, getting the best people and developing them brings tremendous value. In fact, all leaders should aspire to find talent that is better than they are. In this way, they secure not only the present but also the future of their organizations. Cook was not afraid to make big changes, and we see this time and again when procurement professionals successfully drive value. As you will know, Tim Cook is now Apple’s CEO.

Boeing, in developing its 787 Dreamliner, expanded the role of procurement from outsourcing parts to outsourcing entire subsections. 40% of the $8 billion development costs were outsourced and Mitsubishi made the wings, Messier-Dowty the landing gear, and Latecoere the doors. Thanks to the foresight of its procurement division, Boeing now has a leaner operation and is an integrator collaborating with subcontractors.

The lesson of these examples is that you don’t have to accept the structures you are given. You can propose radical changes if there is a sound business reason for doing so.

This is an approach I have taken more than once in my own career. As General Manager Supply Chain at Shell Nigeria, I re-engineered the company’s logistics base at Port Harcourt. The base had been a cost center since its inception, but my team and I saw an opportunity to add value by turning it into a revenue center.

Our approach was creative. We brought in a core investor to take over management of the facility, while also investing in improvements and attracting new customers. The revenue earned as a result not only offset all of Shell’s costs for using the facility but also turned a profit. Our creative approach converted a minus on the balance sheet into a plus.

So, we have established that the role of procurement in the modern company is to drive value across the value chain. But how far outwards does the value chain extend? Does it stop with our suppliers, or their suppliers and sub-contractors? With our customers?

In fact, I would argue that the value chain effectively has no boundaries. It extends well beyond traditional business partners and stakeholders – even beyond customers – and into the fabric of the societies and economies where our businesses operate.

When I look at many of the issues in society today, I see how procurement can play a major role in helping to tackle some of our biggest problems – particularly in developing countries.

I used the word ‘duty’ just now about nurturing talent. I also believe that modern corporations have a duty to society. They can and should have a positive impact wherever feasible. This will include ensuring the sustainability of their operations and minimizing their impact on the environment – and could well extend to fighting corruption and raising standards of accountability.

You will find best practices in many different industries. Brewing is far removed from my business of liquid natural gas. However, it is easy for me to identify examples of best practices from a company like SABMiller – the world’s second-largest brewer – because intelligent procurement always stands out.

The company’s stated policy is to build sustainability into the value chain whenever possible by local sourcing of raw materials, such as hops and barley. In Africa, it is going one step further by adapting the brewing process to crops that are not traditionally associated with beer.

Cassava is a popular crop in many parts of Africa – including my own country – and an important source of healthy food. However, until recently it was not used in commercial brewing.  It was not feasible for brewers to collect the fresh crop from widely dispersed small farms because cassava deteriorates rapidly after harvesting.

Again, creative thinking came into play. SABMiller acquired an innovative mobile processing unit. This travels to the cassava-growing regions and processes the root in situ before it begins to rot. As a result, SABMiller has already been able to launch two cassava beers – Impala in Mozambique and Eagle in Ghana.

This is good business for SABMiller but also fits perfectly into its policy of local sustainability. Smallholders now have a guaranteed market for their surplus cassava crop. The excess product that used to rot in the fields has become a reliable source of income for poor farmers and their families.

This example from SABMiller is a real win-win and shows how imagination and a willingness to try new things can simultaneously deliver business growth and benefits to society. It gives a new meaning to the concept of smart procurement.

Returning to my own area of business, I’d like to give you an example from Nigeria LNG of which I am particularly proud. I think it demonstrates the benefits of involving the procurement team from day one.

We recently signed a $1.4 billion contract with Samsung and Hyundai in South Korea to build six new LNG ships. This followed a transparent and fiercely competitive tender, which ensured we got value for money. Having so ensured shareholder value, normally that is where the story would have ended.

However, not for us, as we had involved the procurement team right from conceptualization. This enabled us to look at stakeholder issues and to integrate into the purchase some solutions to address several socio-economic challenges in Nigeria. These included skills acquisition, employment, capacity development, etc.

We included in the contract terms that 600 Nigerians will be trained in shipbuilding – 200 in South Korea over the two years of the ship construction, and 400 in established institutions in Nigeria. For those Nigerians now in South Korea, the experience and skills they will gain will enable us to transfer shipbuilding knowledge that was hitherto not available in Nigeria.

But then we did not stop at that.

We looked at materials to be used for the construction of the ships and identified those that could be made in Nigeria, including cables, paints, furniture, anodes, etc. We then included in the contract that these must be bought in Nigeria by the Korean Companies, once they met the required standards. We then worked with the local manufacturers to improve their capacity and also got international agencies to verify that their products met global standards. Today for the first time in Nigeria, local companies such as Kabelmetal – a beneficiary – have exported over $1 million of cables to South Korea, and other categories are following.

But that was not all.

We also got Korean companies to send shipping simulators worth over $5 million to Nigeria. This will enable us to train many more Nigerians in ship operation and navigation locally rather than only the few that could afford to go overseas. These simulators will not only help save funds but also improve significantly the regulator’s capacity and create higher capacity locally.

We didn’t stop there.

We also included in the contract that a dry-dock facility must be built in Nigeria at the back of the contract. We got Samsung and Hyundai not only to commit $30 million to the project but also to provide technical partnerships to local investors for the project. A feasibility study has been completed, and once this dry dock is built it will create thousands of jobs locally. Also, ships that historically used to spend foreign currency in locations all over the world for dry docking can now do so locally.

I think you will agree that this project really did stretch the boundaries of what a procurement exercise is normally expected to achieve. Although this was a large-scale project, the principles it embodies can apply to almost any procurement scenario. We could have settled for getting great value for the company and its shareholders, but we wanted much more for our workers and for our country. I intend to use it as a template within my own company for many years to come.

So, I hope I have given you a clear idea of my vision for the future of people working in procurement. With the considerable help of CIPS for over 80 years, the profession has truly come of age. We have a global community now in the region of 106,000.  This is such a strong base from which to face the future.  CIPS, I know, works tirelessly across the globe to strive for the best that this profession can be – it is an Institute that we should all be proud of.

The launch this year [2014] of the Global Standard for Procurement and Supply is evidence that CIPS continues to set benchmarks for professional development and best practice and wants to raise procurement to fresh heights.

The profession globally has a strong foundation and is increasingly involved in strategic business decisions. But to make the next leap forward – and join the top table of management – procurement professionals must raise their game and raise their voices. Like our friend the young footballer, they should take every opportunity to add value to the team. Don’t just be the goalkeeper – whose job is only to save goals – but step outside your comfort zone and become the goal scorer.

How to begin? I would urge you to focus on the five areas I spoke of earlier:

1. Look beyond your traditional strength of cost reduction. Learn the language of the business and understand where you can add value and encourage growth.

2. Drive value in the entire value chain and enable your suppliers to innovate. It will benefit both you and them.

3. Push the boundaries of value and be a solution for big societal issues. This is good for society and for business. 

4. Secure the present and the future by investing in the best people. Develop them and allow them to excel. You may find the next Tim Cook.

5. And have procurement reporting to CEOs and at the most senior levels. You may not have this where you work but you can aspire to it. It is happening in my organization and I can tell you that it works.

Speaking of things that work, please share good ideas with your procurement colleagues – and tell them about times when you raised your game and your voice. You can do this by posting a comment on the CIPS website, which will allow others to learn from best practices.

As I said earlier, the sky is the limit for people working in procurement.  Indeed, I look forward to a time when our profession is recognized as a force for tackling major global issues – and becomes a lead item on the agendas of bodies such as the United Nations and the World Economic Forum.  

Thank you for listening. Please go out there and make your voices heard.