Proxima & Activision Blizzard achieve sourcing success How to build or enhance a sourcing function Bertrand Leroux, Activision Blizzard John Mathew, Proxima © Proxima 2013. All rights reserved. www.proximagroup.com About Activision Blizzard The company Activision Blizzard is a leading publisher of video games and a distributor of interactive entertainment Revenue $4 billion+ in Calendar 2012 Employees 7,000+ Ticker “ATVI” Did you know? Call of Duty has been one of the most significant entertainment events of each of the last six years. Call of Duty Black Ops 2 grossed $1b in worldwide retail sales in 15 days" Total sales for the Call of Duty franchise have exceeded worldwide box office receipts for “Harry Potter” and “Star Wars” – the two most successful movie franchises of all time 2 www.proximagroup.com Proxima / Activision engagement 3 Engagement scope Activision Blizzard selected Proxima in 2012 under a multi-year engagement to provide: • Strategic sourcing • On site change management • Category expertise • Sourcing administration support for indirect spend Major areas of indirect spend • • • • • • • Marketing Video production Media POS HR Information technology Professional services www.proximagroup.com About Proxima What are we? We are an alternative sourcing partner What do we do? We improve companies’ productivity by aligning supplier spend with business objectives We manage over $10bn worth of spend across the full spectrum of non-core spend Areas such as facilities management, professional services, marketing, travel, IT, MRO and so on 4 Far beyond price we ask why money is spent We look at how it can address needs, effect behavior, and impact risk, transparency and innovation We act as a catalyst to bring corporations and suppliers together, changing the behaviors of both so that each gets more out of the relationship by engaging with each other more constructively and creatively We have been creating value for money – by turning suppliers from enemies into assets – for 20 years www.proximagroup.com Aims: What will you get from this session Hear lessons learned from building a sourcing function in a highly creative no-mandate environment Understand how the sourcing organization has enabled rather than hindered success Learn what the wider business impact has been on Activision Blizzard 5 www.proximagroup.com Environment before transformation 1. Spend/ categories influenced was small 2. Responsibility for sourcing sat with managers along with day job Commercial Technology Innovation 1. Limited spend data visibility and analytics 2. Lack of information in place to track and trap requirements 1. No systematic approach to reap innovation from suppliers 2. Little involvement in business planning led to increases Measurement/Control 1. Inappropriate suppliers used for operationally critical services 2. Inability to ensure supplier delivered contracted business outcomes and savings 6 www.proximagroup.com Drivers for sourcing transformation 1. Evolution of gaming industry and price points require quicker reaction time 2. Digital impact on gaming business 3. Integration commitments External pressures Organization impact Internal pressures 1. In order to maximize value, company adopted a centralized structure 2. Management recognized collaboration with stakeholders as key to long term success 1. Cost management a key aspect of culture 2. Improve supplier costs and service levels 3. Free up valuable resources in Marketing, IT and HR to focus back to core functions Opportunity 1. Management saw significant opportunities for improvement, in both financial and nonfinancial terms 7 www.proximagroup.com Activision Blizzard target state Extending sourcing’s influence: 2014+ 2013 Into new categories Across geographic borders Across business units Across functions • 2012 • Sourcing activity devolved across business units • Undertaken in an inconsistent manner • Limited efforts to consolidate or leverage spend • Loss of value 8 • • Significant savings delivered and taken to the bottom line • Balance of power shifted from suppliers to Activision Blizzard • • • Sourcing viewed as a trusted business partner aligned with BU success Protection and enhancement of the reduced cost base Openly seeking innovation from suppliers Professional category management approach through engaging sourcing Suppliers become allies www.proximagroup.com The Challenge: closing the gap in a no-mandate environment Starting point Target State Activision Blizzard environment No mandate for sourcing involvement A creative environment with purposefully independent decision making Limited centralization of functions 9 www.proximagroup.com Answering the challenge Without a mandate we needed to create a pull for procurement’s involvement Three key success factors: 1. Category expertise 2. Customer intimacy 3. Management support Creating a step change in the breadth and depth of category expertise Driving procurement transformation through a “customer intimate” approach Enabled us to provide stakeholders with insights and ideas Rather than through the standard procurement strategic sourcing game plan Internal sponsorship and know-how to shepherd the program through the Activision Blizzard organization and around the existing land mines 10 www.proximagroup.com Key success factor #1 1. Category expertise 2. Customer intimacy 3. Management support Creating a step change in the breadth and depth of category expertise Driving procurement transformation through a “customer intimate” approach Internal sponsorship and know-how to shepherd the program through the Activision Blizzard organization and around the existing land mines Enabled us to build a bridge to stakeholders, providing them with insights and ideas 11 Rather than through the standard procurement strategic sourcing game plan www.proximagroup.com Credibility on day 1 through category expertise Providing effective sourcing and valuable insights to stakeholders required deep expertise across 200+ spend categories It’s not affordable to have this in-house With Proxima, we tap into the experts we need, when we need them Thereby leveraging the power of multiple resources at the cost of far fewer The model was put to the test on day 1 when we kicked off several large and complex Marketing projects… with immediate success 12 Scalability, knowledge & leveraged delivery model www.proximagroup.com Key success factor #2 1. Category expertise 2. Customer intimacy 3. Management support Creating a step change in the breadth and depth of category expertise Driving procurement transformation through a “customer intimate” approach Internal sponsorship and know-how to shepherd the program through the Activision Blizzard organization and around the existing land mines Enabled us to build a bridge to stakeholders, providing them with insights and ideas 13 Rather than through the standard procurement strategic sourcing game plan www.proximagroup.com The CPO's dilemma What procurement wants What the business wants Sourcing process Business solutions Savings Value for money Centralization across BUs, geographies, business functions Speed to contract Maximize spend under management Reliable suppliers and positive relationships Keep to the process time line Minimized risks: Personal… Delivery… Business continuity Create a competitive threat and switch to lower cost supplier Long term trusted supplier relationships 14 www.proximagroup.com The solution… Our need to build a bridge to the business in a no-mandate environment meant that we could not take the standard approach and base our new procurement operation on “what procurement wants” We needed to find a way to satisfy the basic requirements of the procurement function but shift the focus to providing the business with what it wants However, this proved to be a much bigger challenge than we anticipated... Fueled by 10+ years of success in strategic sourcing, procurement’s focus in the US has shifted completely to support this process. A narrowly focused operating model has evolved – activities, skill set, objectives. To overcome the CPO’s dilemma and be successful in a no-mandate environment, we realized that a completely different paradigm was needed 15 www.proximagroup.com The solution… (continued) We needed: A different approach to de-emphasize the standard sourcing process A new set of objectives and metrics And most importantly - a different skill set A deep bench of category experts The key question then became: …or… Prohibitive Proxima • Due to the cost and complexity of building and maintaining this model internally • A complete operating model based on a customer intimate approach to procurement. This allowed us to immediately deliver on “what the business wants” • We decided, if it was available in the market, to tap into an existing capability. This led us to Proxima, who had built their reputation on success in no mandate environments • Their approach was to focus simply on understanding our customers’ true business issues and bringing the total power of the supply market to solve for these needs 16 www.proximagroup.com Key success factor #3 1. Category expertise 2. Customer intimacy 3. Management support Creating a step change in the breadth and depth of category expertise Driving procurement transformation through a “customer intimate” approach Internal sponsorship and know-how to shepherd the program through the Activision Blizzard organization and around the existing land mines Enabled us to build a bridge to stakeholders, providing them with insights and ideas 17 Rather than through the standard procurement strategic sourcing game plan www.proximagroup.com Solidifying our success through a strong program sponsor 18 Select a key sponsor who understands organization fabric Bertrand was part of the senior team for mergers with Vivendi and Blizzard. He had an established key working relationship as CIO Establish ‘tone for working with business units’ - “Collaborative” vs. combative Key to success would be to adopt a customer intimate approach with stakeholders and focus sourcing approach around their needs Communicate early Momentum and quick wins were important. We openly announced key successes with both Senior Management and at operating groups www.proximagroup.com Results to date In 12 months delivered multi million dollar savings across all key category areas Including challenging areas such as marketing, production, customer service, and IT Taken to the bottom line and measured at P&L level Reinvestment of hard savings into the business Goal is to drive even more in year 2 Sourcing viewed as a trusted business partner and engaged proactively at the start of most initiatives Actively monitoring deals with the business to meet savings targets 19 www.proximagroup.com Value beyond ‘savings’ C-Suite & upper management see strategic sourcing as a valuable tool to drive business performance A sourcing function with defined expertise by category A rigorous way of engaging with suppliers/ partners Improved understanding of supplier cost structures & commercial terms Sourcing is a trusted partner including in critical areas like Marketing A workflow system for logging BU needs & allocating sourcing & legal resources 20 Mandates tied to thresholds for engaging sourcing and bidding Supplier due diligence and assessment of potential risks Support when stakeholders want to avoid difficult supplier conversations (good cop, bad cop) www.proximagroup.com Key takeaways • 1. Category expertise • • 2. Customer intimacy • • 3. Management support 21 Creating a step change in the breadth and depth of category expertise Enabled us to build a bridge to stakeholders, providing them with insights and ideas Driving procurement transformation through a “customer intimate” approach Focus on the business needs rather than through the standard procurement strategic sourcing game plan Internal sponsorship and know-how to shepherd the program through the Activision Blizzard organization and around the existing land mines www.proximagroup.com Thank you John Mathew Vice President, Client Services - Proxima [email protected] © Proxima 2013. All rights reserved. www.proximagroup.com