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A sure bet for better business at Ladbrokes
CG: Today I am joined by Clive Rees, Chief Procurement Officer for Ladbrokes plc. Thank you for joining me today Clive, can you tell me a little more about your background and current role at Ladbrokes?
CR: I have had over 30 years in commercial procurement roles. The first 14 years were in the UK National Health Service (NHS), with various roles in different parts of the country. In 1998 I joined National Australia Bank (NAB) in an IT procurement role. I was also involved in global outsource deals for Australia, New Zealand and the UK.
I then became the Head of IT Procurement for National Australia Bank in the UK. After four years, I departed NAB and joined Abbey (pre Santander) as the Head of IT Procurement. I was then enlisted to be involved in India call center deals, India application development deals – as we were looking to off-shore those services.
I took voluntary redundancy when Santander took over and spent a couple of years as a stand-alone contractor consultant working for the then CPO at Lloyds, amongst dipping in and out of various other categories. Then I went permanent as Head of IT Procurement at Lloyds TSB. When they acquired Halifax Bank of Scotland I became the IT Procurement Director for Lloyds Banking Group.
In 2010, I did a consolidation of the Telco supplier. It was a billion pound, seven-year deal, which I led the commercials on. Again, as with Abbey, I’d done some team leadership and then some negotiation. I left there in February 2012, and went back to contracting consultancy. I did an assignment at Network Rail for four or five months, then did a six month assignment at Ladbrokes as the Chief Procurement Officer. As of January 2013, I am now the permanent CPO at Ladbrokes.
I have a PhD in supplier relationship management, which is quite relevant to what I do.
CG: How did you find working in public and private organizations?
CR: There are lots of similarities and some significant differences. The similarities are that the public sector requires you to understand how to get sign-off for big contracts, how to identify and navigate your way around the key influences and who the key committee members are.
And that’s the same in big corporates, certainly in the banks that I’ve worked in, less so in Ladbrokes because it’s a lot smaller. But in the big banks you’ve got to understand how to get things done, what the sign-off processes and procedures are, whether it’s a risk based decision, whether it’s a cost reduction decision, depending on what the issue is. So there are a lot of similarities in the bureaucracy management or, if you like internal client stakeholder management.
CG: How would you compare the decision making processes between the large banks you worked in and the small operations of Ladbrokes?
CR: At the banks we knew what we were trying to do, or I thought we knew what we were trying to do. I think there’s just more people to convince, so it just took a bit longer to find the key decision maker.
It’s easier in some ways to find the real decision maker in a smaller organization. In the bank there are far too many people that thought either they owned it or they had a say in how to manage that supplier relationship. Whilst you can pull the information probably quite quickly in a big organization, assuming that you’ve got the right data mining capabilities and access to single version of the data, identifying the true owner is a bit more complicated - I used to find that a bit frustrating.
Whereas at Ladbrokes, I know who the real movers and shakers are because there’s fewer of them. And because of the way we’ve set ourselves up with the executive directors at Ladbrokes, I’ve got all but one of them on a procurement steering group that I take updates to monthly. In the update I provide what I’m looking to do as a strategy and tracking against business objectives.
I have also set up a similar forum but the focus is on supplier relationship management, in which I invite an executive member from a supplier to join.
I suppose these are examples of being able to drive change a bit quicker in a smaller operation because I know who to talk to, whereas in Lloyds there were just so many people. Whilst I could go to the CIO it could get a bit political then as to who else should be involved.
CG: Ladbrokes has recently acquired BetDaq – what are, if any, the implications from your perspective around this deal going into 2013?
CR: This is a very positive move for Ladbrokes and fits with the plans to develop and grow the business. Ladbrokes have and always have had a strong organic growth strategy; we do though look at M&A where it actively accelerates our organic growth plan—which Betdaq does. Procurement are there to support all M&A deals.
CG: Outside of this new deal, what are some other key challenges you are facing over the next 12 months?
CR: There are several key pillars to our procurement transformation strategy. The first being SRM, getting the value out of our current suppliers and making sure that the incumbents are returning value which in turn helps shape our thinking. We share our goals and plans for the next 12 – 18 months during strategic review meetings and similarly the suppliers share their goals back with us. We then discuss what they can share with us (lessons, best practice, ideas) from their other clients (not necessarily within the same market).
Therefore, SRM is a real big focus for us. Number two, inevitably, and you know all procurement organizations, whether they like it or not are measured on their P&L contribution to the bottom line. So I’ve got some savings targets which we’re going to try and hit, and also some Capex expenditure because we’re looking to invest quite heavily throughout 2013 - particularly into our online presence and capabilities. Therefore, we will be assessing some of our existing IT contracts.
I suppose the other two things are how we engage internally with our clients. The perception of procurement in Ladbrokes to date, which is starting to change though it takes time, is that we were playing at the lower end. So I’ve just personally done some deals about picture content that we buy from media rights people about horse racing that go into our TVs in our shops. Traditionally we wouldn’t have been involved in that – this has opened the door to our marketing colleagues, helping us position ourselves higher within the business.
The final challenge is trying to upskill the capabilities of the team.
CG: Your inroads into marketing is an interesting one, I assume they a potentially big client for you?
CR: Given the size of their budgets, yes – although we haven’t worked closely with them before. Ladbrokes runs a lot of TV adverts, which are in the top ten of most recognized TV adverts [in the UK]. There’s also a lot of spend on Channel Four horse racing advertising space and sponsorship of events such as the St Leger at Doncaster every year.
Increasingly marketing are an important stakeholder but we wouldn’t have, traditionally in the past, been encouraged or allowed to play in that space, whereas now we are.
CG: How do you create value for the various stakeholders you work with across Ladbrokes?
CR: We can’t just be seen as the cost cutters or penny pinchers otherwise we will not be engaged in the right way and people will be turned off by us, or they’ll just try and protect their budget because they’ll think we’re just there to collect some elements of it and give it back to the Finance Director. For example, a big portion of revenue comes from customers who are introduced to Ladbrokes online by other organizations and their websites, the affiliate scheme as it’s called. So it’s not just the costs that we pay out to those folk you’ve got to look at the revenue that we then subsequently generate as a result of having new customers and retaining those customers. So you’ve got to understand what the business is about.
I have no history in betting and gaming, but I make sure to go out regularly to the retail sites because it helps me understand what the business, at the grass roots, is all about, it helps me understand how people in marketing, for example, are trying to portray the business. So I have to understand the business, I have to understand the business unit drivers and I then have to convert what we do in procurement into their language. Otherwise, as a procurement person, I would be rejected or at best tolerated.
CG: What about upstream, towards the boardroom, do your FD and other board members view value creation in the same way that your stakeholders do?
CR: The chairman and non-execs are going to be interested in what happens to the share price. So you talked about the BetDaq acquisition that it has done a good thing for our share price. We can’t always say directly that’s the case because of the vagaries of the stock market.
They’re not going to be as interested in what value we get from individual initiatives or from individual suppliers. But they are very interested about our top 30 suppliers and there has been, not only at the executive committee but also the operating committee and the actual board, discussion around driving greater value from our suppliers.
I report into the Finance Director for the group. He is very pro-procurement and very supportive, which I think helps. But he isn’t, if you like, a typical FD who is just looking at the cost side, he obviously understands and looks at the revenue as well and the value that we create, and knows the long-term game is to make sure we grow the customer base and give them what they like. He’s been instrumental in terms of the capital investment that we’ve earmarked for 2013, and what return we expect to get for that in the way of revenue and then profit.
CG: Tell me more about your relationship with your FD?
CR: Our relationship is very good. He recruited me, so that always helps. I report into him. I see him for an hour every second week. He comes to the monthly procurement steering group. I am, at the moment, going on a monthly basis to the executive committee to update on procurement. I go to his monthly direct report meeting, which is a bit of a mix because he’s obviously got his finance guys but then he’s got the chief counsel, a risk person, an investor relations person and me. So it’s quite a different mix of people in a meeting.
Given the positive nature of our relationship, it has helped me build new relationships across the business, particularly at the executive level and increased my exposure to various people across the business.
CG: On the topic of people, our recent research found that the cost base for global businesses today has significantly changed over the last decade – with revenues being spent on labor gradually decreasing (average for FTSE 350 in 2011 was 12%), whilst revenues spend with non-labor and third party suppliers increasing (average for 2011 was 68%). Do these figures surprise you?
CR: Your numbers are a little surprising, perhaps a little higher than I would have expected. Ladbrokes is big on short-term engagements with specialists to help us move on when needed. We also employ people who maybe aren’t as specialist but a bit more generalist, who would then monitor the delivery of outsource partners so that we don’t incur the overheads. And it’s easier to bring people in and exit them from a contractor basis than it is to employ them on a permanent basis.
CG: The final question I have is around a concept called catalytic or non-unconventional thinking. Do you have an example of a transformational change you have been involved in that stemmed from catalytic thinking?
CR: I don’t think it’s particularly catalytic, but we ran a project around educating our commercial team who are not in procurement, but who are doing deals, around listening to what the customer was looking for – rather than what the market said the customer was looking for.
The information they were gathering was often shallow and gathered from a single source. They were pretty lax at getting insights from market research companies and I don’t know if anyone was actually talking to any procurement people (internal or external) around the things that were being purchased.
Obviously, you can’t share too much or you’ve got to be a bit circumspect about how you do that, but there are some basics like desktop research, attending conferences etc. I think you get a bit staid and a bit comfortable and you’ve got to force yourself out to gather the information.
In a company Ladbrokes’ size the difficulty is you’re never going to have a discrete couple of people as we used to have in Lloyds that would scour the market, understand what’s happening with say data centers and understand the latest thinking in certain software approaches. Within Ladbrokes we’re expecting the buyers not only to do the doing but to do a bit of research.
I’ve tried to say that’s part of their role, and that’s just taking a bit of time for them to buy into the concept, I suppose.
So I’m not sure that’s unconventional but it’s certainly a new emphasis for Ladbrokes, i.e. listen to what your customer wants, and challenge that, yes, great, but let’s just make sure we listen.
CG: Thank you for your time Clive.