The value of a contract is not just in the document, it is in how you bring that document to life with the help of people with the right subject expertise, technology to scale what you have at hand, and gaining insights that are beyond just numbers.
Hosts Matthias Toppert and Guru Venkatesan are joined by Lisa Ehrsam-Nixon and Patrick Foelck - procurement leaders from Roche - a multi-billion-dollar healthcare company, headquartered in Switzerland. They discuss how well-managed contracts have the power to move the needle in organizations by accelerating contracting, tracking and measuring vendor performances, increasing leverage for negotiations and reducing leakage.
Here’s how it goes:
Matt: Hello, I am Matt and I have here with me my co-host Guru, and we would like to welcome you all to this episode of the Class and Effect podcast presented by Simply Contract. Joining us here today are two guests, Lisa Erison Nixon and Patrick Folk, both of them procurement leaders within Roche, one of the leading healthcare companies in the world headquartered in Switzerland. Lisa has deep experience in procurement procure to pay processes, contracts and compliance. She leads Contracting Excellence at Roche and has a global team that focuses on contract records and lifecycle management within the global procurement function. She also manages Roche’s supply side and R & D contracting processes and systems. So has a very deep subject matter expertise in anything pertaining to contracting in procurement.
Patrick is the head of Strategy and Procurement Transformations at Roche. Patrick has led and delivered several global transformation initiatives, mainly for large corporations, and has immense experience in anything related to procurement, strategic sourcing, category management, procure to pay to list just a few. At Roche, Patrick is driving the future vision and strategy of the global procurement function. And as part of that role, he manages various line organizations, including risk, contracts and compliance, and other value creating and enabling capabilities. So very broad portfolio again, then with very deep insight into the internal operations of procurement.
Lisa, Patrick, absolute pleasure that you could join us in the podcast today. And we're super excited to have this conversation and dive deep into the world of procurement and contract management. Thanks for being here.
Guru: Likewise, Matt. It's an absolute honor to have two leaders come on and join us this morning on our series of podcast. Probably I could start to open up this conversation with some questions to Lisa, sharing her thoughts.
Contracting Excellence that's something which is really a thought leadership that Roche has done. I believe probably you are very few leaders across the globe who set up this function and are leading it. Some thoughts about that, Lisa. About what specific KPIs that you drive on this function, and why did Roche decide to set up this?
Lisa: Thank you, Guru and good morning, everybody. So Contracting Excellence has a whole bunch of different aspects to it. So one of them is contract lifecycle management, which we're going to be talking about a bit later in this podcast. And, the other piece of it is contract record management. So once you have the executed contract, how do you actually manage them and store them?
So Contracting Excellence also includes things like training, ensuring all of our colleagues across the organization are familiar with what does the contract mean, and why do we need it? Protecting Roche from different aspects. And, I think it's a new organization with some new focus that we're going to be working on. So it's going to be an exciting year for my team and myself to sort of really dive into what can we deliver for global procurement at Roche, but also the wider organization? And of course, it includes our new contract lifecycle management technology that we will be rolling out shortly.
Guru: Excellent. So that's pretty impressive. So just to add on to that, the next point that I wanted to chat with you about is the importance of so-called managing contracts. The whole world of contract authoring, volumes, velocity, value, how do you drive it? But the core cracks come into the M of the CLM, which is the importance of managing these contracts. Any thoughts about or any of the best practices that you come across in your experience on giving you a vast background?
Patrick: First for me, and this not only applies to contract management, I think this is a bigger challenge that we have in procurement and other enabling functions that we move beyond creating an analysis or dashboard or present some figures and just some facts that we actually generate insights and do something with these insights and action on these insights. So the M for me in contract lifecycle management is probably the real value that we can generate for the business and for us in procurement.
If I just run a great repository, if I just negotiate contracts well and sort of manage the authoring process, that gets me to a document that gets me to a milestone, but I need to move and work beyond that milestone. So what Lisa and team do is they look at that. How do I create excellence in getting to this milestone? And then what do I do with this? How do I drive excellence in management? How to deliver the value? How do I create the outcomes that I intend to with the contract, with the record I'm creating? And, that I think requires a lot of investment because I think this needs a good process. It needs good technology, but also needs, I think, a strong focus on the users than the stakeholders. So change management. And that's why we've decided to invest in this. And that's why I think we're making big steps forward in delivering the value of a contract beyond just a compliance record.
Matt: So, Patrick, let me hook in on that one, because I find that very interesting. What you have managed around stakeholder management, around value creation, is a view that we don't have very often. Very often what procurement says is our role is we need to drive the tender, the sourcing events, then prepare and conduct a commercial negotiation to finalize a very simplified price list, and then we’re out. Everything else is the role of the adjacent functions in legal to create a contract, in the stakeholders to bring that contract to life and make sure that you get the value from the contract.
It sounds like what you have just said, that you are envisioning the role of procurement and of contracting within procurement as something that is a little bit broader than what many traditional procurement functions think they should do. So share with us a little bit on how you have set up procurement within Roche, as the leader of that transformation that I mentioned in my introduction to you. And what you envision the role of procurement contracting within procurement to be.
Patrick: Great question. Thank you, Matt. I think maybe a bit of a provocative statement to start with, but sort of setting the scene here. I think if we continue doing what we're doing, procurement is dead. Because automation, digitization to an extend, a threat of decentralization, is challenging procurement status quo. If I continue focusing on just doing sourcing, just creating basically at best a piece of paper, a contract that documents what I've done in the sourcing process, then where really is the value at? Because to an extent that can be done by technology more and more so very soon. Also, this can be done with technology in a self-service way by the business, and more and more service providers come up that do this better because they do this at scale. There are many internal functions.
So procurement has to and must change if it wants to survive and really contribute to corporates as a function. And therefore, we at Roche, we've decided we invest in procurement, but invest in terms of, I think, leveraging the capabilities that we have to deliver more than just sourcing. And, more for us means we have created a portfolio of values that we commit to the business. That includes certainly savings or productivity, as we call it, no question. Also, Roche needs that, but more it focuses on quality of supply, for example, it focuses on delivering innovation, taking care of risk and sustainability, delivering solutions to business problems. Not just, hey, yeah, of course I source this for you and deliver an RFP for you. But no, actually, I look behind your request and understand your problem and sort of engineer, architect something together with a supplier to develop and deliver a solution. And, I think as we are talking contracting here today, we also want to deliver a certain buying experience, and that includes more than just, hey, I turned what we just negotiated with the supplier into a contract. I actually manage that contract for you and with you. I manage that supplier relationship with you and for you and I, together with you, deliver the value that we believe we've negotiated into this contract. The value is not a great negotiation and this thing is on paper and lives in the drawer. It actually needs to be delivered. I need to turn this into content in my system so you can buy against it. And I need to help you to manage this.
So this is, I think, just a very quick summary of what we believe the future of procurement will be. We think this is a value focused future rather than a pure ROI focused future. How can I get more out of procurement in terms of pace or in terms of greater savings results? That to me is an ROI view. Where this leads to is automation, digitization, externalization, decentralization. But, if you want to focus on value, you need to pull other levers and allow procurement to do more. And that's the route we are going.
Matt: And I think that is a nice set of what you have said right around delivering the value that you have negotiated into the contract, to use your words, is very much linked also to the role that you ascribed to contracting within procurement. And, I would assume and I would love to hear from you and from Lisa how you see that. I would assume, right, that the value does not sit just in the document. Of course, that's clear. But it sits in how you bring that document that you have signed to life, in the daily interactions with your vendors, with your suppliers, with any third parties that you interact with. And that obviously is a multifaceted problem that needs to bring in the stakeholders, that needs to bring in the suppliers, that needs to bring in the users. So how does your contracting departments within procurement help to achieve that? To bring the contract to life and drive value from that road stale document that is an artifact that is sitting somewhere?
Patrick: Maybe I can talk from an expectation perspective and there are sort of multiple angles to this question, Matt. I think that the first one is I need to have the capability to negotiate and I think exchange ideas and work with the supplier along the contracting process in an efficient and effective way. This is one big value add of doing this well. It comes across as professional, it does do this in an efficient and effective way, and I think it makes it faster. The whole speed to market aspect, especially for life Sciences companies, is super critical. If I spend three weeks negotiating a term because I need to send paper across, it's not good for us as a company and definitely not good for the people we work for our patients. Yeah. So I think that's critical.
Second benefit of doing this well to me is I have this recorded somewhere. I have the facts available. I have sort of a record I can work with, I can share with the business. I can allow others to use.
Then I think the third benefit here or the third focus area for me is the managing aspect. Once I've got something, and everyone has agreed to it, then I can sort of manage this and really drive value out of it. And the exciting piece for me is how do we do it? And that's, I think, where Lisa can add some excitement because that delivers, I think the value then really
Matt: Lisa, what delivers the value? Enlightened us!
Lisa: A whole bunch of different things, Matt. So first of all, I just like to take a real tiny step backward. So the contracting, negotiation and compliance team within global procurement is actually made up of a lot of fantastic people, and a lot of them are actually lawyers themselves. Okay. So we have a very high delegation of authority on behalf of Roche's legal organization to actually manage global procurement contracts, as well as some other types of contracts that are not a typical procurement related but do give us a seat at the table with the business.
I think having also the way that our team is set up, we're set up by what we're calling hashtags today. So they have an area of expertise, and they're very closely embedded with the stakeholders. Whether those are colleagues in procurement, but also colleagues across the business. So they understand the area of the business that we're supporting, which brings a huge amount of value and also speed and being able to tailor the contracts appropriately to the needs of the business and ultimately to our patients.
I think one of the things that we haven't been too good at in the past is technology. And, technology is the buzzword right now; and how can we make technology support us all? Having one system across the organization is definitely beneficial. We're coming from a fragmented, decentralized landscape and moving into one platform, which will allow us to have overarching visibility, not just in the main sites of Roche, but also in our affiliates and our intent to make our procurement contracts open and visible to our colleagues in the different affiliates so they can leverage them. And, technology being able to move from sourcing over contracting into our downstream. And, Patrick mentioned also the demand side of it. How can we help our stakeholders buy a bit more readily there? In addition, we're looking at a whole bunch of additional pieces of technology that will help facilitate the management of the contracts because we do need to ensure that we are protecting the company. If we fail to manage them, we can lose rights, we can lose rebates. If we're not following through, we might get overcharged by a supplier. We have no idea that that's happened.
So having it all in one place and being able to follow that through and that's what part of my organization will be focusing on is really supporting that management of those contracts and what has been agreed.
Matt: Patrick, I think you also had a follow up.
Patrick: Yes. I wanted to say a couple of words on the team in general, and then technology also. And I've seen many procurement organizations as part of my sort of consulting background before I joined Roche. And, when I joined Roche, I was surprised to see the size of the team and the broad focus area and deep expertise. Very quickly I learned the significant value this team in a procurement function delivers every day.
Just to give you two examples, many other Life Sciences companies I've worked with who had smaller teams and did not give that much focus to contracting and sort of contracting excellence and everything we talked about so far, struggled with getting the great output that procurement was delivering on paper and whatever was on paper effectively delivered and managed. It just doesn't work without people who have the expertise and doesn't work with the right technology.
If you continue to rely on a legal function whose focus is cutting the next M&A deal or protecting the company on other fronts, you in procurement and the supply side, to an extent, always comes last. So I quickly learned this major value in terms of speed to market, advisory to the business, managing and getting the stuff that procurement does on the road from this team. That's why we continued to invest in terms of growing the team, adding capability, but also adding significant technology and digital capability to accelerate. I can say now, four years later, after joining Roche, I'm still super excited about having this team. I'm amazed by what they do, and I'm amazed by how much the patient even feels and sees the value that the team delivers in terms of getting patients into trial faster because we also take care of contracting for clinical trials. And that is true. I think procurement value delivered to our main customer, which is the patient, and that comes from this team.
Matt: So one thing that you're saying, which is very interesting, an important precursor for success in contracting excellence is investment. Investment in people with the right subject matter expertise, not only on the legalese, but also on what they're actually contributing to - the category that they are buying, the service that they are procuring and helping to contract to get what's in the business on a piece of paper. And secondly, an investment into technology to help you scale that team much faster because you probably will not be able to find all the people that you need. That's very interesting. Guru, I think you also had a follow up here.
Guru: Yeah, Matt! So like you and me, I have been talking about it and this is to Patrick and Lisa. We fundamentally believe that the tool is an enabler. It can enable you to get the best policies and principles and practices that you have. But there's a lot of work you need to do before you start implementing any solution. So, having come a long way in your professional roles and the setup at Roche that you have, are there any learnings or experiences that Lisa, you want to share about? How did you go about implementing tools and solutions for any of these pain points that you had in business?
Lisa: I could talk about this for hours. Okay. So as I said earlier, I think we come from a fragmented, decentralized landscape of technology and it was because of the way the company was set up in the past, and that's how we ended up there. So, we were given the opportunity to be part of the new procurement, end to end technology and of course, contracting sits right in the middle.
So we did a lot of analysis of how we do contracts today in our current systems, and what would we like the future technology to give us, okay? Roche being Roche, as well as I guess a lot of our colleagues in other organizations that are very similar. We're a complex organization. We have a lot of processes some of them depend on local sites due to whatever financial, legal compliance reasons they need to do things a certain way. But we've tried to come up with what we're calling a global template of technology.
So taking all of the fundamental elements that we can align across the organization and building those into the software. At the same time, one of the key things we realized was it's a huge change management effort. So a lot of people are used to working in one specific way, and they will now need to change the way of working, which, of course, is never easy for people, is it? Having to adapt and change the way you've done things for the last 20 years or even less, it's always hard for a human being to do. So I think, one of the bigger challenges is actually the process. And, one thing that we also realized is you need to have determined the process before you fully build the technology because you can never bend the technology around 20 different processes. So you need that holistic picture and you need both things to work together.
It's a challenge in a big organization to implement technology that also works in the way that we're trying to do it, that it works from a sourcing event, flowing seamlessly information into a contracting module of a system, but then also feeding demand management, buying channels, and whatever else it is. So we're dependent on the other side of the system, and that can cause some discussions on how can we make this fit. It's an interesting journey, and I'm super excited to actually see it go live; we've been working on this for a long time. But, one thing is clear - what we are putting live right now is a minimal viable product. So we will need to continuously enhance it. We're also investigating are there other pieces of software or technology that we can attach that will help make things easier, simpler, and smoother to manage contracts going forward.
Guru: Thank you, Lisa. That was a great segue to how we were looking at the technology adoption within Roche. Back to some of the cores of contract management. We fundamentally believe the risk analysis of contracts starts from the day you start thinking about the contract. It does not necessarily come after you sign the contract. Every contract when you sign starts with some bit of risk. Tthat leads to many of the companies that we have discussed across the globe comes talks about defining KPIs on contract management. And Patrick, I guess this is more close to your heart. Maybe. Lisa, feel free to give us your feedback as well on when you look at contract management. That's the core of a relationship between a vendor and a customer supplier and a customer. So it's important to have the relationship tracked for the good reasons for both parties. Do you have any views or extremely different views about defining KPIs for an engagement that can be tracked through contract management? And Matt, you've been a procurement expert, would love to hear your thoughts as well on this.
Patrick: One key, I guess KPI that the business in particular always talks about is sort of cycle time. My translation sort of speed to a result. If the business comes to us, be it in the clinical trial space, we need to onboard certain sites or get patients into a program. Clearly, every minute counts. But also, I think when we negotiate and contract with suppliers on the supply side, for us in our business, we're in also, every minute counts to an extent. We need to start and we want to get going. And the business usually engages in procurement when they already have an idea that they want to do something. Hence time is always tight.
So enabling us to do this in the fastest and most efficient way is certainly a very, very critical measure of success and hence needs to be turned into some sort of KPI. To me, however, this doesn't stop with the record in the repository being created. So you can almost argue from requests coming in one way or another, to us sort of closing the deal, signing the contract, and sort of filing it - it's certainly one critical KPI and one measure of success. Then I think we need to measure and that's something we need to create with our partner with maybe some industry experts would be great to actually continue the dialogue Guru after this podcast here on this question. So how do we then measure success of managing the assets, the contract that we've created? Yeah. And I think there are multiple dimensions to this.
Number one is, I think for us really getting clarity on what is the value of this contract. Is it delivering the performance of the supplier, of the partner we're working with, or is it managing the compliance to certain aspects that we agreed in the contract, or is it extracting value beyond the facts in the contract, for example, innovation, continuous improvement whatsoever? I think we need to discuss this and sort of also then explore how we track this, how we record this, monitor, and how do we tell a great story about this?
Matt: It is a very interesting problem that you're posing. This M in CLM in Contract Lifecycle manager. Anything that happens after you do have the content in your repository and you need to bring it to life. You have procurement who's doing a fantastic job negotiating the commercial side. You're bringing in contracting, you're wrapping everything together with your supplier, it sits somewhere. But then the challenge actually starts right?
Then it's the users who are engaging with the supplier in bringing in procuring, the services, the materials, whatever it is. They to some extent need to manage the relationship on the fly where procurement is not and contracting is not involved. Then you have other parties who are engaging and then you have the poor guy at the end of the line in finance, who needs to say then somewhere, oh, is this the bill that's coming in the invoice? Is that actually what I should pay or is there something else that goes back to the contract that drives a financial implication linked to performance into my invoice?
And that's a very interesting multifaceted challenge and problem to have. What's your thinking here, how do you want to solve this? How do you want to go beyond just - this contract is expiring in three months, so I should renegotiate it? How do you go beyond that and look into performance and translate performance into effect and impact for the company? Not only on savings and productivity, but also on real value creation. What's your idea here that you have?
Patrick: I think there are a number of areas and even though sort of just tracking expiration date and some sort of key facts and figures and the emphasis on adjust, I think this would be already a significant step forward if we could do this in a consistent way. Sort of inform procurement as well as business colleagues or stakeholders on these events coming and sort of agreeing an action plan. That will be proactive. That will be actually managing, back to your point, a certain risk that we, for example, are out of contract and may then be even out of supply. So I think that is an area we need to look at. How do we, I guess proactively manage some of the key facts and I guess milestones agreed in the contract. That is value area one for me.
Value area two is, I think linking this to other data, information, events or things I have in my wider procurement ecosystem. If something happens in the world like Corona or something else, an earthquake somewhere whatsoever, that I connect this to my critical contracts and understand what the implication for in this case, Roche could be what the contract allows me to do, maybe even secure additional stock, alert the supplier.
And then the third bucket to me is managing all the aspects that go beyond just pure compliance instead of opportunities or risk management you just talked about. Innovation is continuous improvement, and whatsoever it's about enabling someone to actually do it. Procurement is very good at writing many things into contracts, but very poor at doing something with it. Not even the first two buckets I talked about sort of the key facts and figures instead of the risk aspect, but also it's focusing on the growth aspects. If we have no ability to manage this somehow or get visibility, it's hard to do.
Lisa: I can just add the copper from my perspective as well. So, part of my team will be focusing on really trying to look at the contracts more holistically and not just are they in a repository and when do they expire. But really trying to pull reports, analyze those reports in a bit more detail, and then work with our colleagues in the delivery side of the world of procurement to actually manage those contracts actively with the suppliers and the supplier relationship managers that we have in looking after some of our key critical vendors. And to Patrick's point, if we have volcano eruptions or Corona or whatever that means, how can we support, first of all, our supply for our drugs and things like that? But also how can we help the suppliers?
Is there a way that we can actually collaborate to make sure that both parties are able to fulfill what has been agreed contractually? So I think that is also going to require extra technology looking at being able to read the contract. We've got thousands and thousands of contracts with suppliers and do we really need a human being to read through every word of the contract to actually pull this data? We are investigating, sort of AI that can extract keywords, sentences or whatever it is that we can get quicker results from reviewing those contracts and seeing what has been agreed to. I think that's one of the problems today. You'd need an army of people to actually read all these contracts, make notes, and then compare.
The other added complexity that a lot of organizations face is that we often have multiple contracts with the same vendor. So you actually need to sit down and analyze those and try and maybe make one or maybe two major contracts with these suppliers. But you can't handle them if you've got ten with the same supplier for very similar things. I think that's one of the key things that my team is going to be focusing on in the coming months and years is helping put that together and say, okay, we've got ten contracts how can we reduce it down to one or two and actually get a benefit for the supplier because I'm sure they're as confused as we are with multiple contracts, but actually then get the benefit out of it. But technology will play a crucial part in helping extract information out of our contracts to be able to do this.
Matt: I think what I would be very interested in is now you being the subject matter expert who has to do every single day with contracts and managing value from contracts. Where do you think would be the key areas where technology could help you in the job that you have in creating value for Roche and for Roche's patients through the contracting process?
Lisa: So if we can get it to help us raise it that way, it would enable contract managers, for example, to focus on the strategy to make decisions based on actual data that we're gathering from our historical contracts. It would also allow us to do better analysis of existing contracts. It would also help with authoring potentially or redlining if you can build it to have playbooks and the templates and you can actually trigger it. It could do that for a Stratford and again giving you as a contract manager or an organization the time to focus on more strategic things, more value added things than just drafting a template based contract. I think it's a challenge for any organization to free up the manpower to teach technology to help you. So there's always that moment in time where you're probably slower until you actually reap the benefits from technology.
And, I think the other key aspects that we all need to consider when we're looking at technology and supporting us in contract lifecycle management is alignment. If we have two-three hundred different contract templates with things in different places and different words being used, technology is going to struggle to actually give you clean results. So having that alignment and supporting the technology I think is also a key step right at the beginning to be able to support technology. In a nutshell, it would free up people to do more strategic kind of work, more in depth analysis, more value adding work that ultimately will benefit our patients and may add to this quickly.
Patrick: The two very critical points for me, beyond everything that Lisa has said is automation to me is the fuel in the car or the rocket fuel in the car that I've built. If I have a great car and everyone is sitting in it and it's not getting wet, but I still have to push it manually isn't as great as if I had fuel or even rocket fuel in the car. So it allows me to scale much faster, much better. I think automation gives me back to Lisa's last point, the ability to focus people on the more value add stuff, but also gives people hopefully a greater experience when they work rather than filling some of these fields. Two three times or doing something repetitively no one likes to do.
The third point here is risk management. Every human being makes a mistake, especially if you work on repetitive tasks. If we can take this away - we are faster, we can scale better, we satisfy our people more and give them a greater work experience, and at the same time control risk through mistakes. Fantastic. All right, let's invest. And that, to me is the next big thing for us to really drive. Now we have the car. Let's make sure we get the right fuel and really drive it.
Matt: Fantastic. Great finishing words, I think. Patrick. Love the car analogies. Thank you so much for spending time with us today. It was a real pleasure and we're very much looking forward to continuing to talk about this in the near future.
Matt: So those were some interesting observations from Lisa and Patrick, procurement leaders from Roche who gave us that deep dive into enterprise procurement and the contracting within it. And very clearly the value of a contract is not just in the document, it's in how you bring that document to life with the help of people, with the right subject matter expertise, technology to scale the knowledge that you have at hand, and gaining insights into the relationship with your vendor, with your partner that's beyond just the pure numbers.
That was our insightful chat with Lisa and Patrick from Roche and we have many such interesting conversations with industry leaders in the upcoming episodes. So stay tuned and catch us the next episode of Clause and Effect. Subscribe to the podcast and visit simplicontract.com for more information.