Unpacking the Role of Procurement in Corporate Innovation and the World of Startups

By Andy Beth Miller

When I first sat down with Martin Perminas to discuss the role of procurement in corporate innovation and the world of startups, I had no idea about the wild and wondrous ride that awaited. Perminas is currently the US Managing Partner of Tomorrow Street (TS), an Innovation Center that is a joint venture founded by Vodafone and the Luxembourg Government, providing startups with a base from which to be mentored to Globalize and scale their business’. So, when he talks, you listen.

And listen I did. From on the button metaphors that swept me away on fishing and hunting expeditions to delving into Darwin’s survival of the fittest theory, unpacking how it also applies to procurement, there was not a single dull moment. But we will get to all of that, so buckle up.

There is a saying, “You’ve gotta give before you get,” that many successful business people, including famous entrepreneur and angel investor Dan Feld, ascribe to as being a touchstone of their mantras. However, after barreling down the alleyway that is Perminas’ ingenious brain alongside him, I began to see that this expert would sooner offer a decided spin on this pithy precept, switching the verbiage to align with his own outlook regarding how it applies to procurement specifically. Perminas would most certainly say instead, “You’ve gotta ‘get’ before you ‘get.’”

Allow me to explain. One of the first barriers to procurement’s success, according to Perminas, is how oftentimes procurement is pigeon-holed into a limited scope. Boxed in, if you will, particularly by CEOs and founders that are operating their businesses—and approaching procurement—with an outdated and ill-advised tunnel vision. These “boxes” are labeled with stereotypes and limited expectations—and equally limited freedoms—for procurement, the most popular label being “getters.”

For example, the CEOs wants something, and it is the sole responsibility of procurement (the getters) to do as their name suggests… to procure… or get. Here is when Perminas would step in and educate us about the other side of the coin that co-exists by way of a double entendre, and how “getting” can—and does— also mean mentally understanding and being aware of something. He would also divulge that in procurement particularly, you really have to “get” (understand; i.e. the business requirements) before you “get” (obtain), or at least before you can do so efficiently.

It is this understanding that Perminas pinpoints as being one of the most vital skills procurement professionals must possess in their arsenal. Simply put, you will need that understanding and intuitive acumen as you are faced with the abundance of barriers that Perminas points out are prevalent in the procurement arena, especially when dealing with startups.

You’ve gotta ‘get’ before you ‘get.’

- Perminas

Perminas highlights a few of these barriers that he has come across in his career as we continue our discussion, one of which includes the piecemeal predicament that he finds in most business ventures today. Perminas sees his previous experience in procurement as focusing on an unique niche that he dubs “procurement strategy,” involving aligning and integrating procurement with the business itself, as well as forming “procurement alliances” between all parties involved, including suppliers, for the most optimal outcome. Perminas revealed one constant rub that often prevented a smooth road to success: “These relationships were super complex and involved a lot of different people and touch points. And typically, they weren’t brilliantly coordinated because you have your procurement person dealing with an organization as a supplier, a sales person dealing with [that same company] as a customer, and then you’d have a partner manager dealing with that company as a sales channel.”

The proverbial predicament of too many cooks in the kitchen came to mind as Perminas bemoaned the beleaguered situation that such collaborative spiderwebs spawned. Luckily, Perminas presented a solution for this quagmire, one which he has personally utilized often to iron out any wrinkles en route. “You had all of these factions within a company that is collectively capable of doing great things,” Perminas recalls, “but somebody had to come in and orchestrate all of that.”

That somebody should normally be from procurement, particularly if the balance of the financial flows are predominantly buy side expenditures. “Procurement should actually manage these relationships and coordinate them on behalf of the group,” Perminas reiterates. “The relationships, people in the companies, have to be orchestrated and aligned with what is optimal for the business as a whole. Somebody needs to come in and make that happen in a collegiate, team working way because you are dealing with different functions and parts of the business.”

I wholeheartedly agreed, bobbing my head enthusiastically as Perminas explained. However, my head slowed to a halt, and hesitation crept into my voice as I had to wonder aloud at the feasibility of such a task. “How?” I uttered. “It’s really about capability, communication, and delivering value. Procurement must have an excellent grasp of the business needs and relationship management skills. It then needs to communicate the impacts of managing or not managing these relationships, and then deliver business results. All of this has to be done in a interdisciplinary way, ensuring that both the business and personal objectives of all involved are actively managed,” Perminas says simply.

Commence the head bobbing once more, as this is something I can understand, which as we have learned is so important. But, this lesson is far from over. Perminas then continues to illustrate how not only are understanding, versatility, and multi-faceted competence must-haves for procurement professionals, but so too are possessing a quick wit and a keen adaptability. The reason for this, Perminas points out, is that the current breakneck pace at which today’s landscape is constantly changing and evolving simply does not leave room for anyone besides absolute innovators.

Enter Darwin. Just as in life, those in the procurement arena must adapt or die. Simply put, you are either pushing forward and creatively innovating, or getting pushed to the peripheral. “What’s happening is that corporations are recognizing that they need to innovate, and that they need to embrace the startup world. Particularly, looking for new things to help them run their business better or support their customer better,” says Perminas.

What’s happening is that corporations are recognizing that they need to innovate, and that they need to embrace the startup world.

– Perminas

This is exactly where procurement should be not only taking the stage, according to Perminas, but should be taking the lead role. “Effectively, these organizations are suppliers. Suppliers of tomorrow. Too often, procurement is cut out of this process, when procurement should be playing right in the middle of it, finding the suppliers of tomorrow and figuring out what, if anything, is disrupting the supply base. This will give their own organizations full competitive advantage by getting in early enough to make a real difference.”

So, I have to ask, why isn’t procurement being allowed to take center stage in this corporate innovation? Perminas replies with one word: Image. He then elaborates, harkening back to the box motif that procurement often finds itself being relegated within. “Procurement is too often seen as tactical [and] non-strategic by many groups. This is a classic procurement problem. They are seen as the guys that do the contracts after the deal is done by the execs. The business tells the people what to buy and they just go and get it done, as opposed to the procurement people working with the executives to understand the business’ needs, then with their (continued on page 17)