In his 12 years as a supply chain executive at Airbus, culminating in his role as Chief Procurement Officer, Klaus Richter oversaw a sprawling organization responsible for sourcing the materials necessary to build the company’s iconic aircraft.
It was no small job. Airplanes are incredibly complex products involving thousands of suppliers, and Airbus builds them at scale. Klaus likens it to building a skyscraper for a client who comes back and says they now want four skyscrapers delivered every day!
Meanwhile, Klaus also faced the pressure of controlling costs in the operation—with 80% of Airbus’ operating costs in the supply chain, procurement has an outsized impact on the company’s bottom line.
One might assume that, given the scale and scope of his mandate, Klaus would have been laser-focused on cost and performance.
Yet, in a recent conversation with Icertis CEO and Co-founder Samir Bodas, Klaus shared that there was another key area of focus during his tenure: transformation.
“The key task is always to trigger transformation and never to maintain what you’re doing,” he says. “You need to always be aware of the fact that you need to have a view on the changes that are coming.”
How did Klaus walk this high wire—how did he balance performance today with transformation for tomorrow? In their conversation, Klaus and Samir touched on three key elements—leadership, technology, and people.
Given the speed at which the competition evolves in today’s marketplace, Klaus argued that driving evolution should be the primary job of a CPO. With support from the C-suite, transformation efforts can get off the ground and make an impact at the organization.
“My job was not to be the administrator of a repetitive business, but to be the driver of strategic change,” he shared. “As a CPO, my job is to engage in strategic transformation, which always requires top-down support.”
By putting transformation on the agenda, Klaus was able to expand the scope of change at Airbus—from incremental improvements to high-impact innovations in how business was done.
It should come as little surprise that technology played a big role in these transformation efforts.
A major part of this strategic change was through adopting digital solutions that could help Airbus stay out in front of its competition.
“If you are sticking to old-fashioned IT tools, you are just falling behind. As the whole world accelerates and goes to new methods, you need to be part of it. You don’t want to become a dinosaur,” he said.
For Airbus, this meant looking beyond traditional technology partners and engaging with innovative startups who were challenging the status quo with their software. This included deployment of a stand-alone contract lifecycle management (CLM) platform that could leverage AI to unlock data and insights from legacy contracts dating back to the early 1980s!
Notably, by deploying forward-looking technology like CLM, the company got more out of the technology than it set out to. What started as a digitization project led to an effort to monitor contractual obligations in real time, including those that were decades old, against what was happening in the real world. Transformation led to more transformation.
“In hindsight, it is really quite obvious to actively use what’s in the contract to manage your business with suppliers in an operational way,” Klaus says.
As hard as he worked to set the tone of transformation at Airbus, Klaus noted the importance of engaging people across the organization to crowd-source the best ideas.
In his humble manner, Klaus noted that senior leaders who are more tenured in their careers might not have a strong grasp of what technology trends are shaping the world around them.
“How a 25-year-old embraces digital transformation is different than how a 50-year-old might embrace it,” he said.
Going back to the contracting example, a senior manager may consider “digitizing” contracting to mean turning paper documents into PDFs that can be stored on a shared drive. For a younger generation, it means deploying software that empowers them to build their own contracts within digital guardrails set by the legal department.
As Samir observed about the energy and focus of this new generation of employees: “They’re saying, ‘Get out of the way, and let me do my job!’”
To capture these innovative ideas, Klaus made it a point to facilitate exercises such as “Evolution Week,” where the younger generations of procurement professionals could provide input on what kind of digital technologies they needed to do their jobs.
“From that Evolution Week we basically understood the difference between process automation and digital transformation, which triggered a full host of projects, including CLM,” he said.
The results of Klaus’ approach have been astounding: By the time he stepped down in 2019, procurement had cut costs by billions per year while strengthening the key supplier relationships that ensured it could deliver its airplanes on time and to specification.
Even more impressive: Airbus’ stock price saw a 15X increase within a decade due to consolidation of end-to-end processes. How’s that for delivering performance!
Want to learn more? Watch the entire conversation between Klaus and Samir on demand.