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Those who favour and sell many clear and fair method to differentiate candi- news assessment products dates. They want methods that are focused on argue that many employers are diversity and inclusion and provide a good expe- overwhelmed with large applications. rience for their candidates. They want to reduce the time and costs and have a clear and fair They use the following catch phrases to sell method to differentiate candidates. their ideas and product: Talent identification in the HR world is “ Next generation” technology; 21st century shifting, indeed has shifted from the traditional generation”; “Digs deeper” “Reveals more”; methods of assessment, including job inter- “Powered by Neuro-Science”; “State-of-the-Art”;“ views, assessment centres, cognitive ability Has less adverse effect….leads to more tests, personality inventories, to techniques diverse choices”;“Authentic” and “real world”; like digital interviewing and voice profiling, “Disruptive”, “exciting new and different” social media analytics, web scraping and text analytics, internal big data and talent analytics Some argue that their techniques have better and gamification. psychometrics: particularly predictive validity: they are more accurate than the “old” well-used and MARKETING IN THE BRAVE tried methods. The suggest that their new methods NEW WORLD in fact lead to a reduction/avoidance of “older method” issues/artifacts (e.g. impression manage- Those who favour and sell many news assess- ment). That is, the more traditional methods have ment products argue that many employers are well known problems associated with them and overwhelmed with large applications. They these new methods largely overcome them. want to reduce the time and costs and have a They also suggest that many new methods provide a better candidate experience: that is that candidates are much more positive about the whole experience. This leads hopefully to better PR for the tester and company doing the assessment and selection. These new and improved techniques are it seems more up-to- date, fairer, and more engaging which reflects very well on the selectors. www.europeanbusinessreview.com 101

ORGANISATION BEWARE THE JINGLE-JANGLE non-academic, the latter often being science EFFECT journalists, practitioners and consultants. An example is McHenry (2017), himself both an The Jingle-Jangle fallacy refers to the idea that academic and a test publisher. He made five two different things are the same because assertions, nearly five years ago, about the they bear the same/very similar names (jingle future of psychometric tests: fallacy) or that two identical or very similar concepts are different because they have 1 Smartphones will replace computers for different labels (jangle fallacy). The question is employee assessment. what jingles vs jangles and why? Old concepts simple re-packaged for the modern ear; or 2 High-quality psychometric testing services will new, different concepts hiding under familiar be sold direct to consumers. umbrella terminology? Advances in the neuroscience of personality Fashions change; ideas and measures need revitalisation. So it is not difficult to take an 3 will reveal which are the most valid individual old test and idea and repackage it, which is, differences to measure and how best to of course, what many do. Manufacturers who measure them. prefer the jingle fallacy. Notice how the cheaper store’s product has a name and package almost The digital badging movement, coupled to the identical to the much more expensive, exclu- sive brand. They want you to think that a thing 4 use of big data and new forms of digital CV, with a near identical name, colour, label is will render many of the current applications essentially the same at half the price. for high-stakes testing redundant. NEW TECHNOLOGY Many attempt to exploit the opportunities that The basis for employee development will in the new technology offers to assess people more accurately, easily, and cheaply. Some are early 5 near future be derived from the data yielded adopters, indeed even pioneers, in the field. by wearable devices and not from psycho- Others find that it is client demand that causes metric tests.” (p. 268). them to investigate, and then use, new tools and techniques that show that they are at the cutting One of the most comprehensive and up-to- edge of psychometrics. The question for many date review called “Personnel selection in the must be the investment of time and money in Digital age Wood et al. (2019) reviewed all recent techniques that in the end fail to deliver what research 2010-2020. Their focus was on Digital they promise and may indeed cause many addi- Selection Procedures (DSP) and the main appli- tional problems. cations and emergent evidence. There are changes in the law, and all the issues They observed: “Digital technology is flexible surrounding discrimination. There are changes and easily updated and adapted and so informa- in how tests are administered and scored. There tion from users,clients and others can be used to are changes in how tests “get to market” continually and rapidly improve the way that, for example, software or online systems function.”…….. There are plenty of speculators and futur- ologists in this area, both academic and 102 THE EUROPEAN BUSINESS REVIEW MAY - JUNE 2021

The rapid configurable nature of digital assessments means a fundamental shift in the way we approach validation,from an “endpoint” of instrument crea- tion to an ongoing accumulation of insight into a technique or methodology”(p71) They detailed many studies which compare old and new methods (electric vs paper-and pencil; proctored vs non-proctored) and different tests (personality vs intelligence). Most showed no differences. However, they do note the problem of impersonation and fraud- ulent completion of tests and that candidates often preferred internet testing over the tradi- tional methods New developments in Situational Judgement breadth of professional and non-professional experience social capital, interest in updating Tests include the use of videos with some their knowledge. evidence that they were more valid predic- In this excellent review they cover various crucially important issues: tors of work performance that traditional VALIDITY : written methods. There is an interest in This is clearly the most important issue and the conclude like so many others: “Alongside issues Digital Interviews where people record video of construct validity is arguably the most crit- ical gap currently in the literature on the validity or digital answers to predeter- of DSPs; namely the absence of peer-reviewed published studies of criterion validity. In the papers Many mined questions which can be we reviewed, only two reported criterion-related easily used for comparison. This validity of digital forms of assessment in the context of selection” (p. 69) attempt to data can be subject to all sorts of exploit the AI and other analysis. ADVERSE IMPACT: opportunities It is argued that new technology can be used to Some studies suggest that reduce human bias in selectors but many main- candidates do not like these tech- tain (through AI technology) biases that are found in society. that new niques being less fair and stilted technology and “Creepier and less personal” PRIVACY: offers to with the traditional methods Clearly some people are really put off the idea though that may change over time. that selectors themselves or hire others to screen all their online content. Further it can be assess In examing Gamified challenged in the law people more Assessments they note arguments accurately, in favour of reduced faking DIGITAL FAMILIARITY: and social desirability while Access to, and familiarity with, technology, may discriminate older, poorer people in developing easily, and promoting “fun, transparency, countries as there is a digital divide. cheaply. challenge and interaction”. But they suggest that despite much buzz about the use of gamified assessments in practice, there remains scarce published liter- ature on the construct validity of gamified assessments and applicant reactions to them. With respect to using social media and network sites to gather digital footprints they note that it is possible to gather information that would seem to predict work success like www.europeanbusinessreview.com 103

ORGANISATION A SKEPTICS RESPONSE TREND #3: GAMIFICATION …. The idea is that if job applicants have more Sherman (2019) notes in a blog in PSYCHOLOGY fun taking the assessment, they will be less TODAY warned about various trends: likely to drop out of the application process. Although the data show that candidates do TREND #1: NEUROSCIENCE enjoy game-based assessments, the data also Some companies measure how fast you react to indicate that gamification doesn’t improve flashing objects on a computer screen and say performance predictions. Research indicates that their assessments are based on neurosci- that applicants who drop out during the assess- ence. Neuroscience is the study of the structure ment process are unlikely to be your strongest and function of the nervous system. Even though candidates anyway….. such a broad definition leaves room for debate, the reality is that neuroscience concerns the TREND #4: PROFILE MATCHING function of individual neurons and the brain First, they assess your high-performers. Next, (i.e., a large mass of neurons)…… they see what differentiates your high-per- formers from a larger population of people TREND #2: BIG DATA AND DEEP who have taken the assessments. The differ- LEARNING ences between the two create a high-performer Some companies brag about their stacks of big profile. Although this profile matching approach data and their use of machine learning or arti- used by many companies seems intuitive, only a ficial intelligence to produce talent insights. proper validation study that differentiates high However, if you dig deep, you find that most of and low performers will give you an accurate the data these companies collect are useless; profile. Don’t fall for assessments that are only they aren’t even using it. For example, millions validated on high-performers. of mouse-movements, keystrokes, and response times can be measured in a 10-minute assess- TREND #5: EMPHASIZING IRRELEVANT ment. But are they consequential? Do they INFORMATION predict anything? …. New and old assessment companies often emphasize the total number of applicants, time 104 THE EUROPEAN BUSINESS REVIEW MAY - JUNE 2021

to hire, and the diversity of the hiring class as selling points……When it comes to performance, the only thing that matters is validity: how well does the assessment predict performance? The Now Techie- reality is that some assessments predict job performance better than startups seek others. Assessment companies that REFERENCES out authors/ don’t show or emphasize validity • Chamorro-Premuzic, T., Winsborough, academics probably don’t have any. With no validity, they have no choice but to W., Sherman, R., & Hogan, R. (2016). New Talent Signals: Shiny New Objects to help them emphasize irrelevant features. or a Brave New World?. Industrial and organizational psychology: Perspectives devise state- on science and practice, 9(3), 621–640. • Furnham, A. (2021). Twenty Ways to of-the-art, CONCLUSION Assess Personnel Different Techniques delivery and Their Respective Advantages. Cambridge: CUP platforms The cosy and profitable world of • Ihsan, Z., & Furnham, A. (2018). The new they sell to assessment has changed. Not long technologies in personality assess- ment: A review. Consulting Psychology anyone. The ago the situation went like this: Journal: Practice and Research, 70(2), “middle-men” Authors and Academics with a test/ 147–166. get cut out. model went to publishers who sold • McHenry, R. (2017). The future of the printed tests to consultants who psychometric testing, In B, Cripps (Ed). sold them in some form to clients. Psychometric testing: Critical perspec- tives. London; Wiley pp. 269-281. Probably the authors made least and consultants • Sherman, R. (2019). Beware These Marketing Trends in Psychological most money in this chain. Assessment And why you shouldn't fall for them. Psychology Today: Now Techie-startups seek out authors/ October 17th • Woods, S. Ahmed, S., Nikolaou, I., academics to help them devise state-of-the-art, Costa, A., & Anderson, N. (2020). Personnel selection in the digital delivery platforms they sell to anyone. The age. European Journal of Work and Organisational Psychology, 29 (1), 54-77. “middle-men” get cut out. There are now a ABOUT THE AUTHOR number of new products in the assessment busi- Adrian Furnham is Professor ness and the buyer is spoilt for choice. They look of Psychology at BI: Norwegian Business School. He is also wonderful; and promise the earth: assessment an author and devisor of psychological tests. He has is faster, deeper, cheaper and more fun. Indeed: been used by a number of organisations to investigate but is this at sacrifice of validity. The problem is the psychometric properties and claims on new tests. that it takes time and money to get the data to www.europeanbusinessreview.com 105 establish test validity: and some entrepreneurs are not willing to wait. Venture capitalists have noticed these new assessment companies, and many are happy to invest. Hence the growth in assessment compa- nies and a complex, crowded and confusing market place. Some of the old hands, like those above, caution against all the hype and a new south sea bubble. Of course there is a difference between scepticism and cynicism., and being luddite in these new and exciting times. So as always caveat emptor

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THE PSYCHOLOGY OF START-UPS By Adrian Furnham Every generation likes to believe lifestyle or have they lost work ethic? that they are different from They prefer a flat hierarchy; is that to those that came before them foster closer relationships with their – “new and improved” as advertisers manager or are they are deeply cynical like to call it. But are the young peo- about authority? They are empow- ple entering the workforce today very ered by roles that have positive social different from those that have come impact and do not tolerate deviations before them? from that goal; is that a commitment to social good or an excuse for lack of There are doubts about how you commitment to organisations? define these different generations: what you call them and precisely how VOCATIONAL CHOICE many there are in the workforce. The Veterans (or Traditionalists) have I have been studying young people and around 1925-1945 as their birth dates; working with them in my more than 35 the Baby Boomers around 1945-1965; year career as an academic. I am an I/O Generation X and Y from 1965 to 1985, psychologist interested in many things the Millennials from 1985 to 2002 and including vocational choice. I both anyone since is classified as the newly research the topic and teach under-and emerging Generation Z. post-graduates. My question has been are there changes in what we used to So how many are there now in call vocational preference: what sort of the workforce? About 5-10% are jobs young people look for when they Traditionalists; 30-40% Baby Boomers; leave school or university? 30% Generation Xers; the remainder (20-30%) Millenials. It is argued that When I left university (Oxford 1981) different generations have different my peers wanted jobs in the media, values, motivations and work styles. We the Government, or the City. They have heard it all before…young people want to have good work/life balance; is that a commitment to a healthy www.europeanbusinessreview.com 107

ORGANISATION were exciting, stimulating and, supposedly, This is Millennial heaven. This is the current lead to fame, money and power. These pref- erences remained throughout the Thatcher/ generation (20-35 year olds), with their need to Regan years. But all three have lost their lustre for different reasons. All have been tainted one invent something new, because they believe they way or another. are special and can do special things, something There have been other fashions. One that has been going some time is the social impulse most likely that the gener- to work, often abroad, in non-for-profit organ- isations that promote ecological, educational Start-up founders ation before them instilled and health issues. These are the young people are mostly young, in them. There are also who have turned their back on the material plentiful sources of invest- world preferring to “make a difference” and help other people. talented individuals, ment and lots of venture frustrated with capitalists looking for START UP MENTALITY hierarchies and the these very special people. So money is supposedly Now the Bright Young Things all echo the same mantra: start-up. We want to be entrepreneurs old order. They don’t not a problem though that they chant! have employees, seems to be changing. colleagues, The stereotype is of a group of friends working The cost of entry for in a casual/funky environment (look at the the kind of start-up that exponential growth of co-working spaces: such as WeWork, Work.life, TechHub and Second managers or interests Millennials is at Home) on their computers, having great fun support-staff, but an all-time low (you can and coming up with (here is the key adjective) ‘friends’. create and upload an app disruptive concepts, products and processes. over a weekend!). Young Their aim is to destroy the lazy, old-fashioned behemoths of the past. people are masters of Three of my best PhD students who initially technology and social media. The use of social wanted to become academics have chosen this route. Others I have interviewed started media platforms enables entrepreneurs to build “serious” jobs in consultancy, finance and the media but all “dropped out” lured by the appeal a product, a brand, and grow the company with of the start up. high interaction and relatively little cash. There are many obvious appeals of the stereo- typic start-up. They are (allegedly) places of fun Start-up founders are mostly young, talented and creativity, unrestricted by slow bureaucratic processes, incommunicative silos and general individuals, frustrated with hierarchies and risk aversion. There is less hierarchy and less politics than in a big old-fashioned organization. the old order. They don’t have employees, The office is a playroom. There are no stuffy colleagues, managers or support-staff, but rules; no petty supervisors; no dull and monot- onous tasks. Indeed, it is difficult to distinguish ‘friends’. They are usually prepared to take risks work from play. - and are in a situation to do so. 108 THE EUROPEAN BUSINESS REVIEW MAY - JUNE 2021

People in start-ups do, or pretend A start-up is classically a small, names and new adjectives but the to, enjoy teamwork and networking. understaffed unit with the advantages same premise – we are different and They see continuous learning as highly and disadvantages that bestows. The we can do things better – but if every desirable and virtuous. And they are salaries are not great, but there are generation says that then aren’t you prepared to work for low pay…until, of promises of shares. Often the owners more alike than different to those course, they discover a must-have app spend more time talking to venture that came before you? and get really rich. capitalists than “running the business”. Lack of commercial insight means that REFERENCES So this is the new vs the old: start-up geniuses are bent on inventing • Almeida, P. I. L., Ahmetoglu, G., and on-trend geniuses vs stale, pale, frail things before they even consider if males. But is it? Is it any more than the anybody wants the product. Chamorro-Premuzic, T. (2014). Who well-known differences between big wants to be an entrepreneur? The and small organizations? Ironically, start-ups are often trying relationship between vocational to solve the problems of big organi- interests and individual differences Most studies show that big organ- sations, the old favourites: big media in entrepreneurship. J. Career Assess. izational units are bad, in the sense firms, the government or investment 22, 102–112 that there is more absenteeism, banks. So how would someone with no • Bonnett, C. , & Furnham, A. 1991. higher turnover and lower morale. experience of a big organisation have Who wants to be an entrepreneur? A Big units lead to a poorer sense of the understanding to build a product to study of adolescents interested in a cohesion, greater task specialisation solve their problems? They are unlikely Young Enterprise scheme. Journal of and less good communication. Yet to even know what those problems are. Economic Psychology, 12: 465-478 size is not closely related to produc- • Henderson, R. and Robertson, M. tivity, but more to the way in which Furthermore, individuals who leave (1999), Who wants to be an entre- people work. big organisations with their infinite preneur? Young adult attitudes resources, to pursue the entrepreneurs to entrepreneurship as a career. The research on staffing looks at dream, soon realise that constantly Education + Training, Vol. 41 No. 5, pp. differences in behaviour between large not having enough resources, which 236-245. and small-populated environments is synonymous with start-ups, means or settings: big and small businesses, that you are constrained to intro- ABOUT THE AUTHOR schools and towns. When a setting is duce processes to direct those limited understaffed, there are usually barely resources. So you are teased with Adrian Furnham is Principal enough people to ensure that it func- freedom from rules but inevitability Behaviour Psychologist at Stamford tions effectively. So, in order to maintain have to deal with them. Associates in London. He was it, people tend to be more active and Professor of Psychology at University involved in what they are doing. You may implement more effi- College London 1981 to 2018, and cient processes but that is what now Professor in the Department The data from ecological psycholo- the generation before you did and of Leadership and Organizational gists, who study these sorts of things, it is inevitable that the “efficient Behaviour at the Norwegian Business show that in comparison with those processes” created by Millenials will School in Oslo. He has written over working in overstaffed environments, be obsolete by the time Generation 1300 scientific papers and 90 books. those in understaffed settings: are Z enter the work force. And so the more committed to their organisation cycle will begin again with news and have higher job performance. www.europeanbusinessreview.com 109

TECHNOLOGY The present article describes how the Vodafone Procurement Company (VPC) has adopted Artificial Intelligence technology to boost its ability to perform “Design2Cost” and achieved significant cost optimisa- tion as a result. The adoption of digital technologies including Artificial Intelligence allows the automa- tion of activities performed routinely by humans. This positively impacts the efficiency of these indi- viduals and allows them, in the best case, to focus on more value - adding activities. At the same time, such technologies can be used to augment the work of procurement professionals by allowing teams to deliver more value. Augmentation typically supports complex and collaborative activities that were not be systematically performed before. POWERING COSTING WITH ARTIFICIAL INTELLIGENCE: THE CASE OF VODAFONE PROCUREMENT By Hervé Legenvre, Gavin Hodgson, Govind Khandelwal 110 THE EUROPEAN BUSINESS REVIEW MAY - JUNE 2021

HOW IT STARTED initial aim presented in the business case was to save 300 million Euros The Vodafone Procurement Company over 5 years, but the stretched goal was to achieve cost reductions of 1 was established in 2008 to serve as billion Euros within this 5 year period. So far, after three and a half years, Vodafone’s centralised procurement over 50% of Vodafone’s global spend has been influenced by the team and hub. By 2017, VPC had reached a hundreds of millions of Euros have been saved, putting Vodafone well on plateau in terms of maturity. Price track to achieving its stretched ambi- tion. Over 250 pieces of hardware have negotiations were facing limits, been analysed to date and the pipeline is full for the coming six months. leading the organisation to ask: SETTING UP A DESIGN TO What’s the next step? The company COST LAB needed further opportunities to elim- The project, branded Design2Cost, was launched at VPC in a tempo- inate costs, but it also needed healthy rary lab located in a meeting room. Following the success of the pilot, suppliers who could invest in R&D. it was clear that more space was needed to perform their cost tear- Procurement experts at Vodafone downs, so Ninian Wilson, CEO of VPC, said: “Take the boardroom and build knew that they were most valued by your lab in it. This is the best way forward. You need more space!” The their stakeholders when they were Design2Cost initiative started small with a team of just five people, and bringing not only savings, but also today boasts 16 trained Design2Cost experts from a range of industry knowledge, facts, and options to the backgrounds including electrical engineers, mechanical engineers and table. Knowledge on the design and manufacturing. On the ground in the lab the team focuses on the hardware on the detailed costs of the products teardowns with the support of a team in India who do detailed analyses of and services provided by suppliers plays the findings. For services cost tear- downs, VPC’s category managers are a key role here. All this led to the idea of trained in cost analysis methodology enabling them to perform their own further investing in the integration of costing activities with the support of the Design2Cost team who give cost analysis capabilities coaching and validate their results. within the procurement So-called ‘design to team. So-called ‘design to cost’ allows the setting of cost’ allows the setting an objective cost goal for a of an objective cost goal product by breaking down for a product by breaking the product into sub- elements and assessing down the product their respective costs and into sub-elements benefits. This allows and assessing their for the rethinking of products and services, respective costs and achieving cost reduction benefits. and increasing the value delivered. The Vodafone team performed benchmarks with automotive companies and looked across the telecom industry to assess existing practices. This provided a good basis to start a pilot, the results of which were very promising and a business case was developed. The www.europeanbusinessreview.com 111

TECHNOLOGY THE PROCESS AND HOW IT the team creates a new cost model or looks WAS DEVELOPED for external cost information, always seeking multiple sources of information to ensure relia- Vodafone’s Design2Cost process was developed bility. From this, they perform all the analysis by creating a series of in-house tools. The team using their software. The final cost model is developed a systematic seven-step process and completed by incorporating the value-adding invested in access to many sources of informa- steps as well as overheads, R&D, and any tion on costs. From the start, the process was other third party costs. This allows the team developed as a cumulative learning process. to produce the information kit for category Right from the beginning they built a data- managers and support them as needed. The base that could be updated and re-used over process is outlined in Figure 1. time, meaning that it is continuously updated. For instance, the data on the cost of labour are Figure 1: The Design2Cost Process for hardware updated every quarter. So, if you have a supplier in a specific region in Vietnam, the database Define the scope gives you the labour for the appropriate skill level, energy and factory floor space costs in that Tear down the Hardware region. Many sources of information contribute to the database and different sources are regu- Scan the entire product larly compared so that it is reliable. Identify every component The analysis process can be described as follows. Whenever a procurement project above Connect each item with a a certain value starts, category managers must cost in the database confirm they have considered a Design2Cost approach. When appropriate, the Design2Cost Perform the analysis using the team starts by defining the scope and the context. software developed in-house This provides a basic understanding of the cate- gory and of the business issues. They then tear Produce the Information Kit for down representative pieces of hardware and scan category managers all the components using a proprietary, internally developed system. This scanning equipment Support category team as needed takes hundreds of images that are combined into a single ultra-high resolution image. Using a neural network, which is currently patent pending, software then recognises and defines the locations of components of interest. Other internally developed software then takes the images already captured, and markings extracted using Optical Character Recognition, to compare and match these components with the internal database built over the life of the lab. Up to 92% of electronic components on an unknown board are now being automatically recognised in this way. Each item within the hardware is automati- cally allocated a cost thanks to the lab’s database. If the information is not already in the database, 112 THE EUROPEAN BUSINESS REVIEW MAY - JUNE 2021

From the start, the process was developed The information kit provided as a cumulative learning down to decision makers who at the end of the process is process. Right from the specify the needs and to the comprehensive, offering a beginning they built a supplier to see how this can be complete overview of the tear- database that could be taken forward. down. It includes what they updated and re-used over call a ‘clean-sheet’ costing, the To create this process and the system that supports it the lab’s own version of the costing. time, meaning that it is team has created a ‘garage inno- They also decompose the costs continuously updated. vation’ environment. Orlando by subassembly, by components Grigoriadisthe lab’s AI specialist and offer detailed views on described the development: labour impact. The lab can also “This started in my kitchen, I offer competitive comparisons by doing a tear down on was putting together all the elements for scanning hard- competitors’ products. They suggest some levers with their ware together at home. Everything was developed in house, cost impact. and sometimes really in my own house! This is often the Typically, the info kit provides category managers with case with machine learning, you can start with some algo- a list of design optimisation opportunities as levers that rithms that are available on open source but then, at some can be used to reduce costs. These can run to 20 or more point you need to make it work for you.” Before this the opportunities, but the actionable number depends on the team was using magnifying glasses and manual tools, they maturity of the product. This provide options. Then it is were looking at every single component on the board and www.europeanbusinessreview.com 113

TECHNOLOGY identifying everything by themselves. takes to do a complex costing has been sources to be able to do a cost tear- Now they are teaching the machine reduced from 30 to 10 days thanks to down quickly and effectively. When to recognise all components so that the tools that use AI and machine the team does not have access to everything is automated. After the learning that were developed as part the cost within its existing database, picture is assembled, the components of the setting up of the lab. Today, the members of the team start to look are identified, and the data is aggre- neural network technology developed at a wide range of external informa- gated automatically. by the team is registered as a patent. tion. By looking at multiple sources, the information is triangulated. The These developments undertaken In this approach the wide access lab has used thousands of sources by the team have had a tremendous to external data is also key. Figure 2 of data to get information on more productivity impact on their own describes the sources of data used than 20 000 components. The level of work and performance. The time it by the team. You need all these accuracy can now exceed 90% thanks to the machine learning algorithms. But the team still plays Sherlock Holmes sometimes, they dig deeper in technical papers to understand some of the unknown costs and they exchange and work with suppliers to better understand some of these. However, this is less and less required as information is accumulated and updated on an ongoing basis. Figure 2 Sources of data Internal Talk with the supplier database Visit the supplier Work with the supplier Structured cost data available on the web Easy to access cost references Unstructured data buried in specialist source 114 THE EUROPEAN BUSINESS REVIEW MAY - JUNE 2021

this offers a full understanding of designs and THE BENEFITS TO THE COMPANY of their impact on cost and customer prefer- Since the lab was established, the team has ences, creating options for the company to performed detailed teardowns and cost analyses on hundreds of complex electronic and electro- choose what is essential and what is not critical mechanical products and services, including x86 servers, remote radio units, customer premise from a customer standpoint. This allows for equipment and various types of deployment, marketing, call centres, IT and other services. the value of every component to be challenged. The impact of these activities has been signif- For instance, the team in the lab highlight on a icant: using the lab’s results, category managers have achieved a step-change in the quality of recurring basis that black paint on a board that discussion with suppliers. They have scrutinised vendor cost structures on the most detailed level, nobody will see is “vanity not value”. Finally, uncovered hidden margins, and opened-up joint cost reduction and value creation opportuni- this allows them to have in-depth, fact-based ties with suppliers. Sometimes this has helped uncover inefficiencies that were due to year of conversations about the opportunities to jointly specifications that had been piling up on each other. Many examples of impact show double- optimise the end-to-end value chain with digit cost improvement. Vodafone’s partners. This is key A category manager interviewed suggested that the benefits are more significant when to opening the door to more The impact of there is a competitive tender at stake. When collaborative and innovative representatives from the supplier know they are in a dominant position, it is more challenging to relationships with suppliers. these activities get their team to be open and discuss detailed design. But he also highlighted that benefits has been on services can be significant. Indeed, the Design2Cost team performs analysis within the HOW WAS significant: field on services. The map processes analyse THE CHANGE using the lab’s them and spot improvement opportunities. IMPLEMENTED? results, category managers have To summarise the benefits, the lab and its Design to Cost process provides new insights that Implementing such an initiative achieved a can be used in commercial negotiations. Second, requires a change in mind-set. step-change in On the supplier side, not all the quality of were open to discuss and share their costs. The CPO and CTO of discussion with Vodafone sent a letter to all key suppliers. suppliers’ Customer Account Teams and CEOs, explaining to them that the Design2Cost Lab had been established and that it would lead to new ways of working. Also, from the start of a project with a supplier, an evaluation of their openness is done. This is important to create www.europeanbusinessreview.com 115

TECHNOLOGY Technology often makes an the right relationships and forms part organization more and the assets they had created. For of tender evaluation criteria. The team efficient thanks to instance, some of the data can be has seen some suppliers coming to them automation. But used to map sources of components with services or products where they lose when technology and react to any disruptions or bans. money and offering to work together to augments the There is also the possibility to offer a see how this could be improved. New Purpose-led Design2Cost capability. entrants in the market often want to work of the best This means identifying impacts on work with VPC’s Design2Cost team and professionals the environment and society as part are open to discuss cost. Incumbent then the benefits of the exercise so further feedback suppliers are more reluctant, but in a can be provided to suppliers. This competitive context or when the process are huge. can help identify if refurbishing brings real tangible opportunities for a product is an option or not, can both sides, progress has been made. help eliminate plastic and serve as a Perseverance and consistency are essential here. good basis to understand CO2 emissions. It can be used On the internal side, a lot of time has been invested to make the necessary total cost calculations for imple- in explaining the benefits and the way it works. This is menting circularity. Finally, one option for the ream perceived as an opportunity for procurement teams to be is also to monetize its capabilities outside of Vodafone empowered with more information and knowledge, so it to other telecom operators who cannot invest in such really helps them make progress with some vendors. a lab. So, the future is looking great for the Vodafone’s Design2Cost Lab. All this demonstrates that technology often makes an LOOKING INTO THE FUTURE organization more efficient thanks to automation. But when technology augments the work of the best profes- sionals then the benefits are huge. This requires maturity, As the team progressed, it realised that additional and for many organisations, further investigations of benefits could be unearthed from the data collected their investments. ABOUT THE AUTHORS Hervé Legenvre is Professor and Gavin Hodgson manages Vodafone’s Govind Khandelwal is Head of Core, Research Director at EIPM, an Hardware teardown lab. He has Software & Transmission Technology Education and Training Institute for two decades of global experience Procurement and Design2Cost Lab at Purchasing and Supply Management. in procurement and supply chain Vodafone. Govind is a Strategic and He manages educational programmes management, and holds degrees from business focused senior international for global clients, conducts Cambridge University, and KEDGE. telecommunication industry execu- researches and teaches on innova- He is currently working on solutions tive with 20+ years of Supply Chain. tion and purchasing transformation. to assess hardware CO2 footprints by He has International work experience Hervé Is the author of the book “Fifth using teardown insights. in India and Europe. Generation Purchasing”. 116 THE EUROPEAN BUSINESS REVIEW MAY - JUNE 2021



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