At global healthcare business Walgreens Boots Alliance, CPO Jim Townsend and his team are on a mission to support affordable healthcare – and reach the highest global standards
On New Year’s Eve 2014, while many were partying to see in the new year, Alliance Boots and Walgreens were celebrating for a very different reason: their completed merger and the creation of the world’s first global pharmacy-led, health and wellbeing business. That moment marked the union of two giant healthcare retailers from either side of the pond, both with their own illustrious history.
The first Boots was a herbalist shop, opened by John Boot in Nottingham in 1849, and in the almost 170 years since then it has developed many product ranges that are now household names. The Boots Group merged with UK pharmacy Alliance UniChem in 2006. In the UK Boots is well known for everything from make-up to the meal-deal, opticians to the Advantage Card. Meanwhile, in the US, Walgreens was founded in 1901 as a single drugstore after Charles R Walgreen Senior purchased the Chicago shop where he had worked as a pharmacist.
From humble beginnings, the combined weight of these companies took their products and services to the four corners of the world. WBA – as it is listed on Nasdaq – now has a portfolio of brands that includes Walgreens, Duane Reade, Boots and Alliance Healthcare. It is known for beauty brands such as No7, Soap & Glory, Liz Earle and Botanics, and was included in Fortune magazine’s 2018 list of the World’s Most Admired Companies – a coveted roll call in which it, or its predecessor Walgreens, has appeared for the past 25 years.
Treating rising health costs
As one of the world’s largest purchasers of prescription drugs, as well as many other healthcare products, the company uses its size to expand supply and tackle the increasing cost of prescription drugs in the US and worldwide. And that’s where CPO Jim Townsend and his team come in. “Making healthcare affordable and helping people feel good is what we do. What better motivator could there be for procurement professionals? It’s a core part of our strategy and we make sure the operating cost base is right to do that.”
Affordable healthcare has long been in the company’s DNA, with Walgreens’ founder manufacturing his own line of drug products to ensure high quality and low prices for customers.
Townsend, who was initially based in the UK with the business, moved to the US following the Boots/Walgreens merger. Over the past eight years he has headed up group procurement for goods-not-for-resale – in other words everything the company buys that it doesn’t sell. And in 2017 he became CPO, overseeing the many billions of dollars spent on marketing, logistics, IT, property and facilities that keeps the company running across 25 countries.
While now based in Deerfield, Illinois – a suburb of Chicago that hosts the headquarters of a number of other global firms including Caterpillar and Mondelez International – Townsend spends much of his time with his staff (there are about 120 of them) in locations including China, Mexico, Chile, the UK, US, Netherlands, Norway, France, Germany and Ireland. “My role is simple: lead, inspire and change.” And for that he says you need face-time. “You can’t lead global categories in complex markets just by telephone, and you can’t assume what works in one country will work in another – you really need to understand the local context.”
Take utilities, he says. While in the UK you may be able to get one national contract, in the US there are several thousand vendors and its geography and size means you’ll need multiple arrangements. “You have to be aware that supply markets are structured differently in different locations.”
His team focuses on how it can best support some of the markets it is in, how it can leverage its scale but not slow things down. “Certain supply markets like IT are global – laptops, for example, are easy to do across the group. But when it comes to facilities management in stores, what’s right for 9,500 shops in the US versus Thailand’s 250 is different. They are totally different models and markets so you have to build relationships with senior leaders in those teams to understand the challenges. Invest in the relationship and you’ll get to the right place,” he says.
Breaking up the beast
No stranger to transformations, Townsend – whose career includes senior positions at Rolls-Royce, GE and Anglo American – says what makes this one so exciting is the sheer size and pace of it, as well as operating in such a dynamic environment. Walgreens Boots Alliance employs more than 385,000 people. It has around 13,200 stores in 11 countries, as well as global pharmaceutical wholesale and distribution networks including 390 distribution centres that deliver to more than 230,000 pharmacies, doctors, health centres and hospitals each year in more than 20 countries.
Townsend’s starting point is always the customer. “Part of the initial process is to understand what’s actually important to the company. What a lot of organisations get wrong is they focus on what’s important to procurement, instead of customers, employees and shareholders. What’s important for us is going to be different to if we were operating in the financial or manufacturing sector, for example. Start with customers, employees and owners, then take best practice internally and externally and plot a path to deliver the most material benefit to all three in the shortest time.”
He divides WBA’s procurement transformation into three critical areas: People, process and programme.
The people pillar involves attracting, growing and retaining the most talented team who are “motivated by the values of the company, excited by the pace of transformation and the contribution procurement makes”, he says.
Process means investing in ways of working and tools that are right for “where we are now” such as procure-to-pay and “not making the mistake of procurement technology first and what the company actually needs second”. “We look at low hanging fruit; the high hanging fruit is for another day. Many transformations try to pick all the fruit at once, which is very difficult to do,” he explains.
Finally programme: driving a delivery programme that supports the company as a whole in its ambition.
Don’t view a procurement overhaul as something as a finishing point, he warns.
“Transformation is inevitable – it’s the norm, it never stops and the quicker you can transform the more you’re able to help your customers. The objective is not the transformation of procurement, but the delivery of what our company and customers need. The most successful procurement teams of the future will be judged by their organisation’s ability to transform and get ahead to deliver the results their business demands. Our transformation plan is something that needs to, at worst, keep up with the changing customers and the digital revolution.”
Nevertheless, as with other plans, of course it has milestones to hit and goals to achieve. In addition to the inevitable savings goals, Townsend aims to make it the best place to work in procurement, a place that is “challenging, diverse, exciting and fun, and where we are proud of our contribution to our company and customers”.
He says the clear final objective is to be totally aligned with the business and while there’s not an absolute financial target, there is an arrangement with the leadership that procurement will do everything it can to try to maximise its return in each fiscal year. “We have a significant number we try to achieve and typically we say ‘we’ll do this as a minimum and we’ll try to get beyond that’.”
The transformation is headed up by Paul Murrin, head of procurement - cost and transformation, is backed by the board and involves no external consultants. Townsend believes if temporary outside help is required to advise on how to structure a procurement organisation “you’ve probably not got the right procurement leadership team”. He expects his team to be able to “lead, inspire and change” and to be in a position to be strategic. “If you’re an organisation where leaders do the day job all the time it’s problematic because you won’t be adapting at the same pace as your customers.”
Townsend prides himself on creating high-performing teams and generating ‘followership’ with “honesty, personal integrity and by leading from the front”. By the look of things, he achieves this with some success: former employees, employers and colleagues line up on Linkedin to pay testament to his passion and drive, his ability to take rational risks, to be tough when needed, but to support his colleagues.
“I don’t have an office, I sit with everyone else, I’m extremely accessible and I understand what’s going on in the team and the wider business. I see some leadership models where individuals spend an awful lot of time, perhaps too much time, marketing themselves and looking after their own interests instead of being close to what’s happening in their own organisations.”
Townsend adds that the company holds itself to the highest global standards. For example, he highlights the UK’s strong anti-bribery legislation, which the company applies globally, as well as its focus on corporate social responsibility. In 2017 it received the United Nations Foundation’s Global Leadership Award to acknowledge its ongoing commitment to the UN’s Sustainable Development Goals.
Curious and courageous
Reporting to WBA’s co-chief operating officer, Townsend’s role is to bring influence and gravitas to procurement’s role at senior levels and to ensure it stays on the agenda. “Achieving this comes down to two factors,” he says. “Firstly, the team around you, and secondly your ability to connect the mission of the company with the contribution of your team. If you fill your team with smart, passionate, curious and courageous people that understand the company’s agenda – you’re a long way there.”
In the case of WBA, Townsend says the leadership team really sees the value in what procurement brings and its ability to make an impact for shareholders, team members and customers. In fact the skill of the sourcing team is celebrated on the company’s website, which describes it as having “unmatched pharmaceutical supply chain and procurement expertise,” resulting in its ability to offer customers innovative solutions and optimal efficiencies.
Progress already achieved includes a significant improvement in employee engagement. Townsend credits this to procurement’s “month-in, month-out relentless focus on delivering the results, which builds the reputation of doing what we said we would”.
“Most executive teams are less interested in a glossy transformation plan and much more interested in you delivering on your commitments. The plan is simply a means to get there. There’s been a significant uplift in the benefits we’ve delivered to the business, and in terms of the models we operate, compliance, process and so on, I’m convinced we’re not far off being leading edge.”
His team works closely with stakeholders in a blend of divisional and cross-divisional activity, and stakeholders are motivated to work with procurement to help hit their own cost targets. “Many organisations struggle because procurement is set a cost target but the functions aren’t. How can that be right when procurement doesn’t have its own money except for a trivial operating budget? That’s set up to fail. Here, we’re an enabler to hitting targets – stakeholders have a real incentive to work with us and their doors are wide open.”
Perhaps as a result of this approach, there’s no time for petty internal battles and no procurement/function-conflict, he says. “When procurement gets round the table with senior stakeholders they connect. They value procurement’s thought leadership, they feel the empathy that procurement has for their challenges, they feel challenged by the push and unwillingness to accept anything sub-optimal, and they demand that procurement is by their side when they’re working with partners and suppliers. But most importantly – they enjoy working with them.”
And the success of this teamwork approach generates positive feedback that leads to new opportunities to get stuck in and help. “It creates a groundswell of credibility that sets us up for success as it permeates across all levels of the organisation,” says Townsend. “Hard earned reputation is everything.”
Walgreens Boots Alliance timeline
Walgreens invented the malted milkshake. Customers stood three and four deep around the soda fountain to buy the ‘double-rich chocolate malted milk’.
Boots made a significant contribution to the war effort, producing items such as water sterilisers, vermin powder and anti-fly cream for men at the Front.
Walgreens operated a non-profit drugstore in the Pentagon. All the profits went to the Pentagon Post Restaurant Council, which supervised food service in the complex.
Boots began selling the world’s first disposable hearing aid, the Songbird.
Walgreens opened what was believed to be the nation’s first net-zero energy store. Its aim is to produce energy equal to or greater than it consumes. The store in Evanston, Illinois, has two wind turbines, nearly 850 solar panels and a geothermal system burrowed 550ft in the ground.
Alliance Healthcare makes 28,000 deliveries a day and drives 42 million miles a year to do so.