Engineering and the Art of the Big Purchase

Ken Gottesman

When you spend billions on technology, supplies and services, it’s good to have a system. Fortunately, Ken Gottesman, vice president of procurement services at Time Warner Inc., knows systems.

Gottesman graduated from UW-Madison with a BS (1984) and an MS (1987) in industrial engineering. He and his hand-picked team help Time Warner leverage its purchasing power in the marketplace and serve as internal consultants to the media giant and its companies including Warner Bros., Turner Broadcasting (CNN, TBS, TNT) HBO and Time Inc., which produces magazines such as Time, Fortune, Sports Illustrated and People. Time Warner also has a fast-growing online games division.“At heart, we’re really a content and technology company,” says Gottesman. “We spend a lot of money on all kinds of technology: servers, storage, telephony, networks, and software. Things like editing software for digital editing. We also stream content directly to customers through a product called HBO GO. If you’re an HBO subscriber through your cable, dish or FiOS provider, then you automatically have access to something like 1700 hours of HBO programming through your PC, Xbox, Roku, iPad, or other mobile device.”

One of the biggest challenges for Gottesman’s team is setting procurement standards. Time Warner contracts with suppliers for telecommunications, network services, content delivery and more.

“We have to ensure that the quality of the product that the customer is getting is perfect,” Gottesman says.

Ensuring quality begins with setting standards. Gottesman first started looking into standardizing purchases about six years ago, and the team made some interesting discoveries. It found 46 personal computing standards across Time Warner; different brands, models and configurations and all purchased at the local level.

“We thought we really ought to have a few standard configurations with a couple exceptions,” Gottesman says. “If you’re an executive, you probably want a lightweight laptop. It doesn’t have to have a lot of memory and capacity but it has to be able to do email and word processing. If you’re a game developer, you’re going to need a machine with a lot of horsepower. So through a very collaborative process, we were able to develop six desktop and laptop standards. Once we got to that, we were able to draw up a forecast against each one of those standards and then go to market with Dell, Lenovo, HP and others and say, ‘How much is it worth to you to get all of our business across all of these high-volume standards?’ We were able to take out about 46 percent of the cost. So there are a lot of soft and hard skills that come into play and that is why industrial engineering and engineering in general are very important to my team, in addition to the people skills.”

Time Warner spends billions on broadcasting equipment, high-def cameras, editing suites associated with tv production, and more typical business equipment and services such as facility operations, real estate and everything from cafeteria and janitorial to security services. There also are payroll systems and associated software, training systems and travel.

The company conducts market research through outfits like Nielsen and purchases other services related to understanding ratings patterns and how people absorb and consume content. Recognizing the shortcomings of traditional market research methods and the rapidly changing media, Time Warner decided to fill the gap between what they know and what they hope to learn about their customers by creating a new media lab in New York. This state-of-the-art facility will analyze how consumers relate to content on different platforms. Researchers will use biometrics to observe physiological responses to content and programming on phones, computers and televisions in order to understand the relationship between the content, the delivery platform, and the advertisement.

“The goal is to figure out what is more likely to make people respond to an ad and we’re able to do that, but not just through the traditional focus group method, but by using things like an eye-tracking device on a computer screen to see if a subject’s eyeball is looking at the ad.”

The lab will help Time Warner determine what to buy by shedding light on customer use patterns. Gottesman says one of the keys to evaluating and sourcing products is understanding just how they will be used. This, he says, is where industrial engineering training really pays off.

“It’s not just about cutting a purchase order,” he says. “It’s about negotiating for the service levels and the requirements that the supplier will need to fulfill in order to support an aspect of our business, be it print production, film or writing or any of those sorts of things. It’s very important to understand how lots of different systems work”

His team of engineers and management consultants engage in an analytical process designed to help them procure the best product at the lowest price. For example, when a supplier offers a digital editing system at $3,000 per unit, his team is able to do some reverse engineering, compare the item to what the competition is using and estimate what it costs the supplier. Based on that, Time Warner can set a fair profit for the supplier and find the best deal for Time Warner.

Gottesman and his team also have re-engineered the system for taking and evaluating bids. “One of the technologies that we deploy to help us in our job is an electronic request for proposal (RFP) system or sourcing platform,” he says. “It’s entirely online. Suppliers are invited to the bidding event, get a login and password and can take self-administered training before they fill out their response online. It allows us to quickly evaluate, side by side, all the different supplier responses. When appropriate, we take it to the next level by conducting a reverse auction–sort of like eBay in reverse. So if we need 1,000 high-powered servers for a specific purpose, we invite specific suppliers to bid against each other in a live online environment. Generally it drives the price down. We’ve had on the order of 400 bids an hour in certain auctions.”

Gottesman says working for a media entertainment company is fast paced. He says he and his staff find their work rewarding and being immersed in the latest cultural phenomenon from Harry Potter to NCAA tournaments – keeps things exciting.

This entry was posted in Focus on Alumni and tagged , , . Bookmark the permalink.

One Response to Engineering and the Art of the Big Purchase

  1. Fast paced indeed, and it’s very much interesting that he’s gone to work for media entertainment companies as they are known to be very demanding. But I doubt with he and his team’s history and credentials that they won’t do excellent with it!

    Best of luck!