Four tips for collaborating with suppliers on innovation

A “try and fail” attitude is crucial when working with suppliers on innovation, a conference was told. 

Niklas Fahlén, SVP sourcing at renewable packaging firm Stora Enso told delegates at the CIPS Virtual Conference 2020 there were still areas of difficulty for firms developing sustainable packaging such as coffee cup lids and paper straws. 

“We got possibly the world's first of those paper straws two years ago at a conference to celebrate with a glass of champagne. After three seconds, they were basically just floating away and it was a complete failure,” he said. 

“But then, of course, you get back into development and then you improve. There are definitely things that are not working, but I'm also happy to see now some of those [examples] we have are really doing the job. It's a try and fail attitude.”

Fahlén explained that in recent years, Stora Enso has been transforming from a traditional paper-producing firm to a renewable materials company that aims to replace all need for plastic. 

In the last five years, Stora Enso’s share of sales for new products, such as sustainable food and drink packaging or building components, has risen from 1.5% to 7%, and the firm has a long-term target to double its share to 15%. 

As a result, Stora Enso has become more interdependent on its partners and suppliers to keep fuelling innovation. 

Fahlén shared four tips for how to successfully collaborate with suppliers on innovation:

1. Identify a collaborator

Fahlén said one of the first challenges when embarking on an innovation project is identifying a potential collaborator in the first place. 

“Finding the right partners requires some insights on capabilities. It could be a traditional supplier, it could be a competitor, it could be a peer. It could also be a customer in another area of your business. You really need to understand where the company is and what kind of relationship you have. Then you understand the full picture and you also don't only look in your traditional supplier base. You can also understand where those complementary assets are that you need for this project.”

2. Find the sweet spot

He said when selecting a partner firms need to “find the sweet spot” and define exactly where they want to collaborate. 

“You never partner up with a full company. You're partnering up around a specific project, a specific content or a specific solution. Don't try to make a partnership company-to-company because that's extremely complex. Find a collaboration area, make the agreements, make your collaboration cover that. Then you can continue to be competitors, continue to be traditional suppliers or customers in other segments of your field,” Fahlén said. 

3. Get the commercial fit right

Finding a partner is not only about finding a firm that meets the technical needs for your project. You also need to ensure the commercial fit is there too.

“You tend to think supplier driven innovation is about finding a technical fit,” Fahlén said. “Of course that's often true that we need technical capabilities that complement each other and that's often a starting point. But when you have found that and you have established the idea of doing a collaboration, you need to understand whether you are a commercial fit and the earlier you do this, the better. It could be about risk balancing, it could be about sustainability compliance questions or legal questions. That commercial fit needs to be in place and you need to collaborate around that.” 

4. End-to-end supply chain

When seeing the project through, the next step is establishing an end-to-end supply chain to make your project a success, Fahlén said. 

“You need to work out how you will collaborate around creating the end-to-end supply chain to be cost competitive and to be competitive with the customers. Together you need to establish supply chain excellence that will actually make this a success all the way through.”

He added: “There will always be challenges in an innovation collaboration. Meet them together, solve them together and recognise the successes coming out.”

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