Real innovation would be changing our approach to it

5 July 2012
‘Newism’ - the subject of’s July briefing - is the latest buzzword to describe why more than ever, consumers lust after the new. They say: “Newism is creative destruction, hyper-competition globalism, consumerism on steroids and a celebration of innovation, all in one. For brands, new and established, it boils down to capturing and holding consumers’ attention.” While the impact on procurement has largely been limited, business leaders are increasingly saying that driving joint innovation with suppliers is critical to achieving long-term goals and helping to satisfy their customers’ seemingly endless desire for the new. In today’s longer global supply chains, we are moving to fewer suppliers with increased levels of outsourcing, driving a need for a more collaborative approach to innovation. A recent survey by Warwick Business School (WBS)  showed while over 75 per cent of people thought innovation in a supplier relationship was important, only 25 per cent of people discussed it every month. So why do organisations struggle to collaborate with their suppliers on innovation, when we all agree it is a good thing to do? The underlying reason is that too many organisations don’t see innovation as a collaborative activity and expect it to be delivered by the supplier. The WBS study showed that the greater the level of collaboration the more successful the results. At a recent conference, I joined a roundtable discussion focusing on innovation with the existing supply base. On reflection, I think we need to start by looking at what emphasis there is in the strategic sourcing process on the ability of potential suppliers to innovate. Indeed, many of the best innovations come from smaller start-up companies that are not currently part of our supply base. The trick is to find these companies and work with them in a collaborative way to bring their ideas to market. This may be best facilitated by having a separate supplier segmentation process for innovation to encourage working with the right potential suppliers. Delivering competitive advantage from innovation is based upon taking a longer-term view founded on value generation and delivering business benefits for both parties. A pragmatic approach to innovation, based on the following principles, is a great place to start: •  Agree with both parties on what you are trying to achieve through innovation. •  Agree named people responsible for driving the innovation in each company. •  Jointly invest in exploring those ideas, ensuring both parties can share any success. •  Talk to your stakeholders to frame the challenge. Without understanding the business need, procurement and the supplier, we don’t know what problem they are trying to solve. Procurement has a huge opportunity to drive the innovation agenda. It is a challenge we should grasp as part of our journey from the back office to part of a company’s leadership team. ☛ Tom Woodham is a director at Crimson & Co
Darmstadt-Dieburg, Hessen (DE)
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