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Approaches to innovation When we review different approaches to innovation, we split innovation into two categories: ‘open’ and ‘guided’, and look at how organisations handle these. Open innovation is where you simply invite suppliers to come to you with any good ideas or improvements. Guided innovation is where you post a need or a chal- lenge to a supplier or groups of suppliers, and ask them to respond with their views on how to solve the need / challenge. The common challenges we observe in organisations harnessing and managing innovation are as follows: › › Definition of innovation – Often it is not clear what the organisation means by innovation; we have seen innovation being described as anything from major step changes to continuous improvement. › › Process to receive and review open innovations – Open innovations are like gold and should be treated as such; remember, you didn’t ask for them and the suppliers care enough to give you their thoughts and ideas. However, these are often under-valued and are either turned down without proper consideration or disappear into a ‘black hole’ of confused roles and responsibilities without real ownership. › › True innovation or sales pitch? – Innovation is often confused with sales pitches and suppliers using this as a forum to simply try and sell more. › › Process to receive and review guided innova- tions – Crucial to benefiting from innovation is having a process that enables you to evaluate suppliers’ responses and act on their suggested solutions. Many organisations have a ‘hap hazard’ approach that relies on personal contacts or simply throwing ideas over the wall into R&D. › › Supplier feedback process – Crucial to managing both proactive and reactive innovation is having a supplier feedback process in place that keeps suppliers informed. Nothing frustrates suppliers more than submitting ideas, only to hear nothing for months. › › Benefit sharing – Our SRM research has shown that most organisations still struggle with sharing benefits with suppliers, both in concept and in practice. › › Contracts – Large organisations often fall into the trap of having an intellectual property clause within the supplier contract, stating that they own any good idea or innovation the supplier brings to them – hardly an incentive for suppliers.
So what can you do differently to ensure you are the customer of choice when it comes to receiving inno- vations from suppliers? Ask yourself: › › Have we defined what our organisation regards as innovation? Is innovation limited to big ‘game changing’ ideas or does it include incremental improvements? There isn’t a right or wrong answer, only the answer that’s right for you. › › Are you happy and willing to receive open innova- tions? Do you have the infrastructure in place to handle them effectively and efficiently? › › Do your suppliers understand your innovation process and have you educated them not to regard it as just another sales channel? › › Have you defined a template or technology solution that requires the supplier to complete a mini busi- ness case for the innovation? This will ensure it is focused on adding value to your organisation and will aid the evaluation of these good ideas to see if you want to pursue them. › › Are you mature enough as an organisation to admit you don’t have all the answers and are therefore prepared to receive help from your suppliers? This is a great way of expanding the collective ‘brain power’ on problem solving, by using current and even prospective suppliers. › › Are you giving suppliers constructive and regular feedback? This is vital to keeping the pipeline of good ideas flowing. Once this pipeline is blocked it will be extremely difficult to get it moving again. › › Are you able to share the benefits of innovation with your suppliers? While we appreciate that in practice this may be difficult, especially as it is often hard to calculate the exact impact of innova- tion, we believe you need to firstly accept the concept and then build practical mechanisms. Remember, sharing the benefit does not always need to be a 100% financial arrangement. › › Is your contract conducive to innovation? Look carefully at your IP clause and rather than claim ownership of all ideas / innovations, look at time bound exclusivity as an alternative. Answering these and other questions will begin to unlock the hidden innovation potential that resides in most supply chains. Article by Alan Day, Chairman and Founder of State of Flux. Call Alan on +44 (0)207 842 0600 or email him at alan.day@stateofflux.co.uk to learn more about managing innovation effectively.
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