INNOVATION
The rewards are clear: research shows that firms who collaborate systematically with suppliers record an EBIT growth rate double that of their peers 3 . But our research shows only 15% of organisations have systematic collaboration with their suppliers in place. The fact remains that “the first overriding result in almost every research report is that there is a significant gap between innovation expectations and performance”. 4 In this years’ State of Flux SRM report, we provide data and a detailed analysis of organisations’ efforts at supplier innovation [p54] as well as, detailing how Toyota [p8] approach the subject. Olympic sprint cycling coach Justin Grace and former Oxford University vice-chancellor Sir John Hood also offer their perspectives on the subject [p12 and 10] Many forms of innovation At State of Flux, we have been measuring organisations’ effectiveness in nurturing supplier innovation for more than 10 years. In that time, we have seen that innovation is not one thing. Focus tends to be drawn to product innovation when there are many other forms of innovation across a spectrum of organisational activity. It could be changing accounting processes to increase working capital. It could be operational efficiency to reduce costs and improve margins.
Building a pipeline through innovation blockers Supplier innovation improves efficiency, reduces cost and risk, and accelerates growth. But when organisations put plans into action, they often hit barriers. Here, we discuss these challenges and how to overcome them.
A rtificial intelligence is set to transform how organisations offer products and services, potentially adding $13 trillion to global economic output by 2030 1 . But to benefit from AI, organisations will depend heavily on their suppliers. As well as technology suppliers, vendors from a breadth of buying categories will provide the data necessary to ensure AI achieves business value. Manufacturing machinery will come with Internet of Things (IoT) sensors, and the supplier will build predictive maintenance models. AI will help drug discovery in the pharma industry, relying on data from research institutes and ingredients suppliers. Marketing suppliers will use consumer data to help model and predict the effectiveness of future campaigns.
Organisations can create an innovation funnel and pipeline: a metaphor describing a sequence of steps to develop initial ideas into successfully implemented projects that deliver value to both the organisation and the supplier.
Suppliers support the innovation endgame
AI is just one example of the changes sweeping through industries, but it shows how dependent organisations are on their supply chains to innovate at the pace they will require. Kasper Rørsted, CEO Adidas is quoted as saying: “We recognise that we need to complement the inspiration and creativity of our people with external innovation… you have to open yourself up to ideas that you might not have been open to in the past.” 2
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STATE OF FLUX
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