INNOVATION
creating and managing ideas, similar to the marketing funnel (see State of Flux whitepaper SRM: Stimulating and managing supplier innovation 6 ) Regardless of the blockers, interest in supplier innovation is unquestionable, and it is a logical outcome of effective SRM. It is nearly always part of the value proposition for SRM and is moving higher up the list: the majority of organisations say it is among their ambitions. From CEOs, we see that the old vision of procurement is fading: the idea that the department will continually reduce costs is taken as a given, and they want to hear something more interesting from its leaders (see global business board member Sir John Hood’s comments, p10). CEOs are hungry for innovation to keep pace with changes in technology and digital transformation. SRM is a way of harnessing supplier innovation and satisfying their appetite.
But organisations are often unsure where to start with broad-based supplier innovation. They ask, “How do we expand the definition of innovation and understand where suppliers can help? Where are the other examples of innovation in marketing, IT, finance and sales? What does innovation look like for these departments, and how can we express supplier innovation in a language they will understand?” There are so many questions addressing innovation, and it is easy for thinking to become confused, and results difficult to come by. But State of Flux has been able demonstrate that organisations can develop a methodology for supplier innovation just as they can for sales and marketing. Building an innovation funnel Organisations face common barriers to supplier innovation (see box), but with a sense of purpose they can overcome them. As well as poor innovation management know-how, there are other factors contributing to a gap between expectations and delivery in supplier innovation. There can be disparate activity which sends suppliers mixed messages. Cultural blockers are also a factor: 78% of millennials believe that innovation is essential for business growth, but just 26% believe that their own organisation’s leadership encourages idea generation and sharing 5 . Some organisations lack consistent executive leadership and have low internal collaboration. Organisations that are risk-averse do not support innovation well. Suppliers can be a factor if they have become disengaged through too many bad experiences. Meanwhile, organisations can get tired of too many management buzzwords that promote innovation; consultants describing the problem without offering solutions; and projects starting without reaching a conclusion. Supplier innovation becomes just another item on the list of failed initiatives. State of Flux has shown that through SRM, 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. It is a framework for
1 https://www.mckinsey.com/practice-clients/operations/ the-power-of-successful-supplier-collaboration 2 PWC 22nd Annual Global CEO Survey https://www.pwc. com/gx/en/ceo-survey/2019/report/pwc-22nd-annual- global-ceo-survey.pdf 3 https://www.mckinsey.com/practice-clients/operations/ the-power-of-successful-supplier-collaboration 4 https://innovationmanagement.se/2011/05/27/the- innovation-gap/ 5 https://www2.deloitte.com/content/dam/Deloitte/global/ Documents/About-Deloitte/dttl-millennial-innovation- survey.pdf 6 https://www.stateofflux.co.uk/ideas-and-insights/reports- and-publications/stimulating-and-managing-supplier- innovation-white 7 https://www.stateofflux.co.uk/ideas-and-insights/reports- and-publications/collaborative-supplier-innovation-1
Common challenges in developing supplier innovation
Process to receive and review innovations
Definition of innovation Often, it is not clear what the
Many organisations have a haphazard approach to developing new ideas. Crucial to benefiting from innovation is having a process that supports the evaluation of suppliers’ ideas and acts on their suggested solutions. Supplier feedback process A supplier feedback process is vital to managing both proactive and reactive innovation. 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.
organisation means by innovation. It can be a major step change or continuous improvement. It can be a product or process or service. Handling good ideas appropriately Good ideas from suppliers are like gold and should be treated as such. Some suppliers care enough to offer 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. True innovation or a supplier sales pitch? Innovation is often confused with sales pitches (by both parties). Companies can fear suppliers will use the process to simply try to sell more and sometimes this is borne out by supplier behaviour. Guided innovation Many businesses fail to communicate business challenges to stimulate innovation.
Powered by FlippingBook