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Building on our recent “Innovation” theme, it is becoming increasingly apparent that procurement have a key role to play in supporting innovation. In recent surveys innovation was highlighted as being one of the highest priorities for CEO’s (PWC Global CEO Survey, 2017) and one where eight in ten organisations are actively seeking more supplier innovation (State of Flux SRM Survey).

In a recent Supply Management article (19/1/18) a number of prominent and successful organisations provide insight to some leading edge practices which they believe make their organisations more accessible to market enabled innovation. They have found ways to overcome the image of the procurement function hindering innovation through excessive process and risk adversity, towards them spearheading innovation by getting things done, enabled by connection to the whole business and its external market knowledge.

Some of the practices cited as successfully contributing to procurement led supply innovation include:

  • Proactively encouraging the supply base to suggest new ideas by holding regular supplier innovation forums (eg. TECOM Group)
  • Developing a detailed market research and knowledge capability
  • Establishing mechanisms to engage and consult with a diverse range of companies via open innovation platforms (e.g. Unilever’s The Foundry, P&G’s Connect, Vodafone Tomorrow Street)
  • Removing navigational and procedural barriers for start-ups to work with larger companies, for example creating streamlined, lighter touch, Master Service Agreement (eg. MasterCard)
  • Change the supplier engagement threshold emphasis from value to credibility and capability
  • Be more open-minded when tendering and developing specifications by taking a problem based approach, rather than thinking the solution is already known
  • Collaborate internally to “smartly contain risk”
  • Provide bandwidth for procurement teams to be creative and experiment
  • Rethink company objectives and incentives around SME product innovation

The ability of organisations to navigate the changing “Innovation Ecosystem” is becoming a source of competitive advantage. No longer should supply innovation be reliant on the big companies who are perhaps blinkered and held back by legacy and bureaucracy. Supplier innovation is becoming more fluid and centred on start-ups and smaller companies who are more likely to take risks, experiment and explore new technologies.

This shifting innovation ecosystem creates a challenge for procurement – the need to balance risk management with risk taking, and demands for supplier consolidation with the imperative to work with cutting-edge and specialist providers.

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