Supplier Innovation
Why that New Supplier Innovation Effort may not be Worth it
November 12, 2015
Mark Perera
3 minutes

Recently we’ve been exploring Supplier Innovation, and it’s clear that most companies want to be seen as innovative.  However, without the right motivation and competence your supplier innovation effort might not be worth it.

In a guest blog from Ian George, he raised the question of whether a company’s supplier relationship management program was really driven by aspiration or whether it was a business imperative?  This led me to question how this line of thinking can be applied to supplier innovation.  I then found an article co-authored by Vijay Govindarajan and Manish Tangri entitled “Why That New Innovation Effort May Not Be Worth It”.  The article states that the success of innovation programs depends on two key factors: motivation and competence.  In this post I apply their framework to the specific case of supplier innovation.

Nowadays, almost every company claims to be innovative, if only to attract top talent, please investors, and strengthen its brand.  Some companies are innovative, but many are not.  If you are going to lead or be a part of a new initiative, how can you tell if your organization is really committed to supporting that effort?  Is the innovation effort only inducing fear, uncertainty, and doubt in the market, or is the company really walking the talk?  Is this just another aspirational flavour of the month?  Not understanding the difference could derail your career.

MOTIVATION: HOW HUNGRY ARE YOU FOR SUPPLIER INNOVATION?

The Leader: As the Chief Procurement Officer how are you motivated and incentivised to drive supplier innovation?  I am sure innovation in the form of efficiencies and/or cost reductions will be a part of the measures around your role, but do you get recognised for new business models, or product innovations, that might be 2-4 years out.  If not, the supplier innovation program is only going to be a side project and something that you might as well halt.

The Team:  If the supplier innovation program is going to be driven by the current procurement team, how are they motivated?  Does each of the category managers have an innovation target as one of their key measures and incentives?  Equally, do they really believe that you as a business are fully committed to the program, and do they believe that output will really drive competitive advantage?

The Organisation:  The drive for innovation is likely to come from the CEO. Ask yourself if you believe that they are fully committed to the cause, or is the push for innovation more a branding exercise?  Equally, is the CEO really going to be there in 12-18 months time?

Are your supplier innovation targets linked to the other business leaders or are you going to have to fight to get alignment?

COMPETENCE: IS THE INITIATIVE SET UP FOR SUCCESS?

The Leader:  In addition to matured cost management capabilities, are your leadership skills strong enough to develop and change manage the procurement function to spot and nurture innovation with suppliers?  Are you willing to support high-risk projects, which are riskier than those you have previously endorsed?  Do you truly believe that the company accepts smart failures?

As Vijay and Manish put it:

Beyond domain expertise, (are you) a leader who is comfortable with risk-taking can help support unorthodox ideas from his team and, in certain cases, provide direction under ambiguity

The Team:  Does your team have the right skills and temperament to start incorporating the innovation capture into their everyday roles?  Equally, with all the responsibilities they have, does your team have the time to drive the program?  Would it be better to form a new supplier innovation team with a different skill-set, in order to develop the new way of thinking?

Do they believe the business will support and execute the suggestions they bring forward?

The Organisation:  Procurement’s role means that you and your team should have good alignment with the other parts of the business.  However, innovation programs are reliant on the businesses’s ability to collectively evaluate ideas and then execute them – is that culture there?

Ask yourself how the business treats failure.  The company needs a culture of recognising successful innovation, but it must also recognise the smart failures that will inevitably occur during the innovation process.

I apologise for only really asking questions in this post.  I hope it offers some sort of checklist for when your business starts to evaluate a larger commitment to supplier innovation programs.  I am convinced that such a commitment will help nurture competitive advantage in the long-term.

I will leave you with these wise words from Vijay Govindarajan on creating an innovation mindset.  I am in the middle of reading his book, ‘The Other Side of Innovation: Solving the Execution Challenge’.  I will be sure to share my findings.

If you loved that post, and want more articles on supplier innovation, supply chain news and much much more then please check out our newsletter.  You’ll receive a news round-up of all the best articles on procurement every week.




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Mark has 20 years experience building and delivering high value enterprise solutions to help large corporates work smarter. He previously founded Procurement Leaders which services the most influential buying community in the world.
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