Sourcing Innovation; Everyone’s Talking About it, But Who’s Doing it?
October 7, 2014
Giles Breault
3 minutes

You can hardly go to a conference, seminar, or even website these days without being bombarded by the notion of the importance of Innovation. If your profession is Procurement, then wherever you turn you are being exhorted to be a master at sourcing innovation, lest you be relegated to the old world of simple strategic purchasing.

It is yet another source of professional angst and the feeling that you should have been paying attention to this long before now. For years I was anxious about arriving at the strategic category aggregation play too late, seemingly after every other company had already done it. Later I grew more anxious at the fact that we seemed to latch onto Demand Management on the back side of the adoption curve. Now with Sourcing Innovation looming so large, I am determined to surf the front edge of this wave!

In our work at The Beyond Group, one of the things we do is to bring groups of senior procurement people together with SMEs over the course of three days in a “Think Tank” to collectively explore a topic, understand its implications and assemble some clear-headed thoughts about managing the issue. To that end we are about to kick off the third day of our “Productivity-in-Pharma” series that is actively exploring Sourcing Innovation. We have gathered a dozen Pharma companies to find out who is actually doing something, and how have they met this new challenge for our function. In these gatherings, day 1 is normally dedicated to understanding the issue and day 2 explores what best-practice solutions have been applied by our members and others in the broader business community. We are delighted to have the Vizibl team as a key partner.

Well in one way, the news is good. Like those previous waves of strategic imperatives that have washed over procurement, when we dig deeply, in spite of our angst about not reacting quickly enough to the latest trend, we find that we are not really behind the wave at all and perhaps even in front.

The fact of the matter is that some participating companies as well as other early adopters have a very broad set of approaches to Sourcing Innovation and there is no single correct process. Apparently we are all searching for the underlying truths and seeking ways to manage this new field of endeavour:

  • Some companies have built on already successful SRM programs and added a strategic component that helps structure the discussion around what innovation is sought and then tries to de-commoditize the conversation between buyer and seller.
  • Other firms have adopted rigorous systems that help supplying companies identify and register their innovations that are then directly absorbed into the company innovation and evaluation process.
  • Still others are experimenting with more flexible systems that promise not to kill the spark of innovation with uber bureaucracy.
  • We have even seen companies that are actively creating environments replete with mood-changing lights and atmosphere to move groups of people to actively collaborate for innovation.

To start this dialogue off probably requires backing up in our functional history. This history is closely tied to the industry development (in this case, the pharmaceutical industry but it is not vastly different from many industries that have developed similarly over the past 20 years). Years ago (you set the time frame for your industry) Purchasing held an operational mandate mostly around getting the buy “right” and optimising the req-to-pay process. Later, as the ability to globally aggregate buys across regions and economies developed that mandate likewise grew to include a continuous savings component based on the ability to drive effective category strategies. Procurement even outgrew this mandate as we became more effective business partners and project leaders and we took on the role of helping our internal clients with demand management capabilities.

These developments and the increasing need for procurement to continuously out-perform its’ own role is mirrored in the changes of the wider Pharmaceutical market. The Beyond Group has paired with E&Y and the industry imperatives identified in their Pharma 3.0 model as a way of understanding the development and direction of the Pharma market. This model suggests that the Pharma market has changed from a singular focus on the development of drugs, to a larger focus on the system that delivers drugs to patients recognising that patient outcomes are the ultimate measurement of success. The convergence of the role of procurement in all of this is that Sourcing innovation is about the search and development of co-created value that can and needs to directly impact patients and their experience.

In this series of Blogs, my colleague Sammy Rashed and I will seek to chronicle the work, insights and findings that are uncovering in our Think Tank series and hopefully reveal some of the underlying truths of Sourcing Innovation and what the implications are for Procurement.

So the stage is set. Procurement is poised to take on the mantle of sourcing innovation that not only supports internal clients but also affects the entire environment of external stakeholders and the ultimate customers. The question becomes “How does procurement nurture the spark of innovation and carry it through to realisation?” In our next blog we will develop this idea and present what our think tank has concluded as the 5 underlying truths of Sourcing Innovation.

This Article has been written by Giles Breault ex CPO of Novartis and founder of the Beyond Group

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Intense and charismatic executive coach & advisor to innovative companies, executives and individuals providing leadership, knowledge, and experience across a spectrum of business activities including; Global Procurement Function Leadership, Productivity, and Business Services. Previously CPO of Novartis.
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