Why is Supplier Collaboration and Innovation key for the future of procurement and the entire business overall?
Technological disruption and the need for more sustainable operations are two of the most pressing concerns corporates have around the world.
- Technological Disruption is driven by innovation from small businesses and startups. Nowadays, some companies can see their industries disrupted overnight due to new products and revolutionary business models. According to Innosight, 52% of fortune 500 companies have disappeared in the last 15 years.
- Sustainability is becoming a key player in corporate strategy. As the article from Fortune says, “like it or not, sustainability is now core to your business”. And according to a study run by BCG/MIT, 60% of companies incorporate sustainability in their strategy.
The real question is… How do you handle technological disruption and sustainability, simultaneously?
Through innovation; new products, ideas and business models can help enterprises handle disruption and operate more sustainably.
But, as always, it isn’t as simple as it sounds. Large firms often find their business models hamper innovation efforts. As Steve Blank says, “The focus of an established firm is to execute an existing business model, to make sure it operates efficiently and satisfies customers.”
Even though some companies might still focus on internal innovation to tackle these issues, some others say: “if innovation can’t come from the inside, it will have to come from the outside.” In other words, the innovation must be sourced externally.
The next question to ask… Who is the outside of a company?
The answer? Suppliers. Companies deal with suppliers every day, often over long periods of time. Suppliers are often viewed as extensions of the business itself, and enable access to a wealth of knowledge and capabilities that companies cannot create internally. They therefore act as invaluable sources of innovation.
And who manages those suppliers? Procurement!
Procurement sits at the interface between the majority of buyer-supplier relationships. The function’s unique position gives it great potential to become a real driver of innovation growth and sustainability for the business. But unlocking this value requires Procurement functions to play a big role in a critical activity – collaboration.