Innovation was a hot topic at the client workshop I participated in last week and, as the two articles I am sharing this week indicate, it is generating significant attention, thinking and experimentation among our fellow travellers in procurement.
Our ability to catalyze innovation within our organizations is an important measure of our impact. Not only is it key to the long term success of our enterprises, it also presents an important opportunity for each of us individually.
The challenge of coalescing an effective coalition of stakeholders – internal and external – often confronts our most cherished and closely held beliefs about risk, our responsibilities as procurement professionals and established workflow processes. And that is exactly what makes it so much fun, n’est-ce pas?
Margaret Gilbert and Anthony English think so! This week’s AOP episode explored the notion of working collaboratively with our suppliers to more effectively mitigate risks across our supply chains – both physical and virtual. What particularly resonated was the need to have risk response plans. Many risk events are systemic, and those who respond quickest are often impacted the least. Have a listen here.
Here are two pieces that piqued my interest this week:
Are Innovative Companies More Profitable? | Dylan Minor, Paul Brook & Josh Bernoff
How Procurement can Enable Innovation | Katie Jacobs
Research is beginning to suggest that in an ever evolving marketplace replete with competitive pressures, we ignore being catalysts at our collective peril:
“We found a significant correlation between the ideation rate at these companies and growth in profit or net income: The more ideation, the faster they grew.” — Dylan Minor, Paul Brook and Josh Bernoff
When the authors of this study (Are Innovative Companies More Profitable) speak about “ideation rate”, they are talking about employee-generated ideas that passed muster with senior management and were actively developed and implemented. Clearly, priorities must be established and choices made not only on which ideas to invest in, but, more fundamentally, in developing (or supporting) a creative culture that rewards catalysts.
Does a firm implement a formal innovation program? Is this even the province of procurement?
There’s a foundational belief about the importance of grouping professionals based on their subject matter expertise or skill set verticals (e.g., creatives, finance, procurement, innovators, business development, marketing). Established companies are organized around this idea and as startups grow they tend to shed their more amorphous structures for structures which support these distinctions.
Somehow, when dealing with the notions of innovation and creativity, some firms take this idea even further by creating a separate department or a spin-off within the organization for the creatives/the innovators; a skunkworks or something where all the innovators reside. If a creative/innovation division or skunkworks is created within an organization, essentially saying, “these people are creative, or innovative, and the rest of you aren’t,” we think it sends a bad message.
Removing the idea that innovation is the realm or sole responsibility of a single group within an organization, harnesses the creative power of the entire organization.
In a similar fashion, we believe, that its core, Procurement is about responsibly caring for the long term health and success of the enterprise; something all professionals share. So, in practice, all professionals are procurement players. That being said, there is a value to organizing certain functions and activities.
A business only sustainably succeeds to the extent it has an effective (and efficient) procurement function. Moreover, as far as we are concerned, Procurement is the life blood of every enterprise: carrying knowledge, experience and wisdom across all points of contact, internal and external.
Procurement as a functional group, then, is perfectly placed to lead the charge in helping their firms evolve.
Leaving a Mark
One company that stands out in its investment in procurement led innovation is telecommunications giant Vodafone. I had the opportunity to interview Ninian Wilson, the CEO of Vodafone’s procurement group last year. We talked about innovation, among other things, and he shared how Vodafone encourages collaboration with startups through single page contacts and immediate payment terms. This transformation of standard operating processes helps the young, innovative companies it works with reduce their costs, improve their cash flow, and increase their impact both with Vodafone and the other clients they serve.
More recently, Vodafone has gone one step further with the launch of Tomorrow Street Global Innovation Center, where it explicitly partners with emerging companies to help them grow internationally by connecting them with Vodafone’s global ecosystem of operating companies and partners. Tomorrow Street members’ also benefit from infrastructure support provided by Vodafone. (Together with several others, this initiative to shift the procurement conversation is discussed in How Procurement can Enable Innovation by Katie Jacobs)
While not every company wants to formalize, or has the funds to invest in, a Tomorrow Street-type innovation center like Vodafone, all can embrace an innovation mindset. We can inculcate a catalyst culture, experimenting with initiatives such as contract simplification, payment term flexibility and engage suppliers and clients alike in conversations to generate transformative ideas.
“So what exactly should procurement’s role be? “Ideas and creativity are the foundation for innovation; but they [alone] are not innovation,” says Marcell Vollmer, chief digital officer at SAP Ariba. “They must be converted into actual products and services that can be implemented to drive new ways of thinking and acting.” That’s where procurement should step in and enable and support … not stifle or hinder with excessive process.” (How Procurement can Enable Innovation)
Some questions to ponder:
- Beyond hitting financial KPIs, are our suppliers (i.e., external clients) delighted with the work they do for us?
- Are our our suppliers delighted with how we treat them?
- Are our internal clients delighted by the way we work with them?
- Which stakeholders (internal and external) are advocates of my work? Of procurement in general?
- What problems are my stakeholders looking to solve? This quarter? This year?
Being a Catalyst
Consider partnering with a friendly stakeholder to identify and address a challenge that they would love to solve. Problem in hand, collaborate with a supplier (or suppliers or internal clients or others in the firm) to generate new solutions.
As always, if you come across an article, whitepaper, video or podcast that you would like to share with your fellow catalysts, please send a quick email with the details. I read every email and am eager to read yours.
This Week in Procurement
Here are some other articles that caught my attention this week:
Value Architects – Procurement, But Not as We Know It! | David Loseby
Do We Still Care About Professional Associations? | Procurious Blog
A Clear Understanding of Outcome-Based Contracts? | Megan Paul
The Traits of an Agile CPO | Giles Breault
Until next time,