5 Ways to Drive Innovation in Procurement
By Mackenzie Oakley | April 12, 2021
There’s no surer way to dull someone’s sparkle than to expect creativity and innovation on-demand.
- It took Tolkien 17 years to complete The Lord of the Rings trilogy (although he’d been working on developing his Elvish languages for nearly 40 years).
- Michelangelo spent four years painting the iconic frescoed ceiling of the Sistine Chapel (permanently damaging his eyesight in the process).
- The movie Avatar took 10 years to make because its director, James Cameron, wanted to wait for special-effects technology to catch up with his vision.
New technology doesn’t just appear at the click of one’s fingers. One commentator observed that it generally takes around 30 years for an innovation to reach full maturity and hit the mainstream. 3D printers, for example, are only just hitting their stride in 2020 despite first appearing in 1983.
For Sourcing Heroes, fostering innovation in procurement will take patience, along with a clear vision and excellent communication skills.
Innovation can come from within the procurement team (developing better ways of working), or a supplier that comes up with innovative ideas ranging from game-changing new technology to incremental improvements that drive down costs.
The importance of driving innovation in procurement
Before we get into the finer details of how to actively drive innovation in procurement, let’s consider why it’s such an important factor for procurement professionals.
Procurement is uniquely positioned to lead the way on organization-wide innovation. It’s procurement professionals who are responsible for identifying and selecting innovative suppliers (which drives product and process development), finding new ways to create value for the business, and working alongside a diverse range of external and internal stakeholders.
Embracing innovation and a “thinking outside the box” mentality helps to drive down costs, solve business problems, increase productivity, boost your brand’s reputation (84% of people claim it is important to them to buy from innovative companies) and gives an organization a competitive edge.
Here are my five top tips for sourcing heroes wishing to drive innovation internally and with suppliers.
1. Build relationships - with everyone!
To supercharge innovation, procurement needs buy-in from two distinct groups: the business decision-makers (whether it’s the CPO, CFO or CEO) and the organization’s suppliers.
Business leaders today are increasingly aware of procurement’s value-add and, as a result, look to the function to lead on innovation. But that doesn’t mean they’ll give your ideas the green light without careful consideration. You’ll need to build lasting, trusting relationships with these stakeholders, be sure that you understand their overall business aims and articulately communicate your ideas and the challenges they will address.
Your suppliers are a rich source of (often untapped) innovation that could so easily be better leveraged. Sourcing Heroes should focus on relationship building, which ultimately results in better supplier-buyer collaboration, and working to implement a more robust supplier selection process that prioritizes innovation.
We’re often told to “be the change you want to see” but in this instance, it’s a case of choosing the suppliers who can bring the change you want to see; whether it’s driving sustainability, efficiency, cost reduction, or building brand reputation.
2. Targeted innovation: giving the customer what they want
PwC’s innovation benchmark found that more than 50% of companies claim their customer engagement strategies help them to define innovation from early ideation, with 35% claiming customers are the most important innovation partners.
For Sourcing Heroes, this means first identifying who your customers are, and what they want. For example, your key customers might work in your organization’s engineering function, and their main “want” is to get the parts they need from suppliers faster. Your efforts should, therefore, be directed towards working with the supplier to find innovative ways to improve supply chain velocity.
Do your research, collect data, conduct surveys, and identify trends to decipher what it is your customers really care about (and to hear their ideas!). From there, you can figure out how to properly cater to them.
3. Encourage (and accommodate) intrapreneurship
One of the biggest challenges companies face is fostering an internal culture of experimentation and innovation, with over 50% of companies citing this as their top hurdle when driving innovation. To address this, procurement leaders must encourage and accommodate intrapreneurship, which means facilitating an environment where employees can work as an entrepreneur within their team/organization.
It’s an opportunity for employees to apply valuable (and often unused) skills, be proactive and self-motivated and approach business challenges in new ways.
- Give your team the time and space to create and innovate, perhaps relieving them from some of their day-to-day duties.
- Communicate freely and openly, discussing what problems need to be solved.
- Acknowledge and commend employees for their contributions and ideas (whether they are adopted or not) to motivate them to keep innovating.
Remember, innovation doesn’t always refer to a shiny new gadget. It could just involve a smarter way of doing things.
4. Embrace CSR and sustainability as opportunities, not roadblocks
Traditionally, organizations were wary that corporate social responsibility (CSR) and sustainability programs were more of an organizational hindrance than a help. After all, new processes can be costly to implement, identifying new suppliers time-consuming, and working with SMEs and minority suppliers inefficient.
However, in recent years it has become increasingly apparent that CSR policies are far more likely to add value to your business than take it away because they compel organizations and suppliers to find new, and innovative, approaches to working.
In addition, employees who work for ethically oriented companies are more motivated, more productive, and more innovative because they care about the work they are doing and their societal contributions. More than 50% of people won’t work for a company that doesn’t have social and environmental commitments, and 74% claim to find their job more fulfilling when they are given opportunities to make a positive impact at work.
5. Measure innovation
The final step to driving innovation is to measure and analyze your progress. It’s not the easiest element to set clear metrics for but could include outlining sustainability goals or CSR policy, identifying key challenges to overcome through innovation, and recording and reviewing the progress made and lessons learned along the way. These steps will help create a long-term, innovation-based culture.
Are you ready to drive innovation? Una’s team of expert sourcing advisors can help you implement steps to ensure innovation is at the forefront of your procurement efforts.