While the word innovation means different things to different organizations, companies are unanimous in agreement that, today, innovation needs to become the bedrock of the business – whether it’s a new piece of technology, a more efficient way of doing things, or simply a new approach that tackles an age-old problem.
Businesses are increasingly turning to suppliers to provide the tools to make new innovations a reality and, although several different functions interact with suppliers, it is procurement that is typically responsible for bringing them on board and integrating them into the business.
According to research from Procurement Leaders, on average, two-thirds of a company’s revenue are spent with suppliers. With such a significant proportion of cash being invested into suppliers, it makes sense to make the most of this investment by forming closer, more collaborative, working relationships with them. After all, if the end game is achieving innovation across every area of the business, the old adage ‘two heads are better than one’ means that collaboration between procurement and suppliers will help drive efficiencies and lead to better outcomes for all.
Get a fresh perspective
In the past, where procurement may have negotiated with suppliers on price, the reality is that this will only take you so far. The real value brought to an organization by a supplier goes beyond simple monetary figures; the extent to which suppliers will support business goals is far more important in the face of increasing business complexity.
Getting suppliers involved in the wider business goals from the outset will make all the difference when it comes to putting long-term objectives ahead of short-term wins. What’s more, collaborating with suppliers from day one of the relationship is crucial to challenging existing business processes.
We all have the tendency to become too insular or too involved in a project, afraid to relinquish control. So, having someone that is new to the problem, who can see it with fresh eyes and bring a new perspective, is essential. More than this, collaborating with someone who specializes in a given discipline, and can use their expertise to analyze the situation and say, ‘‘have you thought about approaching it this way?’’, adds real value. After all, suppliers are experts in their field and will know more than you do when it comes to improving efficiencies in a given field.
Equally, organizations that bring in suppliers early to act as a consultative sounding board can return the favor. Perhaps there is some gap in the supplier’s service that you can help identify and provide advice about. Whatever the case, engaging with suppliers at an early stage demonstrates a commitment that will encourage them to invest their time and effort into finding the best possible solution. Innovation ultimately comes when both sides support each other and work together towards a shared goal.
Innovation starts at home
As well as collaboration with external suppliers, working together with other business functions can lead to innovation.
Internal collaboration is crucial when trying to understand how to address the pain points across a business. It is important to ask, “what is each function looking to achieve and how does this contribute to overall business objectives?” Procurement needs to work alongside different departments to understand their requirements and find the best way to get from A to B.
To achieve better internal collaboration, organizations can start by making simple changes such as getting senior management to acknowledge the importance of innovation and collaboration, conducting reviews of a team’s skillset, and creating a culture of shared responsibility. As with any organizational change, this should always start with support from the very top of the chain. Then, it is also necessary to determine if the existing procurement team has the skills needed to leverage innovation.
If the procurement department is being asked to develop closer partnerships with suppliers for the long term, this will rely heavily on being able to form strong working relationships. Better relationship management will ultimately help businesses demonstrate a commitment to the supplier and encourage them to work towards the long-term goals.
Considering this, ask yourself whether your team has the necessary skills, or do you need to invest in training? Training is something a supplier could potentially provide, or it may be necessary to recruit an in-house specialist in the particular field.
The responsibility for innovation can’t fall on the shoulders of one department or person. Instead, improving results in both the short and long term will require a collaborative approach that encourages different departments to work together towards a shared goal. An innovation Taskforce that involves people from across the organization is an ideal first step to achieving this objective and becoming a more efficient, smarter and, ultimately, progressive organization.