Capturing and successfully implementing supplier innovation is now considered a strategic issue for most companies, who see it as a major value creation driver. Here are some good practices, results of recent projects, as well as recent activities of our Think Tank.
Rule #1: Organize and promote Business Intelligence to efficiently engage the stakeholders of the innovation ecosystem.
Seeking innovation from suppliers involves first to be able to clearly communicate the strategic lines of innovation. This is certainly not to curb creativity, but to guide the proposals towards the strategic priorities of the company (miniaturization, energy reduction, connectivity, CO2 reduction ...). The innovation plan or technological roadmap is a key tool to project and share that vision through a multi-business governance.
Then it is appropriate to map the innovation ecosystem with care. This is not limited to suppliers but includes a more complete set of partners (suppliers, customers, universities, laboratories, start-ups, consumer associations, etc.).
Finally, the areas of innovation can be promoted and shared with the innovation ecosystem stakeholders through various communication channels (strategic meetings, innovation portals, open innovation, forums, etc.).
In conclusion, to capture and successfully implement innovation depends primarily on a clear and understandable organization of the relationship between partners to better use the energies and skills of each.
Rule #2: Identify and select the right suppliers to succeed in implementing innovation
Too often, companies rely on a traditional model of SRM (Supplier Relationship Management) to identify preferred suppliers for innovation. These models are often guided by a desire to rationalize the number of suppliers and lead to selection of suppliers able to meet all the required criteria.
But, the larger suppliers are not necessarily the most relevant for innovation! Successful innovation comes also from smaller suppliers as they are more agile and able to accompany you in the evolution of your business model (especially guided by the digital revolution). The integration of these "nuggets" required to know how to adapt procurement strategies include being able to enhance the contribution of these suppliers to enable them to grow with you.
We selected 3 major criteria to identify the right partners:
- Skills: technological, quality, industrial, financial...
- Ability to cooperate: which is expressed by the strategic alignment and agreement on the main principles of cooperation and governance of innovation projects
- Fit: the compatibility of cultures, but especially the desire and commitment of top Management
« Big is Beautiful » not necessarily an ideal to choose your partners in co-innovation. Successful innovation is first a story of men and women and cooperation between talent!
Rule #3: Share the right information with suppliers to ensure strategic alignment
Driving supplier innovation and co-innovation is first knowing to be open and not hesitating to share information deemed sensitive (hence the importance of rule # 2): market visions, consumer developments, innovation plans, key elements of the technology roadmap, etc.! Of course, this must be mutually agreeable.
If spontaneous events can be organized (conventions, open innovation, etc.), it is important to conduct strategic reviews with key suppliers (usually 2 times a year) to ensure the involvement of top management and alignment of the two companies.
Innovation initially come from exchange and must be driven by the Top Management of the two Parties.
Rule #4: Create a climate of trust to co-generate ideas with partners
It's well known. A majority of innovations come from the exchange and confrontation of ideas. There are multiple ways to organize this cogeneration: specific meetings, challenges, tech-days, creative sessions, collaborative platforms, etc.
In any case, it is important to agree in advance on a collaboration contract which sets rules for collaboration (particularly in terms of intellectual property, risk sharing, etc.). Many attempts died or were given birth to in pain and frustration because the terms of the collaboration were not clearly defined from the start and the leaders of both companies were not specifically involved.
Creating an environment of trust with partners is a fundamental prerequisite to successfully and sustainably cogenerate ideas!
Rule #5: Structuring idea consideration to choose the right innovations.
Generating ideas is not the most complicated part. It is then required to evaluate and sort ideas easily using rational criteria. This requires the establishment of standard documentation sheets where the factors are described (customer value, differentiation, competitiveness etc ...) as well as the level of risk (technological, industrial, etc ...). A fluid process must help sort innovations quickly to give quick feedback to discuss with suppliers.
A good practice is often to make the assessment in 2 stages (filter 1 and filter 2) which allows you to quickly rule out invalid ideas to focus on those with a real interest.
Evaluating ideas with agility to successfully implement the proper transformation and keep the motivation of partners!
Rule #6: Promote and structure the internal exchanges to better drive innovation.
The establishment of a multi-business governance (marketing, R & D, Purchasing ...) is a key success factor to organize the promotion and driving of innovation with suppliers or ecosystem partners.
This governance is fundamental to aligning technology roadmaps, procurement strategies and supplier roadmaps. Some companies can significantly transform their organizations. For example, a leading automotive supplier brought together under one organization ("Engineering Procurement") part of its R & D and Procurement / Suppliers Development teams to drive supplier innovation and ensure alignment with operational roadmaps.
The internal multi-business governance is essential to efficiently drive supplier innovation and align it with product strategy.
Rule #7: Valuing in-house innovation to create desire.
Fostering an innovation culture requires the establishment of a change management policy which is based around three axes:
- Create the right mind-set: communications, celebration of success, highlighting suppliers, etc.
- Demystify: organize industrial visits / labs, share benchmarks, communicate on simple innovations, etc. Innovation is within everyone's reach!
- Create desire: create challenges, incentivize managers on the resources dedicated to innovation, create a synthetic indicator, etc. …
Innovation is primarily a state of mind!
Rule #8: Promote individual involvement in innovation to increate initiatives
Innovation cannot be forced. It must be at the initiative of everyone and the more the better. If communication and promotion of innovation contribute to create this state of mind, this is not enough. It should also be relayed by HR and managerial actions.
- Empowering managers: train and coach them so they can relay to the teams; enable them to grant time for innovation
- Integrate criteria of innovation in recruitment, assessment, and in newcomer integration programs.
Human Resources has a key role in spreading innovation culture!
Rule #9: Develop the right skills to capture and retain the value created
Successful innovation with suppliers also requires the know how to develop the right skills:
- Develop technical skills: the classic mistake is to focus suppliers innovation to address a lack of internal technological skills! On the contrary, you have to be able to always control innovation from the supplier to be able to capture the fair share of value but also to keep it on time. The mapping of knowledge is an important prerequisite before committing to such an approach.
- Develop life skills: the skills required to stimulate and drive supplier innovation are not those traditionally expected of buyers. Functional and technical expertise give way to leadership skills, Business Development, "Intelligent Risk Taker", etc.
Successful supplier innovation also finds ways to change through development of individual and collective skills.
To conclude, we say that successful supplier innovation relies on organizing an ecosystem that is structured, but also agile enough to make new opportunities emerge and become reality. These new patterns of cooperation are both complex and dynamic. They disrupt the traditional relationship patterns between companies and their suppliers. Companies, including their purchasing teams, must redeploy and equip themselves to face these new challenges. This is a major challenge to ensure the contribution of the procurement team to value creation!