Purchasing Innovation I: An introduction

I liked the recent article on SupplyManagement.com entitled What’s the Big deal? that quoted Professor John Bessant who stated “Purchasing has an essential role to play in triggering innovation” because that’s precisely what I believe. After all, I did start the blog Sourcing Innovation and the companion resource site SourcingInnovation.com.

Today, the companies that make the giant leaps forward and stay ahead of the game are those that are continually innovating. Furthermore, as the global marketplace gets more competitive, I believe that the only way most companies will survive is through innovation. But innovation doesn’t always come naturally. Fortunately there are methodologies that one can use to increase the odds.

This article in particular overviews a number of basic approaches that Professor Bessant believes in which include “doing what you do, but better“, “discontinuous innovation“, and “thinking caps“.

The first approach, “doing what you do, but better“, involves using established relationships more effectively. Your suppliers should be innovating with you and become an extension of what you do. The article notes that even businesses with billion-pound research spend (or approximately 1.25 billion US at recent exchange rates), such as P&G, now source half their innovation from outside. The reality is that you only have a limited number of people, a fixed amount of resources, and an ever-shortening window of time to get a product out or miss the window of opportunity. As a former techie, I can tell you that some of the greatest product ideas come from the minds of technology users, not developers. Left to their own devices, many developers will work on products that are technically challenging or “cool”, but not that useful. But the developers that listen to people on the outside who say “if only I had a tool that would help me …” create the greatest products.

The second approach, “discontinuous innovation“, where you brave the unknown, think the unthinkable, and explore the frontier where you might lose some of your glorious history and do something completely different, involves spending time making different connections and building relationships with different people outside your core strengths. The harsh reality is that every so often “something pulls the carpet out from underneath everybody’s feet – all the bets are off and it’s a new game“. Maybe it’s a radical new technology, maybe a new market just emerged, or maybe oil shot up in price again. The companies that survive this turmoil are those ready to make the leap and exist at the new frontier. We can again look to the technology sector for examples. IBM, once one of the biggest producers of computer hardware, now makes 50% more on its services then its hardware. (In fact, its services were 47% of revenue in 2005.)

The third approach, “thinking caps“, involves bringing together a dedicated interdisciplinary team to explore different methodologies for “doing what you do, but better” and “discontinuous innovation” while maintaining a balanced outlook. The challenge is to find partnerships that come with relationships that work for you. This is where Professor Bessant sees a role for purchasing managers as this should be part of their fundamental skill set. I agree, regardless of whether your preferred term is “purchasing manager” or “sourcing professional”.

However, these are not the only approaches that exist for innovation. Over the summer, in a collection of 3-part series, I will be exploring different generic methodologies that you can use for jumpstarting the innovation process. I will also outline the role that I see for Sourcing – the next generation of Purchasing – in the brave new global marketplace that we are entering even as you read this. Stay tuned.

For more ideas on how to innovate your purchasing – and your sourcing – see the Next Generation Sourcing wiki-paper over on the e-Sourcing Wiki.

Still quiet here.sas

Leave a Response