“Procurement: A gateway for innovation,” was the enticing title of a presentation that was delivered at Ovation, our CPO executive retreat which took place in Dublin during July.
Nothing new there, you might think – after all, a CPO taking the stage to talk about how his or her function delivers innovation isn’t especially new (regardless of the validity of their claims). What made this presentation a little more unusual, however, was that it wasn’t a CPO doing the talking, but a CEO.
This was Craig Muhlhauser, chief executive of $6bn Canadian electronics-company Celestica. Muhlhauser leads a workforce of 100,000, and is a supplier to some of the best-known brands across technology, aerospace and defence, renewables and other industries.
And he’s someone that knows the true value that procurement can bring.
Just listen to how he talks about working with customers: “It starts with the tone at the top,” he says. “We choose [organisations] that are willing to embrace change, and look for tangible evidence that in certain aspects of their business they’ve done that.”
This is a man who knows the value that he can bring to his customers, and if they aren’t open to working in a certain way he will “choose” another organisation to do business with.
Muhlhauser goes on to explain how he sees the supply base as a crucial source of intelligence. “If I’m bent on getting the best opportunities for the company I’m working for, I would be asking different questions of suppliers relative to their vision of how they see the industry changing.”
And he explains how procurement can be a barrier to the types of business relationships that deliver real and sustained value: “There’s a process by which [procurement] certify and qualify suppliers, and until you get through the procurement gateway, it’s very difficult.”
The key here, is that while discipline and process is certainly necessary, procurement must see beyond this (as well as savings) and be able to work with their suppliers collaboratively and towards shared goals. As an example, Celestica is working with some of its clients on joint design and manufacture initiatives and integrated technology and product roadmaps which run out as far as 3 – 6 years.
Crucially, suppliers and buyers have as much to lose as each other.
In many ways, Muhlhauser’s presentation at Ovation was a call to action for CPOs. Essentially, procurement must start looking to suppliers for inspiration and new capability, stop prescribing specifications and start tapping into the expertise of suppliers, stop thinking with a short-term mindset. And so on – by now we know the script.
His description of joint roadmaps and integrated technology plans, for example, are at the core of the concept of Supplier-Enabled Innovation (SEI). It doesn’t matter what industry you operate in, nor the category of spend you might be focusing on – there will be expertise and knowledge that exists within suppliers that procurement is in a perfect position to unlock.
Unfortunately, there is a very real risk that procurement risks missing the supplier innovation boat, or, indeed, that it already has, and I will explore this in detail in a later post. But, in brief, companies are aware of the amazing resource the supply base offers, and are busily establishing relationships to try and tap into it. They are appointing “heads of external alliance management”, as an example, to lead the push and, in many ways, to circumvent procurement. These roles sit outside procurement, despite many of these external alliances being either existing or future suppliers…
So, Muhlhauser’s call to action for CPOs? Simple – adapt, or accept a return to non-strategic, back-office duties.
Find more blogs on Supplier-Enabled Innovation (SEI) at our Ovation site. To register your interest in SEI, or to find out more about our study into this area, contact us here.