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Innovation Maturity: A Tale Of Procurement's Two Approaches


02-Oct-15 11:26

The world isn’t short of maturity scales. Nor, it has to be said, is the world of procurement. Ask your friendly local consultant, Google, or, no doubt, even Apple’s cyber-assistant Siri, and it won’t be long until you’re mentally blinded with a witch’s brew of buzzwords.

 

Of course, these have a place – moving from ‘ad hoc’ to ‘optimised’; or ‘unmanaged’ to ‘proactive’ can only be a good thing for procurement functions, and it’s not my interest to try and undermine them. But it is interesting to think how appropriate they are to the world of Supplier-Enabled Innovation (SEI).

 

While these maturity scales play an important role in helping procurement functions to assess whether they are tapping into value beyond savings, or partnering with suppliers rather than buying from them, and so on, they aren’t designed to assess SEI maturity.

 

The reality is that SEI is a game-changer. It demands procurement to think differently, incentivise differently, be measured differently, talk differently and to go after different opportunities. It requires different people – or, at the very least, different skillsets – meaning maturity in SEI needs to be viewed through a different lens.

 

On this point, watch this space; but one interesting question to come out of the conversations I’ve been having over the last few weeks and months is certainly relevant to the debate – whether SEI should be developed and structured as a standalone initiative (either working within or outside procurement) or whether it should be embedded into strategic sourcing.

 

Harm Veerkamp, director of purchasing excellence at Dutch chemical company DSM, for example, firmly believes it should be a separate team because it allows them to focus entirely on SEI, and to resist being dragged into the more transactional elements of procurement. He has three dedicated headcounts working for him on SEI, and a relatively mature programme called ‘Innovolve’.

 

Supporting his view are a number of organisations that are approaching it in a similar fashion – Brose has a dedicated team of 12, Johnson & Johnson Consumer a team of 13 and Roche has a dedicated innovation centre where representatives from the organisation and suppliers work together full time, to name just a few.

 

But a number of separate conversations I’ve had over the last couple of weeks have made me think further about this. The first with Clive Heal, who heads up Roche’s supplier-innovation initiative, a second with his CPO, Markus Gemuend, and a third with John Paterson, chairman of our Advisory Board and former CPO of IBM.

 

All are of the view that SEI ultimately needs to be embedded into strategic sourcing, or category management, to give it its other name because doing so will mean that it becomes truly systemised (and it’s important to remember that this is the ultimate end goal, here). Essentially, they argue, a dedicated SEI team is a step on the maturity journey, rather than the end in itself.

 

But while I can see the argument, I’m not entirely convinced.

 

Most of the more mature companies in terms of SEI have segmented innovation into two broad areas: ‘core & leap’, ‘incremental & disruptive’, call them what you will, but essentially short-term, relatively low impact innovations and large-scale, game-changing ones.

 

This is the right thing to do, and where I can certainly see core innovations being facilitated through strategic sourcing, the leap innovations are where the hurdles get higher, to use an unnecessary pun. Some of the collaborations and co-development initiatives I’ve heard about, for example, are so deep, far reaching and strategic, I find it difficult to understand how they could be born out of category management, however mature the approach might be.

 

But I suppose this is alright. If we accept that SEI has two levels – which, like I say, most companies seem to have done – and adopt a different approach for each, we can systemise and embed the development of incremental SEI within the strategic-sourcing process while working at a different level on larger, longer-term projects.

 

And both have the potential to bring huge amounts of value to our organisations.


Find more blogs on Supplier-Enabled Innovation (SEI) at our Ovation site. To register your interest or to find out more about our Supplier-Enabled Innovation Compass, contact us here.

This article is a piece of independent writing by a member of Procurement Leaders’ content team.


David Rae David Rae is Content and Community Director at Procurement Leaders. He is responsible for content strategy and community-driven initiatives and draws on 18 years covering procurement, finance and technology, for senior business leaders. Follow David on Twitter: @david_rae

 
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