Fancy a challenge? Because an interesting one was set by one of several members I’m working with on Procurement Leaders’ sustained investigation into Supplier-Enabled Innovation (SEI).
The challenge? Secure an hour of your CEO’s time and use it to provide an update of the work your procurement function is doing to systemically bring innovation into the company from the supply base. Use the time to spell out the scale of the opportunity, the investments you have made (and intend to make) and the forecasted uplift in revenue over the next one, three and five years.
Provide tangible examples of when the work that was done in procurement brought competitive advantage above and beyond savings. It could be new packaging innovation, new digital marketing approaches, new ingredients, new technology or consumer-service enhancements. But, most importantly, explain the processes and tools that are in place that ensure the examples can be repeated. Essentially, describe how SEI is being embedded into the DNA of procurement and the wider business.
Well, maybe not. The discussion we had was that few CPOs would be willing to put their heads above the parapet because the work being done is’nt close to being able to stand the scrutiny of even an hour with the CEO.
But with this lies a problem, and it isn’t that few organisations are using SEI to the extent that their CEO would rush out and buy another Aston Martin upon hearing about it for an hour. The problem is that SEI holds such a massive opportunity, that every successful business will be doing it in future, with or without procurement. If the CEO isn’t already well aware of the opportunity, he or she soon will be – whether or not it’s the CPO who brings it to their attention.
Unless you work at one of the handful of organisations that scored in the top quartile of our SEI Compass benchmark report (and, if we’re being honest, even that might not put you in the clear completely) the problem is that you need either to be honest and admit that improvements and investment are needed or stay as you are, play it safe, and risk losing the opportunity to another function.
In 2008, Professor Richard Lamming depicted a vision of procurement’s future as being a room containing a black box, a buyer and a dog. The black box would perform all of the complex duties of procurement, including negotiation, risk management, contract compliance and so on, while the buyer would ensure the black box was switched on, kept cool and maintained. And, rather more importantly, he would feed the dog.
The dog, meanwhile, was there to snarl at the buyer (who had since been handed the new title of caretaker) if he ever tried to switch the black box off.
It was an inspired vision and one that’s getting closer by the day. A huge amount of the procurement role has the potential to be automated, and a similar proportion can be carried out by low-level, back-office staff. But the remainder, the sexy stuff, the capability scouting, innovation sourcing, joint business plans and so on, can’t.
From all of my conversations, it’s becoming increasingly clear that that’s where the future lies. But, at the risk of repetition, unless we up our game, invest and take a leadership position on SEI, it’s a future that won’t include procurement.
Instead, the responsibility will be taken by other functions: research & development, which knows the scale of the opportunity in terms of the collective R&D capability of suppliers; supply chain, marketing, which is closer to the consumer and understands their needs; corporate innovation, and so on. Perhaps these functions don’t always have the commercial skills required to make a success of SEI, but you can be sure they will be investing to put that right.
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.