“We need a clear strategy for changing our company culture,” one procurement executive recently told our Supplier-Enabled Innovation Center (SEIC). “There’s a desire in my team to develop supplier innovation – but the culture of the wider company isn’t there yet.”
Procurement functions pursuing SEI will be all too familiar with this predicament. 71% of companies with ineffective SEI programs lack a culture for collaboration, according to SEIC research. While current business and technology trends all point to collaborative innovation as a driver of future growth, not all companies identify with this need – and fewer still see procurement as a bridge to innovation.
There are two parts to this problem: the culture of an organisation overall, and how procurement fits into that culture.
For the former, a company might retain a ‘not-invented-here’ attitude to innovation, where a new product can’t conceivably be launched without full ownership of IP, and where the brain power of internal specialists is assumed to be superior than that residing elsewhere. For the latter, procurement might still be considered a back office, cost saving function by the business, with little capacity to add value.
Both scenarios are terminal for successful SEI. For procurement functions that experience one or both – as the company we recently spoke to does – changing these cultural norms is an essential step towards accessing supplier innovation.
The first of these two problems – the overall company culture – must be tackled first. Functions struggling with a company-wide resistance to collaborative innovation tend to benefit from aligning supplier innovation meetings – where key suppliers come into the business to discuss challenges – with the wider company’s innovation days. This means that external insights are shared in some of the discussions taking place, which both promotes how a “not-invented-here” attitude is no longer compatible with the business’s interests, and raises awareness of how suppliers possess capability that the business needs.
This will only go some way to removing procurement’s reputation as a cost-saving function, however. To cement its place in the business’s innovation culture, more will have to be done.
We’ve found that the process of improving procurement’s reputation is best achieved by demonstrating the value that SEI can bring to the business and, importantly, how instrumental procurement is in advancing it.
Leading companies that we’ve spoken to adopt this approach. Key supplier relationships are developed to the point that they yield innovative solutions, and these solutions are then held up as examples of procurement driving new intellectual capital from the supply base.
As other functions become more aware of procurement’s ability to connect business needs with supplier capability, this should be followed up with an event that bolsters this awareness. There are several activities that procurement can undertake, but cross-functional supplier innovation days are perhaps the most effective.
At an SEIC member’s recent supplier day, for instance, procurement worked on establishing technical solutions and contributions to specific challenges faced by the company’s engineers. This work was circulated among key stakeholders so they could see the nascent value the supply base held. On the day itself, suppliers were brought together with cross-functional stakeholders, allowing senior supplier representatives to pitch their technology and solutions to a wide and relevant group.
These are only some of the examples of what can be done to start changing company culture; but cementing this change and embedding procurement as a source of innovation will not happen overnight.
The process is necessarily long and gradual, with incremental change the order of the day. As we have seen first-hand in the SEIC, procurement functions across numerous sectors possess the tools and capability to facilitate collaborative innovation in the business – it’s just a matter of making full use of them.
First featured on Procurement Leaders’ Supplier-Enabled Innovation Center (SEIC). To learn more about membership to the SEIC, please email us.
This article is a piece of independent writing by a member of Procurement Leaders’ content team.