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What can we learn from public innovation procurement? .

Leadership Supplier relationship managementInnovationSupply chain managementTalent and Leadership+-

In this, the first part of a series of guest posts, Pieter Duerinckx, procurement manager at IBERDROLA, talks innovation and offers his thoughts on how procurement can get the most out of the process.

 

In his book Dr. Jack V. Matson said: Innovate or Die! His point was that a company must innovate to stay ahead of the competition, to stay in the game and indeed to stay alive.

 

But innovation is also a costly enterprise, research and development (R&D) spend in some large companies can reach between 5% and 22% of total revenues, and success is not guaranteed. Simply spending more on innovation usually leads to a waste of resources; the key to success is to increase the effectiveness R&D spend, which will leverage a return on investment. Profitable innovation is, in other words, not for sale.

 

Start-up businesses and small innovative companies have been crying out for years to public authorities for more and new ways of securing funding to provide them with the oxygen they need.

 

The message has been heard by some European governments and new programmes have been established to stimulate the innovation process both at a European and national level. Examples include the Irish government's Buying Innovation: 10 Step Guide to SMART Procurement and the Spanish government's Guía sobre Compra Pública Innovadora.

 

Some of the advice here might look like common sense to the experienced procurement professional, but has it all been implemented?

  • Have you communicated your procurement plans to all stakeholders as far in advance as possible?
  • Do you know what your (future) budgets are?
  • Are there any alternative solutions that the market can provide?
  • Have you specified desired outcomes/outputs without prescribing how the supplier should meet this?
  • Have you thought in terms of total cost of ownership rather than lowest costs? 

Consulting companies keep saying that the procurement function is developing and indeed there are a lot of areas in terms of developing innovations where the function can improve. More advanced tips and tricks are provided by public guidelines, however the more 'advanced' a function is, the more difficult it is to implement them. Here is some advice though:

  • Have you thought of split tendering, joint tendering, alliances or encouraging the use of subcontractors?
  • Are you discouraging companies with excessive qualifying criteria?
  • Have you asked for feedback and have you been constructive when providing feedback?
  • Did you consider incentives? A contract is not only about penalties.

Sounds complicated to achieve? Maybe it calls for some innovation.

 

Pieter Duerinckx is procurement manager at Spanish energy company IBERDROLA.

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