Article: Supplier Enabled Innovation – What it is and how to use it to multiply your opportunities
Large organizations have hidden strengths when it comes to innovation, and one of those strengths is the opportunity to engage a wide supplier base in Supplier Enabled Innovation (SEI).
We’ve always argued that innovation is not all about the genius idea. The real secret to successful innovation is in the implementation, but without an idea in the first place you won’t get anywhere… and that’s where SEI can open up new opportunities for you: the idea generation, filtering and proving steps.
In theory SEI can be used by organizations of any size, but it works best when you have a broad supplier base, and when those suppliers are sufficiently invested in your relationship that they will be happy to spend time and energy on it far beyond the immediate sale.
There are two main reasons to use SEI:
1. To gain access to a larger group of minds
At Cross 8 when it comes to innovation, we start from the fact that we’re not looking for a lone genius to act as a fountain of new ideas and a master implementer. Maybe they exist but banking on finding one is no way to run a business. Instead, we turn innovation into a process. We assume that the ratio of good ideas to bad is pretty consistent for all of us and we find ways to maximize the number of ideas overall, increasing the number of good ideas by default.
As part of your process to increase innovation, you’ll have set up ways to capture the intelligence within your own organization, but SEI gives you access to even more people, and that means access to more ideas.
Most large organizations have thousands of suppliers, imagine if you could have a subset of the people in each of those organizations working on your problems or looking for future opportunities.
More people = more minds = more ideas
To avoid drowning in the dross, the pipeline will need to be managed effectively, but that’s why you’ll use a process.
2. To access specialized expertise and a different perspective
You chose your suppliers for a reason; presumably they are better at some things than you are.
This is the time to leverage that expertise beyond the simple transactional act of buying goods or services from them.
Depending on the supplier they may have an R&D department that’s already considering the very things you want to look at. They’ll certainly have a slightly different view of the marketplace to you and combining both perspectives is likely to present opportunities neither of you would have thought of alone.
How to tap into your Supplier Base and promote SEI
So, how do you encourage your suppliers to contribute their ideas?
The first step is informal. Be open with your existing supplier base that you’re looking to move in this direction. Ask your operations managers and procurement category managers for a shortlist of the suppliers most likely to be helpful and approach them first. There’s a good chance that a portion of them will respond ahead of any formal contractual arrangements. Not all of them will, of course, but you don’t want them all to. At the very least it will help you get a feel for who is likely to be a good partner on this journey.
Going forward, however, you’re going to want to bake SEI into your procurement approach, and that might mean some changes to your procurement processes and possibly even personnel. This is a different angle on procurement to the one that’s traditionally been used in large organizations. It’s not about cost and risk reduction, it’s about adding increasing value through the contract life.
To unlock SEI you’re going to need to move from tactical procurement to strategic sourcing. To do that well means understanding the internal value chain. Effective procurement functions will engage with the business early on in the requirements setting, and they will expose the need for innovation to suppliers at the earliest point in the procurement process. From the moment you begin a market test with your suppliers, make it clear that you will be looking for them to demonstrate innovation throughout any award, build it into the contracts, and make it a part of the KPIs at supplier performance reviews.
SEI is not about cost and risk reduction, it’s about adding value.
Not all suppliers will be effective partners when it comes to innovation… you’ll need to assess them. And be honest about your own capability as well, you’re looking for complementary skillsets, to do that effectively you’ll need to know the gaps in your capability.
How do you use them?
There are three starting points you can use to seed any innovation, and all three can be used for SEI:
1. Specific problems to solve, e.g. develop a device to do x; automate process y
2. Broad goals, e.g. reduce overall processing time by x%; increase customer numbers
3. Horizon scanning, i.e. solve problems / identify opportunities we don’t know about yet
Hold knowledge sharing sessions at least annually and give them sight of as much of your pipeline as you can. The more they understand about your company’s roadmap the more they’ll be able to innovate in ways that are aligned to it.
Depending on the type of innovation you’re looking for the knowledge sharing session can include multiple suppliers, but the playback should be between you and individual suppliers. This involves sharing, but you retain control over the process as the customer.
Once you’ve got a pool of ideas then identify if there are any natural partners amongst your suppliers to help you test them out. You can use SEI simply to increase the number of ideas you have access to, but to realize its full benefits you should involve your suppliers in getting those candidate ideas to the point of implementation.
Again, be clear with them up front that being an innovation partner (and therefore successful in your new procurement approach) is going to require genuine investment on their part.
Kickstart your innovation pipeline by bringing your suppliers into the idea generation, and unlock even more value by having them help you design and execute proof of concept phases.
Note: Read our previous article that discusses how large organizations have hidden strengths when it comes to innovation, and one of those strengths is the opportunity to engage a wide supplier base in Supplier Enabled Innovation (SEI). Alternatively you can find out more about SEI and maximising value from your suppliers by watching our on-demand webinar – Success Strategies For Unlocking Supplier Value.