SRM is key to a Successful SEI, Experts Say

Survey after survey shows CEOs are putting a primacy on innovation to drive revenues and margins.

And an increasingly important plank in innovation strategies is the embrace of so-called Supplier-Enabled Innovation (SEI) techniques to enhance or even lead internal innovation efforts.

Supply Chain Digest Says... Suppliers are going to be wary of risking sharing their innovations with buyers of a company in which the finance department is late in paying them. What do you say? Click here to send us your comments Click here to see reader feedback

Tapping into supplier ideas for innovation seems to be simple common business sense, yet a number of studies in recent years have found some companies are much better at it than others. (See Keys to Successful Supplier-Enabled Innovation.)

Rachel Sharp of the Procurement Leaders organization recently attended the inaugural Supplier-Enabled Innovation Center (SEIC) Accelerator Program in London, and says that coming out of te event she found there were five key approaches to achieving supplier innovation success.

Those five are:

Know your capability: When approaching SEI for the first time, it is important to understand what capabilities already exist in the organisation, the existing relationships procurement has with suppliers, the business priorities of the company as a whole, and what a successful outcome would look like to the business.

Procurement has the best seat in the house to understand these capabilities for innovation, as it has an inward view of the internal workings and needs of the company and also the best access to the supplier network.

Don't be bogged down in price: One of the biggest hurdles to SEI success is that the business and procurement function always comes back to a revenue approach. It is important to remember that not all innovative products necessarily have direct financial benefits in the short-term.

No man is an island: Successful SEI cannot come from the procurement function on its own. Whether SEI is owned by a separate team or is integrated across the business ecosystem, cross-functional collaboration is key to success. Procurement should collaborate with other functions such as marketing or R&D, taking advantage of the different skill sets of the different teams.

Involving the other areas of the business also helps to ensure that internal stakeholders don't feel threatened by the focus on SEI. With boutique R&D teams and contract manufacturing teams becoming part of an SEI drive in some companies, the existing functions can be left feeling obsolete, and so engaging them in SEI can eliminate the hostility towards SEI and the supply base.

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SRM is key to a successful SEI: The best examples of SEI come from businesses treating suppliers as equal partners, rather than the traditional view of suppliers as servants to the company. Businesses need to become the preferred customer of choice for suppliers so that when you find a supplier you want to work with, they will also want to work with you. Suppliers are going to be wary of risking sharing their innovations with buyers of a company in which the finance department is late in paying them, and where the R&D department are controlling in what they do.

Different functions across the business need to align their strategies in how they engage with external suppliers, otherwise they risk creating schizophrenic customers that have little trust in the business and, in turn, will not come knocking on the door to share their latest ideas.

Both a push and pull approach is needed to get the best from the supply base: Net fishing for innovation is not always the most effective method for drawing innovation from suppliers, as if you throw out the net to everyone, you can end up with a lot of waste and very little value. Businesses need to merge both a push and pull approach to suppliers, by pointing suppliers in the direction of solutions the business is looking for as well as creating a platform or portal for suppliers to communicate new innovations.

Interestingly, Procurement Leaders research last year found trying to drive SEI by diffusing the procurement culture with a supplier-innovation focus is not nearly as effective as having a smaller group specifically targeted on such strategies - with the right metrics in place to measure the results.

What do you think of these five tips for improving supplier-enabled innovation? Let us know your thoughts at the Feedback section below.

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