ProcureCon EU – Creating Belief, Energy and Trust in Your Innovative Procurement Team

JJ Van der Meer is a partner at PA Consulting and was previously a senior procurement executive at Unilever and GSK, but he was fondly introduced last week at ProcureCon’s Monday morning kick-off session as “The Buying Dutchman!” We can only wonder …

He talked about the various activities that an innovative procurement organisation must undertake in order to engage ‘reluctant stakeholders.’ The first thing he said was that “Energy and Procurement should go together – but they don’t".

He told a story from his time in a line procurement role. His company had an aggressive competitor, which introduced a new chilled product, something that his firm would find hard to replicate.

“The corporate reflex kicked in,” he said. The first thought was to spend time and money developing new production facilities, new logistics operations internally to match the competitor. So where did that leave Procurement – who were often just called in at the last minute to negotiate 2% of the price of fridges?

On this occasion, they decided to do things differently. They asked themselves: what do we really need? Bigger factories? More advanced chilling systems? Or maybe we can compete through a new supply chain and supply base approach, that would provide flexibility and speed to market. So procurement started to build on trusted relationships with suppliers and stakeholders, and together found a route to market using third parties for critical activities that enabled them to compete rapidly. What that took was creativity and energy from procurement - and the business impact was enormous.

During the process, the team and Van der Meer learned a lot. And it was having that knowledge that drove him to become a consultant.  He learnt that procurement teams should be considering different collaboration models, working with suppliers to harness technology and engaging them early and in different ways to be part of the innovation strategy. He learnt how to operate beyond the procurement function to drive innovation in the business.

More recently, PA has carried out a survey to discover what ‘innovation’ means to their clients. 65% of them said they were working on ‘breakthroughs’ to ‘disrupt’ their sector. 90% said innovation is ‘crucial’ for their business.* But when they asked whether Procurement was the source of innovative ideas – answer came there none! In fact, a big fat 0% responded positively.

So what does that tell us? How many CPOs want to hear that?

It tells us that Procurement isn’t releasing or optimizing the value we could offer our organisations.  The question Procurement should be asking is: how do we help our companies innovate better? “It’s a tricky business,” he says, “9 out of 10 innovations fail to get successfully onto the market. So it’s our mission not just to get ideas out there, but get them on the shelf too".

With R&D budgets dwindling and up to 80% of the cost base for top firms being external, Procurement can do a lot to help. Even if the failure rate only falls from 90% to 80%, the success rate would be doubled. What Procurement needs to do, he says, is behave like entrepreneurs, with a mission that goes beyond the process.

And how they do that is focus on:

  • Reputation – if you want success, you have to take risks and be prepared to put your reputation on the line.
  • Ruthlessness – which requires a different level of commitment and energy, and really prioritise well. You shouldn’t really have more than 3 or 4 priorities.
  • The "Room of Pain" – a metaphor for what it takes to tackle the problems that really matter. Solving them requires pain, so people generally evade them.

We will remember the "room of pain" for some time! But the message of innovation is a critical one for procurement; more organisations are getting to grips with it, but we still have some way to go as a profession.

 

Discuss this:

Your email address will not be published. Required fields are marked *