Procurement for Innovation – part 4 – making it happen

Our debate about “procuring innovation” has been stimulating, including views that it doesn’t really mean anything. We’ve also had some great comments, and we’ll put those together into a feature for next week.  But let’s consider what we put forward in our previous post as a reasonable proposition – that you should take steps, “to increase the chance of getting innovation, where you want it – or at least ensure that you don’t put barriers in the way of suppliers offering what might prove to be interesting and innovative solutions”.

Making notes for this piece, it quickly felt like enough material for a White Paper, or maybe even a book! So this is really a pretty high level summary of key points rather than an attempt to be definitive.

What is clear is that at every stage in the procurement process, there are steps you can take – or steps to avoid – which support the chances of innovation. And whether you’re an innovation cynic or not, we would argue that they are, almost without exception, good practice generally, even if you are not looking in particular for innovation in that purchase.

So here are six stages in the procurement process with relevant points for each around being open to innovation.

1. Understanding your supply base and where you’re starting from

Having some sense of what your supplier base looks like must help to establish the chances of getting innovation. I’m not convinced you need to record women or minority businesses, but there’s no doubt that if you have no idea what your supply base looks like, it’s hard to make any assessment of its diversity (in the widest sense).

2. Deciding where innovation is going to help

As we said previously, not every category needs innovation. You may not want it in a core raw material, or in mobile phone contracts. You may – for good reason - want what you’ve had before, or the industry standard product.  (Having said that, there’s an argument that even here you shouldn’t be totally closed to radical new ideas). Or it may simply be a question of capacity – an organisation can only handle so much innovation or change at once.  So part of strategic category thinking should be around this issue - where do I want to promote innovative ideas from suppliers?

3. Promoting the opportunity

There’s a lot that can be done pre the formal core procurement / tendering to encourage innovative proposals. Engaging the market early, explaining what you’re looking for... all fairly obvious stuff, but it so often doesn’t happen, purely because time is short. But some investment here can pay off later.

4. Defining the requirement

This can usefully be linked with the engagement process. The biggest barrier to innovation is probably the specification. Tying it down too tightly will block innovation, while using output or outcome based specification whenever possible can encourage suppliers to take different approaches to meeting your needs.

 5. The procurement process

An evaluation methodology that relies on tried and tested responses and proposals... a high weighting given to supplier track record, financial solidity..  of course none of these factors are necessarily wrong in themselves, and every procurements must be appropriate for the particular case. But taken together, they can kill off any the chance of any innovative solution coming through very easily.  On the positive side, and not for full discussion now (see here or here for more detail) optimisation technology can open up the opportunity for suppliers to propose different types of supply options and allow the buyer to assess them rationally.

6. Managing the post contract relationship

Innovation doesn’t necessarily stop post contract award. Indeed, once the tension of the selection process is over, in many ways the time is ideal for discussing innovation with the chosen supplier(s). But the process needs structure, which takes us on into SRM (supplier relationship management) thinking. And the basic delivery against contract can’t be forgotten – a bit of innovation won’t count for much if a supplier is letting you down on basic delivery, service and quality!

As we said earlier, this is really a pretty high-level canter through the topic. But it might have sparked a few thoughts around what can be done relatively easily to encourage innovation, and, indeed, better overall supplier and supply base performance.

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