Procurement’s Innovation Deficit: The Wisdom of ‘Why Not?’
Procurement doesn’t have customers, it has prisoners. Although the statement is paraphrased (borrowed from sentiment long associated with enterprise software companies), does our profession deserve such criticism. Is it fair?
Let’s face it, when it comes to driving innovation, procurement’s less than stellar reputation is well earned. Its inability to act as an intelligent and informed customer of the would-be innovator is generally so bad that companies have established separate offices dedicated to the practice. And here’s the rub. What do these innovation offices typically cite as their single biggest obstacle to success? You guessed it: internal procurement.
We’ve got to fix this.
There are lots of questions: How often do we see total cost of ownership (TCO) well-applied to purchase decision making, unless it’s related to a major, long-term capital asset? What happens when a non-incumbent shows up with a product that has a higher initial purchase price, but the total cost of ownership (TCO) is markedly lower? What grade do we give ourselves when faced with an outcomes based specification that isn’t entirely consistent with the initial tender? When we discover that the realization of the innovator’s promised benefits must be tracked against a different set of metrics, what’s our attitude?
If a winning business case can’t win, then there’s a problem. We know that the calculation of TCO requires a total lifecycle analysis. It must include the accumulated costs of acquiring, operating, maintaining and disposing of the products and services the innovator seeks to replace. If dutifully applied, fair enough, as the innovator relies on us taking the practice seriously. In other words, investigating, developing and learning to track alternative performance models goes with the territory.
When it comes to translating the benefits of the innovator, procurement must reassert itself. It must own the dissemination and application of what the market can teach, as it is not only indispensable to the creation of value, but without it, there can be no innovation. The focus must be on results, not on maintaining control over how it happened. And not that there’s anything wrong with executive sponsorship as a way in, but if that’s the only path available to the would-be innovator, then there’s something terribly wrong.
Procurement and supply chain management departments that don’t own innovation transfer must remake it a priority to become its integral facilitators. If they don’t, then they must accept the risk of giving back valuable, recently gained reputational ground.
They say that tipping points are reached when the question changes from “what if” or “why” to “why not.” Bottom line, if procurement’s reputation as a block to innovation transfer persists, it will find itself asking “what happened.”