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Outsource magazine: thought-leadership and outsourcing strategy | May 1, 2017

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Is procurement the key to unlocking innovation within organisations?

Is procurement the key to unlocking innovation within organisations? Innovate to Accelerate
Outsource Magazine

Depending on your business sector, the department you work in or your job function, innovation means different things to different people. Procurement professionals may view innovation as a long-term strategy, given the tremendous potential for delivering efficiencies and cost savings over time, while other business functions may see it differently. Their interest might be focused on enhancing performance and processes, delivering slicker workflows or increased speed to market.

Your own view of innovation may encompass both perspectives and could include a more traditional approach as well as looking to technology as an enabler. Many procurement teams have been able to adopt a leaner, more efficient approach because they have benefitted from digital systems such as contract management or spend analysis tools for example.

Innovation essentially means working in new ways; whether it’s the rapid introduction of digital technologies or simply adopting a more collaborative approach with departments and suppliers. By rethinking how you define innovation, procurement teams can act as the ‘ultimate ‘problem solver’ as they discover new ways of unlocking innovation across the wider business.

Digital transformation

Digital innovations are increasingly available across all business functions and are manifesting themselves in various ways. From a marketing department perspective, for instance, this may involve coordinating activities on digital channels, such as social media or SMS, so they correspond with more traditional means of communications, such as the delivery of printed brochures or direct mail campaigns.

Whatever your business, innovation is crucial to the competitiveness of any organisation – especially in an age of rapid digital transformation. As Richard Beaumont, former CPO at Prudential Global Digital Services and the Co-Op Bank and VP Procurement at Rolls Royce, recently explained in the APS whitepaper ‘Putting a price on innovation: The procurement puzzle’: “Digital transformation is not just a nice to have, it’s become a necessity.”

Richard explains that resistance to this change can be hugely detrimental to any business. He goes as far as to say that it is preventing companies from hiring the best talent available. “If you’re still filing paperwork in triplicate when your competitors have embraced digital tools, it starts to become a recruitment issue for businesses. If you don’t embrace digital transformation, the best of generation Z is not going to come and work for you,” he says.

Barriers to innovation

Introducing innovations into any business is easier said than done though. It’s not uncommon for organisations to be slow to embrace digital transformation and new methods of operating for several reasons. This hesitance can stem from the individuals within a business function – where people may be concerned that new business processes will impact their role. Concerns can also be raised from IT, if they are worried that a digital initiative may test the capability of their legacy systems.

A fundamental barrier to innovation can happen when businesses are so focused on short-term savings that the business case for long-term efficiencies is lost. In this scenario, the pressure for procurement to achieve best price from their suppliers can hinder attempts to work with them collaboratively.

An inability to work in partnership with suppliers can impede the close working relationships necessary when developing new solutions that help companies gain a competitive advantage. For companies seeking an innovative approach, supplier relationship management is crucial and this is placing procurement right at the heart of the process.

Procurement holds the key

What’s clear is that many procurement professionals understand this and want to play an active role in helping their organisations achieve this goal. A recent survey conducted by APS revealed that a ‘strong track record’ was the still most the important factor when choosing a supplier. But ‘innovation’ was ranked as the second most important factor.

However, nurturing the collaborative relationships necessary to facilitate innovation requires an organisation, as a whole, to be supportive of these goals. If senior management do not appreciate the value of innovation, procurement might struggle to press the business case for long term efficiencies. Collaborative working also extends across to other departments, such as IT in the case of digital transformation.

When an organisation has a culture that is supportive of the above approach, procurement professionals can play a central role that will enable companies to drive innovation throughout their organisations.


About the Author

John Holmes 150John Holmes is executive director at APS Group; an international marketing and communications provider.

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