Strategic supplier innovation; how the world’s most successful organisations stay out in front

By Allan Watton on

Having been involved in optimising more than 500 complex strategic supplier relationships, we have been fortunate to have worked with organisations, both private- and public-sector, to develop some really great innovation-led practices. As part of this work over the last 20 years, we’ve found that enabling (as opposed to just talking about) innovation between client organisations and suppliers is often quite challenging at the outset.

Even more challenging is to maintain enthusiasm in this innovation throughout the lifecycle of the relationship; to drive it every single day in a relentless way. Interestingly, the key to keeping it going is quite simple, but exceptionally hard to implement. It’s by having the discipline to undertake simple, yet seemingly tedious, steps, each day, every day –

(1) Discover/review (2) Design (3) Deliver (4) Measure

It’s about capturing good outcomes and the issues that cause challenges, on a daily basis, collating them and reviewing them with your internal client and supplier teams every three to six months, subject to the criticality of the service being delivered. Note – ideally, there should be no longer than six months between intervals.

You then pilot more of what works well, change the target operating model of what does not, update your outcomes, objectives, operating processes, financial models and contract terms. Rinse and repeat every three to six months – again, subject to the criticality of the service being delivered. We call it ‘re-shaping’ and it is built into every strategic supplier relationship we advise on so that you drive maximum value for the lifecycle of the relationship.

‘Simples’, yes? Well, not quite.

A great articulation of how to communicate the process of innovation

An interesting article in Visual Capitalist concerns some research a consultancy called Doblin conducted to condense all forms of business innovation into just ten categories. It’s a really helpful way in which to consider innovation.

The importance of innovation

England has a population of just shy of 56 million people but is home to 5.2 million private businesses (1.1 million of which are based in London), with approximately 500 new businesses joining them every day. We live in a crowded marketplace, and no matter whether your area of expertise is in logistics or rocket science, you’ll find that there are many others out there claiming to do exactly what you do.

In the (g)olden days (1990s and back even further into the past), success was based on who had the biggest megaphone, metaphorically speaking. It was all about who had the highest number of marketing people, the biggest marketing agencies and advertising budgets, and how that led to more brand exposure.

Today, the internet has to some degree levelled the playing field as digital marketing has the capacity to increase the scale of exposure smaller organisations are able to get. They are now often able to compete for the same eyes at the same lower price as larger organisations. In this way, new ways of attracting business emerge. For many, that’s where innovation comes in – why fight on a level paying field when you can define your own field and who is allowed onto it?

Doblin’s research and findings

While we all know this is not a new discovery, it’s taken a while to codify it like this. Doblin claim that they discovered their ‘ten types of innovation’ back in 1989 and have been working on fine tuning their understanding of them ever since.

The important point to recognise is that often these innovation types need to be combined for best effect. Individually, they will often affect one another, but together you can develop real competitive advantage.

Configuration

Innovation types 1 to 4 are all carried out behind the scenes. This inherent ‘invisibility’ is the reason why they have so often been ignored or not considered to be innovation in the first place, but all have their part to play in providing the foundational shifts that could trickle down to other more customer-facing impacts.

Each of these four types provides a Business Model Shift that Doblin defines as follows ‘This kind of innovation focuses first on configuring assets, capabilities and other elements of the value chain to serve customers and make money differently’. The example they provide is of Zipcar, which developed a whole new way for customers to reserve and pay for their rental rides. Through creating a network, fleet customers could find cars parked in their location and pay by the hour for their hire.

Offering

This is the obvious section of the innovation table, the one most people associate with innovation. However, because of this it is much more difficult to stand out using these types alone. Most products and services evolve over time, with new features and functions added, but to succeed in a Platform Shift you need to reimagine how your customers may wish to use your products and reverse engineer from there.

The example they give is of Amazon, which started out as a successful online book retailer, then instead of simply offering more in that space they leveraged their huge database to determine significantly different markets to dominate.

Experience

Anything that has an impact on your customer experience is likely to show rapid results. The problem is that those results may be positive or negative, so it’s important to listen to your audience, to be prepared to pivot if need be.

The Customer Experience Shift looks to engage in distinctive ways, but be careful, as you may intend to go over and above for a short-term campaign, but an audience can become accustomed to this and react badly to its being taken away. Plus, the expectation’s bar is often set pretty high as so many in the market try to compete on ‘experience’, so you’ll need to back this up with real substance.

The example provided was Starbucks, which found a way to scale up the friendly local European coffee shop while providing a consistently exceptional service no matter where in the world you walked into one of their outlets.

Three ways you can influence innovation in your strategic supplier relationships

Innovation can elevate a standard supplier relationship to an impressive collaborative working partnership. The measurement of the priority your supplier places on innovation should be an integral part of your procurement process. Their commitment to drive new practices and processes, to imagine big and always be looking for more efficient ways of achieving your goals, is central to the success of your organisation.

The problem is that the pressures on effort and resources of ‘business as usual’ can leave little airtime for innovation. Often the ideas are the easy part: it’s finding those with a willingness to formulate, take action, measure the results and implement the lessons learned that are the tough parts.

We’ve put together three of the most effective steps to sustain innovation that we’ve found while observing and supporting the top organisations that drive maximum value in their complex strategic supplier relationships:

    1. Prioritise collaboration

Innovation does not happen in a vacuum. It requires all parties’ involvement, both supplier and client. Make yourself open and available, build a team that consists of the brightest minds from your side and theirs, ensure communication is fluid and that everyone knows not only their role in the team and process, but the importance you place on their work and the potential ramifications of success – and failure.

    1. Experiment, learn, experiment, succeed

Results are the goal, but they are not the only goal. It’s important to ensure that everyone involved recognises that innovation requires experimentation, and experimentation sometimes requires numerous failures before a success is achieved. The important thing is that through success should come advancement and through failure should come wisdom to be applied to the next experiment and the next, with a view to the ‘possibility’ of success rather than the ‘expectation’ of it.

How you and your team handle failures will help determine whether you achieve a success some way down the line. It can be easy to become disheartened or to blame others, but the cohesiveness of the team and their belief in both each other and the possibility of success, as well as learning from those failures, is the resilience any innovation team needs to achieve its goals.

    1. Create a culture of commercial trust

As mentioned above, the road to innovation success is littered with failure, and failure can be difficult to take, but take it you must. As the pressure of failure mounts it can crack and part even the strongest relationships, but the longer you can maintain the team’s commitment to providing a unified front, the better chance you have of success.

Creating a culture of commercial trust is one of the key components in achieving this, of driving the right behaviours between team members from both the client and supplier sides, even when they become frayed at the edges. This is the strong foundation that your innovation team can rely on, the support that holds everything up and together.

Conclusion

The categorisation of innovation makes for a really interesting read. And while it may seem like a rare aspiration, if you are able to make it an integral part of any and all of your strategic supplier relationships, you will have already increased the chances of your project success.

Should you wish to find out more about how we have been able to encourage some exceptional examples of innovation within a number of the hundreds of complex strategic relationships we have guided over the years, do feel free to get in touch.

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