Does have Purchasing a role to Play in the success of Innovation?

In many organizations Innovation is the domain of Research and Development or Marketing. How come that Purchasing is almost not on the radar screen of innovation? And what may be the impact of this?

In the Master Thesis Strategic Purchasing and Innovation, written by Casper ten Cate from the University of Utrecht (Science & Innovation Management) in collaboration with Capgemini Consulting, an answer on the questions are given. In his survey, he handles 12 case studies of Purchasing Functions in organization of different market sectors. He shows a significant correlation between three factors regarding Purchasing and the impact of the success of innovation:

• Level of Strategic Purchasing
• Supplier Involvement
• Purchasing Integration
  

De hypothesis is validated that if all three factors applied in the organisation, contribution to the success of innovation is significantly.

In respect to this he describes four different patterns in the relation of Purchasing and Innovation:

Pattern 1: Achieving a contribution to innovation by purchasing:
Pattern 1 comprises those companies that have obtained high scores for ‘level of strategic
purchasing’ and high/medium scores for ‘supplier involvement’ and ‘purchasing integration’, as well
as a medium/high score for the dependent variable ‘purchasing & innovation’.

Pattern 2: No innovation via purchasing:
Pattern 2 includes the companies that have low or very low scores for the three independent
variables, as well as for the dependent variable. This applies to both of the Maritime and Harbour
Services companies. Contributing to firm innovation is not within reach.
These companies are currently busy defining the purchasing function and its position in their firm.
The majority of purchasing activities are operationally oriented, there is little room for long-term
issues or carrying out a purchasing strategy.

Pattern 3: Entrepreneurial purchasing:
Pattern 3 comprises the companies that have a medium/low score for the ‘level of strategic
purchasing’, but generally high scores for ‘purchasing integration’ and ‘supplier involvement’, and
also an above average score for ‘purchasing & innovation’. These companies – while large on a national scale – are relatively small compared to the other
companies in the case study and correspondingly have a relatively small purchasing staff. While this
means that the level of strategic purchasing is medium or low for these companies, it does mean that purchasing is inherently closer to the rest of the organization: purchasing is well integrated in both companies.

Pattern 4: Stuck in the middle:
Pattern 4 includes the companies that are typically in between the companies in pattern 1 and the
companies in pattern 2 in all the variables. They have medium scores for the ‘level of strategic
purchasing’ and medium/low scores for ‘supplier involvement’ and ‘purchasing integration’.
Furthermore, they have little contribution to firm innovation by purchasing. These are companies which do have a clearly defined purchasing function in place – albeit not on the
highest strategic level. Furthermore these companies involve suppliers to a certain extent and there
is some purchasing integration in the company. They have thus far been unable to achieve a
contribution to firm innovation by purchasing.

Another conclusion of this survey is the fact that the key bottle neck for Purchasing to contribute to the success of Innovation is the Purchaser him or herself!!! I wrote already that the business community is desperately looking for the New Generation Innovators, this is also very truth for Purchasing.

I like to invite you to watch our vision on slideshare:

Innovation Driven Procurement

Freedom of speech, transparency of information and new web technology: minimum basis for Open Innovative Society

In December Capgemini organized a round table session for clients in corporation with the Center for Inquiry of the United Nations and Mint Consultancy. The topic of the event was: “An more active role for companies in creating an open innovate society is vital for solving global social issues”

Several trends and developments describe the rise of an open innovative society. In this kind of society, there will be no differences between people and their role in the classic way of producer, consumer, owner, civilians and patients. Now the can play each role simultaneously. Key indicators for success are freedom of speech, transparency of information and the availability of new web technology.

Up to now this theme is mainly discussed in the academic world and global governmental organizations. The (global) business community is relative not active participating in the discussions and needed action to create an open society.
We organized this event to invite some of our clients like DSM and Friesland Foods to take their share in the process.

Our keynote speaker of the event was Austin Dacey. He is a philosopher who works as a United Nations representative for the Center for Inquiry, a think tank concerned with the secular, scientific outlook. He is also the author of the book: “The Secular Conscience”.

The key message of his speech is the power of the new concept Open Society: mobilizing the individual capabilities of people to create innovative solutions for social problems in the world. This new concept is also described by other new thinkers such as Charles Leadbeater in his book “We-thinking”. How to create an open society?

1. Create the core of a basic idea for a social problem: enough to work on, but with enough possibilities for additions.
2. Motivate and entice participants: treat the participants as ‘peers’ and not as employees, civilians or suppliers. Participants see their contribution as representing personal development and status. They are looking for concrete and practical benefits. Besides this, low entry barriers and user-friendly tools are essential.
3. The need for (virtual) meeting places: a place where people can work together interactively and where clear rules of ownership (getting, using and returning) are established, based on new web technology.
4. Self-distribution of work: an open working method based on high acceleration of the peer-to-peer review process that quickly identifies the good ideas and that can be elaborated upon.
5. Think LEGO: innovations are split into a series of modules that fit together and can be integrated. The integration is regulated on the basis of clear, simple and centrally created design rules. These rules and protocols make it possible to allow mass innovation.
6. A new form of leadership: these are no traditional corporate chief executives ore political party chief, but leaders with characteristics such as modesty, willingness to remain in the background, self-confidence, strong norms and values, passion and attachment. Their specifically top-down style of leadership makes large-scale, decentralized, bottom-up innovation initiatives possible.

Based on the ideas of Austin the participants discussed the role and responsibilities of business organizations. There are many road blocks ahead:

• Large companies have already great difficulty to create this concept within the boundaries of their own organization, let alone to organize this beyond their boundaries.
• Companies have to accept the paradox of interest: short term profit based on constrains in transparency versus long term value based on openness.
• Many employees fighting the paradox of Security versus Freedom. People give up (personal) freedom to Executives, Financers, Governments in order to take key decisions and accept the consequences. In a lot of places in the world there are still many firm constraints to speak up freely without severe personal consequences.

All participants believe strongly in the new concept en the need for their active participation. Not only for their own business innovation capabilities to create short term profit but also to participate in enduring openness of the society in solving global issues. The key question still is how to begin and to endorse the initiatives?

Capgemini and the Center of Inquiry of the United Nations together will take further initiatives to play an active role en bring concrete solutions to clients and stakeholders.