April 3, 2023
Written by
Meg Candler

Unlocking supplier innovation: 8 key steps

With the business landscape becoming ever more competitive and the lifespan of large organisations dwindling, it has never been more important to tap into the expertise hidden in our supply chains. In this article we give you our top eight tips for fostering supplier innovation in your procurement function.

In today’s hyper-competitive and unpredictable business landscape, leading enterprise organisations place supplier innovation high on the priority list. 

Not only is supplier innovation key to developing innovative products, services, and solutions, it’s a game changer when it comes to transforming outdated operating models, unfit-for-purpose processes, and unsustainable categories. 

Suppliers are frequently subject matter experts, armed with deep knowledge of your business, your competitors, and the broader landscape in their category. Localised suppliers also bring intimate understanding of local markets. The supply base is a rich source of knowledge, and a valuable resource for those who know how to access it. 

To help you understand how to tap into this resource, we have put together these eight quick tips for unlocking supplier innovation, covering issues such as fail fast culture, how to identify ripe opportunities, and how to maximise your innovation efficiency. 

And if you need a primer, you can get more innovation on supplier innovation in our longer article What is Supplier Innovation?

Supplier innovation best practices:

Remember innovation is not an outcome, it’s a process

We speak to some enterprise companies who recognise the benefits that innovation can bring and hope to pursue it, but cannot clearly articulate why it will drive the strategic goals of their own business. 

It’s important to remember that innovation should always be tied to a strategic imperative, whether that’s business model transformation, operating more sustainably, or uncovering new revenue streams. Failing to tie innovation drives to the overarching priorities of the business is likely to result in wasted effort and resources, and lacklustre results. 

When organisations are clear about how innovation fits into the organisation’s strategic goals, by contrast, resources can be more appropriately funnelled into where they’ll make the most impact. 

Evaluate supplier capabilities

Once why you’re pursuing a supplier innovation programme has been identified, it is time to establish who to work with. 

Which suppliers to onboard into an innovation drive will depend on the goals you are seeking to support, but in every instance will involve evaluating their broad capabilities and their ability to innovate alongside you. 

Looking for suppliers who have a history of innovative products and services, deep experience with the problems you’re looking to solve, and a willingness to innovate will help weed out suppliers who are unlikely to support your goals. This will help prioritise your resources and your team’s time where the investment is more likely to have significant return. 

Continue to pursue customer of choice status

Even where there is a solid existing relationship, it is important to foster open communication, trust, and transparency with the suppliers you select for your innovation drive. 

Developing this ethos of mutual trust and mutual value is a key step towards “customer of choice” status – a dynamic which is absolutely imperative to supplier innovation as it grants priority access to existing IP and future innovation opportunities. 

To learn more about the importance of customer of choice status, check out our blog Why customer of choice has never been more imperative

Identify innovation opportunities

With “customer of choice” status prioritised and your innovation aims aligned to your organisation’s strategic goals, it’s time to work alongside your chosen suppliers to identify innovation opportunities. 

This is likely to involve market research on both sides to understand what consumer or organisational needs are not being met by existing solutions in order to identify where capability gaps exist and brainstorm possible new developments. The format of these brainstorming sessions can vary, though one of our pharmaceutical clients briefed target suppliers on some key issues they were looking to solve for, and then invited them to a full day event to pitch their solutions. Around half of these went to proof of concept stage, with many of the validated concepts later being developed and integrated into their business. 

Establish measurable key performance indicators for the ideas that are moved through to trial stage in order to assess later the performance of all opportunities towards the goals you established for your innovation programme. 

Develop an innovation-friendly culture

Large organisations frequently move slowly, make large investments, and do not look kindly on failed ideas. 

Though in some areas this caution and commitment can be beneficial, it can undermine the experimental culture that is needed if innovation is going to thrive; if team members do not feel confident in taking a leap of faith trialling a concept, or suppliers fear damaging the relationship if their ideas don’t work out, then innovation potential ultimately suffers. 

Here, large enterprises must take a leaf out of the start-up book to develop a culture where experimentation, creativity, unusual ideas, calculated risk-taking, and “fail fast” mentality are welcome – both within their own organisation and within their supplier communities.

While it is still necessary to qualify out entirely unworkable ideas as soon as possible, developing a culture where ideas can quickly move through to POC or pilot stage on a small scale to prove their worth (and where failure to prove the concept isn’t regarded as a mark against the name of whoever suggested it!) will help to strengthen creativity and innovation over time. 

Formalise & optimise the innovation process

Though open-mindedness and creativity foster innovation, it is still important to pursue ideas in ways that are robustly governed and documented in order to realise the potential benefits of supplier innovation in full. 

How organisations approach this varies, but it may include steps such as establishing clear criteria for an idea to move to proof of concept stage, embedding processes to assign accountability for tasks and reviews, agreed upon evaluation criteria for an idea to be deemed a failure or success, and using technology to centralise and streamline the movement of your project portfolio along the innovation pipeline.

These processes should be reviewed on a regular basis by both your team and by suppliers to incorporate both casual and formal feedback as your needs and capabilities develop. 

Measure & track progress

In addition to formalising the movement of projects down your innovation pipeline, it is also important to robustly measure and track the progress of all initiatives against the goals you established for your innovation drive. 

What metrics you track will depend upon the initial goals of the individual project – if the aim was to support your environmental goals, for example, then you might track KPIs such as carbon emissions saved, uptick in recycled materials use, or reductions in waste. 

It is also important to measure the efficiency of your innovation pipeline by keeping track of these projects in aggregate. A technology solution which allows you to roll up your view of performance across your entire innovation portfolio is likely to be helpful here, allowing you to systematically evaluate and maintain innovation performance even as your programme scales. 

Support, incentivise, and celebrate

In addition to the groundwork you put in at the start to strengthen relationships with suppliers, it is important to nurture the development of these relationships throughout the innovation process.

Providing resources and support to suppliers will help them to innovate to the best of their ability – this may include access to R&D facilities, funding, or technical expertise from within your own business. This support can work hand-in-hand with incentivisation of innovation performance, such as providing preferential contracts to proven innovation partners. 

It is also important to celebrate the wins as they occur. Ensuring that suppliers and internal team members are celebrated and rewarded for their innovation efforts (such as through bonuses and annual supplier innovation awards or similar) will help recognise the contribution they are making to your business and strengthen the pro-innovation culture you have created. 

Learn more

By incorporating these tips into your supplier innovation initiatives, you can drive a culture of collaboration, creativity, calculated risk-taking, and celebration that promotes successful innovation and, ultimately, delivers competitive advantage to your business. 

To learn more about the use cases, benefits, and challenges of supplier innovation, check out our longer article What is Supplier Innovation, or to learn more about our supplier innovation solution, visit Vizibl Supplier Innovation Hub.

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