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Supplier-led innovation: fact or fantasy?

Posted by Tim Cummins, President of IACCM, Professor, Leeds University School of Law; Chair, International Commercial & Contract Management | Aug 19, 2019 2:34:00 PM

At present, supplier-led innovation appears to be more fantasy than fact. That’s the conclusion we must draw from an IACCM Research report, published last week. It shows a significant divide between the aspirations expressed by buyers and the reality experienced by suppliers.

What’s going wrong?

There is wide agreement that supplier-led innovation is both possible and desirable. There are, of course, some great examples of it occurring. But it is the exception rather than the norm, in spite of the efforts of many customers who insert ‘innovation clauses’ into their contract, in the rather forlorn hope that this may cause something to happen.

Part of the problem is that ‘innovation’ is frequently not well defined. For example, is it innovation at a global level, or within an industry, or just in the context of the specific customer? And how does ‘innovation’ differ from ‘continuous improvement’?

However, more severe than this issue is the fact that most organizations have not established any form of innovation process or protocol. There isn’t a formal structure for review or to generate funding or to determine how risks and benefits will be shared. This is a source of frustration for many suppliers, who feel there is no avenue for ideas to be proposed and evaluated.

innovation needs trust

Finally, there is also a significant trust barrier. However much Procurement groups may claim they have changed, the experience of most suppliers is that bid selection processes remain dominated by lowest price and risk allocation. Quite simply, they do not trust the underlying integrity and sense of fairness in many of their customers. In those where trust prevails, innovation flourishes.

The IACCM report, compiled through surveys and interviews and authored by a group of academics and practitioners, provides guidance and methodology to those who really seek supplier-led innovation. It happens, but only when the environment is right.

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