driving innovation through procurement - sig · driving innovation through procurement raj nath the...

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Driving Innovation Through

Procurement

The Life Tie ProjectRaj NathExecutive Director - Strategy

The Smart CubeMark BjedovManaging Director

www.sig.org/eval

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Innovation

How Procurement Can Help Accelerate the Innovation

Agenda

October, 2014

Here to take your business forward.

The Smart Cube

—High Value Category Intelligence

and Analytics

—Global Delivery Model

—Focus on Insight

—Compelling Economics

The LifeTie Project

Thelifetie.com

@lifetie

415-269-2246

@rajnath

COMPANIES THAT PERFORM WELL IN INNOVATION INITIATIVES GROW SIGNIFICANTLY FASTER

Innovation done right means tangible gains

13%

84%

5%

28%

Top InnovatingCompanies*

Other Companies5-year CAGR

Average Annual Growth

Revenue Growth

Source: Bain Innovation Assessment Survey, Georgia Tech Survey

7.50%

14.50%

Low Cost

Innovation

Average Profit Margin For Self Reported Company

Strategies

Procurement: Can it play a role?

Source: Hackett Group

PROCUREMENT:

WHAT ROLE CAN IT

PLAY?

A global QSR major wants to develop a

specific type of “flavor dispenser” for

their beverage products; existing

suppliers had limited knowledge of the

technology…A beverage company wants to make a tailored-fit home dispensing system for its customers—branding, size fit, the works…

A confectionery manufacturer wants to “go green” with its packaging, ultimately using non-GMO biopolymers…

A global FMCG giant wants to develop integrated electronic-based oral care products by developing “never before” products in the domain

Six Key Factors

1Flex your

mindset 2Deploy the

right talent

3

Get involved…

at the right time

4

Organize flexibly…

one size never fits all

5

Bring insight to

the table

6

Measurefor success

Flex your mindset…

Be an agent of change

Procurement must change it’s fundamental role

15%

7%

63%

54%

15%

46%

Peer Group World Class

Valued BusinessPartner

Negotiations/Sourcing Expert

Gatekeeper

Administrator

Old Role New Role

Steward to purchased cost savings

Steward to a balanced supply scorecard

Procurement process executor

Business process enabler

Stock picker and trader Money manager (i.e. risk manager, not risk owner)

Supply gate keeper Supply gate opener to supply market innovation

Siloed function owner Coordinator of cross-functional supplier

interactions

Sourcing methodology zealot

Solutions assembler (agnostic to the toolset)

Source: Hackett Group

the right talentDeploy

If procurement’s role is changing, so will the skills and knowledge

Extreme difficulty attracting/retaining

Difficulty attracting/retaining

Minor Difficulty attracting/retaining

Strategic thinking and analysis

Change management and

process improvement

Project/program management

Vendor/Outsourcing management

Data analysis and modelling

Relationship management

Problem solving

Business acumen

Low demand(Replace turnover)

Significant demand(Growing need)

Very strong demand(Critical skill)

CORE COMPETENCE NICHE COMPETENCE SKILLS DEFICIENCY RED ZONE

Finding this talent is going to get even harder

Mapping procurement business skills demand and supply trends

RED

ZONE

Source: Hackett Group

Get Involved…

At the right time

— Engage Early

— Identify alternative suppliers

— Understand alternative markets and geographies

— Assess supplier risk carefully

— Conduct financial analysis (Make/Buy)

— Evaluate alternative tools and technologies

— Involve supplier in New Product Development…

— …At the design stage

— Listen and Leverage

Get Involved…

At the right time

Organize flexibly…one size never fits all

Dedicated Teams

Virtual Teams

Cross Functional Teams

…Put in place procurement innovation managers or specialists that

work closely with the Innovation R&D team and Marketing team...

…Translate business strategy into something that is meaningful to

suppliers. Take for example, the strategy to develop next generation chocolate

tablets. You could certainly argue that this is mainly a media marketing

strategy but what does it mean for packaging suppliers, for ingredient

suppliers, for equipment suppliers etc.? It doesn’t make sense to them. This is

where procurement innovation managers come in to translate the

needs…

Jean-Baptiste Rubens, Head of Procurement Innovation, Mondelēz

International

Bring Insight to the Table

— Identify possibilities

— Identify the right vendors

— Align vendor strategies and innovation plans

— Evaluate and manage economics

Measure for success

Reduced Time-to-Market…

…Improved Profitability

3.5%

7.4%

Average Top Quartile

INCREMENTAL REVENUE FROM SUPPLIER

INNOVATION FACILITATED BY PROCUREMENT

(% OF TOTAL REVENUE)

Source: A.T. Kearney

Six Key Factors

1Flex your mindset

2Deploy theright talent

3Get involved…

at the right time

4Organize flexibly…

one size never fits all

5Bring insight to

the table

6Measure

for success

Procurement’s Path

Assess your options

Review supplier capabilities

Map supplier capabilities to requirements

Study feasibility and co-develop

Assess your options

Review Supplier Capability

Map Supplier Capability to Requirements

Study Feasibility and Co-develop

Innovation Philosophy is Broad…

…Many elements to consider

Innovation isn’t about owning everything, it is about owning the right things

Innovation isn’t only about new products, but also

new processes, technologies, etc.

Process skills alone yield little differentiating value

Good project management is a hygiene factor

Are you a customer the supplier will trust?

Do you have a bias for partnering?

A key strategy for the largest innovators

…In the last three years, about 70 per cent of our innovations have been contributions from our suppliers……Significant amount of costs have been taken out of our end-to-end value chain... …And about €1.3 billion ($1.6 billion) worth of capacity investment by suppliers for us...

“”If you look at our company’s organic net revenue growth in Europe, at least

50% of the growth is coming from supplier contribution……To measure this we have defined criteria that determine whether a project or product qualifies as significant supplier contribution or not……Intellectual property (e.g. Do we receive the IP or does the IP stay with the supplier?), exclusivity on that type of material, resource commitment of supplier…

“”

(2013)

(2014)

Contact Information:

Mark BjedovThe Smart Cube, Inc.Managing Director

mark.bjedov@thesmartcube.com

Tel. 248-522-7917

Raj NathThe Life Tie ProjectExecutive Director - Strategy

thelifetie.com

@lifetie.com

415-269-2246 (M)

Thank You

Mark BjedovManaging Director

Mark.bjedov@thesmartcube.comTel: 248.522.7919

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2014

Session #28

Driving Innovation Through Procurement

Raj NathThe Life Tie Project

415-269-2246

Mark BjedovThe Smart Cube

248.522.7919

Mark.bjedov@thesmartcube.com

Speakers: