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Open Innovation - Working with Suppliers

Thu, 06/30/2011 - 13:52 -- admin

In my last blog I outlined some of the challenges facing Open Innovation in the context of large contracting relationships.  I’ll now move on to some of the top line considerations when working with suppliers, from the perspective of both customer and supplier.

The first guideline, very familiar to those companies who follow the Want/Find/Get/Manage sequence, is to fully understand what you want before you engage the supplier.  If you start the discussion by simply challenging the supplier to “bring me innovation”, you will both be disappointed.  You won’t have your expectations met, and your supplier will invest a lot of time and effort bringing you options that won’t interest you.

It’s much more interesting if you share your strategy, customer needs, technology gaps etc before describing specific challenges.  Not only does this set the context for the innovation gaps you need to fill, it employs the creativity and expertise of the supplier much more effectively, as they can often come up with solutions you hadn’t anticipated, simply because they understand your business better.

The next guideline is to spend more time defining the problem/opportunity thandetailing the solution.  There will be some exceptions to this, but again your supplier may be able to identify new routes to solve the problem.  Firstly, they will look at it with fresh eyes; and secondly they possess different competencies that may be able to solve the problem in an alternative and potentially superior manner.

You will already have contracts in place with your suppliers.  Before you start your innovation challenge, take a good, hard look at them.  For example, clauses on indemnity may protect you against any loss you suffer that is caused by the supplier.  What if your supplier has a competent and honest try to solve one of your innovation problems, you invest time and money as well, and the project fails?  Are you going to sue them under the indemnity clause?  I think that would be a bad idea, because we all know that many, many innovation projects fail for very good reasons.  Don’t let crazy contractual clauses ruin your innovation potential.

Usually, supplier relationships are “owned” by procurement professionals.  It’s unfair to expect them to fully manage an innovation relationship that doesn’t involve other parts of the business that have responsibilities for internal innovation, particularly R&D and Marketing.  It’s essential to directly involve those key internal functions in the development and management of the relationship.  How you do it is up to you and the way you normally manage innovation, but it’s essential you do it.

Finally, don’t forget or underestimate the value of personal relationships in the management of innovation with suppliers.  As in all Open Innovation partnerships, the personal element is the oil that keeps things moving with less friction, and the glue that keeps it together under stress.

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