Here is some good news for CPOs to ponder as we start the first work week of the new year: “American innovation is in trouble.”
Yes, that’s the headline for an analytical piece in a recent issue of The Washington Post newspaper, and it really is good news for procurement. Why? Because it opens one more door for procurement to prove its value by leveraging the supply base for new product ideas.
The author of the article, citing other studies, says the percentage of new companies in the US is declining, the percentage of old companies is increasing, and that since old companies are more risk averse than new companies that’s bad for innovation. It’s hardly the first article on the innovation deficit. In fact, there have been several articles on that subject in the business and general press over the last couple of years.
Many of the tomes bemoaning the lack of innovation prescribe remedies such as letting more immigrants with technical knowledge into the country, cutting the number of federal and state regulations that are obstacles for startups, easing the tax burden, and increasing government funding of research. The Post article listed those plus the availability of near-universal health care, which would make it easier for would-be entrepreneurs to leave established companies and start new ones without worrying about their families’ health needs. Obamacare moves in that direction.
There is plenty of other advice too, such as these suggestions in a recent issue of the Harvard Business Review, and this piece about innovation at HP in Fortune magazine. More ideas will emanate from an upcoming Global Innovation Summit to be held in California’s Silicon Valley next month.
Interestingly, what is barely mentioned is the potential of companies working closely with suppliers, who have specialized knowledge and insight in specific markets and technologies, to come up with new products. Yet, there are several examples of international companies which have done just that, including P&G, American Airlines, GSK, and F. Hoffman-LaRoche, to name a few. They are all good role models to follow. In the case of P&G, it has been a corporate mandate that a large percentage of new products come from outside the company, including suppliers.
One area that procurement chiefs could work on is expanding the depth of their search of their supply chains for innovation. A Procurement Leaders survey found that few focus on tier two suppliers for innovation and virtually none focus on tier threes. There is opportunity there.
Tom Linton, CPO of Flextronics, has said that the most successful procurement executives are relentlessly creative. By using that creativity to draw more innovative ideas from all tiers in the supply chain, they will keep their companies at the leading edge of their industries and increase their own professional standing at the same time.