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1 Welcome Headline Sponsor

2 INNOVATION SOURCING DRIVE GROWTH A COMPETITIVE ADVANTAGE EMMA FREIHA MBA, LSE

3 Innovation is a Necessity After the recession, Innovation is returning as a top priority for companies. Satisfaction with innovation return is slowly increasing. The current focus is cautious on incrementally improving existing products and services rather than developing new ones but broadening in the most rapidly developing economies. Risk-adverse corporate cultures, lengthy new-product development cycle times, and inadequate measurement practices for innovation are limiting innovation.

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5 Innovation in procurement is vital to growth Since 2008 financial crises, companies have placed major emphasis on cutting cost to survive. Maintaining cost cutting and management initiatives whilst sustaining customer satisfaction require innovative procurement thinking Traditionally, departments responsible for innovation such as R&D and Marketing have worked independently from the rest of the organisation. There is now a need for functions such as procurement to become more innovative to improve top and bottom line performance. The involvement of procurement determine the level of the organisation maturity and the ability to adopt value creation concept, the more procurement drive innovation the more mature the organisation is and the impact on the bottom line is greater. BACK TO BASICS

6 The procurement maturity can be measured by: INNOVATION=VALUE CREATION 1- The company exposure level to innovation 2- The level on integration of procurement into the innovation function in a company Lead to Gaining competitive advantage and the development of new markets.

7 Procurement involvement is key THE INNOVATION PROCESS REQUIRES TIGHT INTERNAL AND CROSS-FUNCTIONAL COLLABORATION.

8 WHAT PREVENT US? Budget constrains Lack of support from other organisation functions Low knowledge of markets and suppliers involvement Slow/ineffective decision making Lack of collaboration across the business

9 BUILDING CAPACITY FOR GLOBAL GROWTH Open innovation strategy driven by cross functional project team Disrupt the market and create a new value chain. Supplier are willing to invest in assets and supply chains to follow the demand. Evolution of procurement operation BE Preferred Customer: Procurement will ensure the company is attractive to its most important sources of innovation changing the partnership, risk/reward and relationship management structures.

10 OTHER PEOPLE S INTELLECTUAL PROPERTY Open-innovation strategies include Establishing innovation definitions and metrics Enhancing supplier innovation efforts focused on company needs Budgeting for innovation training Working with universities and other third parties Finding ways to discover and assess supplier innovation capabilities. Innovation should be a business strategy encouraged by the senior level executives to stay competitive The company-wide innovation strategy should be more open than close, engaging suppliers likely provide innovative solutions Organisation still can protect their secretive know-how and trade secrets within an open innovation environment by striking the appropriate joint development agreements, licencesing, royalties, exclusivity and IP distribution- be fair and cautious Make innovation the new organizational culture that values innovation from suppliers and external sources.

11 INNOVATION IMPLEMENTATION REQUIRE CHANGE MANAGEMENT

12 CASE STUDY: COCA COLA GO BIO Polyethylene Terephthalate, also called PETE or PET, is a plastic resin of polyester. It is extensively used as a packaging material owing to its properties such as high versatility, strength, and recyclability. Bio-based polyethylene terephthalate is a resin manufactured from terephtalic acid and ethylene glycol, which is obtained from plants such as sugar cane and sugar beet by thermo-chemical process. Due to its environment friendly qualities, such as reduction in GHG emissions and carbon footprint, bio-based polyethylene terephthalate is widely accepted in packaging of various food and beverages and in automotive industry. Under the new regulations, NGO s and consumer pressure major brand owner such as Coca Cola and Danone have to innovate and adopt and new more sustainable packaging solution so they turned to Bio-PET and recycle PET as solution... Such demand created a new global capacity for bio-pet and recycle PET and drove the prices level down.

13 Case Study LEGO sustainability challenge LEGO has announced a mission to introduce more sustainable materials to their platform by 2030, LEGO has released that they need to adopt an open innovation strategy to achieve the target successfully, reduce the R&D cost, integrate an external competent and expertise and have a solid access to the newness in market trends and technologies. Recruited over 70 specialists: procurement sits in a cross functional core team Bring the suppliers in the early stages of the innovation project Established global partnerships Drive global demand by embracing open innovation LEGO demand created a new market and consumer awareness. Produced the first sustainable LEGO bricks

14 BIO-BASED MATERIALS CAPACITY DRIVEN BY DEMAND Source: Nova institute report 2017

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