Driving Innovation Through Procurement

Transcription

1 Driving Innovation Through Procurement The Life Tie Project Raj Nath Executive Director - Strategy The Smart Cube Mark Bjedov Managing Director DENVER FALL 2014 SU MMIT

2 Evaluation How-to: Why? Your feedback drives SIG Event content By signing and submitting your evaluation, you are automatically entered into a prize drawing How? Option 1: App 1. Select Schedule 2. Select Schedule by Day 3. Select Day 4. Select Session 5. Scroll to Description 6. Click on the Evaluation link Option 2: Browser 1. Go to 2. Select Session (#28) DENVER FALL 2014 SU MMIT

3 Innovation How Procurement Can Help Accelerate the Innovation Agenda October, 2014

4 The Smart Cube High Value Category Intelligence and Analytics Global Delivery Model Here to take your business forward. Focus on Insight Compelling Economics

5 The LifeTie Project

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7 Innovation done right means tangible gains COMPANIES THAT PERFORM WELL IN INNOVATION INITIATIVES GROW SIGNIFICANTLY FASTER Top Innovating Companies* Other Companies 84% 5-year CAGR 28% Average Profit Margin For Self Reported Company Strategies Innovation 14.50% 13% 5% Average Annual Growth Revenue Growth Low Cost 7.50% Source: Bain Innovation Assessment Survey, Georgia Tech Survey

8 Procurement: Can it play a role? Source: Hackett Group

9 PROCUREMENT: WHAT ROLE CAN IT PLAY?

10 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

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12 Six Key Factors 1 Flex your mindset 2 Deploy 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 Measure for success

13 Flex your mindset Be an agent of change

14 Procurement must change it s fundamental role Old Role New Role 15% 63% 46% Valued Business Partner Negotiations/ Sourcing Expert Gatekeeper Administrator Steward to purchased cost savings Procurement process executor Stock picker and trader Supply gate keeper Steward to a balanced supply scorecard Business process enabler Money manager (i.e. risk manager, not risk owner) Supply gate opener to supply market innovation 7% 54% Siloed function owner Coordinator of crossfunctional supplier interactions 15% Sourcing methodology zealot Solutions assembler (agnostic to the toolset) Peer Group World Class Source: Hackett Group

15 If procurement s role is changing, so will the skills and knowledge Finding this talent is going to get even harder Mapping procurement business skills demand and supply trends Strategic thinking and analysis R E D Extreme difficulty attracting/retaining Project/program management Change management and process improvement Business acumen Z O N E Difficulty attracting/retaining Vendor/Outsourcing management Low demand (Replace turnover) Data analysis and modelling Significant demand (Growing need) Relationship management Problem solving Very strong demand (Critical skill) CORE COMPETENCE NICHE COMPETENCE SKILLS DEFICIENCY RED ZONE Source: Hackett Group Minor Difficulty attracting/retaining Deploy the right talent

16 Get Involved Engage Early Identify alternative suppliers Understand alternative markets and geographies Assess supplier risk carefully Conduct financial analysis (Make/Buy) Evaluate alternative tools and technologies At the right time

17 Get Involved Involve supplier in New Product Development At the design stage Listen and Leverage At the right time

18 Organize flexibly one size never fits all Dedicated Teams Virtual Teams Cross Functional Teams

19 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

20 Bring Insight to the Table Identify possibilities Identify the right vendors Align vendor strategies and innovation plans Evaluate and manage economics

21 Measure for success Reduced Time-to- Market Improved Profitability INCREMENTAL REVENUE FROM SUPPLIER INNOVATION FACILITATED BY PROCUREMENT (% OF TOTAL REVENUE) 7.4% 3.5% Source: A.T. Kearney Average Top Quartile

22 Six Key Factors 1 Flex your mindset 4 Organize flexibly one size never fits all 2 Deploy the right talent 6 Measure for success 3 Get involved at the right time 5 Bring insight to the table

23 Procurement s Path Assess your options Review supplier capabilities Map supplier capabilities to requirements Study feasibility and co-develop

24 Assess your options

25 Review Supplier Capability

26 Map Supplier Capability to Requirements

27 Study Feasibility and Co-develop

28 Innovation Philosophy is Broad Many elements to consider

29 Innovation isn t about owning everything, it is about owning the right things

30 Innovation isn t only about new products, but also new processes, technologies, etc.

31 Process skills alone yield little differentiating value Good project management is a hygiene factor

32 Are you a customer the supplier will trust? Do you have a bias for partnering?

33 A key strategy for the largest innovators (2013) 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 (2014) 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

34 Contact Information: Mark Bjedov The Smart Cube, Inc. Managing Director Tel Raj Nath The Life Tie Project Executive Director - Strategy (M)

35 Thank You

36 Mark Bjedov Managing Director Tel:

37 Session #28 Driving Innovation Through Procurement Speakers: Raj Nath The Life Tie Project Mark Bjedov The Smart Cube DENVER FALL 2014 SU MMIT