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Differentiation via collaboration15th of September 2011
In his fourth article for ECJ, Pedro Chidichimo explains the benefits for facility management companies of working with suppliers in the identification and development of innovations that solve end user needs. New processes, new relationships and most importantly, a new culture must be set to achieve sustainable differentiation in the marketplace.
How often and how much do you ask your suppliers to come up with innovations for you? How much do you share with them your business challenges? How many of those innovations fail and how many succeed? How many of those are exclusive to you?
These are questions that any leading facility management company should ask itself on a regular basis. Innovation is a critical differentiation factor in the marketplace if you do not want to compete on cost, and the one of the most recent trends I see in our market is collaborative innovation with suppliers.
Your suppliers may be able to bring a fresh new look and solutions to your long-standing challenges and because they possess different competencies, they may be able to solve the problem in an alternative way.
Think of recent innovations coming from leading FMCG companies: most of them stem from the packaging, logistics, displaying fields, and mainly from their vendors more than their own innovation…
In this article I would like to recommend you a new corporate approach to foster innovation that is really customer oriented and holds a high probability of success. There are three areas we need to organise internally in order to profit from this new approach.
In my view, there is a clear process of four stages that has to be set up before the new idea enters your traditional innovation pipeline:
1. Problem definition – define your most critical business challenges (whether it is in service delivery, end-user adoption, training, ergonomics, productivity or other fields such as shipping, invoicing, etc). Choose a few vendors that are closely involved with the area at stake, and share those challenges with them openly. It is even more interesting if you share your customer needs, strategy, technology gaps etc, before describing the detailed challenges.
2. Joint field observation – 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 it can often come up with solutions you hadn’t anticipated, simply because it understands your business better.
The next guideline is to spend more time defining the problem/opportunity than detailing the solution.
3. Scanning committee – after all suppliers have done their homework and studied their own individual solutions, a meeting is called to share them and brainstorm possible joint ones. A thorough analysis of the alternative options must be done, including traditional financial measures such as Expected Net Present Value and CAPEX required, understanding the strategic fit with the company’s long-term growth plan.
A critical point here is the team composition for this review. Suffice to say that it must be open, diverse and include representatives from the suppliers and from several areas of the company (sales, marketing, finance, logistics, etc).
A presentation must then be prepared for the company’s leadership team to make decisions.
4. Solution selection – be realistic about the number of innovations your company can work on at a given time. Innovation is a process that fails when 'hope' of success is part of the decision criteria. I do not personally trust silver bullets, but I have great confidence in selecting a limited number of projects and going all the way until the end with them.
The leadership team of the company must make those decisions and put the resources behind them, on a quarterly basis.
Supplier relationships are usually managed by procurement professionals. I would personally recommend the process to be managed by an innovation relationship that involves other parts of the business that have responsibilities for internal innovation, particularly sales, R&D and marketing.
And of course, do not underestimate the value of personal relationships in the management of innovation with suppliers. The personal bit is the glue that will keep the process together.
The culture in the most innovative companies around, like Google or Apple is based on the firm belief that 'leading from the top' is the only way to succeed. Their founders and ceo's make innovation part of the strategic planning of the company. First, appoint an innovation leader that consolidates all innovation and knowledge efforts scattered around the company. Then, make innovation part of your corporate purpose and part of your variable pay.
And last, but most importantly, put great effort in communication and recognition that fuel up employees' self esteem and sense of urgency.