Innovation transforms something, whether a process or a machine. It is more than an incremental improvement—saving “fingers and toes” worth of time, effort or money.
Many companies, if not all, claim that they want their supplier pool to bring them innovative ideas. Not many businesses today are offering innovations on such a grand scale as the steam engine, yet many companies do have the ability to significantly improve day-to-day business functions over time.
Asking for innovation—transformation—is a tall order and few suppliers accept the challenge. I think I know why.
Perhaps the biggest assumption people make is that customers want innovation, when what they really want is significant improvements to existing processes. Not just small, incremental changes, but meaningful changes that will give the customer an edge in the market. Customers want what suppliers say they can offer—a better process or product at fair price that will improve the customer’s operations or product offering.
To do that—significantly improve a process at a fair price—both companies have to jointly develop a solid business case. The business case is often the missing link and is more than asking the supplier to put a proposal together.
Too often, customers and their suppliers make half-hearted attempts at “innovation”. There are “innovation clauses” in contracts, and “innovation” segments of sales pitches and QBR reports and poorly conceived “innovation” proposals from suppliers. None of these measures actually gets the customer what it wants—significant improvements. And, it doesn’t give the suppliers what they want—a return on their investment.
Jointly developing the business case is a collaborative process. A well thought out business case includes the compelling business reason, the potential cost and time impacts to the customer and its end users, the time and money investments from the supplier, the outline for IP ownership, a financial analysis of the potential return on investment, and most critically, the change management mechanism to ensure employees are prepared for the changes. This business case is then presented to and vetted by the management team, the legal team and finance. Now, both companies are on the same page working to a common goal with a shared understanding of the effort needed to make the initiative a success.