By Proxima

09 Aug 2019

Procurement is uniquely placed across departments, meaning the function could be a centre for learning within organisations. Proxima explains how procurement and innovation intersect. 

Businesses are beginning to leverage Procurement to contribute to their front line objectives – is now the time for a rethink? As a function that most departments use, but do not fully understand, it is paramount that Procurement proactively bring greater value to the table. But how do we achieve this?

Across many private and public sector organisations you will find Procurement Centres of Excellence. Indeed, Procurement is in a unique position and their exposure spans across the entire workforce, from CEO to frontline staff. This means that, as a function, Procurement is ideally placed to act as a ‘boundary spanner’, learning lessons from other departments and offering an array of tools to enable cross-functional learning. However, more often than not, Procurement is perceived to be a tick box exercise, the regulatory ‘police’, where businesses come to understand what is required of them. So how do we reposition our Centres of Excellence as ‘boundary spanners’?

Maybe we should look at one of the most common buzzwords around Procurement - innovation. Yes, it is a broad term and means various things to different organisations, but many people look to Procurement to drive it. Of course, the idea that anyone can just go to a supplier and say ‘I want your proposal for innovation’ over-simplifies and devalues the whole process. Finding innovative solutions to complex problems is a structured process with a plethora of tools, frameworks and methods that can be shared across a business, from the Double Diamond to Nesta’s Innovation Spiral; you just need to know how and when to use them. So let’s take a look at what happens when Innovation and Procurement come together.

One major success that showcases the role that procurement can play in innovation is Google’s Project Loon. When the request to source a balloon costing $50,000 came to the procurement team the answer was not ‘no’, but ‘how can we make it better’? This approach meant that as Project Loon expanded in scope, from 1 to 2000 balloons, the ideal solution was already in place at a lower cost than anticipated, with a better specification. In this case the result was the innovation and not the idea.

'The idea that anyone can just go to a supplier and say ‘I want your proposal for innovation’ over-simplifies and devalues the whole process'

Innovation does not occur without failure. Google have tried to penetrate the wearable smart tech market with Google Glass; venture into social media with Google+, and; the gaming market with Google Lively. Arguably, these ideas have failed in that they have cost the company billions in R&D and loss of potential revenue. However, if Google did not develop and test new ideas they would not be the market leaders they are today. Just take a look at Blockbuster, former leader in the home movie rental sector. Blockbuster had the opportunity to buy Netflix for $50 million but turned down the offer claiming Netflix was operating in a “very small niche”. Another example to note is Verizon turning Apple away when they were offered exclusivity over the iPhone, in exchange Apple asked for a share of the consumer’s monthly subscription charge. In both of these cases, the ideas carved new markets for themselves, generated billions $ for shareholders and have become household name, and in Blockbuster’s case, left the market leader for dust.

Procurement can help bridge the gap between business departments, enable cross- functional learning and create safe environments for change. Procurement needs to ensure that specifications and contracts include the right communication channels so the right people are talking to each other. Organisations ought to recognize that failure is not actually a failure, but confirmation that the proposed solution is not the best way of approaching the problem. Once these mechanisms are in place the best people to drive it are the contract users, contract managers and suppliers. Procurement can help, it is just a question of moving away from the traditional cost-saving perception of Procurement and asking ‘how can we help’ to ensure that you have the right frameworks in place to find the best solution for the requirement.

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