Innovation discovery plays an important role in supplier and market research. Optimal supply market research involves including a competitor-focused component, also known as competitive intelligence. Without this component, a holistic view of the competitive environment is not achievable. Understanding innovation performance and/or potential in suppliers and location selection provides the researcher with the ability to grasp how the entire competitive environment is changing and that is a key strategic advantage.
To further this point, Accenture, based on study findings about ecosystems and future growth, makes the case for companies to recognize innovation potential with suppliers to reduce the risk of being left out of developing ecosystems. Accenture’s Seth Rogers writes: “An organization and its suppliers and partners make up a crucial ecosystem within the overall business environment, and such ecosystems are vital to innovation.” Accenture found from study business leader respondents that 52% see the formation of ecosystems by competitors as a serious threat and 63% see that ecosystems present the best opportunities to innovate.
Measuring Innovation Using Supply Management Metrics
When considering how to measure supplier innovation much of today’s excellent thinking in procurement involves applying innovation-specific supply management metrics. Here are a couple examples:
- Beroe encourages procurement organizations to include innovation focused KPIs in the supplier relationship management process. These KPIs measure overall project value, and supplier involvement, such as number of innovation events, sales realized from projects with supplier involvement, and number of collaborative projects completed.
- Inside Supply Management Weekly’s September 2018 Monthly Metric features an Incremental Revenue for Supplier Innovation measure. Jim Fleming, CPSM, CPSD, ISM Program Manager, states “Traditionally, cost reduction is what supply management is known for…But with innovation through early supplier involvement in early procurement involvement, additional revenue can be realized sooner. That’s an impact we are seeing more and more companies making.”
Measuring Innovation for Supplier and Location Discovery
Measuring innovation is part of the supplier and location discovery process. Measures that can be used for determining a supplier’s potential for innovating or current capabilities and activities include examining patent activity or various indices that focus on innovation. One can also examine research and development spending, the amount and frequency of innovation-forward partnership deals, recent hires for innovation or new product development experience, industry innovation awards received, and participation in innovation-focused industry conferences or symposiums. For location discovery, there are a number of indices available to consult.
For looking at patent data, there are open access tools available such as United States Patent and Trademark Office – Patent Full-Text Database, The Lens, and Espacenet.
Here is a sampling of indices that measure various supplier and geographic innovation capabilities:
- Pharmaceutical Innovation Index 2019 – This index ranks companies in their ability to bring products from Phase I/II to market and commercialize them successfully
- Law Firm Innovation Index – This Phase 1, Version 1.0 of the Law Firm Innovation Index measures law firm innovation (not a ranking)
- MIT Sloan Management Review/Glassdoor Culture 500 – This online tool lets you see how major companies in the world economy rank across the nine dimensions of corporate culture, including innovation, based on more than 1 million Glassdoor reviews
- The Global Innovation Index 2019 (GII) – In its 12th edition this year, this index is co-published by Cornell University, INSEAD, and the World Intellectual Property Organization. The core of the GII Report consists of a ranking of world economies’ innovation capabilities and results
- The Global Energy Innovation Index (GEII) – The GEII measures national contributions to the Global Clean Energy Innovation System, of which 24 nations and the EU have joined
- Global Competitiveness Index by World Economic Forum – Launched in 1979, this standard maps the competitiveness landscape of 141 economies through 103 indicators organized into 12 themes with one being innovation capability
What is Difficult to Measure
Even those that believe in measuring all things possible must admit that some things are more challenging to measure, especially when it comes to innovation.
Andrew Pope (CSMWire) writes about curiosity being the “fuzzy front-end of innovation,” and that “innovation starts before we come up with an idea. It starts with connections, creativity and spontaneity. All of which is turbo-charged if we are curious in our work.”
An IACCM August 2019 research report reveals that a major barrier to supplier-led innovation initiatives is trust, especially supplier perceptions of integrity and fairness in the bid process. However, “where trust prevails, innovation flourishes.”
Without imagination, there is no innovation. On discussing the role imagination plays in innovation, Extreme You author Sarah Robb O’Haga defines creativity, for her, “as the process of following my instincts and using my imagination to see ideas and solutions that haven’t existed before.”
For Further Reading: