It’s a common misconception that procurement in business is all about saving money.
While savings do play a role in procurement, there are many other factors that business executives must pay attention to in order to continue to deliver successful results.
Progressive chief procurement officers (CPOs) who wish to get ahead of the curve must focus their attention elsewhere: specifically, on growth through innovation. Procurement is uniquely positioned to identify and pursue opportunities for innovation and growth that other parts of an organization might miss. It can make unique contributions to areas such as ecosystem management, better governance and adoption of a holistic supplier view.
Increasingly, procurement specialists are viewing the opportunity to drive innovation as an attractive feature and strategy. Emelia Nosser, CPO of Shiseido Americas Group, notes that she was attracted to the company because “leadership was looking to procurement to help drive innovation. That’s very different from the cost-cutting mission at so many other companies. Of course, there are expectations around savings and performance, but the real focus is on growth and innovation.”
Despite the prospect of positive outcomes from driving innovation through the procurement function, some executives still haven’t jumped on board. That’s a dangerous stance to take. Those who fail to achieve optimal levels of innovation risk falling behind the competition. Accenture Strategy research found 52 percent of businesses saying that the formation of ecosystems by rivals poses a significant threat.
For skeptical CPOs, delivering innovation through procurement can be defined through a few key components:
For companies to integrate these suggestions strategically, CPOs need to ensure they have base procurement capabilities in place. If, for example, a company’s source-to-pay infrastructure is poor, and it’s paying vendors late, innovation through procurement likely won’t be successful. But if the organization is ready, procurement might be able to make a significant contribution to growth.
An initiative to drive growth through supply innovation doesn’t have to be difficult to start. Pick one supplier, business area or spend category. Start with a pilot, then scale based on what you’ve learned. As Confucius said, “Better a diamond with a flaw than a pebble without.”
Too many companies fail to make progress in this space because they over-think or over-plan. Any business that wishes to drive growth and stay competitive must focus on updating its ecosystem to pursue innovative and agile business models.
Seth Rogers is managing director for Accenture Strategy.
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