4 ways procurement drives corporate innovation

November 26, 2019

Traditionally, the procurement department has been viewed as an essential mechanism for acquisition through a lens of savings, and the members of those procurement teams have traditionally been granted minimal leeway when it comes to creatively executing their responsibilities. Simply stated, the procurement team is intended to deliver the products and services required by the company directly to the organization’s doorstep at the times and dates when those products are needed, and they aren’t meant to become too inventive in achieving their goals unless it involves cost-cutting measures.

Yet, there is clear evidence that procurement teams can aspire to contribute far greater value to the organizations they serve, including the example provided by Google’s Project Loon. What began as a run-of-the-mill procurement task involving the purchase of a $50,000 balloon would later balloon—literally and figuratively—into a system capable of providing emergency internet services in the wake of catastrophic storms. Therefore, a well-intentioned procurement department can clearly spawn innovation when empowered to do so.

In consideration of this advanced level of service that procurement leaders are capable of delivering to the companies they support, here is a list of four ways in which procurement can drive innovation on a companywide basis.

1. Procurement gets to innovations first

When you think of the corporate trendsetters who push their companies to embrace and integrate new technologies, methodologies, products or services into the daily routines of the businesses they work for, it is unlikely that procurement leaders would be the first people you would think of. Yet, in the natural course of researching the most effective means for aiding their organizations, procurement leaders are among the most evident gatekeepers of technology, and are also those within the company who are the most readily empowered to make direct purchasing decisions that would result in an immediate wave of innovation surging into the organization. Obviously, the procurement department would need to produce financial justification for its purchases, but it remains true that procurement plays a direct role in researching and authorizing innovative changes within the businesses they serve.

2. Procurement crafts innovative relationships

Few departments within an organization enjoy the same degree of interactivity with outsiders as procurement. This is due to the myriad interactions procurement specialists engage in when vetting potential suppliers, and finalizing contracts. As a result of carrying out these two critical roles, the procurement department retains considerable innovative efficacy through its capability to tap into the thought processes of outside organizations, and its ability to mandate collaborative problem solving on behalf of potential suppliers if they want to secure contracts. Therefore, procurement teams can set the tone by awarding their business to suppliers that rebrand their product and service packages as innovative solutions to the problems posed by the procurement staff. This results in sourcing being conducted with innovation ingrained as a hallmark of every solution established within the process.

3. Procurement innovates by saving

We’re right back to discussing the traditional responsibility of procurement, but this time we’re reexamining that role through the lens of efficiency management and sustainability. While performing the essential tasks associated with cost-cutting, procurement leaders can also identify opportunities for their organizations to curtail their dependence on outdated or non-essential resources. For instance, eliminating the need for paper, reducing the dependence on inefficient forms of energy, or identifying real estate assets that can be sold off or repurposed through the acquisition of new technology are all undertakings procurement can initiate through its natural function, provided that long-term thinking processes are brought to bear. When exercised responsibly, this blueprint for cost reduction in procurement strategy can awaken managerial minds to hitherto unrealized realities of efficiency.

4. Procurement can innovate from the top down

The Chief Procurement Officer (CPO) role is unheralded relative to other C-suite occupants like the CEO, CFO and COO. Yet, in organizations where such roles are present, CPOs possess an important culture-shaping capability given their access to the rest of the C-suite, and their control in establishing the overall objectives of the procurement department. In several cases, CPOs possess sufficient autonomy to cultivate procurement strategies that reward innovative reasoning and outcomes. More importantly, CPOs have the ability to relay innovative strategies developed at the front lines of procurement all the way to the minds that play the most vital roles in spearheading organizations and directing their activities. While CPOs can direct the activities of their subordinates to ideals like resource efficiency, creativity-minded supplier acquisition and technological gatekeeping, they can also steer their fellow executives toward adopting innovative attitudes.

Realistically, all comprehensive, innovative procurement strategies are developed through collaboration and collective experience, and not in isolation. With this in mind, it is imperative that several informed sources are consulted within your organization in order to identify the most suitable procurement strategies for your company to implement.

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