Innovation is getting a lot of buzz these days, but what sort of innovations are on the CPO’s agenda? Furthermore, what emerging, breakthrough innovations have the potential to increase the value of Procurement's contribution many-fold?
This article introduces Denali Group’s predictions for future innovation – innovation that will help drive Procurement towards an enhanced strategic role in the enterprise. Insights are based on Denali Group’s in-depth research with Procurement executives from Global 1000 companies, in industries such as: high tech, finance and insurance, energy and utilities, pharmaceutical, entertainment, and retail.
Denali Group Research Methodology
Denali Group’s Procurement Innovation Research focused on understanding and documenting emerging procurement trends and innovation targets across multiple global Procurement organizations. Our approach included one-on-one interviews with 35 Procurement executives, followed by in-depth, hands-on work with 16 executives at our recent Procurement Innovation Executive Roundtable.
Denali Group’s interviews with Procurement executives addressed:
- Where CPOs will shift their focus during the next one to five years
- What external factors will impact the CPO's agenda, and how
- Procurement’s most significant future challenges
- The CPO “wish list” for innovation in Procurement
- Likely Procurement innovations for the next three to five years
Next, sixteen Procurement executives joined the Denali Group Leadership Team to discuss innovation and participate in various exercises under the facilitation of Adam Richardson, author of Innovation X and creative director at global innovation firm Frog Design, Inc.
About Innovation and Procurement
True innovation leads to breakthrough results. True innovation displaces old ways of doing things, alters traditional roles and responsibilities, and often significantly changes outcomes or services rendered.
In the world of Procurement, an example of a significant innovation is the use of online reverse auctions. What once was accomplished effectively in several weeks, now takes just a few hours – with improved quality of results. That’s an improvement of more than 20-fold in efficiency alone.
Another example of Procurement innovation is Low Cost Country Sourcing (LCCS). Numerous companies worldwide have achieved significant cost-reductions through LCCS.
Over the years, Procurement has shifted from a back-office clerical function to a strategic one that creates shareholder value. New innovations will continue to drive change.
Complexity is on of the greatest challenge to innovation. Today’s customers and internal stakeholders are more demanding, systems are more complex and difficult to integrate, and enterprises are facing increasing competition.
Because Procurement’s internal stakeholders are more demanding than ever, integrating solutions designed for their needs – as part of a major cross-functional effort – also becomes more challenging than ever. As complexity around Procurement increases, the organization’s ability to understand and focus on solving business problems becomes more important to driving innovation.
Major Procurement Innovation Themes
Denali Group’s Procurement Innovation Research gathered more than 500 data points. More than 200 Procurement innovation ideas alone were generated during brainstorming or “ideation” sessions at the Procurement Innovation Executive Roundtable.
Most of these 200+ ideas converged around three major Procurement innovation themes.
Major Procurement Innovation Themes* 1) Expanding Procurement’s Value
Prediction: Procurement Will Greatly Expand The Methods and Channels by Which It Adds Value
Most procurement executives feel that Procurement is constrained by a singular focus on savings, and that their organizations can add much more value in other strategic areas to the business.
The group discussed various dimensions of Procurement value, including:
- Time to market: How Procurement can speed their company’s time to market through their efforts
- Brand management: What role Procurement plays as an evangelist of the corporate brand
- Revenue generation: How Procurement can facilitate additional revenue generation
- Product innovation: How Procurement can increase innovation through supplier collaboration
Procurement organizations that are able to expand beyond cost-cutting/savings-only expectations can find ways to add significantly more value.
2) The Virtual Procurement Organization
Prediction: Procurement Will Evolve Into a Mix Of Strategic In-House Resources and On-Demand Transactional Resources
Even as Procurement is asked to expand its value contribution and take on more work, resistance to “building an empire” will increase.
Procurement will meet this challenge through innovative approaches to “doing more with less”.
The move toward a “virtual” operation model will be facilitated by a combination of innovations.
3) Rethinking Talent Management
Prediction: Procurement Organizations Will Reshape Their Expectations and Talent Compensation Models
A number of factors will force a radical rethinking of the Procurement organization, including:
- Demands of the Gen Y workforce
- Increasing workforce mobility
- Non-traditional compensation models
- New technologies
*Source: Denali Group Procurement Innovation Research
Note: This article is an abbreviated version of Denali Group’s first whitepaper in a series on Procurement Innovation. Register here for access to Denali Group whitepapers.
Learn more about Denali Group's Procurement Innovation insights and how they can help your organization drive significant value.