Insights from the SCRC Meeting on Supplier-Led Innovation

We had a great turnout with over 120 executives at our SCRC meeting today at the downtown Marriott in Raleigh.  The theme, Supplier-Led Innvoation, featured a number of excellent speakers and insights.

After I did a kick-off discussion emphasizing the importance of trust, integrity, and leadership in driving innovation, Dan Kettler from John Deere followed up with a discussion on how Deere is implementing their Partner Integration program for branded products in Turf Care.  Dan noted that:

“Every company wants to grow, and we want to be in certain segments.  Supplier innovation allows us to get into certain markets and get into them rapidly.  In many cases the partner has expertise and has IP and we want to leverage that.  But it is how we combine those together and grow these suppliers that is the key capability we are seeking to build.  We need to have some type of sustainable way of growing our partners – and this is a way/means to do that.

Another reason for supplier-led innovation is opportunity cost – we don’t want to make everything.  It isn’t practical, and sometimes taking the same approach to launch products that works at Deere isn’t always the best idea for our suppliers.   So we need to launch products efficiently, and ensure the processes work effectively.  So we needed to find a process that considered the capability of the partner, and is streamlined and efficient.  Partner capability and deal structure are crucial to making this work.

Good partnerships have improved speed to market, lower product launch costs, and for these to work, and the dual margin structure, there has to be efficiency in R&D spend, and we need to right level of launch risk. ”

Deere, like many companies is on a journey to make this work.  One key insight from many of the discussions is that PEOPLE are a critical component of making supplier relationships hum.  It is not about technology or systems – nor is it just about a streamline process – there are ultimately situations that have to be managed on a case by case basis, with people who can listen, interpret, and act to drive change.

Along those lines, a conversation with Gordon Heidecker from KPMG pointed to the fact that this isn’t a new discovery.  Gordon brought out an old Chrysler annual planning booklet from 1996, that shows how the hierarchy of company objectives was driven down to a category and even part level process.  During this period, Chrysler’s Extended Enterprise approach drove savings of literally $1B plus for several years in a row.  And this was a deliberate approach to drive improvements based on supplier cost savings ideas.

And that is real money.