Procurement Leaders '17: Supplier enabled innovation is a foundation for procurement's strategic repositioning

I had the opportunity to sit in on a number of sessions at Procurement Leaders American Congress 2017 in Miami this week.  Despite the snowstorms that prevented many from making it down, there was a full house at the opening keynote.

PL’s research shows that for procurement, cost savings is still the main issue that executives focus on.  Cost savings were on average 4.5% in 2015, down from 7% in 2016. About 83% of procurement organizations are changing operating models, with 33% are undergoing transformation.   year over year savings – and 25% are reporting revenue metrics – but 97% stick to cost savings.

Joe Agresta – VP Enterprise Procurement Excellence J&J, spoke at the keynote.  Joe has been at Johnson and johnson forg 17 years.  He elaborated further on the theme, “Conquering the Next Frontier” – which focused on thinking about the strategic positioning of the function, through collaboration and supplier-enabled innovation, as well as using technology as a disruptor.

Joe shared some insights from his time at J&J.  “J&J”s credo is about our communities and our people and our stakeholders. It is about the patient. It guides everything we do.  Innovation is our life blood – not just with products, but with processes, in the way we are organized and the way we use technology.

What is a culture of innovation? J&J’s Credo encourages everyone to innovate.  Here are a few points.

• Patients are waiting for a solution, the next medicine.
• When we look to innovation, we innovate with an eye on safety, quality and sustainability.
• We need to look at the impact of innovation and how to prioritize those that will have an impact on our business and our customers.
• The world is our Window – as procurement leaders we are one of the only functions that has an outside view of what is going on.
• We have to resource to win – don’t do it half-baked. But also “Fail Fast” – and the two go together.
• If you think it is Innovation – it is! If you believe it is an innovation – then it is and put it out there.
• Perseverance and Passion is key – we may get discouraged early and it doesn’t get on the portfolio. Don’t forget about a project and persevere on a multi-year portfolio.
• Aligning our research is critical and understanding where suppliers’ research is, where ours is, and aligning on that is key.
• You want the A team and A suppliers on your investments.
• We have to “LIVE a learning partnership” – sharing one of your best practices while you are here. It builds momentum and belief.
• We need to share our stories – and do a better job of sharing stories on innovation.

J&J has developed a Supplier Innovation Center, that is focused on unmet business needs, and created an innovation culture through advanced sourcing and innovation teams with NPD people looking at product launch and innovation.   They have also split out innovation sourcing teams, in consumer innovationto drive collaborations to facilitate broad-based innovation opportunities. They have people who work closely between innovation and R&D to drive discussions with suppliers, and identify risks to bring potential innovations to market. Others work on health care solutions on global design offices, and who work on a Leadership team to build enterprise capabilities to deliver healthcare solutions in new ways, to motivate people, and to get the right technology at the right time. Design thinking is customer-centric, which is inclusive of the patient, considers the feasibility and viability of the business, and desirability for people. This drives meaningful solutions for positive health outcomes, working collaboratively with supply chain and suppliers on customer-centered innovations into development. Integration with other innovation centers between procurement and these groups is key. Procurement is not always comfortable and we are often too focused on saving money and expediting, and may not be comfortable with integration into the global design center, looking at unmet needs, and working with suppliers to target these. It is about having the right people in the right roles, to seek to understand and to seek to coach. No idea is a bad idea – this sounds simple, but it is not easy to do.

Cynthia Dautrich, former CPO from Kimberly Clark,  talked about talent.  The fundamentals for people they are looking for are key, but we are looking for people who are humble, hungry and smart.  But if procurement is only wanting to be recognized for cost savings, this doesn’t recognize what stakeholders always value.  So being humble, and influencing and managing relationships without authority is key to a successful career in procurement.  About 1/3 of the procurement was meeting the profile.  About 1/3 had to come in from outside.  And 1/3 we had to recruit from inside the function, in IT, sales, and marketing.  This required improving the procurement branding, and understanding what we needed to do in procurement to change the supply chain.  And moving people around in the function is also key.

Part of that involves taking your partner’s business measures, and making those procurement’s outcome measures.  Using revenue generation, profit margin speed to market, and market share, and making those part of procurement’s outcomes.  TCO and cost savings are the traditional measures that procurement uses – so assessing these other measures will become increasingly important.