The role procurement plays in business innovation

 
Both Forbes and BCG Perspectives have recently released polls of the most innovative companies for 2015. Both studies rank companies based on key metrics such as value of business measured against enterprise value (EV), three year growth and revenue & margins. The highest ranking companies will not come as a surprise; Apple, Google, Microsoft and Amazon have consistently ranked among the top worldwide innovators for many years. 
 
When we look a little further into what ‘innovation’ means and how these polls are compiled we notice some themes becoming apparent. ‘Innovation is the process of changing or creating more effective processes, products and ideas, to increase the likelihood of a business succeeding. Businesses that innovate create more efficient work processes and have better productivity and performance.’ This bears a striking resemblance to what we find ourselves saying when asked ‘what does procurement actually do?’ A successful strategic procurement function drives efficiency in any business. Words like ‘efficiency’, ‘productivity’, ‘processes’ and ‘performance’ are included in every client brief we take. They often relate to the particular goals of a procurement strategy and are frequently among the qualities sought in a new employee.  
 
While we rightly associate the term ‘innovation’ with creativity, change and imagination, it is processes and efficiency which drive innovation and allow companies to make change happen. Procurement and innovation are far more closely linked than it might first appear.
 
There is no denying that in some sectors such as technology and pharmaceuticals, creativity and discovery are at the heart of business innovation. New technologies and advancements in understanding are the product of creativity, imagination and problem solving – they are fundamentals of success. But if we look towards industries such as retail or logistics, innovation is more explicitly related to procurement and supply chain management at the consumer level, with discount retailers being a prime example. 
 
Discount retail is a model which has changed the way in which we shop by operating in a leaner way. Innovation isn’t about reinventing the wheel; sometimes it is about reassessing business practices and understanding how processes and performance can be modified and improved upon. Improvements to buyer experience such as quicker delivery times, click & collect options and moves to online and mobile platforms are all lead by improvements to procurement and supply chain functions. This is innovation, albeit back of house innovation.
 
Michael Page Procurement held a conference in 2015 to discuss the role of procurement and supply chain professionals on boards and how innovation in procurement can drive business change. This debate continues into 2016 as we are set for another year of change and innovation across all sectors. There is a lot to be said for the balance between creativity and process in driving business innovation. Perhaps 2016 is the year when we see procurement lauded as a strategic business tool.
 
For a confidential discussion about hiring procurement professionals please contact Alice Traish, consultant at Michael Page Procurement and Supply Chain.  
 
Alice Traish
T: 07469375446