In a recent post, I asked if now [is] the time of niche. Upon further reflection, I think it is for those companies looking for true innovation. I realize this may sound a little counterintuitive at first to those of you following the market and the M&A buying sprees going on where the big players like SAP, Oracle, JDA, and, now, Ariba, are doing their best to buy everything (and everyone) under our sun, but if you think through it, I believe it is quite logical.
First of all, if all of your time and effort was going to into buying and selling companies and divisions, how much is going into true innovation? In all likelihood, zero. And while the product or technologies being bought may be innovative to you, your customer base, and, if you’re lucky, the market at large, all products or technologies have an innovation shelf life that ends as soon as a more innovative product or technology hits the market. And while the more innovative product or technology could theoretically be the next version of your product, there is only a chance of this happening if R&D on the product or technology is continuing. Thus, if everything is put on hold for an M&A activity that could drag on for months (or years), there’s no way that the companies involved are going to maintain their innovation edge.
Furthermore, as highlighted in this recent Industry Week article that asked what would Steve Jobs do, to be innovative in today’s economy where time and resources are at a premium, you have to be focussed on a small number of products or solutions. You have a limited number of people with a limited amount of time and creativity and a fixed set of resources to support them. If you split your focus 1,010 ways and try to be everything to everyone, there’s essentially zero chance that you are going to stumble upon any truly groundbreaking innovation. But if you say no to 1,000 things and focus on the handful (5 to 10) of products or services you excel at where you have a chance to truly make a difference, the chances of real innovation increase exponentially.
So if you’re looking for truly innovative products and services to revolutionize your supply chain, look to the niche players that specialize in spend analysis, decision optimization, or predictive analytics. When you plug these into an end-to-end framework enabled by one of the big behemoths (that specialize in end-to-end platforms that can serve as a good foundation), or assemble your own from best-of-breed e-Sourcing, e-Procurement, and e-Logistics vendors (if you are tech savvy enough to do it, possibly with some third party expertise), that’s when you’ll start to see the truly innovative results that deliver double digit percentage returns year after year after year (and not just one-time reverse auction savings that disappear once you’ve sucked all the fat out of the supplier’s margin).