Daily Archives: February 3, 2013

Nine Rules for Stifling Supplier Innovation

Over on the Old St Labs blog, Mark Perara recently penned a great post on Nine Rules for Stifling Supplier Innovation in homage to a post by Rosabeth Moss Kanter on the HBR blogs on Nine Rules to Stifling Innovation. I thought Mark’s post was so awesome that I asked to share it with you, and he graciously agreed. So, without further ado, here are Mark’s Nine Rules.

1. Be suspicious of ideas that come from your suppliers – your strategy, innovation and R&D teams know your business better than anyone externally.

2. Keep suppliers really busy. Change your requirements and staff regularly so suppliers have no time to focus on innovation. Their account managers will be too busy to try and second guess what your business needs as well as not knowing who to speak to.

3. In the name of excellence, encourage cut-throat competition. If a new idea comes in from a supplier, immediately put it out to the rest of your suppliers to see if they can provide it cheaper. Even better run a RFX and auction.

4. Don’t share any information with your suppliers. Sharing product roadmaps, demand and organization charts will only encourage them to come up with ideas on how to help. Knowledge is power!

5. Sit on ideas for as long as possible. If a supplier does find the time to share some innovation, ensure not to get back to them in a timely manner. Let the idea bounce around the different areas of the business with no ownership until it fizzle’s out and the supplier stops asking for an update.

6. Ensure quarterly reviews don’t happen. Make sure the procurement team are so busy that they don’t have the time to hold their quarterly meetings with top suppliers. Having a face to face meeting with suppliers on a regular basis may provide a sign that you care about the relationship.

7. Pay late and extend payment terms. By paying late your supplier will spend hours chasing your accounts payable team trying to get payment. Even better push out payment terms as far as possible. Your FD will thank you and the supplier can bear a little bit of pain for the grace of having you as a customer.

8. Act as though punishing failure motivates success. If a suppliers idea does somehow slip through the net, ensure the employee who championed it is aware that failure will be a direct reflection on their capability. A few public hangings will soon stop future cases arising.

9. Above all, never forget your the customer and you already know everything there is to know about your business.

Following these rules will ensure suppliers will never see you as a customer of choice and will take their innovation to your competitors. That said if you work for a dynamic business that wants to develop a competitive advantage, I would suggest creating a culture to embrace and nurture supplier innovation.

For each of these supplier innovation stiflers, innovation promoters can move to the opposite behaviours. So if you want to be a customer of choice, which suppliers invest in and bring innovation to, take a look at these behaviours and allow supplier innovation to flourish:

1. Encourage ideas from suppliers as they often know your business better than some of your own team.

2. Promote your commitment to the supplier innovation programme and ask your suppliers to invest time into providing new ideas. Respect their time by giving them as much notice of changes to requirements and key members of staff, so they can spend the time on innovation.

3. Nurture ideas with suppliers and establish a culture of trust, so suppliers know you respect their IP.

4. Share as much information as you can with your top suppliers. The earlier suppliers can see your product roadmap, the sooner they can provide ideas to improve it.

5. Make sure you have a defined supplier innovation workflow and let your suppliers know how their ideas are progressing on a regular basis. Assign an internal owner to each idea ensuring there is accountability.

6. Make sure your category managers hold their quarterly reviews with strategic suppliers, to share performance reviews and discuss innovations

7. Pay your suppliers as agreed and if at all possible don’t push out payment terms. It diminishes your position as a customer of choice and adds costs to the suppliers, as they have to find alternative financing to support your improved working capital position.

8. Motivate your employees to collaborate with suppliers on new innovations. Let them know there will be some projects that will not be as successful as others, but its okay to fail. Publicize and reward innovative suppliers at annual supplier awards ceremony.

9. Embrace your suppliers as an extension of your business. Learn from their ideas and build open and trusting relationships where innovation will thrive.

Thanks again to Rosabeth for the inspiration for this post and good luck with driving supplier innovation in your business.

Thanks again Mark for sharing Nine Rules for Stifling Supplier Innovation.