Initially posted on the e-Sourcing Forum [WayBackMachine] on Friday, 8 September 2006

In our first series of posts, we discussed some approaches that you might use to introduce innovation into purchasing and the organization as a whole. In our second series of posts, we discussed how the organization was changing, the important role purchasing will have to play, and how you can use new outsourcing methodologies such as crowdsourcing to reduce costs and improve productivity.

Before we get into this third, and final set of posts in our first Purchasing Innovation Series, I’d like to mention a little software company by the name of BrightIdea.com that provides an innovation management on demand software tool for only $49/month per user. If you don’t know where to start in your innovation improvement efforts, companies like BrightIdea (which reports clients that include Bosch, Honeywell, and Reliant Energy), can help you dive right in and increase innovation productivity from day one – using the same type of on-demand solution that you already use in your industry leading sourcing efforts. Innovation doesn’t take brilliant product and process managers, just brilliant people enabled by the right processes and tools to guide them. The tools offered by companies like BrightIdea are supported by analytics, archiving, financials, and rewards processes that allow a company to understand and save data created around innovations, compute the bottom-line impact, and recognize those most responsible.

In this series of posts we are going to discuss why innovation is so important and why purchasing has to lead the way. Tomorrow we are going to discuss some recent research from Aberdeen Group that quantifies not only how important innovation is in new product development (NPD), but the significant financial benefits it entails. Sunday we are going to wrap up the first part of this series by detailing how purchasing can lead the way in shaping the new enterprise.

When procurement is included in NPD in the design stages, product development cost is typically decreased by 16 to 18%, overall product cost is typically decreased 15%, and revenue is typically increased by 19%. Furthermore, whereas the majority of companies are not able to consistently hit product development targets with respect to percentage of products meeting revenue targets, cost targets, launch date targets, quality targets, or product development cost targets, the majority of best-in-class companies that have incorporated procurement into the process at the design stages hit these targets over 80% of the time.

For more ideas on how to innovate your purchasing – and your sourcing – see the Next Generation Sourcing wiki-paper over on the e-Sourcing Wiki [WayBackMachine].