Category Archives: Sourcing Innovation

NineSigma’s Open Innovation Mission

A few weeks ago, I wrote about The Value of Non-Confidential Exchange in the Open Innovation process and briefly introduced you to NineSigma, a consultancy built on an Open Innovation process. I recently had a chance to talk with Frank Evan at NineSigma about their company and their processes, and I’m going to summarize some of the key points in this post.

The primary offering of NineSigma, who are focussed on accelerating the innovation cycle, is their Rapid OIsm program that they designed to help clients design and launch their own open innovation initiatives.

The Open Innovation (OI) process begins with the NineSigma team sitting down with the client in a two-way conversation designed to help the client understand what OI is and how they might have to change the way they do business to take full advantage of what OI has to offer. Then NineSigma reviews the client’s goals, processes, and projects; builds a RACI (responsible, accountable, consulted, and informed) diagram to make sure that all key parties are included in the process; identifies areas where processes need to be altered or improved to take advantage of OI; and outlines the changes that need to be made for the company to take full advantage of OI. The next step is to sit down with cross-functional teams to help the client implement the appropriate OI-friendly process changes.

Once the client is ready to take the first step down the open innovation path, NineSigma will work with the client to generate the right proposals and disseminate those proposals through their network (which is 1.7 Million strong and growing). They’ll also review all proposals that come back, to make sure they are appropriate and well-formed, and assist the customer in identifying those proposals that appear to be the most suitable. Once one or two proposals are accepted, they will help the client engage with the solution provider(s) and make sure the entire process goes smoothly.

As partly discussed in The Value of Non-Confidential Exchange, there are numerous advantages to both the buyer and the supplier in the open innovation process when a third party is used as an intermediary. The buyer gets to explore the market without exposing their identity, which is important if they are a big multi-national in an ultra-competitive industry, as this could tip of their competition about their future plans. Furthermore, NineSigma, who requires suppliers to sign off that they are not releasing confidential information in the absence of a formal agreement, insures that all proposals submitted are appropriately formed.

In addition, at NineSigma, all of the primary facilitators are PhD scientists and engineers with significant industry experience. Compare this to your average big consultancy who is just as likely to assign you a fresh MBA with no real world experience as it is to give you a senior partner. Furthermore, commitments are on a project-by-project basis and the client retains the right to all information generated during the process – which has worked for big name clients including Kellogg’s, P&G, and Hershey in sectors that include CPG, Food, Automotive, High Tech, Chemical, and Petroleum. That might be why NineSigma has been growing rapidly for the past three years, opening their first international office in Japan in 2006 and their second international office in Belgium this year.

Design Thinking Your Way Into Innovation

The Harvard Business Review recently ran a great article on “Design Thinking” and how thinking like a designer will transform the way you develop services, processes, and even (operating) strategy. The article, which starts off by noting:

Thomas Edison created the electric lightbulb and then wrapped an entire industry around it. The lightbulb is most often thought of as his signature invention, but Edison understood that the bulb was little more than a parlor trick without a system of electric power generation and transmission to make it truly useful. So he created that, too. Thus Edison’s genius lay in his ability to conceive of a fully developed marketplace, not simply a discrete device. He was able to envision how people would want to use what he made, and he engineered toward that insight.

has some very good points. Innovation is often powered by a thorough understanding, through direct observation, of what people want and need in their lives because any innovation that doesn’t make someone’s life easier is not likely to catch on. And I think the author, Tim Brown of IDEO, is right when he says he believes that design thinking has much to offer a business world in which most management ideas and best practices are freely available to be copied and exploited. After all, simply asking a designer to touch up an existing idea is tactical while allowing a designer to come up with ideas that better meet your market’s need is strategic, and there’s much more value in strategic work than there is in tactical.

In addition, innovation also involves (rapid) prototyping, to allow a design team to quickly zoom in the solution the users really need. The prototyping should not be rigid, but should be flexible in nature and require only as much time, effort, and investment as are needed to generate useful feedback and evolve an idea. It’s about getting to the solution, not getting bogged down in the process.

Furthermore, the process works for services and processes as well as it works for products. The author gives an example of service innovation undertaken by Kaiser Permanente, which undertook a project to make its nursing staff more efficient so they could deliver better patient care. At their hospitals, nurses often spent the first 45 minutes of their shift at the nursing station being debriefed by the outgoing shift on patient status. After working through a project to re-engineer the information capture and exchange process, which included the addition of customized software that could be used by nurses to quickly capture information in a friendly format during the shift, the amount of time required to pass information at a shift change reduced substantially while increasing patient care quality. I don’t know about you, but I think it’s pretty rare for a nurse to comment “ I’m an hour ahead, and I’ve only been here 45 minutes” or “[This is the] first time I’ve ever made it out of here at the end of my shift.

So how does a design process work? While it’s different for each project, the three generic stages of inspiration (recognizing an opportunity), ideation (generating, developing, and testing ideas), and implementation (where a path to market or implementation is charted) are common for all projects. Note that the three stages are not necessarily linear. Sometimes you’ll bounce back and forth between them until you have the right solution. But if you make an effort, you’ll get there.

So what does this mean for supply management professionals? If you can identify a problem, you can identify an opportunity. And if you can identify an opportunity, you can identify a solution that improves service and saves money with a little bit of innovation. They key is to be in the right frame of mind.

ThomasNet Takes Sourcing to the Masses

ThomasNet recently launched it’s free Purchasing Tools, based on SourceOne’s (acquired by Corcentric) free WhyAbe (sunset) platform. This platform allows buyers who still haven’t adopted an e-Sourcing platform to test the waters with a basic RFx and Auction service.

The platform, which comes with a complete Buyer User Manual as well as a Supplier User Manual, allows buyers to create a private or private RFX, see their listings on a dashboard (where they can also identify reviewers and block blacklisted suppliers from bidding), and also take advantage of ThomasNet’s engineering, web, and community tools. The RFxs are essentially RFQs where you solicit bids for well a basket of well-defined products and services, and the reverse auction formats are limited to supplier rank and lowest bid, but that’s where most companies start on their e-Sourcing journey.

The auction tool allows you to specify whether or not you want duplicate bids, minimum decrements during bidding (as a number or percentage), and automatic extensions to prevent bid sniping. The product also supports multiple currencies, attachments, and product images as well as e-mails to invited suppliers. It’s not on par with any of the paid Software-as-a-Service offerings, but as I’ve said before, it’s cracking the sourcing mold and offering a free solution that companies new to sourcing and sourcing technology can use and experiment to find out what works for them, what doesn’t, and what they need help on. It’s a great way for a company to test the water as it provides a quick start to e-Sourcing with a price that can’t be beat. Then, when an organization has identified it’s needs, and, more importantly, identified what it can do well in house – and what it can not, it can always upgrade to a more extensive e-Sourcing platform and retain a PSP, like Source One, to help it with those categories that it doesn’t have the experience, or the leverage, to get savings on.

So, let’s give ThomasNet some applause for trying to spread the sourcing word and hope that this convinces more organizations still using e-mail and fax for RFQs to join the twenty-first century.

e-Sourcing Roll-out Success Tips

At reSource, Iasta’s (acquired by Selectica, merged with b-Pack, rebranded Determine, acquired by Corcentric) annual user conference, last week, both Fluor and First Group, two of Iasta’s larger customers, gave presentations on successful rollout tactics and lessons from complex implementations that had some good tips on getting the most from your e-Sourcing solutions. Considering that every additional day required for solution roll-out, and subsequent mastery, is another day where you’re losing process efficiency AND leaving money on the table, in these challenging times, every tip helps.

Some of the tips were what you’d expect, and included:

  • executive sponsorship
    it’s almost always easier to get buy in when support comes from the top down
  • retention of experts
    there’s often no faster way to kick-start your project than to bring in appropriately qualified experts
  • don’t overlook “change management” and the importance of a “change culture”
    e-Sourcing is all about change for the better, and it requires buy-in across the board to be truly successful
  • form true cross-functional teams
    every impacted department, including legal, marketing, and R&D, should have a seat on the cross-functional purchasing team
  • get financial support up-front
    you not only need the right tools up front, but you need the right expertise (in the form of consultant subject matter experts) up front as well – and this requires seed money (upon which you’ll see a great return when the project is executed right)
  • a standard sourcing process
    that is executed across projects

But some of the tips were a little less obvious, such as:

  • use the tool, not e-mail
    most of today’s sourcing platforms have companion supplier portals and allow for all communication with the supplier to take place through the platform – using e-mail fails to centralize knowledge and, more importantly, can allow the process to be side-stepped, which could not only allow for a loss of efficiency and savings, but could violate the ethics of e-Sourcing
  • don’t overlook mid-management
    even if you obtain buy-in from senior management and the team, if mid-management doesn’t buy in, there could be daily struggles
  • make greater use of all available features sooner rather than later
    most platforms these days come with basic spend analysis, decision optimization, and / or contract management – all of which deliver savings above and beyond what you can obtain with e-RFx and e-Auctions, which is not only where most companies start their e-Sourcing journey, but in too many cases, where they prematurely stop it as well
  • monthly meetings
    make sure that the cross-functional project team meets (at least once) every month – not just during project kick-off and project completion
  • build the standard agreements up-front
    and make sure each is reviewed by legal before being sent to potential suppliers as part of the RFx
  • roll your own buyer’s guide
    have one of your senior team members combine the relevant vendor product documentation, process guides, training materials, and free resources (such as the wiki-papers on the e-Sourcing Wiki [WayBackMachine]) into a single, printed, easy-to-follow buyer’s guide for each of your buyers that they can use as both a quick-start guide AND an easy reference

SourceOne scores a Grand Slam with WhyAbe

Gartner recently named Source One’s (acquired by Corcentric) free WhyAbe.com (sunset) platform as a Cool Vendor in Procurement and Finance for 2008. This is a big score for the sourcing and contract management toolset, when you consider that not many sourcing providers get this recognition from Gartner and that previous winners have included FreeFlow, Vinimaya (rebranded Aquiire, acquired by Coupa), and BIQ (acquired by Opera Solutions, rebranded ElectrifAI) – the latter of which are really cool vendors.

Source One, a Procurement Service Provider (PSP), is a fairly major player in the strategic sourcing & cost reduction consulting marketplace, having been incorporated back in 1993 – well before companies like FreeMarkets (now part of Ariba) made strategic sourcing vogue, and many of their consultants have over 20 years of experience in the field. They take the traditional approach to sourcing projects with a two part project team (consisting of Source One personnel who do the project and Client personnel who sponsor and manage the project on the client site), as compared to the resource augmentation approach some of the newer consultancies take. The approach may seem heavy to a smaller organization, but the results speak for themselves. With an average savings of 18% across 60+ categories (whose average savings range from 5% to 25%, while some outliers, like cash management, are as high as 90%), when they say their aggregated purchasing power allows them to secure exceptionally competitive pricing, they mean it. And from what I hear, they’re doing so well that it’s a daily struggle to keep up with a constantly increasing demand for their services. (P.S. They’ll be making a big announcement at ISM next month. You might want to watch for it.)

But let’s talk about WhyAbe.com. From a technology perspective, RFX, Reverse Auction, and basic Contract Management is nothing new … basic solutions for the former has been available for over ten years and a basic solution for the latter for at least seven years. There’s nothing new about cookie-cutter on-line stores or stripped down supplier networks either. What is new is the fact that it’s totally free.  WhyAbe.com is cracking the sourcing mold and offering a free solution that companies new to sourcing and sourcing technology can use and experiment to find out what works for them, what doesn’t, and what they need help on. It’s a great way for a company to test the water as it provides a quick start to e-Sourcing with a price that can’t be beat. Then, when an organization has identified it’s needs, and, more importantly, identified what it can do well in house – and what it can not, it can always upgrade to a more extensive e-Sourcing platform and retain a PSP, like Source One, to help it with those categories that it doesn’t have the experience, or the leverage, to get savings on. Furthermore, should it retain Source One, it can still use the tool as a way to work with the PSP. In other words, even though there’s nothing new from a technology perspective, the model is very cool and I think they deserve the Cool Vendor award for it. If nothing else, it will force some of the stagnant providers in the e-Sourcing space that haven’t done much with their solution for 2, 3, 5, and in some cases, 7 years to update their offering to provide real value for the $$s they’re charging, or fall by the wayside to make room for the new innovators. And that’s a win for the space you can’t argue with!