At its best, procurement isn’t just about saving money. To be sure, the amount of savings delivered is a critical performance metric for a Chief Procurement Officer (CPO). But as procurement’s performance has matured—routinely delivering excellent internal service while increasing the level of savings with suppliers—progressive CPOs are searching for new ways to deliver value. The single, largest opportunity CPOs now have to drive topline value is to focus on growth through supply innovation.

Procurement’s success in its traditional role has uniquely positioned it to identify and pursue opportunities for innovation and growth that other parts of an organization might miss. Specifically, procurement can make a unique contribution in areas such as ecosystem management, better governance and taking advantage of a holistic supplier view.

"Our 200-plus brands across 180 countries are constantly innovating. We believe we can make our innovation pipeline and our brand reputation even stronger if our supplier-partners play a more proactive and insightful role in ideation and delivery. This type of partnership will drive sustainable business performance for both parties."

– JENNIFER MOCERI, CPO –  Diageo

Why innovation?

Innovation is increasingly part of the mission of advanced procurement organizations. This is what Emelia Nosser found when she became Chief Procurement Officer of Shiseido Americas Group, a Japanese multi-national personal care company. “What intrigued me about the opportunity was that leadership was looking to procurement to help drive innovation. That’s very different from the cost-cutting mission at so many other companies. Of course, there are expectations around savings and performance, but the real focus is on growth and innovation.”

But how, exactly, is innovation to be delivered through procurement?

63%

of businesses view the ability to innovate as the top opportunity ecosystems present

52%

say industry innovation is a great threat from competitors forming ecosystems

Effective ecosystem management

An organization and its suppliers and partners make up a crucial ecosystem within an overall business environment, and such ecosystems are vital to innovation. Suppliers, for example, will increasingly be relied on as a major source of new ideas that can help give a company a competitive edge.

According to a recent Accenture Strategy study, 81 percent of C-level executives surveyed agree that ecosystems allow their organization to grow in ways otherwise not possible. Why are ecosystems so important? In the same study, we found that 63 percent of businesses view the ability to innovate as the top opportunity ecosystems present. (And about half—52 percent—recognize innovation by competitors forming ecosystems as a threat.)



Better governance

CPOs also use different governance structures to improve supplier collaboration including annual Top-to-Tops, or Quarterly Business Reviews. These communication channels can deliver tremendous value when they are chartered and structured with intent. Jennifer Moceri, Chief Procurement Officer at Diageo, a multinational alcoholic beverages company, is launching a new Supplier Relationship Management (SRM) program to do exactly that. “Our 200-plus brands across 180 countries are constantly innovating. We believe we can make our innovation pipeline and our brand reputation even stronger if our supplier-partners play a more proactive and insightful role in ideation and delivery. This type of partnership will drive sustainable business performance for both parties.”

Innovation from a holistic view

Procurement can see things in suppliers who support multiple lines of business that individual users might miss with a standalone supplier relationship. It is also common for procurement to form internal supplier councils around a given spend category, or for CPOs to share best practices externally in industry groups, creating a broader perspective of supply market capability. This visibility enables procurement to help the business locate better supply sources.

Procurement is also empowered to support growth through innovation because they shape the terms, conditions and compensation of suppliers. They have negotiation tools at their disposal to help form at-risk, gain-sharing and exclusive rights agreements. These commercial terms can influence business outcomes and ensure alignment. Challenging suppliers to invest in your partnership, or come to the table with original ideas, or conduct proprietary market research, is an often-underutilized tactic when forming these commercial relationships.

Getting started

Any talk of procurement’s ability to support growth and innovation presumes that you have superior base procurement capabilities in place. If, for example, your source-to-pay infrastructure is poor, and you’re paying vendors late, they probably won’t be very receptive to a conversation about innovation. But if your organization is ready, procurement may be able to make a significant contribution to growth.

An initiative to drive growth through supply innovation doesn’t have to be difficult to start. Pick one supplier, business area or spend category. Start with a pilot, and then scale based on what you’ve learned. As Confucius said, “Better a diamond with a flaw than a pebble without.” Too many companies fail to make progress in this space because they over-think or over-plan.

The best corporate-supplier ecosystem is one where each member has a vested interest in everyone else’s success. Your growth means others will grow, as well.

1 Michael Lyman, Ron Ref and Oliver Wright, Cornerstone of future growth: Ecosystems, Accenture Strategy, May 11, 2018.

Seth Rogers

Managing Director – Accenture Strategy


Thomas Ligenza

Senior Principal – Accenture Strategy

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