Collaborative Innovation: Drive Profitability by Playing Well with Others in the Supply Chain

Hat tip to Michael Lamoureux of Sourcing Innovation for his post covering a recent article in Industry Week on Collaborative Innovation.  Let's start with the meat that gets everyone's mouth watering:

Increase profits 15% to 20%.

That's correct.  According to a survey of 30 global consumer packaged goods manufacturers in retailers, 95% of them cited collaborative innovation as very important to achieving business objectives and a driver of profitability.  A few of the main points, as highlighted by Michael at Sourcing Innovation:

  • Non-Adversarial Mindset
    Michael mentioned going one step further to say that you need to be able to trust the the party.  I completely agree.  When it comes to manufacturing sources, particularly in overseas places like China, building trust occurs out of 
    • working with people who are trustworthy in the first place (duh!  but often overlooked…)
    • putting in the time to meet your partners and understand their business
    • approaching your business dealings with them as a partnership and looking for win-win scenarios.  What's good for the goose is good for the gander and your partners will go the extra mile for you to meet your deadlines and meet your specifications when they know they will gain if you do.  

 

  • The Ability to Learn to Speak "Another Language"
    Michael's thoughts: "Every profession, and every group, has their own "language". You are going to need to learn it or you might as well only speak English while your collaborator only speaks Mandarin as the communication gap will be just as broad until you do."  IMHO, the success of learning another language is driven by speaking a lot.  I often say that you cannot communicate too much in product development and sourcing throughout your supply chain.  When you talk more, you catch things that were missed and raises the probability of discovering areas where your "language" is different from their "language".  Making the effort is 80% of the battle, and goes a long way to buttress the first point–building a trusted relationship.  It may take more effort in the beginning, but once you are in the swing of things with the other party, progress will occur at blinding speeds.


  • New Metrics
    Most companies will have a hard time transitioning from the metrics they have to measure supply chain performance now, and metrics that will help analyze and improve elements of the supply chain such as collaborative innovation.  One area that companies are increasingly tackling is corporate social and environmental responsibility, which requires collaborative innovation and work up-and-down the supply chain.  Metrics for the supply chain, or supply chain partners are developed, such as packaging reduction, eliminating energy intensive materials and processes from the supply chain.  Managing, measuring, and sharing in the successes and failures brings partners closer and can be an indirect method of getting a handle on the level of collaboration taking place.  More simple methods of looking at this might involve looking at what % of ideas came from where.  For example, how much did you product specification change from when you first handed it off for quotation compared to when you arrived at a final quotation based on approved samples?  Were materials changed?  Assembly processes changed?  Part dimensions changed for lower cost tooling?  If so, where did these ideas come from.  Your vendors may be bringing you more value than you think?  Also, one can look at the % of risk shared.  How is performance measured and payment structured?  Is one partner shouldering all of the risk?


  • Willingness to Share IP
    When thinking about offshore manufacturing destinations like China, hands start to tremble at the thought of this.  In the article, this point might be more directed towards conversations downstream in the supply chain–such as with distributors, retailers, and key customers.  It's important to make decisions about when and what and with whom you are willing to disclose IP related information.  However, while most focus on what can be risked and loss, there is also quite a bit to be gained.  Fresh and valuable perspectives on how to make the most of one of your most core assets, from a core partner, could be one of the most profitable benefits.  

I like this article because the global business environment is simply too competitive to not leverage the value of your best partners.  Talent and resources can be tapped that you don't need to directly pay for, and mutual wins can translate into strong relationships that drive competitive advantage.  While this may be a lot of MBA and corporate speak to say that putting in effort to play well with others means more change in the piggy bank, it's surprising how many companies and people forget this when playing in the sandbox.