Corporate Procurement: Creating a Culture of New Ideas
In conversations with Chief Procurement Officers (CPOs), we’ve learned that if they do not push their procurement organizations to find new ways of providing value to their companies then they will likely slip into the anonymity of a shared services center.
Many procurement organizations have taken steps to improve their functional maturity—investing in their systems, outsourcing low value categories, and moving processes like “procure-to-pay” to their shared services departments—with the hope that this will improve their ability to generate greater value by enabling the organization to take on bigger, bolder projects. However, most procurement organizations are still employing basic and familiar techniques and engaging in projects that would be classified as “buy impact” or “demand impact”. Progressive organizations pursue higher-value “cost structure impact” and “product and brand impact” projects, which are neglected or considered too difficult by most organizations (see chart 1 in this piece for more detail).
Our research shows that procurement organizations with balanced project portfolios generate more hard savings than their peers, are more likely to be viewed as strategic business partners, and are able to incorporate supplier-generated ideas into new products and process improvements. However, in order to achieve a balanced portfolio and improve the quality of ideas, procurement organizations need to have a process in place that will help category managers be creative and develop new ideas. Our most recent research looks at successful “ideation” processes that have been developed in the world’s procurement functions.
Ideation is Challenging but Important
Procurement organizations often have a difficult time trying to create a balanced portfolio. According to our members, one of their biggest challenges is determining whether their staff even have the capability to engage in breakthrough thinking. In the past, many procurement staff were tasked with process-oriented roles where they were not required or asked to “think big.” Furthermore, the internal procurement culture of some organizations is not generally conducive to bold thinking.
But progressive organizations make use of their employees’ passion for creativity, coach their staff on how to think bigger, and model breakthrough thinking. These organizations have significantly higher levels of new ideas, produce better quality ideas, and as a result create competitive advantage for their companies. As an ancillary benefit, procurement organizations that are successful at producing breakthrough ideas have more effective and engaged employees. Highly engaged employees put in approximately 57% more effort and are 87% less likely to leave the organization.
Our most recent research shows how companies like GlaxoSmithKline and industrial manufacturer, IMI, have created effective coaching and modelling techniques that guide procurement staff to think beyond their day-to-day roles and that remove the biases and assumptions that tend to constrain their thinking. For now, Procurement Strategy Council clients (PSC) can use use this already-published case study to understand how Amway procurement organization helps create a culture of bold thinking for its category managers.
PSC’s First Meeting on Creating a Culture of Ideation
On July 13th we hosted 30 CPOs at our Chicago Annual Executive Retreat. It was our first opportunity this year to share our findings on “Creating a Culture of Ideation”. The material was extremely well received and the discussion was fantastic. If you are a PSC client, please contact your account manager to understand which sessions still have availability.
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- Additional research by Brian Menke