Your suppliers can teach you something about your core business – are you listening?
We are living in a time of increasing change; the climate emergency is crystallising into increased action, political will, and worse weather disruption. Car companies are announcing tens of thousands of job cuts as they prepare for an electric vehicle age. Digital disruption is becoming embedded into everything we do, and political changes like a restructured trade landscape reverberate as countries try to throw their weight around. For companies trying to ride the wave of change and gain an advantage, it’s hard to work out what to listen to and where to focus; we’ve found an area that’s often underdeveloped is your biggest pool of outsiders, the supply base.
I’m reminded of a story from cosmology; Arno Penzias and Robert Wilson at Bell Labs, a hotbed of innovation in the middle of the last century, was working on a new supersensitive antenna (part of an experiment in reflecting transmissions for communications). They had to eliminate all the background noise and kept coming up against a strange noise 100 times stronger than expected, there every day and night.
They checked their equipment, even clearing it of pigeons and some droppings which had accumulated, but had just about run out of ideas when a friend told them about a paper Peebles and Dicke were working on, predicting exactly this noise as the remnants of the first surviving light in the universe, the Cosmic Microwave Background. The hard work sparked by that conversation ended up winning a Nobel Prize.
Where's the innovation?
Time and time again, we look for innovation from ‘lightbulb moments’ or focussed teams and places like Bell Labs. However, stories like this show us that innovation often comes from unexpected new links and conversations, throwing new light on problems or findings that have already been worked on. Immigrants are known to patent at highly disproportionate rates, with 40% of global patents filed by immigrants despite them being 3-4% of the global population. Why? Well, it’s partly because these are likely to be highly motivated, skilled people who have moved and worked hard to build new opportunities. It’s also because of what it takes for innovation to happen – these people sit at the edges, bridging their cultures, networks, and perspectives to bring new innovation to the fore. So where are these people in your companies?
Suppliers each have their own distinct focus, culture and values which bring a fantastic set of edges for your company to work with, spark off, and build something new together. Your supply base is probably 30-60% of your cost base – and could represent over half of all the people working to deliver for your customers. These people blend the worlds of their company and yours, so are likely to see all sorts of opportunities to do things differently. How can you facilitate this and make sure they are bringing you their bright ideas?
It starts with conversations – making sure you’ve given suppliers permission to make suggestions, and being open with them about what you’re aiming to do. Building strong relationships by talking regularly, in an environment where both of you are bringing ideas to the table, gives both sides the insight and security to suggest new things. Hearing your suppliers strategic goals, and their pain points, makes it easier to find the right way to trial an idea – and they will need help navigating your company to make this change a reality.
Sometimes, a third party can help facilitate that relationship; we helped one client open up to a strategically important supplier where they felt they had a weak position, unlocking nearly 10% cost improvements by stripping out legacy process steps and creating conversations about alternate products. The transparency and relationships created helped both sides mitigate risks, and see more opportunities to explore. For the supplier, it was their core business. For the client, it was an edge they had not yet found – and an innovation which would open up a new market as the product hit a disruptive threshold. So what have you heard from your suppliers lately?