Why procurement can and should be the epicentre of business innovation

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SueBarrett_100.jpegBy Sue Barrett, Founder, Barrett Consulting Group

Procurement, whether they are aware of it or not, is the epicentre of innovation and leadership of complex systems management within organisations and across supply chains. Or at least they should be...

Procurement's exposure to all elements of a supply chain can and should inform them and, in turn, other key stakeholders within and outside of their organisations of the latest, easiest, most sustainable, fast, ethical and best ways of doing business.

While procurement cannot be expected to be experts in every area of business, they can and should be experts in systems, managing complexity and managing relationships. Procurement professionals need to be more systems orientated in their approach and understand and facilitate the interconnected web of business, human relationships, sustainability, innovation and ethical sourcing.

But, is this being taught at procurement school? Is this being encouraged from within businesses from the C-suite down?

I am not sure.

So, why is this important?
The biggest killer of innovation in any business is often the procurement process itself. When a request for proposal (RFP) is reduced to a tight specification brief for a shortlist of three suppliers, and no room for alternative ideas or offers, or is poorly written with no understanding of the real impact on the business, then innovation, ideas, smart people and better ways of doing business are cut out of the equation. It is like living in a walled city with no idea about what is happening in the outside world.

Why is this of particular importance to Australia?
According to Harvard and a recent Financial Review article, Australia is Rich, Dumb and Getting Dumber:

Bangladesh, Cuba, Iran, Mali and Turkmenistan share an unexpected connection to Australia, and it isn't membership of a tourist destination hot list.

All are among the economies that are so lacking in complexity, and have such limited natural opportunities to develop new products, that Harvard University recommends they adopt industrial policy straight out of the post-colonial developing world: the 'strategic bets' approach.

The advice comes from the Harvard Kennedy School's Centre for International Development, which two weeks ago launched an online database of 133 economies that combine remarkably rich data with beautiful presentation.

Designed to map, literally, the economic progress and opportunities of the industrial and non-industrial world, the Atlas of Economic Complexity exposes an under-appreciated truth about Australia.

The enormous wealth generated by iron ore, coal, oil and gas masks probably contribute to an economy that has failed to develop the industries needed to sustain its position among the top ranks of the developed world.

Put simply, Australia is rich and dumb, and getting dumber.

Australia ranks 93 out of 133 nations in terms of the Economic Complexity Index: it has a score of -0.60 compared to Japan at +2.28 and just 0.02 points above Pakistan and 0.04 points behind Senegal.

So, what are we doing about it?
Who is responsible? Where can we start?

Innovation and managing complexity should be a top priority on the agenda of every Australian Board and C-suite. If it is not, then they are simply not doing their jobs properly.

But why wait for them?
Given procurement can often be a bottleneck for innovation, why not start there? From the pragmatic place of the day-to-day operations of business.

This is where procurement can and should step in and take the lead.

However, if procurement professionals decide to stick to their compliant, cost-managed, automated procurement process of operating, that keep suppliers and ideas at bay and remain the budget-adhering lackeys of finance, they are at risk of becoming obsolete and doing everyone else a great disservice thus leaving organisations, people and communities vulnerable and in danger of obsolescence.

No pressure procurement professionals but I do believe that you can and should be the epicentre of innovation, the open gateway to ideas and opportunities, and the leaders of complex systems management within organisations and across supply chains.

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