To stay innovative, many leading companies run internal programmes, covering a wide range of subjects from technology innovation to business model innovation. But these programmes, in many cases, fail to generate significant value.
Some companies consider collaboration with others in the supply chain. One obvious benefit of doing so would be the integration of capabilities and skills. But it’s almost impossible to integrate different strategies at a large scale, since many companies would be unwilling to share all of their data and information.
Apart from limited innovation, the consequences of locking innovation inside companies are obvious. Knowledge and information are not integrated between companies in the supply chain, so the services and solutions delivered to end customers may not be the best ones. Additionally, supply chains are usually output-focused instead of outcome-focused.
Suppliers seldom focus on the value delivered to end customers. On the other hand, if innovation can’t be unlocked in the supply chain, the supply chain is not efficient. Suppliers, contractors and clients have to discuss back and forth several times before final decisions are made.
In some industries in the UK, such as the utility industry, the regulator has triggered the change to unlock innovation in the supply chain, by directing the industry to be outcome focused and customer focused. Companies are incentivised to explore new models to engage suppliers for innovation. One approach is the formation of a strategic alliance, where suppliers/contractors and the client companies can work together within one organisation, and team up to deliver services and solutions to end customers. Suppliers are contracted on outcomes instead of on outputs, so that they consider the end customers as well as the closest step in the supply chain.
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Image: Ford Rouge Factory Tour
Credit: Nicole Yeary
Reproduced courtesy of the University of Cambridge
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Unlocking innovation in the supply chain
27 April 2016
Jinchen Hou from Cambridge University's Institute for Manufacturing comments on how members of complex supply chains can form alliances, in order to unlock the innovation that’s often hiding within individual companies.