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1. Innovation Driven Procurement (IDP)
January 2009

2. Corporate mission, vision and strategy statements stress the importance of
innovation as the engine for growth
We deliver innovation by investing in world
class strengths in end-user insights,
technology, design and superior supplier
networks
Philips
Source: corporate websites
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3. An example of an innovative company: Procter & Gamble Open Innovation initiatives
connect external parties to contribute to new product development
Open Innovation with P&G
P&G’s Innovation Net
Mechanisms
Consumer An internal network of 70 technology
Insights
entrepreneurs who think up scenarios and write
technology briefs
Suppliers’ research teams work in P&G labs
Customer
R&D
Teams
Labs and P&G researchers work in supplier labs
Interactive prototyping tools to co-invent new
product packaging with consumers.
Networks connect companies that have a
science or technology problem.
Employees
Trade A network that links over 800 retired but high
Suppliers
performing scientists and engineers from over
150 companies.
Results
Since 2000, share price has doubled and R&D
investment as a percentage of sales is down
Suppliers
Venture from 4.8% in 2000 to 3.4% in 2006
Capitals
Launched 100 new products, 35% of which
originate externally, up from about 15% in 2000
45% of the initiatives in product development
have key elements discovered externally
Contract Labs Research
Institutions Increased product hit rate to more than 90%,
from 70% in 2001 through open innovation
Source: (a) “Why companies should have open Innovation”, HW Chesbrough, (2007); (b) “Connect and Develop: Inside P&G’s new model for Innovation”, HBS 58 (2006); (c) Company website
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4. The Innovation Driven Procurement (IDP) Strategy based on the Corporate and
Procurement Strategy will transform procurement into a true business partner
From Strategy to IDP
Corporate Procurement It is essential to align the Procurement Strategy
with the overall Corporate Strategy to ensure
Procurement’s efforts are focused appropriately
and are consistent with the fundamental direction
of the business. This is what makes Procurement
Strategy
a service provider for the business.
Corporate Procurement Whereas innovation is often stressed in Corporate
Strategy Strategy Strategy and open innovation is embraced by
many successful companies, many struggle to
translate this into the Procurement Strategy. Let
alone providing procurement services satisfying
the business’ innovation needs.
IDP The translation of the Corporate Innovation
Strategy into a Innovation Driven Procurement
(IDP) Strategy provides focus for procurement.
Mechanisms such as those shown in the P&G
Innovation
case need to be formalised and embedded in the
organization. IDP will transform Procurement from
Innovation Support a service provider into a business partner.
initiatives services Depending on the IDP strategy, new roles and
services will be provided by procurement. This can
have an effect on the entire procurement function,
mainly impacting tactical procurement operations
such as sourcing, demand management and
supplier relationship management.
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5. Innovation Driven Procurement is one of the crucial aspects in adding value to your
business if innovation is part of your Corporate Strategy
IDP in procurement development
Over the past decades, the increased importance
of the procurement function has set a
development in motion. Nowadays, most
•Value extraction companies have spend management strategies,
Value focus
allowing them to leverage economies of scale and
and creation
managing demand in the organization.
Procurement maturity level
IDP
Most have gone further with involvement of the
•Performance enhancement business in the procurement processes. This
process focus makes procurement a reliable
Product focus
service provider responding to business demand
•Supplier involvement
and mitigating risk and costs.
Some have successfully gone further recognizing
•Eliminating deficiencies
suppliers as a key actor of the end product. This
Process focus
goes beyond responding to business demand with
•Business involvement procurement services, mitigating risk and costs. It
means pro-actively providing value added services
that will help the business reach the corporate
•Consolidation goals.
Spend focus
IDP services are focused on future client demand
•Compliance
and (potential) markets. It encompasses a
procurement function which is embedded in new
product development, which uses its extensive
market knowledge to scout for new opportunities
Transactional focus •Negotiation beyond direct business demand, and may even
spur new directions for the company.
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6. IDP includes mechanisms both internal and external to the product chain for
Procurement to contribute to Open Innovation
IDP based on Open innovation
Product chain internal mechanisms
Connecting existing suppliers with engineers
Searching and stimulating new developments
within the existing supply base
Set up joint development programs, co-creation,
partnerships
Provide toll gate services for new technologies
throughout the innovation funnel
P&G case example: strong internal networks
and close collaboration with suppliers
Product chain external mechanisms
Scouting for new developments outside the
existing supply base and in completely different
markets
Creating flexibility in supplier segmentation and
dependency
Building scenarios of future markets with
boundary spanning networks
Connecting with new ventures inside & outside
the product chain
Changing the market focus or future market
P&G case example: prototyping, networking
with consumers, engineers and entrepreneurs
Source graphic: Prof Henry Chesbrough UC Berkeley, Open Innovation: Renewing Growth from Industrial R&D, 10th Annual Innovation Convergence, Minneapolis, Sept 27, 2004
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7. Beside the natural position of Procurement as the suppliers’ partner, Procurement
competences match perfectly with those required for Open innovation
Key Procurement competences Open innovation required competences
A well developed procurement department Open innovation must be organized and
(maturity level of process focus and higher) has facilitated. Open innovation goes far beyond an
strategic purchasers who can: internal R&D department developing new ideas.
Competences required for Open Innovation are:
Challenge business demands Critical view on internally developed
specifications
Contribute to developments with strong
knowledge of the category markets and Boundary spanning communication and
products collaboration skills
Build up a broad vision on markets Technical and market insight
MATCH
Develop and leverage relationships between Decision making in the various toll gates in the
the business and suppliers innovation funnel
Manage an open portfolio of suppliers and Critical attitude towards the status quo, and
evaluation their contribution readiness to engage with new parties
Challenge suppliers develop more value for the Curiosity and ambition to investigate and realize
product chain future possibilities and potential markets
Source graphic: Prof Henry Chesbrough UC Berkeley, Open Innovation: Renewing Growth from Industrial R&D, 10th Annual Innovation Convergence, Minneapolis, Sept 27, 2004
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8. The IDP strategy impacts upon all strategic and tactical aspects of Procurement
• Develop maturity to at least the process focus level
• Translate innovation strategy into IDP strategy
• Set up and support for the projects by the responsible
• Align initiatives with the board of management
CXO’s
• Set up project organization for multi-functional IDP teams Procurement
Strategy
• Define roles and responsibilities Development
• Evaluate category plans to help identify IDP projects
Governance &
• Increase weight of multi-functional teams for IDP
Organisational Development
categories
• Conduct sourcing within IDP teams
• Increase scope of sourcing strategies
• Specify needs functionally
• Specify problems instead of solutions
• Focus on (future) added value to the product Category Planning
chain
• Open up portfolio management
• Involve legal for good IP structures
• Extend supplier management outside the supply
base
• Redefine relationships
Supplier
Demand
Sourcing Relationship
Management • Deal with IP rights
• Fully involve the business in the IDP Management
• Open up networks with the ecosystem
teams
• Increased partnering, development and co-creation
• Feed the business with market
knowledge and developments
Supply Planning & Control
• Set up networks for new idea creation
and scenario building
Provision of Goods & Services
• Set up internal and external
knowledge bases
People
IT Knowledge & Information
• Make use of online tools for networking
• Ensure perfect communication within
• Connect with suppliers
IDP teams
Managing the Enablers
• Support boundary spanning project
• Connect with external knowledge
management
sources
• Communicate success
• Select the top resources for IDP projects
• Recruit your success and change profiles of strategic purchasers
• Develop project management and collaboration skills
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9. Contact
Consulting Services Consulting Services
ir Robbert den Braber ir Ronald Geerts
Senior Consultant Senior Consultant
Capgemini Nederland B.V. Capgemini Nederland B.V.
Papendorpseweg 100, P.O. Box 2575, Papendorpseweg 100, P.O. Box 2575,
3500 GN Utrecht - The Netherlands 3500 GN Utrecht - The Netherlands
T. +31 30 689 5056 T. +31 30 689 3842
Mob. +31 6 15 03 09 01 Mob. +31 6 27 15 92 96
Robbert.den.Braber@capgemini.com Ronald.Geerts@capgemini.com
www.nl.capgemini.com www.nl.capgemini.com
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