Hot off the heels of CES, our annual pilgrimage to the land of product innovation, everything from walking cars to AI-infused toothbrushes wowed us this year. The secrets of innovation need not be limited to venture-backed startups. The concepts were revealed by some of the world’s largest manufacturers, e.g., Hyundai and Procter & Gamble, respectively.
In fact, many of the most impressive innovations at this year’s CES were from big companies. After years of abandoning what attracts consumers to newer industry players, big companies are finding better ways to innovate inside their traditional structures. Digging deeper, these titans are doing things differently to take disruptive new products to market and are acting more like startups to foster new product innovation.
According to a McKinsey & Company survey, “more than 25 percent of total revenue and profits across industries comes from the launch of new products.” Successfully and repeatably taking new products to market then appears to be one of the key enablers to company’s long-term success.
Make no mistake, big companies have a significant head start over startups in the form of resources. Large-cap manufacturers possess deep investment capital, broader employee pools, and established manufacturing infrastructure, all of which (if used properly), can crank out innovative products at or faster than most firms.
One of the most distinctive advantages that big companies have over smaller firms is their established supply chains. Many manufacturers have spent decades cultivating relationships with global suppliers, building connected, lean-extended supply networks that, when purposefully harnessed, unlock immense new product innovation potential.
Supply chain professionals within large manufacturers are uniquely positioned to accelerate product time-to-market by expediting technology commercialization and reducing not only the time of, but also the costs and risks associated with, new product innovation.
5 Supply Chain Strategies Big Companies Can Use to Innovate Like Startups
1. Empower Your Supply Chain Team
Supply chain professionals encounter an immense number of new manufacturing processes, material compositions, and cutting-edge technologies on a daily basis. We need to tap this amazing resource by sharing our companies’ long-term strategic product plans with our front-line buyers to better include them in the innovation process.
“Ask employees to submit ideas for improvements to existing products and services, as well as operational improvements and new ideas,” says Dan. People we do what’s incentivized, so find ways to acknowledge and reward supply chain team members for identifying and advancing innovation within your organization.
“Consider a reward system for submitting ideas that bring about innovative processes, products, or improvements to new products,” adds Dan.
2. Source Innovation
Startups often need partnerships to acquire the technologies and scale they need to compete. This frugality is part of a startup’s DNA and forces the supply chain personnel at these firms to do more with less. Oddly, budget limits can be a beautiful motivator because if a startup runs out of money, then they’re out of business, so it’s clear to understand how the budget impacts their team’s focus and results. But that dynamic doesn’t exist at big companies because there isn’t the same level of urgency; there’s always a cash reserve backstop.
“Spend the time up front on the product, bring in every expert you can to help provide critical Design for Manufacture and Assembly (DFMA) reviews of the product; utilize experts to evaluate how the product will be made and provide advice,” says Dan. Sourcing specialized services firms in design, engineering, or supply chain can reduce the cost and time to acquire expertise in a given industry or market segment.
Further, a small project for a small services firm can be the contract of a career. Thus, large companies can recreate the “startup sense of urgency” that drives speed, focus, and results by sourcing small services firms. These smaller services firms can act as sandboxes to cost-effectively experiment and develop best practices and technologies that can be later rolled out to the broader company.
3. Enable Suppliers to Take Risks
Failure is learning. If we don’t fail, we won’t learn. Subsequently, one could argue that we don’t innovate when we’re not constantly failing, and your supply chain team members are in a unique leadership role during innovation. As an example, you could source new product concepts with two competing product development firms, essentially mimicking Steve Jobs’ notorious approach of having internal teams compete, which produced some of the most innovative Apple products when it was just a startup.
“The most common failure manufactures make developing new hardware products is they rush to market without designing the product to meet the customer use requirements or durability necessary to ensure commercial success,” says Dan.
Sourcing suppliers to develop new products is a trusted advisor style of partnership, not a basic indirect spend commodity to be strongly negotiated. This doesn’t mean that you can’t negotiate or receive cost-effective support, but it does mean you need to keep an open mind and listen to suppliers’ creative approaches to deliver on your requirements.
After all, you want to foster more innovation, so limit the mandating of specific processes your suppliers follow. You can still drive timelines and budgets, but if you want suppliers to take risks, you need to acknowledge that developing innovative products isn’t a well-defined process; it’s a messy, creative process that, when given space to breath, can create economical innovative products for your organization.
4. Pilot New Technologies
Encourage your supplier relationships by being an early adopter of your suppliers’ latest technology offerings. This can further strengthen your partnerships and establish greater market strongholds through supply loyalty.
As an example, cloud software has dramatically lowered the investment costs of newer supply chain software. Gone are the days of requiring expensive consultants to set up software platforms over multi-year deployments. Thus, the cost to pilot leading-edge software technologies, in many cases, is simply your time.
Don’t want to be out-maneuvered by your competition? Embrace the future now by continuously trying new software and manufacturing process technologies. In most scenarios, it’s better to gain exposure and be the early adopter than to wait until your competitors are already familiar with, and have implemented, a new technology.
5. Be in the Arena
Let’s face it, large teams can fall victim to “group think”, so the next breakthrough idea won’t likely come from within your company walls. As President Theodore Roosevelt put it, “the credit belongs to the man who is actually in the arena.” You and your team need to get out of your office and into the arenas of where innovation is happening.
Partner with universities, accelerators, venture capital firms, and startups to gain exposure to new ideas and approaches to solving your customers’ most pressing problems. As an example, you could join the corporate advisory council of a startup which is developing a technology with an application to your industry. Big company-startup relationships can truly be win-wins: access to innovation in exchange for early customers and real-world market feedback.
A common misconception is that you need to be a senior supply chain executive at a Fortune 500 company to participate in these opportunities. Far from it. Your expertise at a working level can prove invaluable, and in some cases more valuable, as you intimately know the specific day-to-day pains startups are working to solve. Additionally, your involvement in innovation will unveil promotional opportunities for your big company as you become a go-to expert in the new technologies that are shaping your industry.
Universities, accelerators, and startups are constantly seeking experts from established manufacturers to participate in research, pitch competitions, and mentorship capacities. Why wouldn’t you want to be involved where innovation is happening, especially if it’s at no cost and potentially beneficial?
“That sounds good…” you say, “So what’s the best way to get involved?” There isn’t a standard approach, but these organizations tend to be well connected and are rather easily accessible. Just find the leader or coordinator of the organization you want to be involved with and send them an email or LinkedIn message outlining your desire to join and/or contribute, and how it would benefit the your firm and the organization. You’ll be amazed at the response rate and you’ll gain exposure to new innovation frontiers in no time.
“New product development takes time, hardware is hard! You can easily get stuck in a constant cycle of redeveloping your product, spending critical money and time on redesign, re-engineering the product sending many generations of beta prototypes to market only to lose the patience of customers and investors.” says Dan.
That’s why we recommend the five supply chain strategies highlighted in this blog, which are proven methods to foster more innovation throughout your company. Every organization, no matter its size, has limited funds, people, and technology, so using your supply chain team to tap into your extended enterprise through your supply base will unlock endless opportunities for innovation.
There are certainly advantages and disadvantages to both big companies and startups when it comes to innovation, but large companies that use their supply chain teams to proactively source and nurture innovation in their organizations will level the playing field and better control their destinies.