Creating sustainable, innovative value chains Value creation through Innovation Annual theme NEVI...

Creating sustainable, innovative value chains

Value creation through Innovation

Annual theme NEVI 2011

Prof Dr Arjan van Weelewww.arjanvanweele.com

[email protected]

© Prof dr Arjan van Weele

1. Why this annual theme ?

Value creation in the chain through innovation


1. Why this annual theme?

The last few years, purchasing as a company function has gained more recognition …

Has shifted from ‘back room’ to ‘board room’…

Purchasing professionalization has generated significant savings…

This development, however, has not had only positive sides...



Short film




Other examples of ‘over-the-top purchasing enthusiasm’…

•Homecare…•Disabled child transportation in the city of Eindhoven…•Contract catering…•Public transport…•Temps agencies…

In numerous sectors there is a pressure on margins... and quality of work at stake...





Debatable purchasing practices (Rietveld (2009), p.32):• Competition enhancement is the most favorite purchasing

technique…• Bundling purchasing volume is the most favorite sourcing

strategy…• For supplier classification, purchasers use the immensely

popular Kraljic matrix…• Sourcing models are no longer regarded as means but as a

target…• Terms of payment are stretched and discount is deducted on

payment…• Purchasers focus dominantly on purchasing savings…

‘To steer into more strategic business waters, CPO’s must abandon the cost savings myopia and service mentality that tarnish procurement’s image…. ( Russill,(2008))



Hypothesis 1‘It took us 30 years to get purchasing into the boardroom… it will take probably less than 5 years to get us out...’

Hypothesis 2‘With our single cost driven purchasing paradigm, we as a purchasing community hardly do our companies and society a service anymore...’

Hypothesis 3‘We need to act different ie. change our ways of working...!’



2. We need to act different…




value

riskcost

guarantee the availability of goods and services

under all circumstances, in line with ‘Triple P’

reduce costs of goods and services and transaction cost

improve the company’s customer propositions,

accelerate customer processes



2. We need to act different

What is Value? Sum of three different value concepts:

•Customer value…

•Social value…

•Shareholder value…




Propeller model: combining customer value, social value and shareholder value (Kibbeling (2010))

Duu

socialvalue

shareholdervalue

customer value

market orientation

innovationsustainability



3.Value creation through innovation



3. Value creation through innovation

Numerous academic studies find that innovation contributes to long-term success and market share.

The most successful

companies consistently

dedicate resources to new

product development. (Booz,

Allen & Hamilton, 1982)

Innovation is a driver for competitive success. (Schilling, 2005)

For decades now, it is clear that innovation is vital for companies’ survival on the long run. (Porter, 1980; Chesbrough 2003a; Schilling, 2005)


Van Erum (2010)


Challenge to many companies: how to manage our EXTENDED ENTERPRISE…?

profit margin: 1.5%

added value: 20%

purchasing value: 78.5%

Question: What should managers do?

turnoversales: 100%

External costs strongly influence companyresults…




Challenge to many companies: how to manage our EXTENDED ENTERPRISE …?

Suppliers determine 78.5% of the costs, innovation capacity , CO² footprint and customer value…


profit margin: 1.5%

added value: 20%

purchasing value: 78.5%

Question: What should managers do?

turnoversales: 100%



Research shows that:

• suppliers are an important source of competitive advantage and innovation…

• innovations in many industries originate mainly from suppliers…




Research shows that:

• suppliers are an important source of competitive advantage and innovation…

• innovations in many industries originate mainly from suppliers…• innovative companies do well to work with innovative suppliers…• these innovative suppliers can and must help these companies make a difference in their market…• all this demands a different orientation from purchasing professionals, their way of operating and the way they are judged and rewarded…



3.Value creation through innovation

There is sufficient theory by now…

Now we really have to look for what really WORKS!



4.What are we going to do?



4. What are we going to do?

The following activities are at hand:

• Best cases: NEVI Kringen present cases concerning the theme innovation at meetings

• Website: to communicate about best cases and toolkits• Purchasing consultants: give their visions on the annual

theme. How to fill in value creation through innovation?• Higher education: arrange meetings… presentation ‘HBO’

thesis award• Universities: presentation ‘WO’ thesis award• Toolkit innovation: develop specific ideas and instruments

that can stimulate innovation within the chain • Publication: compile the best contributions in the field from

practice and higher education (‘HBO’; ‘WO’)



4. What are we going to do?

Who needs to ACT ?

The NEVI Kringen and their Boards…The NEVI knowledge managers…The professors and lecturers…The college students...

This is all true… but the one really needs to act, is YOU!

Now is the time for a new beginning… LET’S DO IT!



Creating sustainable, innovative value chains Value creation through Innovation Annual theme NEVI...

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