Perhaps the single-biggest issue with Supplier-Enabled Innovation – at least for those companies that are on the early stages of their journey – is how to measure its efficacy.
The reality is that there’s no easy way to provide a concrete link between some of the investments required to make SEI a reality, and an end result being achieved. A collaboration between buyer and supplier, for example, might bring new product innovation, but how this translates into financial success is subject to a large number of contributing factors. Organizations that are in the early stages of evolution tend to be more obsessed with trying to prove the ROI of SEI.
The performance management of SEI requires a broad range of data input and evaluation. Not only do outcomes need to be assessed, but analysing progress can be equally important in identifying and acting quickly to resolve emerging issues. Given the breadth of involvement in programs, this necessitates a carefully constructed and executed management system.
The most-simple approach includes tracking straightforward measures such as strength of pipeline, number of ideas generated, number of business proposals and number of approved projects. But CFOs and others will be equally interested in top-line and bottom-line impact, hard evidence of which is much harder to provide.
Level 1: Opportunistic Innovation
Performance monitoring focuses on the achievement of functional objectives through the adoption and implementation of SEI.
Level 2: Systemic Innovation
Performance systems are aligned with the strategic goals of the organization and developed to encourage cross-functional cooperation and delivery of solutions.
Level 3: Interactive Innovation
Performance measures are co-developed with partnering organizations to support the mutually beneficial development of solutions that result in increasing levels of collaboration.
Level 4: Embedded Innovation
Metrics and monitoring systems have been harmonized across the partnering network to provide standardization and a common basis for business development and decision making.
Every SEI initiative must have metrics to track the overall success, but while it’s natural to try and measure everything in order to prove ROI, the reality is that SEI leaders must be pragmatic in their approach.
Rather than putting in place myriad KPIs, which take a great deal of time and energy to complete with only varying degrees of success as to their eventual usefulness, it’s probably more effective to work on the knowledge and understanding of those stakeholders who demand to see the return on investment statistics.
Naturally, this should translate to every relevant stakeholder, but with the support of key stakeholders at executive level, and in finance, the need to track every single line item of cost and its efficacy becomes less crucial against the overall belief that investment in SEI is the right thing to do from a corporate strategic position.