Increasing Supplier Driven Innovation
SUPPLY CHAIN: INNOVATION
Increasing Suppl 'ierDriven Innovation
When customers collaborate with suppliers they can build trust, reduce relational stress, and increase innovation-related activities.
BY JOHNW. HENKE JR. AND CHUN ZHANG
MORE THAN 50 YEARS AGO, management guru Peter Drucker identified innovation as one of the basic ways in which a business builds and maintains a competitive position in the marketplace.I
It wasn 't until recently, however, that companies not only established internal environments conducive to innovation but also began identifying, cultivating and taking advantage of a wide variety of external sources for innovation.2
Among such sources, suppliers are recognized as having especially large innovation potential because they know what the companies - that is, their customers - are doing and need and also because mechanisms for knowledge transfer from supplier to customer are typically in place.3 But years of evaluating supplier working relations in various manufacturing and service industries reveal that it is one thing for a mechanism to be available by which suppliers may transfer innovation to customers and quite another for the suppliers actually to do the transferring.
Competitive Side Of Collaboration
Customer/supplier activities that are collaborative tend to build trust and subsequently foster supplier innovation transfer. There are, however, competitive activities in every customer! supplier relationship that result in distrust, which negatively affects such transfers. For example, a company and its supplier may diligently and unselfishly work together to provide the highest-quality end product, thereby strengthening their mutual trust. But when the company asks the same supplier for price reductions, both parties will compete to steer the negotiation to their own advantage, and stress will be created in their working relations.
It is this relational stress and its accompanying distrust that cause suppliers to limit the extent
Increasing Suppl 'ierDriven Innovation
When customers collaborate with suppliers they can build trust, reduce relational stress, and increase innovation-related activities.
BY JOHNW. HENKE JR. AND CHUN ZHANG
MORE THAN 50 YEARS AGO, management guru Peter Drucker identified innovation as one of the basic ways in which a business builds and maintains a competitive position in the marketplace.I
It wasn 't until recently, however, that companies not only established internal environments conducive to innovation but also began identifying, cultivating and taking advantage of a wide variety of external sources for innovation.2
Among such sources, suppliers are recognized as having especially large innovation potential because they know what the companies - that is, their customers - are doing and need and also because mechanisms for knowledge transfer from supplier to customer are typically in place.3 But years of evaluating supplier working relations in various manufacturing and service industries reveal that it is one thing for a mechanism to be available by which suppliers may transfer innovation to customers and quite another for the suppliers actually to do the transferring.
Competitive Side Of Collaboration
Customer/supplier activities that are collaborative tend to build trust and subsequently foster supplier innovation transfer. There are, however, competitive activities in every customer! supplier relationship that result in distrust, which negatively affects such transfers. For example, a company and its supplier may diligently and unselfishly work together to provide the highest-quality end product, thereby strengthening their mutual trust. But when the company asks the same supplier for price reductions, both parties will compete to steer the negotiation to their own advantage, and stress will be created in their working relations.
It is this relational stress and its accompanying distrust that cause suppliers to limit the extent
References: 1. P Drucker, "The Practice of Management" (NewYork: Harper & Row, 1954), 37 Review 50, no. 1 (fall 2008): 32-40. Marketing 23, no. 5 (2008): 287-300. Knowledge Economy," ed. C. Hecksher and PS. Adler (Oxford: Oxford University Press, 2006). 6. See, for example, R.H. Hayes andW.J. Abernathy, "Managing OurWay to Economic Decline: ' Harvard Business Review 58 (July-August 1980): 67-77; C.Y Baldwin 73-109; J.L. Bower and C M. Christensen, "Disruptive Technologies: Catching the Wave: ' Harvard Business Review 73 (January-February 1995):43-53, LO AdvancedTechnologies in the Automobile Industry" Journal of Operations Management 19, no. 2 (February 2001): 219-238; and MacDuffie and Helper, "Collaboration: ' (Reading, Massachusetts: Perseus Books, 1998);1T. Stallkamp, "SCORE! A BetterWay to Do BusineSS. Moving from Conflict to Collaboration" (Upper Saddle River, New Jersey: Wharton School Publishing, 2005); and J Liker, "TheToyota Way: 14 Management Principles from theWorld 's Greatest Manufacturer" (NewYork: McGrawHill, 2004) Copyright © Massachusetts Institute of Technology, 2010.