Outsoursed supplier innovation

Outsourced Supplier Innovation

Bangor Procurement Summer School "The Best Gift is Knowledge”

Rui Patrício

[email protected]

12th August 2014

Digitalflow © All Rights Reserved

Digitalflow Value Proposition

Digitalflow is helping organizations implement Procurement and Innovation effective management systems. Our reward rests on a hands-on approach that accelerates and makes it easier for organizations to put cutting edge tools and methodologies into practice.

Public e-Procurement (PeP)

Procurement Innovation Systems (PIS)

Innovation

Management Systems (IMS)

Procurement

Innovation

Strategy Execution & Performance Management

Technology & Process Automation

www.digitalflow.pt | www.linkedin.com/company/digitalflow


Agenda

1.  Supply Partners 2.  Innovation in Procurement 3.  Framework for Procurement

Innovation 4.  Topics for discussion



The main goal is to discuss the role of supply partners in the

procurement innovation process.

A broader role of supply partners in the innovation processes

Companies are increasingly outsourcing critical business functions, including the outsourcing of R&D to the supply base.


1. Supply Partners

Source: Capgemini - Kirsten Schipper

As a result, the relationship with suppliers becomes more complex and companies are finding it more and more difficult to keep up with the pace of innovation through internal R&D alone.

Speed up the innovation process + Reduce R&D costs

The leaders engage suppliers in the “initial concept” phase nearly five times more frequently than followers

Source: A.T. Kearney’s Assessment of Excellence in Procurement


1. Supply Partners

See Procurement Innovation Framework - Concept Viability

Source: Public procurement vs private purchasing: Is there any foundation for comparing and learning across the sectors? Jan Stentoft Arlbjørn and Per Vagn Freytag

1. Supply Partners

Tendering vs. Collaboration

Agenda 1.  Supply Partners 2.  Innovation in Procurement 3.  Framework for Procurement







How Innovation is Changing in Europe: an interview with OECD's Andrew Wyckoff

Innovation goes far beyond R&D It goes far beyond the confines of research labs to users, suppliers and consumers everywhere – in government, business and non-profit organisations, across borders, across sectors, and across institutions. The Oslo Manual for measuring innovation defines four types of innovation: product innovation, process innovation, marketing innovation and organisational innovation.

2. Innovation in Procurement

http://www.youtube.com/watch?v=m4kM7ocL6fA&feature=youtu.be

Public sector is faced with important challenges like in Health care, Climate Change, Energy Efficiency, Transport, Security, Public sector efficiency…. Addressing these, often requires public sector transformations for which no commercially stable solutions exist yet.



What governments and organizations should do is specify the problem they want to solve and then allow the market to inspire them to find the best solutions. Source: Sascha Haselmayer

Typically when organizations buy goods or services, they spell out in strict detail exactly what it is they want to buy. But that level of specificity stifles innovation, because it restrains the inventiveness of companies who might bid on the work. It also limits the pool of bidders to established companies familiar with the sort of solution the tender asks for.



Rather than laying out exactly what it wants to buy (say, bike lockers), Barcelona is laying out six problems it wants to fix (such as reducing bike theft).

Responses could involve buying things, but they might also suggest new services, regulatory changes or any other means of accomplishing the goal. Source: How Barcelona and Philadelphia are turning procurement upside down, July 17, 2014 By Christopher Swope



http://bcnopenchallenge.org/the-challenges-2/

Public procurement of sustainable and innovative goods and services is one of the essential tools for stimulating new technological or service solutions while helping to create jobs and boosting the competitiveness of the European industry and SMEs. It also encourages more efficient public services. Source: Antonio Tajani, Vice-President of the EC and European Commissioner for Industry and Entrepreneurship.


Procurement Innovation is a key tool that enables the procurers to push industrial R&D to its needs and accelerate innovation in organizations.


Public Procurement Innovation aims to ‘close the gap’ between cutting-edge technology and processes and the public sector users who can benefit from them. In contrast (with technological research driven by industry or academic researchers), procurement of innovation is driven by the demand of public customers, and targets the development of concrete solutions to meet these needs. It can provide an early 'reality check', helping suppliers to better anticipate demand for new solutions and shorten the time to bring them to market. Source: Guidance for public authorities on Public Procurement of Innovation 1st Edition.




If solutions are near the market and would be provided if clear requirements / sufficient demand expressed by the market (PPI) - Normal procurement directives.

If it is still R&D required, still different competing solution approaches to compare before committing to deploy (PCP) - working under R&D exemption of the procurement directives. Mid/long-term needs that would not be addressed by the private sector by itself without financial support from the public sector.


Incremental type

Transformational type

PCP vs. PPI

3. Framework for Procurement Innovation

Source: http://cordis.europa.eu/fp7/ict/pcp/links_en.html


Benefits for both the Procurer and the Supplier

Procurer Supplier

Reduce the risk of miss-specified tender for the commercial roll-out.

Better understanding of public sector needs and real life testing environments.

Share the risks and benefits of designing, prototyping and testing a limited volume of new products and services.

Rapid R&D cycle and shorter time-to-market that can better anticipate demand for new solutions.

Obtain a lower cost (and less risk) deal compared to exclusive development contracts by giving IPR to suppliers.

Have the possibility and ability to work with potential clients on their needs in a structural way.

Create optimal conditions for wide commercialization and take-up of R&D results.

Wider innovation diffusion.


Procurement Innovation Concept Viability


2. Technical Feasibility Analysis

3. Market Availability

1. Key needs

identification

Concept Viability Testing

Governments and Organizations should specify the problem they want to solve.

Typical approach for the Needs Assessment/Concept Viability Phase: • Literature review of scientific, technical and policy publications • Expert Opinion • Focus Group Research • Wouldn’t it be Great If...(WIBGI)’ workshops to identify and rank needs • Key Informants interviews, including service end-users The Concept Viability Phase should result in a final decision regarding the need, how to address it (through a PCP approach or via traditional procurement) and how to formulate the need for such a procurement


Source: A practical guide to PCP – Project Progr-EAST


1. Key needs identification (identify the key needs of the stakeholders). Does it respond to a societal challenge?

2. Technical Feasibility Analysis (assess whether it is technically possible to create a solution to meet that need) or

3. Market Availability. Check whether the need can be met with products/services already available in the market or so close to the market that no R&D but only incremental/ integration type development is required.


2. Technical Feasibility Analysis

3. Market Availability

1. Key needs

identification

3. Framework for Procurement Innovation Specification

This framework is aimed primarily at those who are responsible for planning and executing procurement procedures (procurers).

1.  Key needs identification (identify the key needs of the stakeholders)

1.1 - Who are the key stakeholders?

1.2 - What are the critical needs of the stakeholders?



2. Technical Feasibility Analysis (assess whether it is technically possible to create a solution to meet the need)

2.1 - What are the solutions that meet the need?

2.2 - Are there any technical solutions that meet the need?



3. Market Availability (check if the need can be met with solutions already available in the market or so close to the market that no R&D but only incremental/integration type development is required)

3.1 - What are the procurement innovation knowledge ecosystems?

3.2 - Are there any solutions already available in the market?



The deployment of this framework contributes to a more efficient process and significant risk mitigation regarding misalignment with government and organization needs.

Procurers will be able to specify the problem they want to solve, show metrics on what success looks like and let the market find and submit the best solutions.



How can the government be less descriptive about what it buys and more open to the ideas nobody knew were out there?

“If we think about procurement as less about buying solutions and more about solving problems, I think we can open ourselves up to a whole variety of innovations” Source: How Barcelona and Philadelphia are turning procurement upside down, July 17, 2014 By Christopher Swope


4. Topics for discussion

What recent developments the EU Procurement Directives bring?

With the new “Innovation Partnership” procedure, public procurers will be able to launch a call for tender without pre-empting the solution, leaving room to the tenderer to come up with innovative solutions together with the authority.



What are the key IPR issues in Procurement Innovation?

Ownership rights of IPRs generated by a company during the PCP contract should be assigned to that company.

The public purchasers should be assigned a free license to use the R&D results for internal use as well as the right to require participating companies to license IPRs to third parties under fair and reasonable market conditions.



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