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Innovation in services

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Article

Gualandris, J and Legenvre, H. “Innovation Sourcing Excellence: Three Purchasing Capabilities for Success.” Business Horizons, Volume 61, Issue 1 (January-February 2018) 95-106

Summary

Innovation is no longer an internal activity within organizations or something provided by a key supplier, but rather, innovation has moved toward considering all sides of the process, from the business to supplier and most importantly right now, the producer. In this study, Gualandris and Legenvre explore how companies source innovation for their businesses to effectively and efficiently meet the needs of their clients.

But what about the supplier? Even with a shift to asking producers what their needs are rather than creating innovations that we think they need, don’t suppliers still play a major role in the innovation process? Of course. Supplier innovation projects take the form of finding ways to be more efficient, preventing problems or minimizing risks, developing new products or services to solve problems, accessing new potential markets or revenues and figuring what ways of working together can have the biggest impact.

The authors identify three capabilities for purchasing including exploring unmet needs and anticipating needs that will be needed in the future, exploring relationships beyond typical suppliers, and involving suppliers in innovation projects and partnering with those who consistently deliver. Gualandris and Legenvre use the analogy of fishing in known territories, developing the fishery, and fishing in unknown territories to highlight the concepts presented.

What this means for food and agribusiness

Much of the innovation in agriculture over the last 50 years has been science based, meaning that manufacturers have developed new solutions for farmers through equipment, chemicals and technology. With that said, however, innovation in services is somewhat rare. Even as farms have gotten larger, their need for innovation around business practices and operations seems somewhat unaddressed. Needs in this space will likely not be innovated at the manufacturer level but will be created closer to the farm. Although, that is not always the case. For example, robotic milkers provide a capital improvement for dairies that can help address labor issues. Autosteer certainly provides an innovation for heavy equipment. And both of those are manufacturer driven. But there is still room for retailers to help farmers solve problems on their farm that extend beyond the products they buy.

Manufacturers also have an opportunity to work more closely with retailers and dealers to deliver more innovative bundles—sometimes connecting data with products or examining moderating effects of combinations of products and services that will address farm challenges.

Maybe one of the most important aspects to note from this article is how the authors address this topic from the perspective of buying. What if sellers used this approach to help their customers become better buyers? Rather than expecting a farmer to request their suppliers sit down and have a conversation about ways to be more efficient, anticipate needs for the future, or think of ways the partnership could bring added value, why couldn’t a supplier initiate that? A conversation that isn’t tied to specific product sales or future-oriented goals, and doesn’t require a commitment from either party, could be fruitful ground for identifying new ways of working together. Maybe some of the ideas that come out of that could even be useful to other farmers, such that a supplier could “create” a product.

As alternative methods of buying products online emerge, the need to create value within the personal relationships at the farm gate will be more important than ever. Organizations that figure out how to serve farmers rather than sell products will have a leg up on their competitors.

AUTHOR
Scott Downey
Scott Downey
March 27, 2018