Getting Innovation from Suppliers

By Wagner, Stephan M. | Research-Technology Management, January/February 2009 | Go to article overview

Getting Innovation from Suppliers


Wagner, Stephan M., Research-Technology Management


Successful firms have understood the superiority of customer orientation over a firm's internal orientation ever since the promotion of the modern marketing concept by marketing gurus such as Jerome McCarthy, Theodore Levitt and Philip Kotler in the 1960s and 1970s. Customer-oriented firms are more likely to innovate and develop new products and services that are valued by their customers.

However, fostering customer orientation in order to guide the firm's innovation activities is not enough at a time when suppliers account for the largest portion of the value delivered to the customer, when the fragmentation of the supply chain has gone beyond the outsourcing of manufacturing and logistics tasks, and when suppliers have to bear more design and development responsibility than before. Companies like Siemens Automation Systems take heed of this by distinguishing "productivity suppliers" from "innovation suppliers" and managing them differently. From the former they expect cost reductions, and for the latter they orchestrate the industrial production of the resulting component to make the innovative solution usable in Siemens' products.

From our supplier innovation research conducted over the past 10 years we can derive the following unambiguous recommendations for getting innovation out of suppliers.

1. Identify and Attract Innovation Suppliers

There are numerous ways in which companies may promote, solicit, implement, and reward innovation with their suppliers. Encouraging ideas from suppliers can commence with standardized channels such as BMW's Virtual Innovation Agency, a Web portal to support active supplier scouting. In supplier innovation forums such as GM's three-day TechWorld conferences, supplier and buying firms can discuss innovation trends and dig deeper into technological developments.

However, such broad approaches and rather impersonal links can be only an initial step toward getting leadingedge innovation out of suppliers. Once a breakthrough innovation has been identified, co-location of engineers to explore the details and support to industrialize the resulting system or component are necessary. For example, ever since Porsche's initial commitment to the automotive supplier SGL in the late 1990s, Porsche has been highly involved with SGL in the development of the carbonceramic automotive brake. As a consequence, Porsche was able to use this revolutionary technology in its 911 model, four years earlier than other luxury-car makers.

2. Assess Suppliers' Downstream Customer Orientation

Despite the criticality of selecting suppliers for innovation activities, firms traditionally limit their assessment of the suppliers' technological and commercial capabilities. Our research shows that the orientation of suppliers further upstream in the supply chain toward the downstream customers plays a crucial role in the success or failure of the customer firm's new product. A supplier should understand, for example, the positioning of the customer in the market, or the societal trends that shape the end customer's buying behavior.

Suppliers' downstream customer orientation has a significant impact on innovativeness as well as on the cost and speed of new product development projects. Both translate into competitive advantage and financial benefits. What does that mean for buying organizations? They must augment their supplier selection process and assess the supplier's understanding of customers along the supply chain. Only a few companies do this.

3. Maintain Truly Collaborative Supplier Relationships

The automotive supplier survey conducted annually by the research firm, Planning Perspectives Inc. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Getting Innovation from Suppliers
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.