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Collaborating To Innovate

August 25, 2009

Logica has this month published an excellent whitepaper entitled ‘Step Change: Collaborating To Innovate’. The authors are two highly respected experts in the field of outsourcing, past IACCM conference presenter Professor Leslie Willcocks and Andrew Craig. It represents a ‘must-read’ for anyone involved in establishing, negotiating or managing any form of complex or high-value contract or business relationship.

The authors set out to study how organizations maximize value from outsourcing and in particular, how they achieve innovation. Many past studies have bemoaned the failure of most outsource contracts to get past cost reduction and move into true high value partnerships. IACCM’s work in this area has confirmed that disappointment is frequent, and has also described the dependencies for greater success. It is good to discover that Messrs. Willcocks and Craig have reached similar conclusions.

First, they highlight the key role of leadership. Like IACCM,  they found a direct link between executive interest and ownership and the ability of the team to deliver good results. But they also saw leadership in the context of the customer’s readiness to embed major suppliers in the planning and development phases, to shape how the future vision would be accomplished. As I have highlighted in previous blogs, traditional sourcing often tends to hold suppliers at arm’s length and to limit their opportunities to engage directly with users, particularly in the pre-award phase (see, for example, A Simple Way To Undermine Procurement Success).

The other two critical areas that the paper examines are contracting and organization. “New forms of contracting are required for collaborative innovation to succeed. Such contracts share risk and reward in ways that incent innovation, collaboration and high performance to achieve common goals.”

This statement could well have been extracted from any number of IACCM research studies over the last few years. Each year our report on the ‘Most Frequently Negotiated Terms” has called for refocusing. Indeed, the most recent study not only pointed to the negative impacts of today’s negotiation focus, but highlighted specifically where future attention should be paid. The areas of the future – which were endorsed by the IACCM worldwide membership – go right to the heart of the Collaborative Innovation message – they are essentially the terms needed to ensure clarity of intent and on-going organization and relationship governance.

There is one other very important finding in the Willcocks / Craig study – and that is their depiction of client behavior (I would suggest they should expand this to also cover supplier behavior, because collaboration depends on trust and that must be driven by mutual actions). They include a chart entitled ‘The Global Sourcing Learning Curve’ and in this they describe four phases of maturity:

  1. Contract administration or negativity
  2. Contract management
  3. Supplier management
  4. Collaborative innovation

The reason I find this so fascinating is that it is the first time I have seen external endorsement of the direction in which IACCM has been steadily moving. Our research, our executive roundtables and our overall strategic thinking have been pointing to this sort of evolution for our members. Most IACCM adherents have moved past contract administration; but for many, the conversion from contract management to suppplier management remains confused, with internal politics often causing a battle over what exactly the supply management activity includes and where it belongs.

As we continue to debate and steer the evolution of contract management and the contracting process, this paper offers a timely and profound contribution. Read it!

  1. Lucas Delaqua permalink

    Nice to find your blog Tim.

    Best Regards,

    Lucas Delaqua

  2. Dr. Sushanta Kumar permalink

    Good morning Mr. Tim,

    Nice to find your Blog.

    With Regards.

    Dr. Sushanta

  3. Great post but I am not convinced about requiring a new form of contract to encourage innovation – like much else in delivering success in service delivery – much depends upon senior sponsorship at the right level in both client and supplier and developing a good relationships throughout the supply chain – not as common as you might expect particularly in the IT sector!

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