Does Purchasing play a role in success of Innovation?

In many organizations Innovation is the domain of Research and Development or Marketing. How come that Purchasing is almost not on the radar screen of innovation? And what may be the impact of this?

In the Master Thesis Strategic Purchasing and Innovation, written by Casper ten Cate from the University of Utrecht (Science & Innovation Management) in collaboration with Capgemini Consulting, an answer on the questions are given. In his survey, he handles 12 case studies of Purchasing Functions in organization of different market sectors. He shows a significant correlation between three factors regarding Purchasing and the impact of the success of innovation:

  • Level of Strategic Purchasing
  • Supplier Involvement
  • Purchasing Integration

De hypothesis is validated that if all three factors applied in the organisation, contribution to the success of innovation is significantly.

In respect to this he describes four different patterns in the relation of Purchasing and Innovation:

Pattern 1: Achieving a contribution to innovation by purchasing:
Pattern 1 comprises those companies that have obtained high scores for ‘level of strategic
purchasing’ and high/medium scores for ‘supplier involvement’ and ‘purchasing integration’, as well
as a medium/high score for the dependent variable ‘purchasing & innovation’.

Pattern 2: No innovation via purchasing:
Pattern 2 includes the companies that have low or very low scores for the three independent
variables, as well as for the dependent variable. This applies to both of the Maritime and Harbour
Services companies. Contributing to firm innovation is not within reach.
These companies are currently busy defining the purchasing function and its position in their firm.
The majority of purchasing activities are operationally oriented, there is little room for long-term
issues or carrying out a purchasing strategy.

Pattern 3: Entrepreneurial purchasing:
Pattern 3 comprises the companies that have a medium/low score for the ‘level of strategic
purchasing’, but generally high scores for ‘purchasing integration’ and ‘supplier involvement’, and
also an above average score for ‘purchasing & innovation’. These companies – while large on a national scale – are relatively small compared to the other
companies in the case study and correspondingly have a relatively small purchasing staff. While this
means that the level of strategic purchasing is medium or low for these companies, it does mean that purchasing is inherently closer to the rest of the organization: purchasing is well integrated in both companies.

Pattern 4: Stuck in the middle:
Pattern 4 includes the companies that are typically in between the companies in pattern 1 and the
companies in pattern 2 in all the variables. They have medium scores for the ‘level of strategic
purchasing’ and medium/low scores for ‘supplier involvement’ and ‘purchasing integration’.
Furthermore, they have little contribution to firm innovation by purchasing. These are companies which do have a clearly defined purchasing function in place – albeit not on the
highest strategic level. Furthermore these companies involve suppliers to a certain extent and there
is some purchasing integration in the company. They have thus far been unable to achieve a
contribution to firm innovation by purchasing.

Another conclusion of this survey is the fact that the key bottle neck for Purchasing to contribute to the success of Innovation is the Purchaser him or herself!!! I wrote already that the business community is desperately looking for the New Generation Innovators, this is also very truth for Purchasing.

I like to invite you to watch our vision on slideshare:

Innovation Driven Procurement