Yesterday, I sat on a panel at 360 IT, a big infrastructure event. One of the questions I got asked (I paraphrase) was "supplier innovation – do you want it, and expect it?".
My answer to this question was what you'd expect. Of course we want innovation from our supplier base.
But I tempered my answer with a caveat, and that is we don't often get innovation from our supplier base.
Big firms always tend to write very big contracts for stuff. We do that because it means we can get the best price. We'll often add some kind of "innovation" or "transformation" part to the deal, as if by doing so we'll magically get all the new stuff we'll ever need.
Practically speaking, though, you almost never get anything other than the basic service or commodity you paid for when you do this. And that's not really the fault of the vendor.
Lets say, for example, you've contracted to have your technology operations outsourced. You ask for innovation, and the vendor naturally shows up with lots of great ideas about how they can do technology better. Its the sensible response, and perfectly reasonable that a vendor would want to innovate around the services that they're presently providing.
The thing is, making something a little bit better that's already working is usually not that interesting to us. The fact is this: when you buy services from a vendor they either work or they don't. It is only in the latter case that anyone other than the relationship management team spend any management time on the service and that's usually staggering from crisis to crisis, not working out how to make things better.
The rest of the time, we're worrying about stuff which has nothing at all to do with the service a vendor provides. Like, for example, deciding the best way to get payments to millions of people, or how to cope with a prospective reform agenda without much in the way of money. In that scheme of things, incremental improvements from incumbent vendors are – I know I'm sounding arrogant – a distraction.
Our reality is there is limited free management time available, and spending it wisely means you have to focus on things that give you the biggest bang for the buck, which is more often than not, some internal meeting or policy or initiative, not something coming from outside.
I accept this is something that large organisations have to become much better at managing. Clearly, when we just write "innovation" into contracts and hope for the best, it doesn't work very well. I think what's needed is for us to take a much more active role in guiding our partners towards things that are materially important to us so they can then show up with propositions that will make a real difference.
Of course this would exacerbate something else, which is that such a practice would naturally focus our attention even more onto a few very large suppliers with whom we do most of our business. Considering we want to be much more active with a range of organisations, both small and large, this is not really a good thing.
I actually don't have an answer. But I'd love to hear from any of you in the comments who have suggestions. If you were trying to advance the supplier-innovation agenda, and trying to make your business more accessible to a broader range of vendors, what would you do?