Involving innovative suppliers helps in obtaining good company results - 4th UPDATE on SURVEY

From the 120 completed surveys, some interesting findings have appeared. The picture below suggests that smaller companies (less than 100 employees) in the built environment benefit from their interactions with innovative suppliers. The small company respondents WITH supplier interaction (n=64) indicated more often that their innovations yield better company results and better results for the natural environment. The (control) group of larger organisations (n=35; more than 250 staff) reported similar benefits from their supplier interaction. This was confirmed when analysing the intensity of the supplier relations (Question 8). Smaller and larger organisations report similar medium-high intensities in their supplier relations, both mostly with innovative companies providing services. Managing external partners takes resources and poses risks. 

Resources in smaller companies are smaller and risks are often bigger. Small company respondents in the survey consider managing their supplier risks equally important (Question 7) as large organisations. When taking size into consideration, small companies hence take a relatively greater effort, and according to the survey can be equally successful. But then the small companies also score higher on entrepreneurship than larger organisations (again Question 8). [The relationship of entrepreneurship and success still needs to be analysed].
Put simply: also for small companies, it seems a good thing to involve suppliers in construction innovations. To some this may seem logical though others would prefer to develop innovations more 'in house'. The overall academic debate is still out, but at least the survey respondents suggest to successfully cooperate with innovative suppliers. 
The question of course then is what to do in a particular situation. 

A recent roundtable discussion with representatives of larger organisations suggests what best procurement practices these professionals would use when managing their innovative suppliers. 
A set of seven contrasting situations had been selected from the survey. The participants could chose from 2 sets of 5 procurement best practices (also from the survey). The discussions confirmed that best practices are context-related, and are not always applied. The Figure below shows some partial results. (Guess copy-pasting the entire spreadsheet would be a bit too boring ...).
The practices were discussed in 2 groups of 4 participants. Participants could individually select 1 or max 2 practices. All practices which were selected (in 2 rounds) at least 5 times, have been indicated below with YES. When all participants did not choose a particular practice, that has been indicated with NO. In some instances participants would like to use two best practices (two YES on one row), or only less than 4 participants agreed on a particular practice, which has been indicated with a ??. 

As the NO is inherently stronger (none of the participants chose to use this practice) than the YES, the Figure gives the NO in bold. Likewise the practices the participants would mostly use, are also shown in bold. 
[As more often in research, this TOP 2 of practices from these 8 participants does not totally align with the TOP 3 as suggested earlier in the survey (see an earlier blog). In part this is because the discussion wanted a max of 2 best practices in a certain situation. It part it may be due the small number of participants. Nevertheless the discussion has given a deeper insight in the applicability of the best practices]. 
And finally: when to use what procurement practice? For example, when dealing with incremental supplier innovations, the participants suggested they would more often use contracts (TOP 1 in survey). When dealing with radical supplier innovations, the participants suggested they would manage relations based on trust and mutual goals (TOP 3 in survey). They did not suggest using suppliers early in the innovation process (TOP 2 in survey). Likewise, in the case of radical innovations only the TOP 2 from the survey (managing risks) was partly found applicable. Rewarding innovative suppliers in case of incremental innovations ranked low in the survey.  
The complete set of practices will be discussed in one more round table discussion later this week. Please complete the survey if you want to contribute to this meaningful New Zealand research! We've made seven people happy with the draw on the Business Model Generation book. Stay tuned for more updates. 

3rd UPDATE survey results on Managing Innovative Suppliers

Meanwhile 120 people completed the survey, which is good! TXS all! (But then I could need a few more survey respondents…). This post discusses some survey results in more detail. 

COMPANY PROFILES

The survey has focused on companies and professionals in the built environment here in New Zealand.

SIZE DOES MATTER

Approximately 50% of surveyed companies have less than 100 employees; and 30% have more than 250 employees. Debating when a company should be considered small or large is quite a different story, which I will not discuss now. I do not follow a EU (< 250 staff) definition nor an NZ (< 20 staff) definition, but something in between. 

Based on literature I assume companies with less than 100 staff (65 respondents) will behave differently from companies with more than 250 staff (35 respondents), with in-between companies showing a sort of mixed behaviour. But then size does not explain everything and other variables will have an impact on the firm's behaviour. Anyway, for contrasting large and small firm procurement behaviour in this post, I skipped the middle segment (10 respondents). Later-on I will use more advanced statistics for analysing the effects of multiple variables.

DIFFERENT FROM OTHER NZ FIRMS. 

Most surveyed small-companies seem service-oriented, have an entrepreneurial approach and focus on excellent products. 

The surveyed small-companies claim that supplier interaction helps them in realizing successful green innovations and in achieving better company results. The intensity of such interactions with suppliers seem to vary, but small-companies seem to indicate more often that they have medium or high intense relations than large companies.

At the same time, small-company respondents indicated that their general management and strategy experience is markedly higher than their innovation or procurement experience. In general large company respondents suggest they have higher experience levels. 

Please note that we purposely (also) selected survey respondents from small entrepreneurial and ‘green’ companies. Hence our survey outcomes may differ from the wider building environment in New Zealand and at the same time could give some learning to other companies.  

SOME MORE SURVEY FINDINGS

Briefly some findings as they seem to appear.

When it comes to defining what specifications companies need from innovative suppliers (1st picture), both small and large companies seem to have fairly similar requirements. They both focus either on the technology or on the economic value, and want innovative suppliers to contribute to the specifications (light blue arrows). They did not consider that they had to manage adversial relationships (dark blue arrows).  

Both the survey and the roundtable discussion showed that managing relationship (2nd picture) with innovative suppliers is very important with small companies. These relations also seem more focused on mutual goals and learning for future opportunities. Although some recent procurement research (Wynstra, 2016?) could suggest that early supplier involvement is not always beneficial, this is still seen as fairly important with both small and large companies.

In case of  finding or selecting (3rd picture) innovative suppliers, small companies seem to appreciate flexible and cooperative suppliers, whereas large companies appreciate that their suppliers know the profiles and demands of end customers.  Large companies seem to use a wider set of selection criteria than small companies. Scanning overseas supplier markets is not high on the priority list of both types of companies. 

Overall, negotiating and contracting (picture to the right) was seen as a low-priority activity within small companies. This could partly be explained by their low negoiation power.

Moreover, negotiations of small companies seem to focus more on opportunities. Larger companies seem to focus more on total costs or managing risks. In line with that, they also seem to focus more on formal contracts than small-companies do.

ROUND-TABLE DISCUSSIONS

Last Friday (24 June) 15 professionals from the built environment discussed first survey results at AUT City Campus. They had lively and industry relevant discussions and appreciated the interaction. “Must do this more often”. “Thanks for these insights, it was most informative”. We will have a second discussion round at NZGBC on the 7^th of July.

Please complete the survey & contact me if you want to participate. We've already confirmations from several people. The discussion again promises to be a good learning moment for all of us.

Enjoy the week - stay tuned for more research. Best regards, Anne

SURVEY: SME procurement practices with innovative suppliers

SURVEY & ROUND-TABLE DISCUSSION 

Please forward this blog to your business relations interested in the research.

Interested in doing the survey first: click here
Interested in the AUT round-table discussion (24 JUNE):  click for more info

Procurement in innovative or entrepreneurial (SME) companies is different in two ways. It is certainly different from large-firm procurement (purchasing) but it also seems different from procurement in traditional SMEs. Large-firm procurement often focuses on cost-cutting and business continuity with specialised procurement professionals and formalized processes. There are heaps of good procurement guidelines (text books, blogs and best practices) to help us there.

SME PROCUREMENT

BUT: an SME (1-250 employees) is not a dwarfed-down version of a large organization (Welsh & White, 1981). This seems obvious from the Figure below (Nicolas, 2011), but is not so obvious when we need specific guidelines on SME procurement practices.    

Our Dutch research at Hanze University on mainstream (more traditional; Reboud, 2011) SMEs suggests that SMEs exhibit a sales-driven approach when they procure their key goods or services, Despite the huge variety of SMEs (e.g. Meijaard, 2005) our research confirms that SME procurement processes are often more informal and centred round the owner's attitude and experience (e.g. James, 2012). We have identified a number of critical practices which have been discussed at procurement and entrepreneurship conferences in Australia and Europe. We are currently developing procurement tools together with a number of Dutch SMEs.

My NZ PhD research would suggest that innovative construction SMEs go one step further. These SMEs have an entrepreneurial approach to procurement and seem to treat key suppliers similar to their customers. They manage supplier risks, and pursue supplier opportunities as they would pursue opportunities with new customers. These innovative SMEs seem to neutralize their famous "liability of smallness". They scan their supplier markets and interact with large overseas companies to introduce radical innovations into the industry. Again, this all may seem obvious. But there is no website or textbook discussing such entrepreneurial procurement practices. We must know more, so that companies can benefit.

SURVEY ...

That is why AUT will survey entrepreneurial (or innovative) firms interacting with innovative suppliers on green-tech construction innovations. Via the survey we need 100 responses from for example members of PrefabNZ  or NZGBC, or other companies & professionals who work with innovative suppliers. My focus is on companies with less than 250 employees that are active in the construction industry (either new-build, facilities management, or retrofit).

The survey runs from 18 April. Please on this link if you want to participate. We will draw 5 respondents who receive a hard-copy of the Business Model Generation handbook. Check the preview if you’re interested!  
Survey results are confidential and cannot be related to you or your company. 
Participation is voluntarily. All participants can receive anonymised survey results. 

... ROUND-TABLE DISCUSSION
To learn more on this topic, we organise an industry round-table discussion on Friday morning, the 24th of June. If you are interested, please give name & email. We will again draw 5 participants for the famous Business Model Generation handbook. We will use the world-cafe method as advocated by Schiele e.a (2011) and Hoffmann (2012). This method stimulates discussion and brings good results for participants. 

HOW FIRMS WILL BENEFIT

Last week I attended a PrefabNZ conference here at AUT. New Zealand has clever and innovative construction companies. 

A large part of the value created for customers can be procured from suppliers (e.g. Van Weele, 2010; Staal & Walhof, 2014). Construction innovations are expensive and risky and companies can benefit from best-practices with innovative suppliers. The survey and round-table discussion are excellent means of developing and sharing procurement practices with the industry. 

Last year, I published a 4-page article on the role of green suppliers: Get your Green Suppliers on Board. It described findings from a workshop with 20-odd Facilities Management professionals, and has so far resulted in 100+ downloads. Likewise, I will publish on this PhD research via New Zealand blogs, websites and newsletters. Keep following this blog for updates.

As usual, you are welcome to email your suggestions & questions. They really help. 

TXS in advance, Anne

Interested in doing the survey: click here

Interested in the AUT round-table discussion (24 JUNE):  click for more info