In today’s economy, where even the most local markets face global competition, “innovative” is a term many companies use—and sometimes overuse—to describe themselves as they seek differentiation. Yet they do so with good reason: The pressure to bring unique products to market rapidly and cheaply has never been greater. “In the coming years, innovation is going to be a huge driver and necessity in order for firms to gain ground and increase revenue,” notes Heather Ashton, research manager for manufacturing and retail insights at International Data Corporation (IDC).i
The source of most innovations is not the invention of a completely new product or method, but through combining ideas, processes, or technologies in ways that produce new outcomes. In this environment, having the ability to support innovation through effective collaboration with your customers can make the difference between success and failure. It also gives you a crucial way to differentiate yourself at a time when the specter of commoditization looms large (and has already put many sellers out of business). Read on to learn why and how becoming more collaborative can help you ride the innovation wave instead of being swamped by it.
Pressure points and trends: Why collaborative innovation matters
So what’s behind the ever-escalating need for buyers and sellers to collaborate—and innovate—better? Multiple market forces play a role:
- Globalization: As buyers extend their supply chains worldwide to find efficient, qualified sellers, their risk rises as well. Collaboration across geographies is supported more effectively through commerce and product development technologies that help both sides streamline communication, synchronize tasks, and stay on top of performance changes throughout production cycles—making it easier to tune product capabilities to market needs on a global scale.
- Intensifying competition: As knowledge and technologies become ubiquitous, your competitors everywhere are empowered the same as you. Fortunately, buyers who work closely with sellers can find the increased agility needed in product development to respond to this competitive pressure, whose leading drivers includeii:
- The need to launch products quickly: 61%
- Customer demand for lower-cost products/price competition: 47%
- The need to capitalize on new market opportunities: 37%
- The need to win customers with products tailored to their needs: 37%
- The need for flexibility to develop/manufacture in multiple supply chain/factory locations: 20%
- Outsourcing of competencies: Companies increasingly need to leverage external resources rather than keeping all their development and testing in-house, especially where they lack internal expertise. And for a growing percentage of products, sellers are taking on more design responsibility in addition to manufacturing. At the same time, effective deployment of outsourcing depends on collaborative technologies that can enable processes—often in real time—across development cycles and supply chains.
- The digital revolution is driving transformation in not just products and services, but markets and their delivery mechanisms as well. For example, segments such as books, games, and media are becoming increasingly digital in nature, while the penetration of e-commerce platforms is enabling real-time customer interactions across digital and physical channels from billing to product support. “It’s becoming an omni-channel world for all customer interactions. It’s no longer good enough to have a call center with a phone number,” says Rick Chavie, chief solution officer at hybris software, an SAP company. “You need online chat, screen sharing, and a mobile interface for all your company representatives, whether before the sale, during a sale, or for after-sale support; customers expect all of these things.” At the same time, buyers want sellers to help them solve problems and improve future product releases by leveraging new streams of market and end customer use data as a feedback loop into design and production.
- The consumerization of B2B means sellers are expected to innovate rapidly, based on the standards being set by consumer tech and cloud companies. And buyers as well as end customers demand high-quality, user-friendly information about products, with images, video, initial user feedback, and other electronic features de rigueur.
Collaborative capabilities and tools let buyers and sellers innovate in ways that address these needs. The result? Improved product design and technology, along with new processes that benefit all parties. And while few buying organizations have perfect strategies in place, most are actively striving to strengthen seller engagement and collaboration. For example, Aberdeen research shows that 71% are addressing supply chain coordination, and 64% are working on managing sellers and partners in the design process.iii
“Everybody’s having to build out products globally, and everybody’s Iooking to use the same kind of tools,” Rick says. The nature of the US market may be more advanced in collaboration and digitally enabled innovation, but the technology platforms that allow such collaboration are globally accessible. “Even if some countries or market sectors have lower penetration today, you see the adoption spreading across markets, from industrial to consumer products, from services to media.”
Becoming a collaborative innovator: Action areas for maximum impact
So what steps can you take to give buyers what they want and need—easier, more effective B2B e-commerce collaboration with an innovation-minded seller partner? Especially if you’re a small seller, Rick advises, “You need some kind of an edge. You’ve got to find ways to differentiate, to be more agile, and to get on board with these tools and techniques so you’re enabled in the same ways as all the bigger sellers.” Consider these key strategies:
- Make the most of networks. Collaborative networks like the Ariba® Network can give you a major leg up by allowing you to partner and exchange ideas directly with buyers. For example, rather than just responding to their stated requirements on an RFP, you can make suggestions about issues the buyer needs to resolve and offer ideas about products, materials, designs, and other areas to enhance efficiency and innovation.iv (Check out this video and this paper to see other ways business networks make collaborative innovation easier.)
- Get your technology up to speed. While technology has helped level the playing field—allowing even the smallest companies to deliver the same collaborative capabilities as huge competitors—plenty of sellers are still behind when it comes to B2B e-commerce. “Most suppliers haven’t gotten on board yet in terms of being able to present their products digitally, share content, or work collaboratively,” Rick notes. For example, many still rely on printed catalogs, but buyers don’t want paper anymore. “They want digital content; they want to be interacting back and forth with their supplier from a tablet.” Globalization pushed procurement towards e-commerce long ago, and now buyers need sellers enabled with the same tools. Areas to embrace include:
- Social listening channels to monitor trends and capture customer and prospect feedback
- Big data monitoring of input from social on existing products
- Configure/price/quote (CPQ) and engineer-to-order tools embedded in commerce platforms to support:
- Real-time configuration of product build-outs, making it easy to visualize final results
- Private-label orders and the growing demand for product customization
- Buyers’ need for interactivity and technical assistance while they’re configuring your product with end customers
- Shared content development software like digital asset management and graphics visualization tools, which allow you to:
- Exchange ideas and info in real time with global business partners to collaboratively design and build products, make modifications, and shorten development cycles
- Give buyers the necessary digital representations when it’s time to sell
- Easily promote your products online—at a much lower cost than advertising in traditional media—by using the content you’ve already developed
And don’t wait: Customers are increasingly demanding these capabilities as a condition to buy from you. Producing great products or services has long been a given, but the ability to produce great multimedia content is now essential as well. “If you can’t demonstrate your offerings digitally, buyers may not even find you, and they certainly will struggle to sell your products or services online,” Rick asserts. “If you want to grow or even stay in business, you must respond.”
- Use direct selling to provide direct feedback. As a seller, you have direct access to end customers—e.g., via in-person sales, digital tools, and the social web—that you can use to advantage, so maintain at least a small percentage of your business selling to them. “Think of it as the little seller’s access to big data,” Rick says. “Because with all the digital tracking of everything you’re doing with an end customer, you can capture such a rich set of information on how they’re using the product, when they’re using it, how they’re buying it, the issues they’re having after the sale, and support.” Direct selling relationships also let you experiment and adapt quickly, because you get response signals immediately.
You can then share the information you gain with your buyers and compare notes; their different channels offer additional insights, and both parties benefit through accelerated development and innovation. This strategy also works as relationship life insurance by distinguishing you from competitors. “If you don’t bring good ideas to the table because you have no insight into the end customer, you have no leverage,” Rick notes. “Smaller suppliers are going out of business or being acquired because they’re not bringing enough of this kind of insight, and they’re too slow to react.” (Learn more about the benefits of direct selling from this video and this Forbes article).
- Leverage your expertise in local markets. Don’t underestimate the value of your knowledge about local regulations that have potential supply chain implications for your customers. By conveying inside information vital for compliance and risk management across geographies, you strengthen their position as well as your own.
- Offer resources unavailable elsewhere. Innovative value-adds provide another edge, as they offer buyers unique advantages and distinguish you from the competition. For example, rather than just a product, sell a complete solution: bundling aftercare services, customer training, 24x7 tech support, custom engineering, and similar capabilities others can’t replicate. By differentiating your business, this helps you avoid the relentless price squeeze of commoditization. It also lets you sidestep private label pressures—where buyers want to determine more of the manufacturing process (but not actually produce the product) while getting the brand benefits themselves—by providing something they can’t easily deliver on their own.
As a seller in this digital world where global competitors are just a click away, it’s true that the pressure on you to help customers cut supply chain costs and reduce development cycle times is relentless and an area of necessary collaboration (i.e., “survival by subtraction”). Nonetheless, you also have a clear and compelling upside for growth through collaborative innovation—“thriving by combining”—and now have the technologies and platforms available to help you realize that upside.
i “Collaborative Supplier Networks—Innovation, Risk Management, Cash Flow: Building Supplier Networks that Drive True Value,” Insight white paper, Procurement Leaders Global Intelligence Network in association with Ariba, Inc., an SAP company, 10 November 2014.
ii Reid Paquin, “Integrating Suppliers and PLM for Profitable Product Development,” Aberdeen Group, 6 February 2014.