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©Prof dr Arjan van Weele
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Value creation through Innovation Annual theme NEVI 2011 Prof Dr Arjan van Weele www.arjanvanweele.com aweele@euronet.nl
© Prof dr Arjan van Weele


Why this annual theme ?
Value creation in the chain through innovation
© Prof dr Arjan van Weele


Why this annual theme?

The last few years, purchasing as a company function has gained more recognition …

Has shifted from ‘back room’ to ‘board room’…

Purchasing professionalization has generated significant savings…

This development, however, has not had only positive sides...
Value creation in the chain through innovation
© Prof dr Arjan van Weele


Value creation in the chain through innovation
© Prof dr Arjan van Weele


Why this annual theme?

Other examples of ‘over-the-top purchasing enthusiasm’…

Homecare…
Disabled child transportation in the city of Eindhoven…
Contract catering…
Public transport…
Temps agencies…

In numerous sectors there is a pressure on margins... and quality of work at stake...

Value creation in the chain through innovation
© Prof dr Arjan van Weele


Why this annual theme?

Debatable purchasing practices (Rietveld (2009), p.32):
Competition enhancement is the most favorite purchasing technique…
Bundling purchasing volume is the most favorite sourcing strategy…
For supplier classification, purchasers use the immensely popular Kraljic matrix…
Sourcing models are no longer regarded as means but as a target…
Terms of payment are stretched and discount is deducted on payment…
Purchasers focus dominantly on purchasing savings…

‘To steer into more strategic business waters, CPO’s must abandon the cost savings myopia and service mentality that tarnish procurement’s image…. ( Russill,(2008))
© Prof dr Arjan van Weele


Why this annual theme?

Hypothesis 1
‘It took us 30 years to get purchasing into the boardroom… it will take probably less than 5 years to get us out...’

Hypothesis 2
‘With our single cost driven purchasing paradigm, we as a purchasing community hardly do our companies and society a service anymore...’

Hypothesis 3
‘We need to act different ie. change our ways of working...!’
Value creation in the chain through innovation
© Prof dr Arjan van Weele


2. We need to act different…
Value creation in the chain through innovation
© Prof dr Arjan van Weele


We need to act different…
value
risk
cost
guarantee the availability of goods and services under all circumstances, in line with ‘Triple P’
reduce costs of goods and services and transaction cost
improve the company’s customer propositions, accelerate customer processes
Value creation in the chain through innovation
© Prof dr Arjan van Weele


Value creation in the chain through innovation
© Prof dr Arjan van Weele


We need to act different…

Propeller model: combining customer value, social value and shareholder value (Kibbeling (2010))
Duu
social value

shareholder value
customer value
market orientation
innovation
sustainability
Value creation in the chain through innovation
© Prof dr Arjan van Weele


Value creation through innovation

Value creation in the chain through innovation
© Prof dr Arjan van Weele


Value creation through innovation

Numerous academic studies find that innovation contributes to long-term success and market share.
The most successful companies consistently dedicate resources to new product development. (Booz, Allen & Hamilton, 1982)
Innovation is a driver for competitive success. (Schilling, 2005)
For decades now, it is clear that innovation is vital for companies’ survival on the long run. (Porter, 1980; Chesbrough 2003a; Schilling, 2005)
Value creation in the chain through innovation
Van Erum (2010)


Value creation through innovation

Challenge to many companies: how to manage our EXTENDED ENTERPRISE…?
profit margin: 1.5%
added value: 20%
purchasing value: 78.5%
Question: What should managers do?
turnover sales:
100%
External costs strongly influence company
results…
Value creation in the chain through innovation
© Prof dr Arjan van Weele


Value creation through innovation

Challenge to many companies: how to manage our EXTENDED ENTERPRISE …?
Suppliers determine 78.5% of the costs, innovation capacity , CO² footprint and customer value…
Value creation in the chain through innovation
profit margin: 1.5%
added value: 20%
purchasing value: 78.5%
Question: What should managers do?
turnover sales:
100%
© Prof dr Arjan van Weele


Value creation through innovation

Research shows that:

suppliers are an important source of competitive advantage and innovation…
innovations in many industries originate mainly from suppliers…

Value creation in the chain through innovation
© Prof dr Arjan van Weele






Value creation through innovation

Research shows that:

suppliers are an important source of competitive advantage and innovation…
innovations in many industries originate mainly from suppliers…
innovative companies do well to work with innovative suppliers…
these innovative suppliers can and must help these companies make a difference in their market…
all this demands a different orientation from purchasing professionals, their way of operating and the way they are judged and rewarded…
Value creation in the chain through innovation
© Prof dr Arjan van Weele


Value creation through innovation


There is sufficient theory by now…

Now we really have to look for what really WORKS!
Value creation in the chain through innovation
© Prof dr Arjan van Weele





What are we going to do?
Value creation in the chain through innovation
© Prof dr Arjan van Weele


What are we going to do?

The following activities are at hand:

Best cases: NEVI Kringen present cases concerning the theme innovation at meetings
Website: to communicate about best cases and toolkits
Purchasing consultants: give their visions on the annual theme. How to fill in value creation through innovation?
Higher education: arrange meetings… presentation ‘HBO’ thesis award
Universities: presentation ‘WO’ thesis award
Toolkit innovation: develop specific ideas and instruments that can stimulate innovation within the chain
Publication: compile the best contributions in the field from practice and higher education (‘HBO’; ‘WO’)
Value creation in the chain through innovation
© Prof dr Arjan van Weele


What are we going to do?

Who needs to ACT ?

The NEVI Kringen and their Boards…
The NEVI knowledge managers…
The professors and lecturers…
The college students...

This is all true… but the one really needs to act, is YOU!

Now is the time for a new beginning… LET’S DO IT!
Value creation in the chain through innovation
© Prof dr Arjan van Weele