The "I" Word

The word innovation gets thrown around in the sourcing business as much as it does in seemingly every other industry. And, in keeping with usage elsewhere, we often hear the word without any clear definition of exactly what kind of new stuff is being done or how precisely it's supposed to make our lives better.

So just what does innovation in sourcing look like? A little over a year ago my firm reached out to clients, practitioners and providers with what we called an Innovation Agenda to suss out the answer to that question. We came up with four planks:

  --Refreshing contract terms: Sourcing has a long way to go, but it's already seen a lot of change, and the old ways of establishing a relationship often don't cut it.

  --Rethinking benchmarks: If the only reason you measure the price of a service against what everyone else is paying is to get your costs down, you aren't doing yourself or your company any good.

  --Gainsharing: Both sides of a relationship ought to be able to expand their risks and rewards as sourcing relationships grow more solid and sophisticated.

  --Change management: Not just another jargon phrase. Sourcing has to develop systems to better align the roles of client and provider.

And here's some good news: The first two of these have already gotten a lot of good buzz in the industry and even some actual application. Progressive minds are moving together. The last two are well on their way to seeing the light of day, and I'm pleased (and should disclose) that my firm has offerings for both gainsharing and change management.

OK, so I've told you about near-term innovation. What's next? I see a couple of possible trends.

The first entails better comparisons between what an organization says it wants and what it's actually buying. The "lift and shift" model of reassigning jobs to a lower-cost environment is just that. If it's being talked about - and measured and criticized - as a more robust sourcing solution that should produce ever-more benefits for the organization, then we're talking about apples and oranges.

Another thing I think we'll see is contracts that are better able to manage the increasing number of multi-sourcing relationships.

I want to keep the Innovation Agenda going. If you're interested in suggesting new planks, please drop me a note.