Fake innovation, are we experiencing innovation or branding?
List 2: value proposal
Mercadona, Inditex or Loreal are just some brands that are fulfilling a noble purpose and projecting their brand by doing a good branding with a doer’s perspective. Other companies such as Seat or Decathlon are co-creating and, therefore, innovating and, however, also projecting their brand positively by converting these actions into value. And others like Starbucks are suffering a reputation crisis because they are not credible in the face of the Coronavirus Covid-19, although their reaction is quick in their domestic market when they close branches and diffuse it with their master franchisees, or Sanitas, the company acted slowly in the face of the health emergency without providing collaboration in a convinced manner, a situation well reconducted by its CEO Iñaki Ereño who has become the main practitioner of communication of its brand, applying the fast; be transparent: and reinforce the values of your brand, publishing a daily post where he informs about the situation on Linkedin.
But how many brands are reinventing their value proposition driven by innovation?
Of course, this is another issue of greater depth, and it is not so easy to find cases, but if you look hard enough you will find wonderful proposals in the midst of a pandemic like Nannyfy , a service that since 2018 connects kangaroos with families, and is experiencing a huge boom in the midst of the coronavirus confinement by reinventing itself and changing its value proposal. Now it offers remote kangaroos that give yoga, programming, guitar, singing, drawing or math classes, and it has increased its turnover: this month it will enter the same as last year since the app was launched in February. Do you also think that the startup ecosystem is facing a great opportunity? That it is about co-creating, innovating and generating alliances, and how do you think that we play a relevant role in the generation of alliances?
Outward alliances
Let us look at a perspective that is not outdated because it is pre-covid19, but rather the opposite, it becomes more relevant. The key aspect is the generation of shared value. All companies need a microcosm of suppliers to develop their activity. It is the size of the company, its maturity and the markets in which it operates that dictate which of these suppliers, depending on the sector, will become strategic allies. However, on most occasions, these strategic decisions related to suppliers are taken by the CEO or management committees to which the CPO does not belong. Many are the companies that enter new markets through acquisition or alliances with other companies, which means integrating the whole flow of orders with different ERPs, managing risks and contracts with local suppliers or centralizing purchases, redefining strategies. In these cases, the purchasing manager plays an operational rather than a strategic role.
Every year we wake up with news of new alliances between brands that directly impact the activity of the purchasing departments. Today more than ever we live in VICA environments. Business alliances such as the one signed between Telepizza and Pizza Hut, mean a huge effort in the centralization of suppliers. Nestlé and Starbucks sealed a perpetual agreement for the commercialization of innovative Starbucks products by Nestlé in the distribution channel. The union of brands such as Starbucks, Nescafé and Nespresso is a milestone for the growth in demand and therefore production in the primary coffee sector. Tesco and Carrefour agreed to jointly manage their relationship with suppliers, as a result of which they plan to improve purchase margins and offer better quality at lower prices to their customers, benefiting from increased competitiveness in the face of threats from other chains. Gestamp, an automotive component manufacturer, and BAIC Group signed a joint venture that will strengthen their position in the Chinese market, allowing them to improve manufacturing processes, products and costs in their production plants. Alibaba and El Corte Ingles (ECI) will mutually benefit from an alliance in which Alibaba brings the last mile closer to its products with corners and collection at ECI centres and, thus, ECI optimizes its investments in artificial intelligence and big data cloud solutions, in addition to marketing its products integrated into the Alibaba Marketplace. This alliance will bring optimization of infrastructure and logistics channels as well as improved margins through economies of scale.
These are just some of the examples that show us how to impact company results through supplier partnerships. Alliances that are managed from the strategy. These are the general management, the marketing and strategy departments, and, in short, the directors, whether they are founding partners, independent third parties, belonging to funds or to the government structure itself, the decision-makers. In most cases, these decisions are taken without the Purchasing Director, who is the maximum guarantor of management with suppliers. Because indicators define behaviour, and when someone asks about mergers and acquisitions, the responsibility is focused on financial management and when someone asks about strategic alliances the head is turned towards commercial and/or marketing or business development management. However, when there are problems in meeting the objectives to be presented to the shareholder, it is when the head is turned towards purchasing, sometimes on the rebound after looking at the CFO first. Reversing this situation should be the main objective of modern purchasing, aware of the “intricacies” of the strategy with an innovation-efficiency-business vision instead of a limited view of innovation-efficiency.
The role of purchasing is to find the pain point for internal and external stakeholders to promote and provoke alliances that challenge the status quo and help organizations’ growth and profitability strategies. Watch out! purchasing is not the hero, its role is that of integrator, of a leader in the shadow, but with the capacity to make decisions. With the capacity to promote alliances with startups, to integrate b2b platforms or purchasing centers, to automate processes with non-strategic suppliers, to rationalize the panel of suppliers, to provoke the integration of services to simplify, to improve the time to market and development of new products in a profitable way. Under global management of suppliers and focused on the triple win: that the person, the company/team, and the society win, attracting innovation and its execution as an approach that I consider the basis of purchasing success.
How do you think outward alliances are fundamental? Then, you will be interested in the next article in this series where I will deal with inward alliances.
