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Increasing Supplier-Driven Innovation

January 1, 2010 | John W. Henke Jr., Chun Zhang | Workplace, Teams, & Culture
Despite the importance of innovation to a business's success, only recently have companies not only
established internal environments conducive to innovation but also begun identifying, cultivating and
taking advantage of a wide variety of external sources for innovation. Among such sources, suppliers are
recognized as having especially large innovation potential because they know what the companies
that is, their customers--are doing and need and also because mechanisms for knowledge transfer
from supplier to customer are typically in place.

However, while it is one thing for a mechanism to be available by which suppliers may transfer innovation
to customers, it is quite another for the suppliers actually to do the transferring.

The customer, the prime mover in building and maintaining the relationship, can move in two different
ways to encourage the supplier to innovate to the customer's benefit. First, it should reduce or
eliminate three kinds of problems: (1) conflicting objectives among the customer's functional areas,
(2) excessive and often late engineering or specification changes and (3) price-reduction pressures on
suppliers that consider only the customer's financial needs.

Second and most importantly, the customer should initiate directly positive and trust-building activities.
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