New research from Ivalua shows UK businesses’ cost focused approach with suppliers is blocking innovation


Research from Ivalua, the spend management cloud solutions provider, has shown that two thirds (67%) of UK businesses say innovation is being blocked by a focus on cost reduction. This comes at a time when pressure is growing on businesses to develop new, innovative products, faster and at a lower cost. In fact, 51% of UK businesses say the number of products or services they launch has increased in the last 12 months, indicating that pace of innovation is on the rise. 

The research, conducted by Vanson Bourne on behalf of Ivalua, found that 60% of UK businesses say they consider the role of suppliers important when it comes to driving innovation. However, less than a third of UK businesses say that they always collaborate with suppliers on new innovations. Furthermore, 64% of UK businesses view their relationship with suppliers as primarily transactional, with more than half (55%) saying that cost savings are more important than driving innovation.

“The pressure is on for businesses to innovate at pace, so collaborating with suppliers to use their industry expertise to develop new products and services has become vital,” commented Alex Saric, smart procurement expert at Ivalua. “The majority of UK businesses (92%) say they are now highly dependent on their suppliers, so when it comes to innovation, companies must rethink how they approach supplier relationships. The more innovative suppliers are in a position where they can now pick and choose who they work with. As a result, UK businesses need to ensure they are appealing partners to work with. This means moving away from supplier relationships that only focus on negotiating lower prices, which can financially stress suppliers and cause them to think twice about working with cost-focused organisations.”

Visibility, risk and poor data hindering supplier collaboration

Encouragingly, more than two thirds of businesses (69%) believe achieving innovation and cost savings are not mutually exclusive. While this is achievable, there are some major barriers that UK businesses need to overcome to collaborate effectively with suppliers, such as: a lack of understanding around supplier capabilities and strengths (35%), security risks (30%), poor data quality (28%) and a lack of incentives for suppliers to become a supplier of choice (27%).

“Effective collaboration with suppliers requires UK businesses to take a smarter approach to procurement, so they can understand supplier capabilities and strengths, assess risks and recognise opportunities. This allows businesses to collaborate deeply on new products or services, unlocking maximum innovation from their supply base,” added Saric. “Procurement must refocus to foster, rather than block, innovation. Not only will this allow UK businesses to innovate at pace, but it also fosters collaborative partnerships that speed up innovation, rather than always asking suppliers to cut costs.”

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