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UK businesses say innovation is blocked by a cost reduction approach

Monday 9th December , 2019

According to research from Ivalua 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 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.

“Alex Saric, smart procurement expert at Ivalua, commented. “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.”

The results find 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%).

Download the full report “It’s not all about the money – why moving beyond cost can help businesses unleash supplier-led innovation” conducted by Vanson Bourne on behalf of Ivalua.