The Critical Role Of Creativity

"Get creative!" (Special Report, Aug. 1) does an excellent job of describing advances at one end of the value chain: the original equipment manufacturer (OEM) and its customers. Unfortunately, it ignores the other end: the firm's supply base. In our study of supply chain innovation, we found that only a small percentage of companies recognized their suppliers as a source of innovation, and even fewer bothered to measure their value. What's most perplexing about this myopia is that the innovation derived from the supply chain is typically the least costly and least risky investment, and often the fastest to market.

Those few companies that did use their supply chain as a source of innovation were market leaders. Procter & Gamble Co. (PG) is aiming to gain 50% of its innovation from outside its castle walls, much from its suppliers. Toyota Motor Corp. (TM) gets more than half of its innovations from its supply base. Cisco Systems Inc. (CSCO) joins forces with other suppliers to provide innovative solutions to Internet customers.