Challenge

With global energy demand on the rise and fossil fuels continuing to make up most of the world’s power consumption, cutting emissions in the energy sector represents a formidable task. What’s more, the pathways for companies to reach net-zero are not necessarily clear.

The scale and complexity of the challenge is such that businesses are looking far and wide for answers to it. For instance, one energy company is actively courting startups, innovators and incumbent suppliers to deploy new, sustainable technologies on the grid, as well as in homes and commercial properties.

Faced with a growing number of enquiries from the business concerning supplier innovation, the procurement team needed a fresh approach to identifying partners that could support the business’s net-zero plan, in addition to harnessing their innovation potential while complying with strict procurement rules and regulations.

As such, the company’s procurement team has redesigned its request for proposal (RFP) process into a request for solutions (RFS) process. Although the concept of an RFS is a well established one, this company exemplifies its real-world application.

What is a request for solutions?

In contrast to the time-worn, prescriptive RFP process, the company’s RFS process is open and flexible. By dispensing with detailed pricing and specification criteria, an RFS gives suppliers the freedom to propose innovative solutions to the buying organisation’s strategic challenges.

A major difference between an RFS and an RFP is that buyers approach suppliers without knowing precisely what it is they are sourcing. Instead, the team invites suppliers to submit proposals to a given challenge. If selected, those proposals can then be further developed in collaboration with relevant business stakeholders.

Once a requestor has initially completed an RFS, procurement works with them to refine the requirements of the project. A typical document covers the following points:

• The name and details of the requestor
• A brief description of the project and business challenge
• Stakeholders affected by the challenge
• Management support required to deliver the project
• Deliverables and expected impact
• The KPIs used to measure the success of the project

Advantages of the RFS process

• Stimulating innovation: without the prescriptive detail of an RFP, an RFS enables buyers and suppliers to cocreate optimal products and services – as opposed to buyers sourcing suppliers’ off-the-shelf products. 
• Accelerating time-to-market: the RFS process facilitates early supplier involvement by engaging prospective suppliers at the ideation phase of the innovation process (see Figure 1, below). Harnessing supplier capability early on can enable pilots and concepts to be developed faster when compared with the use of RFPs.
• Casting a wider net: by providing general information around a challenge instead of specific sourcing requirements, the RFS process makes it possible to approach potential suppliers that may not be considered in conventional procurement exercises, for example, startups and research institutes.
• Improving cost effectiveness: Research suggests suppliers’ prices were at least 10% higher when responding to complex RFPs. The study suggested that the response to an RFP itself can represent a cost driver. An RFS simplifies the bidding process and may help eliminate unnecessary costs.

The RFS process in practice

Not only has the new approach helped to facilitate early supplier involvement, it has also brought about procurement’s early involvement in the company’s supplier-enabled innovation (SEI) process.

Previously, procurement’s role in SEI was limited to comparing preselected suppliers using RFPs, once the business had decided on its challenges and supply options. With the RFS process, the function now helps define the requirements around a challenge in collaboration with the business (see Figure 2, below). 

The process works as follows:

1. Business needs are defined on the basis of the company’s strategic challenges, for example, supporting the energy transition by deploying new technologies.
2. Procurement and the business collaborate to define the requirements around a challenge.
3. Procurement publishes the resulting RFS on the external market.
4. Companies that respond to the RFS are screened before entering into collaboration with the business, to refine their ideas. Procurement maintains close cooperation with the business at this phase to ensure any potential suppliers comply with existing procurement regulations.
5. Using predetermined selection criteria, the business invites prospective suppliers to pitch their proofs of concept or minimal viable products.
6. Representatives from the business evaluate suppliers’ pitches and decide whether to award the business on the basis of established criteria.
7. Those companies with winning pitches are onboarded as suppliers, following the conventional RFP process.

Outcome

By adopting a more flexible approach to gathering proposals from prospective suppliers, the company is better able to harness sustainable innovations from third parties, while also continuing to abide by existing procurement rules and regulations.

Not only has the company’s RFS process enabled it to channel supplier expertise into the ideation phase of the innovation process, it has also helped to elevate the profile of the procurement function by enabling it to play a more strategic role in scouting innovations.

Furthermore, the RFS process helps to create the perception among external stakeholders of an innovative company that is open to working with startups, to which the conventional RFP processes of large corporations can be prohibitive.