A switched on team of senior management makes all the difference. No matter which part of the world, and how unfamiliar the concepts are – an interactive team will always find how to use ideas for their business. I recently had the pleasure of interacting with the chairman and top management team of one of the most strategic companies in Asia. The healthy discussion and the response proved the power of ideas to me once again. Was also pleased to be presented the Chairman’s award. Thank you. You can see a gist of ideas I presented on my book “The 5 Star Business Network”.
Yet, even the most senior sea masters and chief engineers trembled invisibly, at least once, if summoned into his office. He had a way of sizing up the people and quickly telling them exactly where they needed to focus.
As I sat across him, he asked “Lad, do you see this sign under my desk?” I glanced at the sign – neatly typewritten and carefully tucked under the glass covering his desk. I started reading it because it seemed interesting. It said:
“A captain is a man who starts knowing a little bit about a few things. As he gains experience, he learns less and less about more and more – till he comes to a point where he knows nothing about everything.
A chief engineer, on the other hand, also starts knowing a little bit about a few things. However, as he gains experience, he learns more and more about less and less – till he knows everything about nothing.”
It was an amusing sign, especially for a junior officer barely into 20s. I cracked a smile and looked at him with puzzled eyes. I was wondering why this serious man with hardly a minute to spare would show me such a frivolous thing.
In his thunderous voice, he asked me: “Which one are you, Lad?”
I answered: “It is obvious, I work on the deck side – so eventually I will become a captain.”
“So, you want to end up knowing nothing about everything?” he asked.
I replied: “Now that you put it this way – no, not really. I want to know about more and more things for sure, but I want also to make sure that I know enough about those things to be able to effectively use that knowledge.”
“Keep that answer in your mind as you gain experience – now you can go and join your ship.”
I wondered if he gave the same lesson to everyone. Then I remembered there were several other sayings taped on his desk.
In the next blog I will write about how to get everything for nothing.
The customer centric model mentioned in the previous post is still a model of last decade and later in this piece we will see the reasons for this assertion. First, let us examine the impact of this model in practice of the commerce as conducted by many companies today. Due to persistence of traditional supplier-buyer relationships, when this model is applied across multiple organisations it morphs into an unworkable hierarchical structure shown in Figure 1 below.
Imagine if 5 of more organisations are linked in a multi-layer structure shown above. Unfortunately, that happens to be the case with many large organisations that compete with Apple in the market-place today. While such a structure minimises cost and responds predictably to all external stimuli, it is not suitable for the world of rapid change we live in today.
Today, businesses collaborate in a robust network
Success of Apple has shown that in the next decade this model needs to be supplemented by an even more evolved model which we have called Efficient Global Leadership model (EGL model for short). In this model we recognise that no single organisation by itself is in a position to service all the needs of a customer relating to even a single product. The fact is that two or more, in general three organisations come together as a supply chain, work together collaboratively, to fulfil the customer’s need.
As shown in Figure 2, each one of these organisations work in close harmony with each other, where the research & development teams of each organisation work together as do marketing teams and even sales teams of these organisations.
To create products, and then to manufacture those products, the production teams and the procurement teams work together to put those products in customer’s hands. In such a model, close collaboration is required among the supply chain partners to create market and sell the products.
Similarly, close cooperation is also required to produce the products, move the products and store the products in such a way that highly innovative products are produced in shortest period of time at a fraction of the cost of traditional products and put in customers’ hands extremely quickly.
Needless to say, when Apple manages to put out one innovative product after another in the market place, it is not only its own innovation but also an innovation of all its partners, which is at play here. Only when companies work together in such an efficient leadership model, do they achieve the level of success which Apple has achieved over the last 5 to 10 years. Figure 3 reminds one of the team huddles as shown below:
When an individual works on his own he is neither very efficient, nor very effective. That is the key reason, from early civilisations, humans have created organisations that give them the benefit of either effectiveness, or efficiency, or a bit of both. Figure 4, on the other hand reminds one of camel trains or dog sleds – where one animal is closely following another as shown in the picture below. Now imagine what would happen to the whole camel train, if the first beast lost its way!
Naturally, the question is why is this important? Think about it for a minute. In fact, stop reading and just reflect on the metaphors. A camel train was a great technology – but is now largely redundant. Moreover, with a limited room to collaborate, it is essentially a command and control organisation. In periods of rapid development, if such organisations stick to the tried and tested, they get left behind by their more innovative peers.
If you would like to see how Supply Chain 3.0 differ vastly from its predecessors, please read the next blog entry of this series.
We were discussing the invention of electricity and he asked me: “Dad, what would happen if there was no electricity?”
Since I actually had such an experience, I recounted to him my life in a remote village in Himalayas when my mother had taken a one-year assignment to teach economics to children in a school nearby.
I told my son that there was no internet, no computers, no telephones, no television, no radio and no light bulbs. Even more so, there was no electricity in that village at all. As a result, the whole village would get up at sunrise, go through their daily routines and were go to bed just after the sunset. People used kerosene lamps to light up for an hour or so after dark and only in case of necessity.
My son is only 8 years old, and grew up in Australia. Hence, obviously enough he found this life almost completely incomprehensible.
On my part, this conversation inspired me to think about life without supply chain management.
I have been lucky enough to have the opportunity of working closely with Dr. Wolfgang Partsch – who is one of the co-inventors of supply chain management (SCM) in the early 80s. I have had a number of discussions with him about how the business life has changed compared to the life before SCM was invented.
No doubt, the division of labour was one of the biggest and most popular concepts which came out of the industrial revolution. The principle is that every job is divided into its constituent parts to the lowest possible level, so that each person can specialise in what he does best, this would increase the productivity of the overall system immensely. By the late 70s, the division of labour had totally taken over the business as well as governmental work.
Unfortunately, bureaucratic complications combined with the division of labour had created a world in which every department within any company was running as a small fiefdom.
Imagine that a purchasing clerk would issue a purchase order. Then he would let his boss know that he has issued the purchase order as per the boss’s instruction. Then his boss will countersign the purchase order and would inform his boss that such and such item has been purchased, who would then inform his boss, who would most likely be the head of purchasing.
The department head of purchasing would inform the head of manufacturing, who would inform his subordinate, assistant head of manufacturing, who would inform his subordinate, the factory manager, who would inform the manufacturing planner that the purchasing order had been issued.
There were 6 to 8 different links in this communication chain running from the purchasing clerk to the manufacturing planner or production planner. Each message would go up the chain in a department, right up to the department head, and then across to another department head who would filter the message down all the way to a person who would act on it. In such a world with these eight or more different links in the chain, the time difference by itself was enough for the message to lose its effectiveness.
Combine that timing issue with the possibility of a message getting garbled in a long chain of communication, due to the differences of intentions and possibility of misinterpretations of messages, suddenly you realize what a nightmare it would cause.
Not only that, the departmental heads were almost always the biggest bottlenecks in such a communication scheme where nothing would go up, down or sideways without a departmental head’s approval. Obviously, their capacity to process information was only limited by how much time they had.
Now before you think of this as a ludicrous, and imaginary situation – let me add that I encountered exactly this situation in an Island airlines where I had the opportunity to participate in a business transformation exercise a few years ago.
Many other organisations I have had the opportunity to serve exhibit at least some symptoms of the same malaise.
So, what would be the typical complications you could encounter if there was no SCM?
You would notice that some easy five-minute jobs could quite possibly take days to accomplish, for a simple reason of the lengthy communication chain required to get the cooperation. You would also see a lot of confusion, because of the possibility of the message getting misrepresented. You would see some coordination, but not a lot of it because of the nature and length of the communication chain.
You would see a lot of bureaucratic nonsense with people hoarding information and only giving it to their bosses or their subordinates in a very selective manner. In many cases, this information hoarding would be pointless and even harmful. The rationale behind the behaviour might simply be a cultural norm or an expectation in such a hierarchical organization.
You would also see too much command and control in this type of organization, for the simple reason that when everything has to pass through a departmental head, he becomes an ultimate arbiter of what information filters through and what does not.
You would also see that the departmental head would have to make all the decisions. Even the smallest scheduling decisions, or planning decisions, or execution decisions, which could have easily be made by people several layers lower than him/her, would need to be made by the departmental heads themselves, again for the same reasons.
You would also see such systems as very rigid with no adaptive capabilities to changing needs of the market place. If you notice any of these symptoms within your company, then there is bound to be a problem with how the supply chain functions in your company.
No matter whether you have somebody with a title of supply chain director or vice-president, your company does not act as an organization with an effective supply chain which cuts across the departmental silos.
As this is a very important subject, in another article I will talk about how supply chain helps to alleviate the silos mentality and integrate departments to act as one company.
Most of the McKinsey (or their clone) trained strategists ask me to show data to back up this assertion.
On the other hand, more intuitive executives (mainly from sales and marketing background, as I observe) ask me to explain the benefits of supply chain 3.0.
Finally, the third group – those who I call the transformational leaders ask a simple question – how can we use the power of supply chain 3.0 in effecting beneficial business transformations.
In this blog I will address the first question. I will leave for later blogs the remaining two questions and other arising questions such as: how does supply chain 3.0 differ from the previous versions of supply chains, and, why it was even necessary to ‘invent’ supply chains in the first place.
It is an important question – “where is the data to clearly demonstrate that Supply Chain 3.0 is real?” The data driven crowd has a legitimate concern lest a couple of isolated examples be seen as heralding a trend. Having trained at a similar top-tier consulting house during my formative years in consulting, I fully understand and endorse their questions.
Why? Because all of us have seen people taking isolated instances and exceptions and making them so big in their own and others’ perceptions that these appear to be the predominant trends. Nay-sayers will take a few stray instances of setbacks, blow them out proportion to support their naysaying. On the other hand, almost all investment projects also have their share of overly optimistic projectionists. In the end, only data reveals the overall picture and clarifies the confusion.
For this reason, when I wrote the book “The 5-STAR Business Network“, our team did a 6 year longitudinal study of the top 1200 corporations around the world. There were other reasons why this study was conducted – which are given in Chapter 14 of the book. The full research methodology and the resulting ranking of the companies is also given in the book, but for our purpose here it is interesting to note that 62 companies out of the entire starting sample of the top 1200 companies in the world scored 20 points out of 25, which is our cut-off for the Supply Chain 3.0.
Also, interesting to note is that Apple – the darling of supply chain crowd – is only ranked #60 in the rankings. And, due to its low margins, Amazon – just missed the cut. So who are the top 35 companies in these rankings? You can see them in figure 1 below. For the time being ignore the 5 colour coding, as well as funny three-letter acronyms (TLAs) in the figure. I am absolutely sure, that this figure is unlike any other figure you might have seen before.
Firstly, the companies themselves come from around the globe – Novo Nordisk is from Denmark while Fanuc is from Japan and Falabella is from Chile. That was to be expected – if you make your research wide and deep enough you will find good companies everywhere. No country, or continent has monopoly on excellence. So much for all the hype about the Asian century. Sure, development in Asia is creating unprecedented opportunities – but good companies around the globe are using that trend to their benefit. You do not need to be an Asian company to be excellent, but neither are all non-Asian companies uniformly good. Secondly, because this ranking is based on study conducted over 5 years (not at a single point in time) the standards of excellence are much higher. Also, this is a global study hence the sample base was much wider.
For this reason many of the usual suspects that you might have seen elsewhere in magic circles and quadrants etc. are missing. Another reason, the usual suspects might be missing is because we looked far beyond tactical operations into the strategic contribution of supply chains to corporate results. For example, rarely has anyone tried to gauge the impact of supply chain collaboration on innovation, new product development, pipeline of products, product phasing etc.
But in our research, we took these into account. For details of the research methodology, caveats, cautions and warnings about not applying these results for investment decision making please read Chapter 14 of the book “The 5-STAR Business Network“. This is critical because I do not want you to take the results out of context and make decision based on flawed assumptions.
Time has come to talk about the 5 funny acronyms in the figure. This is because we want to see how these are linked to the strategic contribution of supply chain management to overall corporate results.
So, what do these TLAs stand for? Figure 2 below shows the details: Figure 2: Five cornerstones of Supply Chain 3.0
Each of these names are quite self-explanatory and most people reading this blog will not need too much explanation. I will only briefly outline them here, because detailed explanation and examples mean that I will be recreating the book “The 5-STAR Business Network“ or a version of it in this blog. One more important conclusion needs to be drawn from the data presented in Figure 1.
You will notice that rarely is there a company which ranks high on each of the five key cornerstones of supply chain 3.0. Yet, all the 62 excellent companies that meet our criteria for supply chain 3.0 excel in at least three of the five key cornerstones. That shows you do not have to perfect to arrive at supply chain 3.0 – you only need spikes of excellence in at least three of the five key areas. In the next two entries, I will write about each of these five pillars in more details.
There is a common assumption that every company’s supply chain should be similar, if not the same. Even learned professors at august institutions write highly prescriptive articles in highly regarded magazines such as Harvard Business Review saying these things. For example see this article by a Stanford professor, on which I had a running correspondence through Harvard Business Review. My rebuttal of the article was published in the next issue of the same magazine.
The reality, encountered in the rough and tumble of the real business world is very different. Especially in the world of start-up companies – even the unicorns – the supply chain looks very different.
In fact, our supply-chain maturity model shown in figure describes four stages of supply-chain, where each stage of product life-cycle is paralleled by a maturity stage of supply chain. As figure below shows, there are four relevant zones of operations determined by two key factors on product maturity and supply chain maturity. Zone 1 is the foundation zone in which both the product and the supply chain are quite immature. As the name implies, in this zone the foundation for the future business is being laid. The next zone on the top left quarter of the matrix – the Innovation zone – implies a relatively mature supply chain, but a developing product. As the name suggests, this is the zone where both product and process innovations are rapidly taking place. The profitability zone on the top right quadrant is where both the product and the supply chains are relatively mature and while incremental innovation might be still possible. This zone is primarily focused on enhanced profitability. Finally, the twilight zone on the bottom right corner is when the product is reaching the end of its profitable life cycle and the supply chain becomes brittle.
Needless to say the more time spent in the profitability zone the more a company can reap rewards of its efforts. However, to maintain fresh product lines, to constantly stay on cutting edge and to retain long term leadership, companies will have to also spend some time in the innovation zone. Intuitively, companies want to spend time in the top two quadrants and minimize their time in the bottom two quadrants. In fact, overlapped on the four zones is a typical supply chain maturity cycle we observe. We will discuss this conundrum in more detail in Chapter 11 where we observe the Advanced Product Phasing strategies of the 5-STAR Network businesses.
Initially, in the introductory stage of the product life-cycle, the supply chain is still very basic. In this improvisational stage of supply-chain, the key focus of supply-chain team is to really just gather enough material somehow, from somewhere, to make the product or to keep the research and development team supplied with raw material. They are not doing any advanced planning at this stage. They are not even aware of all the raw materials or all the parts, which will be required for making this product. Bill of Materials may not exist or, if it does, it is incomplete. There is no supply-chain planning mechanism besides this Bill of Material. There is no supply-chain control mechanism either. Even a budget does not yet exist, or it might be just a very rudimentary budget. At this stage of supply-chain maturity, the companies are not worried about its efficiency at all. There is no supply-chain collaboration with its partners for this simple reason: we don’t even know who they will be.
To read more get the book on http://5starbusinessnetwork.com/ or download 3 free chapters.
Almost single-mindedly he twice created a company that eventually became bigger than the economy of Spain (and many other countries).
Having grown up away from computers, I personally experienced his genius much later in my life than most people did; only when I installed a very expensive and clunky hard drive based music system in one of my cars I found out in a few months that his company had released a much more compact, mobile, versatile, far superior iPod, which made my costly, and clunky install redundant.
But today, when I reflect – almost every technology I use on daily basis has his finger prints on it – Microsoft Word, Windows, Android Phone – all have ideas inspired by him. It was his misfortune that ‘the look and feel’ was something that could never be patented – shows you how useless the patent laws really are when they protect what is not worth protecting and give no protection to what is worth protecting the most.
When I wrote my book ‘The 5-STAR Business Network’ I used Apple as a shining example of the first star – Innovation. The collaborative approach to innovation that Steve Jobs pioneered, and that is epitomized in the quotation above was worth emulating.
Admittedly, his is not the only company that does it – his company just used to do it better than anyone else. Using a business network of suppliers, suppliers’ suppliers and collaborators to co-create a product in far less time than anyone else could have created was a work of a genius.
He stood the Edison and Tesla model of innovation on its head. And, even Ford could have learnt a few things from him. What surprises me most is that despite the overwhelming evidence and a clear role model – why most companies still cannot get their act together when they sit back to create products that their customers would worship.
Why do they still settle for shoddy GM cars, or pills that do more harm than good.
I will end this blog with a quotation from Steve Jobs’ biography by Walter Isaacson:
“Because he believed that Apple’s great advantage was its integration of the whole widget – from design to hardware to software to content – he wanted all departments at the company to work together in parallel. The phrases he used were “deep collaboration” and “concurrent engineering”. Instead of a development process in which a product would be passed sequentially from engineering to design to manufacturing to marketing and distribution, these various departments collaborated simultaneously. ” Our method was to develop integrated products, and that meant our process had to be integrated and collaborative”, Jobs said.
He called it ‘deep collaboration’ – and we call it Supply Chain 3.0. Hopefully, we will have a lot more time to put it into practice. This tribute to the great man has been cooking up in my brain for a long time. The world is a much better place, for he was in it for a few brief decades. You cannot say that about too many people.
Disclaimer: I never had, and do not currently own, any shares in Apple.
And, she ended up taking a very long journey through the east.
On her return, I asked her how she felt. Her reply was that she had moments of pure joy, but most of the time she still felt the same.
Unfortunately, her travel only served to confirm her biases, without expanding her horizons. She carried her whole world with her, wherever she went.
But I have seen several people get out of the rat race successfully, and I talked to them about their methods. Two key points I learnt are these:
You are not a rat
It is not a race
If you feel like a rat on a wheel, it is because you have allowed others to make you feel like one. Rats are mammals of lower order, mainly run by a limited brain capacity and caught up in the game of procreation, nutrition and survival.
Obviously, for a human all three of these are important. But, if that is all that occupies your time then eventually you will feel like a rat.
So, what do you do to go beyond those three basics?
a. Invest in relationships: Relationships of the past were based on mutual dependence and need. They were really rooted in the three basics mentioned above. Only those who invest in relationships based on CARE, TRUST and INTEGRITY can manage to raise their consciousness above the level of the rats.
b. Speak your truth: Self expression is a necessary tool of expression. You can find many mediums – painting, novels, sculptures, inventions are just a few. The joy of creation will start to bring you up another notch.
c. Clear your perceptions: Constant barrage of 24/7 news channels is now supplemented with numerous social media channels with bait-and-switch headlines. Where does it end? You end up clogging your perception to such a high degree that you may not have a single original thought for months. What chance do you have of getting out of rat-race if this is all that occupies your mind?
d. Co-Create: Creating a child is only the most beautiful and pleasurable way of co-creation. But, that is not the only one. Join your consciousness with others’ and you will be surprised with the results. Those who do not see the need to do so must read this blog post on Steve Jobs.
Let’s talk briefly about the second point above. It is really not a race? Nobody took birth to race to his/her grave. If you don’t KNOW THYSELF and your purpose then you will surely get caught up in the race. Who has the biggest ‘______’ is not the way to measure the quality of your life?
It may be an expression of your contribution, or even of your truth – but there is no reason to stop your consciousness at that level.
Do not let your petty jealousies drive you – leave that job to your purpose.
So, how do you KNOW THYSELF, and your purpose?
Generally speaking points a, b, c and d above would have already brought you that knowledge.
All you have to do is accept the truth as it surfaces, and live it. You will never get caught up in the rat race, no matter where you live and what work you do.
That will be a true human life that knows its own value.