Let’s start with a story illustrating how supply chain security irrevocably altered the fortunes of a company that was
This story is in
Think of the time before Iphone and Samsung phones came along and conquered the supply chains of the industry, and the minds of the users. I tell that story elsewhere.
Here we focus on the simpler times.
A seemingly trivial random event, on a fateful day in March 2000, changed the destiny of the industry.
Both Nokia, and Ericcson, the stalwarts in the mobile phone industry at that time, were equally impacted by the same event – a
Both Nokia and Ericsson experienced business disruption to an equal extent as a result.
More importantly, the manufacturing capacity of the plant was damaged and it was difficult to estimate the time for repairs.
This is where the events take an interesting turn. Not everyone thinks of supply chain security beyond the physical security of goods in transit. For
In fact, all the security experts who have no background in supply chain security fail on this count – they never think deep enough in terms of the layers of
Nokia had invested months, if not years, in creating and perfecting a robust and responsive supply chain security, while Ericsson’s business network was relatively a middle-of-the-line affair that worked well when things were good.
Ericcson staff were content to go with the flow, without too much care and worry about this part of supply chain security.
After the fire, Nokia was able to see the full impact of the chip shortage on its own business, as well as the entire industry with a lot more clarity than Ericsson, and even Philips.
Moving quickly, it activated other parts of its business network to shore up supplies, to redesign some of the chips to manufacture them in other plants, and to take pre-emptive steps in the network.
Ericsson let the situation evolve at its own pace and made decisions more reactively.
The resulting gain in profitability and market share for Nokia and the loss of these for Ericsson tipped the balance of the industry to an extent where within a few years Nokia pulled far ahead of the Ericsson which never caught up with its erstwhile equal rival.
It does have some anecdotal entertainment value.
But the moral value is even higher. Here are some things to ponder:
I could easily turn this above 7 point list into a large magazine article (listicle), but my readership is wise enough to connect the dots themselves, and do not need
Given the quality of my readership – I have created a
If you really want to pay
People often wonder where the best opportunities for start-ups are. Supply Chain Security space is getting a lot of attention in this regard.
In fact, just today someone asked me on a popular platform about opportunities for start-ups in Supply Chain Security space . They wonder whether these were more in software, or consulting arena.
Here is my view:
It would be neither of those two. Rather it will be a combination of hardware and software – initial application know-how will have to come from the user side.
Let me explain.
Post-2001 (911) the world of supply chain security has changed dramatically. The regulatory environment has evolved dramatically (as we explain in my report Global Supply Chain Group’s SUPPLY CHAIN SECURITY REPORT). But that is not the only change. Almost everything – customer innocence, political and cultural norms, technology and particularly technology – has evolved dramatically as is explained in this report.
Most importantly – the threat perception has evolved considerably. Look at the diagram below which summarises the supply chain threats over the decades:
So far, this is common sense representation of common knowledge. What is not common knowledge is how technology has evolved in response to these trends.
There are at least 6 technological streams which find applications in supply chain security. You will find them in the report, or in this survey on supply chain security – Supply Chain Security Survey
But the most interesting insight in the report is that almost all the opportunities offered are in combinations of hardware, software and some know-how in the application.
That is not to say that pure-play companies do not exist. In fact, many companies have evolved to products with a considerable component of application know-how. In mature products that is always going to be the case.
But, for a start-up, a combination of hardware, software and some application know-how is the best bet
There were only 24 hours left. Tomorrow the board would pull the plug on the project which had continued for well over 3 years. The total costs as per internal calculations had run into hundreds of millions of dollars.
External consultants reckoned that when you included the costs of internal resources seconded to the project from rest of the organisation, and other costs buried elsewhere in P&L’s the real total was at least double of that.
However, the project had built a momentum of its own. No one was willing to point at the elephant in the room, let alone to lead it out. Careers were at risk. Good careers – built over several years.
I will talk about the outcomes later in this piece. Before, I do that I want to spend some time talking about how did the company arrive here?
How did so many competent people miss obvious and easy signs that the project was not on track. More importantly, where did it all go off the rails?
Of course, I have covered these, and other similar questions in my book OUTSOURCING 3.0, and in my blogs and videos. The book, in particular, carries a very comprehensive model and diagnostic tool kit, which is value for money.
In this piece, I want to focus on only a few key points. And, I want to frame it as a positive affirmation of key things that would build momentum towards success.
Three kind of congruence is important:
In the case quoted above, while minor lapses occurred in all three, several major gaps very readily apparent in #2. It appeared as if IT team was working in total isolation from the Supply Chain and Business Transformation team – though their projects were closely linked.
Short term, tactical thinking – predominantly related to cost savings and control issues and considerations tend to dominate. It is quite easy to lose track of the big picture in the process. All the initial discussions and dreams of gaining competitive advantage are thrown out of the window at the first opportunity.
Then, what is the point in spending all the money? The project appeared like a lot of effort, just to stay in the same place.
This takes more than a flight of fancy. A lot of things will change when one thing changes. You cannot ever do enough of visualisation and preparation. Every time you do this exercise, you will discover some more things that need to change in parts of the processes, infrastructure, skill sets, SOPs, contracts, warehouses, etc. Change it.
That brings me to my last point. All this difficult work is highly specialised; it also takes considerable time and money. It needs skills rarely found inside organisations, or even in IT service providers.
While it is well known that most IT projects run into time and money problems, the scope adjustment problem is less well articulated. Yet, taken together, these can wreck havoc on your business outcomes.
The above graphic – taken from my book OUTSOURCING 3.0 sums up the situation nicely.
In the case study quoted at the start of this post, the outcomes were a lot different than what was expected by the majority. The board made a bold decision and pulled the plug on the project in the middle. That single decision most likely saved the company in the long run. They could have saved a lot more money if, at the outset, they are created governance structure to ensure just a few key points. After all, prevention is better than cure.
If you are in Australia, it is more than likely that you already know this saga. If you are not in Australia, or do not follow the news cycle, take a look at the video below:
Several years ago it was this:
Some band-aid solutions are rolled out – mostly to restore public confidence and get the demand up again. However, a comprehensive supply chain security regime is never put in place.
Having done large scale supply chain transformation projects for companies as sensitive as explosives, chemicals, fertilizers, food stuff, soft commodities, bakeries, meat, dairy, livestocks, and many others, we have seen both – the vulnerabilities and some really cutting edge supply chain security in practice.
Unfortunately, supply chain security, in conceptualisation and training, has not kept paced. There is no university course that covers this topic sufficiently. Conferences skirt this topic. Books cover it sketchily. Regulatory framework is patchy and officious.
And after complying with the regulatory burden most people relax in the belief that they have done enough.
Yet, dozens of incidents have demonstrated that regulatory framework is never enough. Each company has to develop its own supply chain security framework, based on its own particular circumstances. Even compliance with insurance requirements is not enough. Reputation damage to your business is a non-insurable loss in most cases.
Complying with regulatory and insurance requirements is a good start. You also need a more robust, holistic and comprehensive supply chain security framework that provides the guidelines for your own company’s supply chain security model.
Our report titled SUPPLY CHAIN SECURITY – A COMPREHENSIVE, HOLISTIC FRAMEWORK provides the information to get you started.
Better still – run a one day workshop based on the content of the report. It will be the best 20K your company ever spent.
Recently, obstetrician Dr Liu Hongmei hit global headlines when she disclosed the story of a young couple who came to her after four years of intense attempt to get pregnant.
As it happens in these cases – when the wife could not get pregnant even after 4 years of marriage, the family pressure was piling on. Speculation and rumours abounded. The desperate couple were ready to try anything – including visiting a doctor.
That is when obstetrician Dr Liu Hongmei got to examine the couple. They spoke about their intense desire for a child. They spoke about their struggle with painful sex at a very high frequency. And, they spoke about the family pressure.
The events unfolded village in Bijjie city in the south-western Guizhou province.
When Dr Liu examined the wife, and was confused to find that she was still a virgin.
I know, now this story gets a bit hard to believe. I had the same reaction.
If you have not read the entire story, then you should do so before continuing.
Now coming to the main point of this blog post –
The Apple watch left me underwhelmed as did the plethora of me-too tablets and phones which are barely struggling to keep up with the ever more nimble competition. I wrote a blog about the Apple Watch here wondering whether the company had lost its mojo.
When I found out about Apple SIM, having written a book on The 5-STAR Business Networks, I suddenly realized the true potential of this great leap forward by Apple. Obviously, there are more than several ways to skin the cat. While everyone was looking for the next innovative product, that Apple has produced every few years in the past, what slipped our attention was the innovative service which will make Apple tablets so much easier to use – especially by its target, high end market.
If you do not know much about Apple SIM – you are not alone. In fact there was not a tweak about it in the usual Apple staged events where the Apple Watch and other new gizmos were introduced. The service (product) was launched quietly as one of the embedded features in the new generation Apple tablets. So what is Apple SIM? As per Apple:
The new Apple SIM is preinstalled on iPad Air 2 with Wi-Fi + Cellular models. The Apple SIM gives you the flexibility to choose from a variety of short-term plans from select carriers in the U.S. and UK right on your iPad. So whenever you need it, you can choose the plan that works best for you — with no long-term commitments. And when you travel, you may also be able to choose a data plan from a local carrier for the duration of your trip.
Clearly, if you are a frequent business traveler, this service will fulfil your CFO’s dream. The international roaming charges are so high that in most cases you have to mostly restrict your time on line to when a WiFi network is in reach. Is this a big deal? From the customer’s point of view, their ability to be online wherever they are is necessary for using all cloud based applications including emails and messaging systems.
If it costs an arm and a leg, as it currently does, customers will grudgingly put up and restrict usage to a bare minimum – while trying to find work-arounds. Some companies, such as Vodafone or Globalgig do provide similar services so this is not a new offering.
Yet, I would characterize the state of the play as akin to the digital music players market before the original, cute looking iPods came along and made all the rest look like clunky dinosaurs. I must admit, I have not used the Apple SIM yet, because of its current limited ability.
Nonetheless, I have used many of its competitors’ and I can attest to the fact that their services work with a lot of clumsiness. Thus, therein lies the opportunity, and challenge, for Apple.
If Apple can make the service as user-friendly and seamless as the rest of its offerings, it will win big in the next tablet war. Well, at least till Samsung and Google figure out a way to beat Apple in this new business network game.
“Call it a clan, call it a network, call it a tribe, call it a family. Whatever you call it, whoever you are, you need one.”
Business Networks are important to accelerate and sustain success for any individual or organization. It is imperative to learn from the evolution and success of business networks. Business structures have evolved radically to such a degree that nowadays, most businesses have no option but to create business networks.
Naturally your business infrastructure is fixed, rigid and cost accruing. Your business networks, on the other hand, are evolutionary, flexible and revenue accruing.
Those businesses which had the most responsive and resilient business networks were the ones to recover from any downfall the quickest. See who survived the global economic downturn during 2008 – 2009.
Data is visibly conclusive that in times of cash crisis, the quality of their business networks saves companies. Those with more robust business networks have far more superior cash conversion cycles, nearly 6 times better. In fact, as pointed out by Aberdeen Group, business network masters improve their cash to cash cycle leading up to the Global Financial Crisis while the rest of the industry went backwards.
Even relatively smaller businesses can achieve remarkable results quickly based on the responsiveness of their business networks. In economic booms, whether accompanied by economic volatility, or economic stability, business networks allow you to realize higher profits, quickly. The potential of your company’s capabilities are multiplied many times over, by the leverage effect provided by your business network. This is only possible through extensive utilization of business networks that the company has built, nurtured and managed effectively. Most executives grossly under-estimate the value and efficacy of business networks in ramping up capacity rapidly in boom times.
Especially during times of extreme volatility, we see airlines and shipping companies forming global service alliances to ride out the season and economic peaks and troughs. In such volatile business environments, budgeting and planning can become a nerve-racking exercise for all companies except those which use their business networks to cushion the lean periods with long term contracts and find scarce capacity during boom periods. Supply chain is unique to every company and industry, formulated over a number of decades in many cases, and is worth several trillions of dollars in value.
Estimates range into trillions of dollars, and yet may be underestimating the full extent and power of these hidden business resources. The magic of business networks has made it possible to design, build, launch and sell revolutionary products in less than one-third time of the industry. If you cannot make your business networks more visible and manage them more proactively, you may be silently yielding the competitive advantage to others who can. It is, after all, the obtainable magic.
Want to start now? Create your own 5-Star Business Network today.
Recently I did a small but quite interesting thought experiment with one of my sons.
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.
We are starting to hear about the need for innovation in supply chain strategy.
Crowdsourcing is proving its value in boosting innovation. The magic of this idea is that it ties new product launches with customer wants and needs.
NASA recently turned to the public for the design of its latest space suit, allowing people to choose among three prototypes.
The Z-2 space suit is an update of the Z-1, which was named one of Time Magazine’s Best Inventions in 2012.
“After the positive response to the Z-1 suit’s visual design we received, we wanted to take the opportunity to provide this new suit with an equally memorable appearance,” NASA says on its website.
Lego Cuusoo – the crowdsourcing platform run by its Japanese partner – has helped the company with product ideas since 2008. Lego reviews product ideas that receive at least 10,000 votes and the winner gets 1% of net revenue from the toy.
“While swallowing smaller companies and their readily available technology is one way big corporations refresh their innovation strategies, some decide to turbocharge consumer involvement early through crowdsourcing. Although the late Steve Jobs may disagree by saying customers do not know what they want, crowdsourcing has its place in many supply chains. With in-house curating, involving customers more intimately in the supply chain can be a powerful combination,” says Vivek Sood – CEO of Global Supply Chain Group.
Recently, Hasbro, the maker of globally popular game Monopoly, ran a crowdsourcing campaign to choose new “House Rules”. The new “House Rules” set, to be released later this year, is an attempt to refresh the game after nearly 80 years.
Just over 10 days of the crowdsourcing initiative on Facebook, several thousand people have given their comments.
“There are a lot of Monopoly purists who want to play by the classic rules and don’t want to change it, but we love the idea of there being some optional rules in there that can mix up the game a little bit,” says Jonathan Berkowitz, vice president of marketing.
Crowdsourcing can range from simply asking for consumer opinions about existing options, to allowing people to come up with workable ideas.
“In a way, crowdsourcing represents the Fire-Aim-Ready (FAR) model of innovation, as it lets companies test new ideas and then continually fine-tune them, while choosing the right partners to realise consumer wishes in a profitable manner,” says Sood – author of the book “The 5-Star Business Network“.
Traditionally supply chain has never been considered as part of the innovation drive, but the FAR innovation concept flips that model on its head – dramatically reducing the time to market, and effectiveness of innovation.
Crowdsourcing is one way to do this.
Business Network is now the engine of the society and it will need newer models of commerce to fast track the recovery.
Hollowing out of skills out of entire societies without replacing them with another set of useful skills, very high level of youth unemployment (frequently disguised by serious looking play on iPads and tablets), growing economic imbalances risking implosions of unrest, civil commotion or even a great war have all combined to create a very alarming set of circumstances.
Whatever transpires in the short term, eventually the business people will have to lead the way to recovery around the world. It is evident that I am passionate about newer models that work better. In my projects and work around the world, I have noticed that in almost all circumstances there is always some way to make things better. We only have to look around and see where the guidelines are, what the trends are and which models will suit the trends.
Eleanor Roosevelt (1884-1962) famously said – Great minds discuss ideas, Average minds discuss events, Small minds discuss people.
While it is very tempting to discuss just one of the three key ingredients of life – either ideas, or events or even people, I prefer to discuss all three because all three of these are inextricably linked. People make events and create ideas. Ideas create events and help people become successful. And events shape people and give impetus to ideas. A book full of concepts and ideas but with no stories about people or events would be extremely boring and dry.
On the other hand, a book with just chronicles of events or people would hardly be worth bothering to read unless its authors possessed immensely entertaining style of writing (which I do not) and even then would be of little practical value besides entertainment. I mostly use events and people to illustrate ideas and concepts to make them more tangible for the readers.
Primarily, then, this book is about ideas and concepts – yet you will see enough discussion about people and events to be able to use the concepts. Most of the people and events discussed are relatively well known so that background contextual information is already present in the readers’ domain and I do not have to supply it. Occasionally I had to use events from case studies based on our work – only because we could not find a well known event illustrating the concept.
I do not make apologies for that or for disguising some data or names of the entities for obvious reasons of confidentiality. Every couple of decades powerful juxtaposition of the trends leads to unique and revolutionary way of commerce. Contrary to the portrayal by the gushing accounts and adulation of the commentators, most pioneers merely stumble on the these trends by a process of trial and error. Other companies, the more nimble and hungry ones, follow the pioneers closely and build strong businesses in their lead.
More established companies then follow suit and try and recover lost ground using their financial muscle and market power sometimes succeeding and sometimes failing in this. Many other companies are so caught up in hubris of their past success or internal politics or some other such attention sapping device that they fail to move at all, or move too late, often with disastrous consequences. Chronicles of such disasters would perhaps be more instructive than the starry eyed accounts of success. As Daniel Coyle points out in his book The Talent Code, the only way to succeed massively is by failing repeatedly at progressively more complex smaller tasks till you master them.
However, most writers and authors persist with the formula that has succeeded since the first bard told stories of the victories in war, and I have no doubt that we will continue to see many starry-eyed accounts of success for centuries to come. It is difficult not to get caught up in the current of adulation that surrounds a particular company at a point in time.
Any such apparent adulation in this book is despite my effort to be objective and cognizant of the cyclical nature of success. As defined earlier, the aim of this book is rather more solemn. It is to take a wide and deep perspective on business trends, define the useful trends as seen from user perspectives, and come up with useful information for the business executives and managers.
The biggest trend sweeping the world – business and non-business – today is networking. Just last week Facebook has announced its IPO filing, valuing the company at $100 Billion. Analysts, pundits and business school professors are still debating what entitles it to that kind of valuation when many others with similar business model – Orkut, MySpace and a plethora of wannabes – have failed to monetize the eyeballs to any great extent. It is not even validated how many of those numerous Facebook accounts are authentic.
— Excerpted from the introduction of THE 5-STAR BUSINESS NETWORK
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