The global fast food franchise has recently released a video showing how McNuggets are made to curb rumours about nasty ingredients. In the clip, supply chain manager Nicoletta Stefou from McDonald’s Canada headquarters walks the audience through the process, with particular emphasis on how “pink goop” is never part of the production line.
McDonald Social Engagement – Supply Chain Transparency As an attempt to debunk the long held myth of “McNuggetification”, the video was also aired during this week’s Super Bowl on Canadian TV. Since the mysterious pink substance namely “pink goop” appeared on the Internet around 4 years ago, McDonald’s has come under attack from sceptical consumers, health advocates and food bloggers. “We don’t know what it is or where it came from, but it has nothing to do with our chicken McNuggets”, Nicoletta Stefou said. Pink goop refers to “lean finely textured beef”, which contains inedible meat trimmings. According to McDonald’s official ingredient list for its McNuggets, the item is made from chicken breast, water, modified corn starch, salt, seasoning, and natural rosemary extract. Vivek Sood, CEO of Global Supply Chain Group, said: “This story stems from McDonald’s decision to reply to a customer’s question about the “pink goop” rumour, which can be seen as a triumph in terms of corporate social engagement. While we already saw a similar attempt in 2008, it is hard to ignore McDonald’s recent move with factors such as: the inclusion of the company’s supply chain executive, the Super Bowl timing, the reference to the ingredient list and so on.” In 2013, ABC News (US) was sued for defamation by Beef Products Inc, makers of “lean finely textured beef” in a lawsuit that ran up to US$1.2 billion. McDonald’s intended to use the transparency card to distance itself from all the noise. Chief Executive Officer Don Thompson said in October 2013: “Customers want to hear more about transparency. They want to hear about provenance and where the food is from.” With the “Your questions” section on the official website, McDonald’s is serious about improving consumer perception of its food. Earlier this year, the company also announced the plan to stay committed to “sustainable beef.” “Quite clearly, McDonald’s wants to build trust, engagement and credibility via transparent supply networks. Through the latest video, the company has set the scene for a new business model that thrives on social engagement. After all, customers are king. I think soon enough there will be a title for a Chief Engagement Officer, who is responsible for addressing supply chain transparency issues and spotting potential opportunities to add value to the brand.”, said Vivek Sood.
I was in a hard bind. I just came out of a meeting with a highly polished marketing professional, who was pitching to our company for outsourced marketing work. She had correctly diagnosed that similar to many small companies, ours did not have any real marketing capability. Most of our sales came from word-of-mouth and repeat customers. We are so good at our work that the quality of our work draws in more work. But, therein also lies the conundrum. Whenever we come up against the big brands in top-tier strategy consulting firms, most people have never heard of our company, and hence they are reluctant to award the contract to us. And, rightly so. After all trust is the basis of all action, more so when a company chooses its strategic advisor. We try and combat the brand unawareness through providing testimonials from CEOs who have used our service in the past, and give examples of the results from our past projects. However, the extra due diligence puts strain on many people looking to make a quick decision. We have recognized the need for at least some marketing as our business grows. However, most of it has been ad-hoc efforts of amateurs, with the help of some junior designers. Mind you, we are very good at what we principally do – which is helping companies multiply their profits using the full power of their global supply networks. But, none of us has the marketing flair, experience or down on the ground knowledge of how it is done in a day-to-day manner. For example, this lady who was pitching for outsourced marketing work took one look at the cover of my latest book and exclaimed ‘that is so 90s that it will never fly off the shelves’. Before meeting her, I thought it was perfect! But suddenly, I could see her point of view and the cover did start to look staid and stolid. I think that comment probably applied to all the marketing material we had. On reflection, I can now genuinely resonate with the quote “If you think it’s expensive to hire a professional, wait until you hire an amateur.” We ask our clients and potential clients to trust us as the guides and coaches on their supply chain transformation projects because our people have led more than 400 of these large scale projects in every conceivable situation, and all with great results. Yet, when it came to marketing our own business, it never occurred to me to go out and look for people who have an equally impressive track record in marketing. For the last 14 years, I have been making the classic mistake that I see a lot of our clients making – persisting by ad-hoc means and sheer will power to win in a field where our own capabilities were never going to be world class. It would have been far savvier to admit this lack of capability and find a way to bring it into our company. However, the decision was not that simple either. Otherwise, I would not be up at 5 am writing this blog piece to document my thoughts. There were several complicating factors. First was that while the lady I spoke to was obviously very good at marketing her company, I did not know what real capabilities lie behind the façade. I was unsure how much personal time she would be able to devote to our business once we had engaged their company, and did not want to be in a situation where we were dealing mainly with a sub-ordinate who was not as good as her in marketing. After all, in our business, the person who sells the job is also responsible for delivering it. In this way, no false promises are made in the sales process and nothing is lost in translation between the sales team and the delivery team. Secondly, their rates were quite high – almost comparable to what we charge our clients. But our clients being large companies can not only afford these, but also get a way bigger business impact for their expenditure. In our case, the worst scenario is our full quarter’s profits could be easily wiped out simply by spending on marketing and design projects that yielded no tangible benefits on the sales. Of course, we would be carefully managing the process, but it would certainly put in place an unnecessary tense situation which does not exist at the moment. The third question was how we square this with our current team of amateur marketers, designers and other sundry bunch of free-lancers who all are genuinely doing their best, and yet falling short of world class. I do not see them as responsible for the current muddle we are in, that is my own responsibility. After all I created that team, and I was responsible for setting the benchmarks. My own ignorance of what constitutes world class in marketing cannot be their mistake. So, I feel responsible for taking as many of them as we can on this transformation journey so that they also upgrade their skills and thinking, while we revamp our marketing portfolio. Last, but not the least, all this marketing effort might distract us from our core business of serving clients to our best possible capabilities. This could become especially a problem if the tensions listed in second complication surface where their firm is looking to expand their revenues while we are managing our costs carefully. After all someone famously said ‘about half of my marketing dollars are wasted, I just don’t know which ones’. Being a lifelong operational person, I am not used to wasting a single cent! So, what should I do? Here is my proposed course of action:
With this in mind, if you are one of those people in a position to share your experience with marketing investments, please do. No doubt, what goes around, comes around.
Dellify (verb) – the process of changing an industry model from high cost, low flexibility, make-to-stock model to a low cost, high flexibility make-to-order model. Before Michael Dell started his business from the college dorm, computer industry followed a very different model. It was been nearly 30 years, and it is hard to imagine those days when branded PCs were sold at a premium prices for out-of-date models that had been sitting in inventories for weeks, if not months. As I wrote in my recent book The 5-STAR Business Network
When Michael Dell started the computer company that bears his name in 1984, the cash-to-cash cycle time in the industry was 56 days on average, and as much as three times as long was well-accepted in the industry. In the book Direct from Dell: Strategies that Revolutionized an Industry, authors Michael Dell and Catherine Fredman describe the journey of phenomenal growth. Michael Dell started the company convinced that by selling PCs directly to the end-customers, he could better understand customers’ needs and provide more customized solutions.
In the PC industry, when Dell started his business, C2C of 50-150 days was the norm. Within four years of starting his business, he had reduced it to -4 days, an unheard of achievement. In fact, Dell was being paid before he bought parts for his product. In the next five years, he brought it down to nearly -40 days – a figure where it has consistently hovered ever since.If you have not already calculated the bottom-line impact of C2C reduction for your business, divide your annual turn-over by 365 days and then multiply that by the cost of capital, obsolescence, and collection. You will be surprised by how high the number is. In Dell’s case the number worked out to several hundred of millions of dollars, a figure that easily allowed Dell to consistently take market share away from his high cost, fixed infrastructure competitors.
Mobile phone systems industry today is showing exactly the same symptoms at the PC industry was at that time. While there is a robust eco-system of suppliers of parts, only a handful of branded products manufacturers release limited number of fixed configuration models at periodic intervals. Similar low flexibility, high premium conditions have prevailed for the last few years – allowing Samsung, Google and Apple to enjoy robust margins and leeway to fight court battles that one judge labeled ‘part of their corporate strategy’. The key question then is – if the mobile phone industry is ripe for a transformation of its business model – who will get their act together first, and start selling custom build mobile phones delivered to your doorsteps in two week or less? Get it in the configuration that suits you – screen size, processors, memory, operating system, other specs and features – exactly the way you like it – with just the right accessories. A number of potential candidates come to mind – more of this topic in a later blog post. Meanwhile, I invite your thoughts. .
Seasons Greetings to all our Clients and Supporters
Every few years the IT vendor industry comes up with a new buzz word. Here are a few I have heard in my work as a strategy consultant for the last 15 years:
Most effective business leaders relish the challenge of answering questions such as the following:
If you are as deeply passionate about the world of business and supply chain networks as I am, and enjoy exploring similar questions and coming up with answers that will help immensely in using this wisdom to build your business, then you will enjoy this blog. When General Motors filed for Chapter XI protection in 2008, it also marked the closing of a chapter in modern commerce. General Motors was seen as the paragon of modern American management theory as popularized by Peter Drucker in the middle of the twentieth century. It was at this venerable company that Peter Drucker formed his early thoughts about management as a profession, separation of the ownership from management of enterprise, the key functions of management, division of labour, theory of leadership of enterprise, indeed the very concept of the corporation. His writings were the need of the time, and were picked up by ivy league business schools and corporations alike and formed the basic foundation of management profession. Indeed there was a time when General Motors and the US commerce were thought of as interchangeable entities with popular aphorism that “what is good for GM is good for America and vice versa.” Some people still think this is the case. They see the decline of General Motors as symptomatic of a wider malaise in the US economy. Others think that General Motors will rise like a phoenix again to become an industrial powerhouse. While we do not know what will eventually happen to General Motors, we know that new models of commerce, new industries, new technologies and new ways of solving old problems will be required to build a stronger economy on a global level. All of these will not necessarily come out of one country, one continent or even one region. In this (Your business model is obsolete) article published in the Fortune, Author Geoff Colvin, senior editor-at-large says: Not since the Industrial Revolution have we seen a longer or broader list of companies whose business models are suddenly obsolete. Start with virtually all companies in the media business, or any company that relies on owning copyrights or selling advertising. Then look at how major retailers — Best Buy (BBY), Target (TGT), Wal-Mart (WMT) — are rethinking their models in response to showrooming (browsing in-store and buying online), eBay (EBAY), and Amazon (AMZN). The whole education industry needs a new model. So do banking, the post office, computer makers, Big Pharma, music, and the telecoms. They all need new business models, and almost all are having a hard time finding them. There is no doubt you will have encountered many other examples of companies – whether in your supply chain, customer base or in the eco-system around you who are struggling on with broken business models. Inevitably these struggles are inelegant and fruitless. Recall the music industry’s struggle against the iTunes. Are there any others that come to mind? Share your thoughts below.
When you make decisions for your business, many things have to be taken into account. Besides, nowadays, strategies have to be based on a global approach, which makes it even more complicated to understand and to elaborate. For this reason, you might not be sure of the decisions you made, although it seemed to be the best option. You can ask yourself this question many times, but the most important is to make sure that your global strategy is good. In The 5-STAR Business Network (http://bit.ly/5-STARBN), a book by Vivek Sood, you will read a lot of things about global business networks and their importance for your business in today’s globalised business world. In fact, today, everything must be based on a global thinking. Any time you have to make a decision for your business, “global” is the key word and the basis for best achievements. Then, you have to be aware of every global trend and act accordingly. Long-term planning must pay attention to key issues of worldwide importance. Because of the increasing importance of this global approach, networks have become important too. In the global scene, you cannot play without a great network. “Networks have become more powerful than they ever were in the past”, Vivek Sood said in his book. Moreover, he added, “Global Business Networks will have an increasingly bigger role to play in the future”, which reveals its increasing importance. Relying on several reports and studies, Vivek Sood exposed many important points about global business networks and clear explanations of its functioning. Many players intervene in the global stage and that is the reason why any strategy must take into account this dimension. Any single strategy must be aligned with the business strategy of the company, which itself must be based on a global approach. Today, your businesses are dealing with global issues in a hyper-globalised world, which means that expertise and influence will determine your position, and your network plays a key role in this story. Whether they are small or large businesses, they must have a global strategy, in order to compete with any competitor in the global market, and to benefit from the best assets, by working in team with global partners. Although it might not be easy to manage relationships with global partners, located all over the world, it is the best option to develop your business on the global stage and to make your place in the global market. You cannot be a leader without having a global approach for your strategy. You will have to deal with global issues anyway, even if you do not focus your strategy on a global approach, so it is better to do it in the first place. Global strategies will give you the best opportunities and the best results in the end. To conclude this article, we have no choice but to accept that is a reality and global approach is no longer an option for your business strategy. Everything in your company must be aligned on this global strategy, if you want to achieve the best.