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.
“What is success? How do you define it in your current role?”
It was a simple question.
I asked this question of the room in general. I expected multiple replies from the all the executives in the room.
Then, I realised that none would be forthcoming.
A number of cultural factors were at play. The boss was in the room. No one wanted to be seen to be on the wrong track.
I had only 45 minutes to deliver some breakthrough insights to the group. Many people had flown in for the one day conference from distant locations.
My help had been enlisted by the ‘boss’ to get his team to lift the game. I better deliver what I had signed up for.
I had prepared my keynote presentation. The facts, the figures, the frameworks all stacked up. It could all be neatly delivered – well enough to justify my fees for the speech.
But, the audience were simply too ‘disengaged’ due to presence of the ‘boss’. Obviously, I was not fully aware of this dynamic – or, I would have thought twice about the engagement. Life is too short to take assignments with no probability of success.
Yet, there is always a way to succeed in every situation. Especially, if we think broad and deep.
But, the time was running out. I had to think quick. I had to think on my feet. Was it possible to send the ‘boss’ out of the room?
Would it have been possible to negotiate that he stay out of the room in the first place? No.
Then, it would be impossible to send the ‘boss’ out of the room.
Then, what else could be done? What was the right way to proceed?
I decided to change tack on a short notice.
I asked the audience to divide themselves into groups of 8 individuals and introduced a simple supply chain game. I improvised some gaming aids.
The rules were very simple to understand the execute. Each group was to play the game three times, and note down the results.
I asked for volunteers to come up and share their experiences from the game. There were many enthusiastic volunteers. They even linked the learnings to their work. They saw things that no one else did. Their were ecstatic by the end of the gaming session – and not just from the games.
I asked three group leaders, with one key point each, to stay on the stage. They expanded on their key points. They talked about why these points were important to their business. They talked about what changes could be made to the business from next day itself. They were enthusiastic, knowledgeable and on the right track. They started making points that linked up with my presentation.
I flicked my presentation to the last slide – where these same three points summarised the entire presentation.
The group leaders had already delivered what I had signed up to do. There was a thundering applause from rest of the audience.
I was at a Melbourne Cup luncheon yesterday, and someone asked me why I do not write about Bitcoin.
On my mobile, I showed them a paragraph from my book THE 5-STAR BUSINESS NETWORK written in 2013, where I talk about the emerging Digital Currency Networks.
But the truth is that given the attention Bitcoin has garnered over the past 5 years – I have barely written anything more on it. During the period the price of Bitcoin has been very volatile, and every move has been accompanied with millions of words written by the mainstream press as well as the more respected blog writers.
Take a look at the 5-year graph below:
The value of a single bitcoin rose from nearly 0 in 2016 to over 25,000 AUD in late 2017. Since then it has been very volatile, now relatively steady in the range around AUD 9,000 mark.
Lots of people came on TV and explained all the reasons why it was where it was that point in time.
Braver people made predictions too. Some even proved to be right for a period of time. Some of those reasons sounded even plausible.
Many people asked me for my opinion, and I always referred them to Enron. I explained that around the start of the century when Enron was in a similar place, people in parties would ask my view on it.
Enron was the darling of the quick buck brigade at that time. Some people even made money on it. Much more money that anyone would ever make by flipping houses, or companies.
But there were at least two big reasons I did not offer an opinion:
Many friends who knew that I scored the only 100% mark ever in the sloggiest finance course in my MBA would not believe either of those too reasons. And, they would press me for an opinion. Perhaps they had money riding on it.
Some, the wiser lot, even took my unwillingness and inability to offer a point of view as a sign, and made the decision which turned out to be right for them. A few even thanked me. Yet, I claim no credit for saving them a buck, or two.
I was merely stating a fact –
I Don’t Understand It.
And, that is all I have to say about the Bitcoin.
If you want to know about more things that I do not understand – feel free to offer suggestions.
Boards always ask the hardest questions. That is why these gentlemen (and ladies) get to be on the boards. They know just the right questions to ask at the right moment. Towards the end of this blog I will relate my recent experience with one such question. They may not know the answer, but they know that they are facing fundamental disruption.
And, they take their roles very seriously. Sometimes, more so than the management.
On one hand, they can massage the quarterly (or monthly, or annual) numbers and pretend that the results are much better than the actual results. A temporary high can be achieved month after month, quarter after quarter, year after year till the fiction can be no longer upheld.
Then you end up losing a tremendous part of your market value in a short period of time. While this story is all too common, the most usual alternative is not pretty either – read the story I recount in this blog post.
So why do many companies resort to massaging numbers? Are they not aware of the consequences? Or, are they just hoping to kick the can down the road till the next market explosion?
One of the reasons is clearly hard nature of the other side of the road.
But clearly thinking is not enough. There are already enough strategists who have done nothing else but thinking (and writing what they think).
If you are wondering why so many of strategists’ reports just gather dust on office shelves – the real answer is simple. Lack of confidence.
Confidence in the findings, as well as, in the ability to implement the recommendations. After all, by now we have a generation of advisers who have made nothing but slides all their lives. Most practitioners have serious issues with that.
Most strategies fail to foster confidence because they are based on industrial age thinking. You cannot fault the managers. Even the best business schools continue to teach outdated industrial age thinking today. And, in the rough and tumble of the real world, very few managers have time to think and work out that they have been taught an outdated business thinking process.
I have written many blogs on the difference between the industrial age thinking and the information age thinking, so I will not repeat entire blog posts here. But I will put in one simple slide to highlight the difference:
So while leaders talk about disruption, there actions remain embedded in traditional thinking. Fresh thinking is even harder than traditional thinking.
Not just that, there is a new kind of leader that is required for disruption. For strategists data is everything – it allows them to focus on the select few things that matter.
Supply Chain CEOs think differently. They are able to focus on the entire B2B network simultaneously – both on the demand side, and the supply side. And they know which levers to pull when to make them match in real time. My book THE 5-STAR BUSINESS NETWORK covers the nitty gritty in a great deal of detail. But here are the five key levers in a nutshell.
My next book THE SUPPLY CHAIN CEO will cover scores of case studies and practical examples of the difference, and how you can apply these techniques in your company.
Before, I stop penning this blog, let me highlight the question that the board asked. The question was – Why can’t we do both the things together?
It is a great question, and I am still thinking of the answer.
Yesterday (on 2nd November 2017) I happened to briefly glance at the Australian Financial Review – the key finance newspaper in this country while I was waiting in the lobby for a meeting. No more do I subscribe to this newspaper, because it appears to be growing more and more out of touch with business reality, and becoming more a shill for vendors with deep advertising budgets, and small brains. Its content in terns of financial and economic news is excellent, but somehow the journalists seems to miss the major shift in the business models to B2B Networks.
Yesterday’s newspaper seemed to be predominantly dedicated to a conference on e-commerce related subjects. I do not remember the specific topic of the conference, and it does not even matter because the entire debate was centered around Amazon’s entry into Australian market place, and the threat it poses to the Australian retailers and businesses.
Indeed, the organisers, and the newspaper, had identified the burning issue of the day for Australian businesses. Looking at the issues, I almost thought of subscribing to the newspaper again.
But a little more unpacking of the pages revealed that almost all the solutions on offer were marketing and sales related, or new age technology related.
What people forget is that Amazon’s success is even more dependent on its incredible supply chain.
Fighting this successful behemoth without an equally effective supply chain is akin to deciding to fight against nuclear missiles with swords.
Most people still do not even know what supply chain really means. If you doubt me – just watch the short (1.5 minutes) video below, and conduct the experiment with 10 people you know:
Lest I leave you with a wrong conclusion, I am not deriding marketing and technology solutions, because they do have a place in the overall campaign. But, if you get an impression from the newspaper (or the conference that seemed to dominate yesterday’s paper) that somehow you are going to outmarket Amazon just using such solutions – you better think again.
Nothing beats a carefully crafted supply chain strategy, executed with precision and flexibility – especially for business transformations in dire circumstances. This point cannot be emphasised enough.
I have written extensively in many other blog posts on how to do just that – all you have to do is explore a bit in the categories and tags on the right of this page. Some of the titles from over the year are in the image on top of this page.
For real leaders, who want to make substantial and deep positive impact – I do recommend my book The 5-STAR Business Networks.
If you have the budget, it is also worthwhile asking for a workshop based on the same material – but we only have limited slots, and already have a big backlog for that.
In his book The 5-STAR Business Network (http://bit.ly/5-STARBN), Vivek Sood mentions the concept of synchronicity, and focus on Carl Jung’s perception of it. The concept of synchronicity has a specific definition in Carl Jung’s mind.
For him, it is a causal connection of two or more psycho-physic phenomena. He started to use this word in the 1920s to describe two or more casually unrelated events happening together in a meaningful way. Although we could write pages on this concept, a short definition would be a coincidence that is not senseless. Carl Jung observed this phenomenon on a patient for the first time.
A patient dreamt about a golden scarab, and the next day, the same insect hit his cabinet’s window. The question that comes up with this kind of situation is: Was the relationship between the events random or was there some hidden force?
The concept of synchronicity has evolved through the 20th century and many studies exist about it, with many theories and explanations. However, this is Carl Jung’s thought in which we are interested. Indeed, his vision of meaningful coincidence is what I think happens with business relationships. Synchronicity is what enables our business networks to expand and to create more value.
To pursue his work, Jung started to collaborate with Wolfgang Pauli. This collaboration lasted for several decades, making conjectures about synchronicity. They conjectured that with a link between the apparently disparate realities of matter and mind were existing. Pauli called it a “missing link”.
While accretion and synergy are two other concepts that create value, synchronicity is the best. Indeed, synchronicity provides even more multiplied effects than synergy, whereas we usually think synergies are the best we can achieve.
Global business networks can become very valuable because of synchronicity power. While synergy provides a good value (2 + 2 = 5, whereas with accretion 2 + 2 = 4), synchronicity is the most valuable. Its mathematical principle is described as follows: 2 + 2 = 22. This is the power contained in this concept.
Therefore, you must focus on this concept to develop your business networks and make it more valuable than by using simple synergies or accretion. Visualization, if not faith, is compulsory to be able to understand this concept and make it work for you. Besides, the concept of synchronicity relies on key principles that may not be available for anyone. In fact, it is all about abundance of outcomes based on wisdom, creativity and cooperative effort. This is the cornerstone of the value of synchronicity.
Consequently, business networks are great and work successfully for your business when synchronicity is the main ingredient. This is the most powerful ingredient that can help you build a great business network. However, this is still a matter of coincidences, although they are meaningful. In fact, the economic metaphor that can be utilized for synchronicity strategy is the free networks.
Accretion relies on free markets. When your strategy evolves to improve the outcomes, through synergies, the appropriate term is “managed markets”. Then, the best strategy, which includes synchronicity, leads to free networks, which is much more significant and valuable than free markets or managed markets.
Thus, step-by-step, you can improve your business strategy, using your business network and gradually implementing strategies of synchronicity. Synchronicity will create the best value through a great business network.
by Anais Lelong
19 years ago, when studying for MBA, our Professor in Change Management, Dexter Dunphy told us that Change Management is nothing but management of downside. I understood that his point was every change has a downside – and as a change manager, the most important job you have to do is to understand the downside of the change being proposed, and manage it well enough. When I became a management consultant with a top-tier strategy house after my MBA, I took his dictum to heart, and it served me well through several change management projects. Those who were most affected by change appreciated the fact that the change was managed in a sensitive and caring manner – rather than imposed abruptly.
After a few years, when we started our current boutique consulting house, I started to notice another pattern. This was that many companies could accelerate their change management by skipping one entire generation of Supply Chain Management (SCM) in their efforts to make their businesses more modern. In other words, change management would entail moving from SCM 0.0 to SCM 1.0 or from SCM 1.0 to SCM 2.0 or from SCM 2.0 to SCM 3.0. On the other hand, many companies would want to take up an accelerated path – jumping 2 steps at a time – e.g. SCM 0.0 to SCM 2.0 or from SCM 1.0 to SCM 3.0.
This enabled them to frequently leapfrog their competitors, and transform their businesses rapidly and systematically. This was nothing different from many companies skipping a generation of Microsoft Windows when they upgraded their operating systems – for example skipping Windows Vista and jumping from Windows XP to Windows 7.0. The reasons were different, yet the methods were similar.
While change management entailed managing the downside for those who were affected by change, business transformation was more about understanding and managing resistance. By now, downside management has already become a big enough industry – just look at the number of large outplacement consulting houses, HR consultancies, and the booming business they do through the ups and downs of business cycles. Business Transformations will lead to a second boom in these.
If a business keeps up with the SCM evolution and moves with it, there will be a greater need for leadership training, corporate cultural adjustment, collaboration training and less outplacement and redundancies. And, there will be a need for understanding, managing and using resistance to further business transformation. What is the nature of resistance? What is the reason? How to identify 4 different types of resistance? How to use resistance to accelerate positive business transformations? That will be the topic of my next blog.
On 14 – 16 April 2015 in Hong Kong Convention and Exhibition Centre, Hong Kong, nearly 2000 top bankers and other professionals from all over the world are going to congregate to discuss the future of finance in business and society. I am speaking in two panels – the opening leadership dialogue around 9.30 or so:
The Supply Chain & Financial Performance Conference Opening Keynote Session
Welcome keynote Foo Boon Ping, Managing Editor, The Asian Banker
Opening keynote Alan Bollard, Executive Director, APEC Leadership dialogue
Global supply chain amidst changing economies Rapid increase in trade has occurred both in goods and in services. Though at the current stage, the trends of globalization and the commodity cycle seems to be declining. Gone are the days of double digit growths and replaced by a more modest and sustainable one. Why has this happened and how is this affecting the global supply chain?
Robert Yap, Executive Chairman, YCH Group
Paul Bradley, Chairman and CEO, Caprica International
Vivek Sood, Chairman and Managing Director, Global Supply Chain Group Moderator:
Foo Boon Ping, Managing Editor, The Asian Banker
I am also speaking at 15.30 on another topic:
How banks and financial institution are disconnected from their clients Post the great financial crisis, clients have moved rapidly to re-configure their business models into B2B networks of supply chains. Most banks and financial institutions have totally missed this rapid transformation and are struggling to stay relevant in the modern supply chain context.
Featuring: Vivek Sood, Chairman and Managing Director, Global Supply Chain Group
Here is a short one minute video introduction to my speech: If you are already attending the summit, or are interested in these topics – I look forward to seeing you at the summit.
Extract from the book “The 5-Star Business Network”, written by Vivek Sood In 2012, when Facebook’s IPO was being discussed in the media, a range of valuations was put forward by the experts between approximately $50 and more than $100 Billion. Most people in traditional businesses were stunned and asked how could a company with no products, no factories, no customers and no suppliers, be valued more than Siemens, Nokia, US Steel, or even a combination of these traditional, well respected companies. The pundits declared the basis of valuation as the Network Effect and left it at that – leaving people to decipher what exactly the Network Effect is and exactly how does it lead to a valuation of tens of billions of dollars. Networks, of course, can be homogeneous groups of similar people, such as net-savvy, with spare time and willingness to share their lives’ details with others on Facebook (or similar social websites), or they can be heterogeneous networks of a multitude of suppliers around the world that provide a vast range of components and parts, such as those that go into manufacturing the Airbus A380. Networks can even be a combination of homogeneous entities and heterogeneous groups, or vice versa. This point should emphasise in the readers’ minds that there is not one single kind of network, and hence the characteristics will vary accordingly.
Needless to say, there is no point spending time on a social network website if you are the only person who ever visits it. In fact, if most of your friends are members of a rival social networking site, you would eventually find yourself there, or find yourself a web outcast. This leads to a catch-22. Most nightclub and restaurant owners are long familiar with the predicament – the more popular your establishment becomes, the more people want to get into it. However, the key predicament is always – how to start off the process. An excellent book “The Tipping Point”, by Malcolm Gladwell, discusses this phenomenon in great detail and attributes it to the three rules – getting the first movers (law of the few – the mavens, the connectors and the salesmen), the stickiness factor (simple ways to make things memorable) and the power of context (small factors in the environment and the relationships that create and sustain impetus). If you have not yet read the book , I highly recommend it. It is neither advisable, nor possible, to paraphrase the excellent content, and Gladwell’s writing style is extraordinarily eloquent. So, with every new addition to a network, it becomes a little bit more valuable. This continues to happen until the network reaches a tipping point, a point at which it suddenly becomes a lot more valuable. After this point, the network will generally race past all its rivals and become a de facto standard in its realm. Whether it is a question of which social network website to frequent, or which type of keyboard to use as a standard (the more popular QWERTY or the more efficient Dvorak style), or which type of cooling systems to use in the nuclear power plants (light water, heavy water or gas cooled) – the decision almost always rests on the network effect.
Networks thrive on trust: they succeed where trust building mechanisms are strong and well adhered to. Well functioning business networks incorporate a secret source – the power that goes beyond the synergy, the multiplier effect, into the realms of synchronicity. Besides, business networks allow businesses to be simultaneously strong in their core strengths and live with their own weaknesses – the other members of their business networks make up for their weaknesses. As businesses move from traditional structure to business networks, the essential co-operation building mechanism moves from control to co-ordinate to co-create.Continue reading
(Scroll to the bottom to see the entire cartoon in the picture above)
I was shocked when I heard of the bankruptcy of Hostess Brands Inc. The $2.5 billion maker of Twinkies and Wonder Bread had about 33 plants, 565 distribution centers and 570 bakery outlet stores across the United States. I have no doubt tons of e-ink will be spilt on dissecting the saga and pinning the blame on the unions, management, workers, and government.
However, from my perspective, the business model of the company was passé long time ago. In this article, we contrast the Hostess Brands business model with that of the top-rung players in the food industry – the so-called ABCD: Archer Daniels, Bunge, Cargill and Dreyfuss.
Even you skim parts of the book “The 5-Star Business Network”, I urge you to read carefully, think and use the material in this article because it could make the difference between your company becoming the Hostess of your industry, or one of the ABCDs.
It is a well-known aphorism in the circles of architecture that the form follows function. In other words, the structure of a particular unit evolves to facilitate the functioning of that unit. If the form does not match the function, the structure or the function eventually changes.
While researching the book, we examined the organization structure of more than 50 companies, almost all of them looked like variations of the generic structure given in the figure here (see the complete structure in the book)
Traditional Organisation Structure
Titles and structure in organisational structure vary enormously. However, most companies agree this is the best way to look at how they are organised to serve their customers’ needs.
At the same time, most of these companies evolved at least two decades ago so their functioning has become almost entirely customer-centric, with their customers’ priorities driving most of the business workings. In our work with corporations, we have often found the supply network structure frequently results in limiting the effectiveness of the organisation.
The traditional structure of the organisation shown above frequently stifles customer responsiveness and innovation. In the modern outsourced globalised world, a traditional structure with strict hierarchies and internal walls between departments is a hindrance, rather than an aid for achieving success in business.
In today’s hypercompetitive world of consumer electronics, Apple is a standout among peers as great as Sony, Samsung, Panasonic, Motorola, Nokia and Dell. With convergence, all of these companies are vying for their share of the consumer’s wallet with increasingly similar products doing similar things. What did Apple do that its market value now surpasses Microsoft’s? How did it manage to get over the entrenched competitive advantage of companies such as Sony, Motorola or Nokia?
Our work in global supply network strategies and supply network design has convinced us that a modern distributed organisation needs to look at redesigning its explicit structure to keep up with the realities of the business world, which has changed tremendously in the last 20 years.
A typical supply chain now runs seamlessly across multiple continents, through boundaries of several organisations, to finally serve a customer with a unique product. To do so, organisations have created de facto structures, which are far different from the traditional structures that they have put in their organisation charts.
The purists might argue that this discussion does not really matter if organisations are already acting in accordance with a de facto structure – an argument which holds some merit. However, people who make up an organisation respond to the explicitly shown structure (see the complete structure in the book) with much more enthusiasm and clarity that to a defacto or mutually understood structure.
I believe that organisations should formalise their defacto structures and use them to gain further competitive advantage. For this purpose we have created the model Customer Centric Organisation Structure.
Extract from the book “The 5-Star Business Network”, written by Vivek Sood
Read more on “The 5-Star Business Network”