Tag Archives for " The 5 – STAR Business Network "

High Demand for Real Supply Chain Experts

Good solid supply chain thinkers are in high demand and low supply.

I would know, I run this company called Global Supply Chain Group for the last 17 years.

It appears that it was not too long ago (when we formed this company) – most business people were struggling to understand what is supply chain and what does it do. We have come a long way since then.

Every politicians speech today is laced with references to global supply chains and business networks that run the commerce on earth today. Companies that are seen as supply chain trend setters are leaving everyone else (even in adjoining industries) biting the dust.

Take a look at the chart below:

But Amazon.com is not the only one.

Current trend is becoming clear- companies such as Apple, Zara, Uber, AirBNB have one thing in common – Supply Chain Leaders as CEOs. Integrators are in high demand. Optimisers rule the roost.

Every era has its own heralds and the mantle changes every few decades.

Every politicians speech today is laced with references to global supply chains and business networks that run the commerce on earth today. Companies that are seen as supply chain trend setters are leaving everyone else (even in adjoining industries) biting the dust.

As as example, it only one or two decades ago that strategists coming from McKinsey or 3Bs (BCG, Bain, Booz) were the prime candidates for the role of the CEOs. What made this necessary was the need for strategic thinking that was missing at the highest level before that. But clearly the mantle has passed on the the integrators / real supply chain leaders now. Here are the previous trends:

  • 1900 – 1925: Inventors, Creators
  • 1925 – 1955: Makers, Builders
  • 1955 – 1970: Promoters, Marketers
  • 1970 – 1980: Accountants, Finance
  • 1980 – 1990: Human Resources
  • 1990 – 2000: Strategists
  • 2000 – Current: Integrators, SCM Leaders

I know, you are asking where is the proof. Take a look at the picture below:

It will take a long time to explain the picture above, if you don’t get it by seeing it. It is also perhaps unnecessary in that case. Suffice it to say that two skills are becoming critical for business leadership:

Integration – of various parts of the 5-STAR Business network, internal and external resources, into a complete unit that delivers the customer experience

Optimisation – that enables sound profitability while delivering the customer experience

I have many other pretty pictures to expound these points, but I would rather focus on the outcomes.

So, what would you expect if above two skills were available in abundance? For sure, you would expect good business outcomes. These could take the form of any of the 5 possible themes:

This is the topic I cover in great deal of detail in my book THE 5-STAR BUSINESS NETWORK – so I will not talk about it in this post. Rather I want to focus on the reason I wrote this blog:

Now, if you have read it this far, there is a good chance that you know someone who will benefit from this information. Earn yourself some brownie points by letting them know – by sharing directly, or via groups. It only take 15 seconds.

Point to Remember - Two Keys to Success:

Integration – of various parts of the 5-STAR Business network, internal and external resources, into a complete unit that delivers the customer experience.

Optimisation – that enables sound profitability while delivering the customer experience

 

The Second Biggest Mistake in Business Transformations

In this article I want to focus on the second biggest mistake companies make during business transformations.

In case you are wondering why I am focusing on the second biggest mistake rather than the biggest one – it is because I have already written a blog post on that topic last week. Here is the link to it.

But the second biggest mistake is even more common and well known.

It is so easy to recognise that there are a whole lot of cliches used to describe it.

Yet it is so common that it worth spending half an hour writing a blog post about it. Even if 10 business transformations are put back on track after reading this blogpost – it would have done its job. After all each derailed business transformation is a huge waste of human effort and ingenuity.

So, what are the cliches that are used to describe this second mistake. I am sure everyone is familiar with these:

Putting the Horse Before the Cart.

Confusing the Cause with Effect.

Post Hoc Fallacy

A theoretical discussion of human fallacies is out of scope of this blogpost. You can read more about these here.

Practical observation shows that most business transformations require at least some degree of IT upgrade.

In many cases these IT upgrades take a life of their own and business objectives of the transformation projects start taking a back seat to these technological considerations.

In my book UNCHAIN YOUR CORPORATIONS I have given more than 20 examples of this phenomenon, in various contexts. Below I quote from the book:

Modern supply chains collect information at each node of the network. This rich data is methodically analyzed to optimize demand, supply, inventory, costs and service levels to create the best profit results. Not many people know this art – while there might be many pretenders.

The next component in business transformations is the informational part of the business network, which is strongly bounded by its IT systems. A word of caution, though, IT should always be viewed as a means to an end rather than the end in itself. In other words, systems are implemented to facilitate information exchange that is conducive to business transformation.

In the project we were working on, the challenge was indeed, moving the system from the regional to the global structure. Apart from having islands of data to consolidate, the company also found themselves dissatisfied with a system that met only 70% of its needs.

Even though you may be tempted by flexibility as it offers more room for maneuver in the future, every additional bit of flexibility breeds corresponding complexity.

To some extent, if a supply chain forms the backbone of your business, then IT is like the nervous system that helps circulate pulses of information and intelligence around the body.

To get a more realistic picture of the complexity, type “supply chain software” into Google and you will get more than 75 million results. How do you know which one is the right one? Though many of them will pretend that they can, there is not a single piece of software that can do everything that you require from a supply chain software solution.

Plethora of tools are available – each with its own peculiarities and limitations. Old ERP type systems can lead your operations into a big hole from which it will take years to emerge. Furthermore, each tool is most suitable for certain situations, and unsuitable for other situations. You need the ability get the right tools – just the ones that suit your situation – and combine them well.

Even though IT is not a solution to every problem, it should not be allowed to create even more problems than those that exist in the first place.

I have dedicated a whole chapter to IT systems in my book The 5-Star Business Network and here I would like to focus only on a few key things. To get this component right, you also need to see things through the eyes of the system provider. It is a delicate dance between rigid functionality and flexible business outcome.

How do you choose the right software for, say forecasting, from among more than 2,500 such systems? How do you link this system to the other systems it needs to work closely with – say inventory management software? How do you pick the right inventory management software from among more than 2,000 systems that claim to do more or less the same thing? Do you go for a single solution that is about 50%-60% right, at best – or do you go for a best-of-breed solution that can cover more than 85% of your need, if you do it properly? All these are very complex questions to answer.

Figure below, taken from my book The 5-Star Business Network, illustrates just some of the ways a business can falter along their road to using IT for business transformation.

GLOBAL SUPPLY CHAIN GROUP

FIGURE: PROBLEMS WITH USING INFORMATION TECHNOLOGY FOR BUSINESS TRANSFORMATIONS

Your job is simple – mix and match a best-of-breed solutions.

Then you configure the pieces to form an integrated system, that meets your rapidly changing needs in a business transformation.

How?

We need to revisit the strategic component, to examine the level of disconnect between the corporate strategy and the IT capabilities and carefully find tools that fill that gap.

In the past, it might have been the case that corporate strategies were made up in the air, then supply chain strategies were formed by people down in the warehouses based on their own assumptions about what the business wanted to achieve, and the IT staff work in their own cubicles to provide systems based on poorly articulated needs.

If the above example of three isolated types of strategies resonates with your personal experience, you would also concur that despite numerous vocal calls for enterprise-wide collaboration, people still continue to work in silos. This is equal to saying many companies are still staying at Supply Chain 0.0 while others are moving towards 1.0 or 2.0 or, even mastering Supply Chain 3.0.

Figure – The process and service component

As you can see from Figure above, which shows typical processes in a supply chain 1.0, there are four levels that need to be weaved into a cohesive whole. Typically, there can be missing links between processes – vertically, or even horizontally.

Someone working at the operational level may not know how their work is related to the work of someone at the tactical level.

Even worse, for instance, a delivery scheduler may not know how his work output related to that of his next cubicle neighbor – the customer forecast expert.

During a transformation, processes and services may get streamlined, re-aligned or even created from scratch to accommodate change. That is why it is pivotal to keep in mind how they all fit together by devising a visual presentation such as the pyramid diagram above.

Another practical example may illustrate the point better.

supply chain managementI was having a conversation with one of the senior executives responsible for business transformation in a large-sized industrial company with operations and plants across the developed world. This particular person had come from one of the top tier global consulting houses and obviously was very well versed in the hypothesis-driven problem-solving approach, which both he and I had learned in our formative years in top tier consulting houses. He was adamant that this approach would be enough to carry out a large-scale supply chain transformation in his business. Hence, he was very skeptical about the supply chain methodologies that we were espousing.

In his mind, he could derive the same results from the first principles using his hypothesis-driven approach. And I was patiently explaining to him the difference between going back to the first principles to create a new approach, and deploying a tried and tested approach for supply chain transformations which had the benefit of having adapted the same hypothesis-driven approach.

So I gave him an example of the early stage motorcars where people were still using solid rubber tires and a number of fittings which were a carry-over from the days of horse buggies. Of course, if he had the luxury of time and budget to make all the mistakes there were, he could probably recreate a modern-day motorcar, going through all the stages of evolution. He was smarter than most of the population, so he could perhaps complete the task in 20% of the time that it took for the actual evolution to take place and perhaps, at 20% of the budget. Yet, if a modern-day motorcar was already developed, wouldn’t he be better off testing if it suited his purpose and adapting it for his use?

The role of “process” in business transformation cannot be overemphasized or under-emphasized.

Obviously, on one hand, you can become too rigid and attached to the process itself. On the other hand, robust processes, based on experience from a number of similar business transformations in the past, are far more useful than some skeptics envisage.

After all, who would you like to be your guide for a climb – a person who can theoretically show you a path through a map of a mountain, or a person who has actually traversed that particular journey several times before, and knows all the pitfalls along the road?

Now let us talk about the “service” bit in the process and service component.

One of the hangovers from the last century industrial organizations which never ceases to surprise me in a modern-day organization, is the importance attached to a product in comparison to the importance attached to service by the company.

What do I mean by that?

Most companies still think they are selling a product, when it is clear that in today’s information economy, most companies are selling the combination of product and service.

The service might be just fitting the product, or providing the right information about the product, or helping customers choose the right product for their needs.

To give you an example, if you are a customer of a motorcar company like Ford or General Motors and you are looking for a particular part, you will be amazed to know how many different possibilities there are of fitting the right part for the purpose. You will then need to discuss your particular needs with someone called a Parts Interpreter in order to pick a suitable part for your motorcar. It is a very specialized job and invaluable service provided by the car industry to its customers. It is the service that makes the cost of parts more expensive than the base cost of manufacturing and selling that part.

GLOBAL SUPPLY CHAIN GROUPIn almost every project we have done, when we calculated the overall cost-to-serve, it is very clear that the product component of the cost was supplemented by the service component of the cost, which was quite substantial to start with, and getting higher progressively.

In other words, the overall cost-to-serve is made up of cost of product plus cost of service, each a fairly significant component of the overall cost-to-serve. Then why do companies keep ignoring the cost of service or treat it as a minor hassle, rather than manage it as an overall part of the full cost equation?

In many companies, especially engineering-oriented companies, product takes the center stage, because it is tangible and visible, and these companies take great pride in creating superior products.

Hence, service is merely an after-thought, even though the cost of service might, in many cases, be higher than the cost of product.

That is the reason why a cost-to-serve analysis is an eye-opener for senior management teams or for boards of directors, when an overall cost breakdown is laid out, clearly showing that cost of product is far less than the cost of service. Suddenly, the entire orientation of the management changes towards managing the service component much more efficiently and effectively than they have ever done in the past.

We have noticed that tendency in airlines, in the automotive industry, the mining industry and in many other industries.

If you look at it from a customer perspective, the service is the most important part of the transaction – experience is well remembered long after the part (or the product) has been fitted and used.

Similar to the informational component, companies are increasingly discovering their ability to cherry-pick service providers that deal with different service modules. Before this can happen, service components must be broken up into geographical, asset based and activity based components to discover and engage best service provider for each module. This is known as modularization.

GLOBAL SUPPLY CHAIN GROUPThen, service modules are homogenized in order to create and manage parallel interactions with several service providers at same time. The cherry-picking or commoditization of service modules enables you to configure a best-of-breed customized business-to-business network that would be impossible to emulate for your competitors, and provide flexibility, cost advantage and risk mitigation to your company.

All this is possible only if you avoid making this second biggest mistake in business transformations and keep the focus firmly on the business – not on the tools – IT systems, or processes – used to achieve the business transformations.

Sure you will need the right tools, and deploy them rightly – that is important. But much more important is why you are deploying them, and are you getting the right results from them?

Ten Reasons Why Your Business Network is Your Business’ Net Worth, and, How To Make the Most of it?

The simplest definition of business is to sell or buy the goods or services. Though, It may define the trading style of the past centuries but now business is not that much simple. One need to compete strongly to stay in the market, to be the best in every sense and above all being a part of business network is almost inevitable. Joining a network is not at all about catching the bandwagon instead it’s a shield which saves you in more than a dozen ways. In other words you can say that your business network is your business’ net worth. Hows and whys are discussed here:

1. Like Nokia like Network… connecting people

Business network works almost in similar way to the Nokia slogan “ connecting people”. People live in society to avoid isolation and same thing a businessman do by joining an already existing network or creating his/her own network. It serves as a platform to share the ideas and knowledge, to meet new ones, to guide them and get the guidance from the experienced ones. Find out more about how a business network enables connection among the business men here: http://www.forbes.com/sites/geristengel/2013/04/24/6-ways-women-can-power-up-their-businesses-with-networking/

2. Source of practical information

You can learn 100s of the tricks from a book to sell your service or product but only the information which you gained through market research can reveal that what actually the customers want. Loyal and trustworthy friends in a network offer this unique and 100% relevant information. Its better to find few trust worthy people instead of expanding the network to the endless limits.

3. A realm of similar people with similar interests.

In “5-Star Business Networks” Vivek Sood, famous business writer, recalls that how he found a group of trustworthy and loyal people ready to share their ideas at Linkedin.com. You may find it interesting to read the whole story and his view point about how joining networks positively effects the business here. http://www.amazon.com/The-5-STAR-Business-Network-Corporations/dp/061579419X Same thing happens when you become part of a network. Joining a business network enables you to find people with common interests and goals similar to yours. Their knowledge and first hand information improves your understanding towards the business.

4. Makes yourself more visible

You may find it difficult to meet new people but in order to expand your business or to brighten your career it is highly recommended to make yourself as much visible as possible. The easiest way to do so is to join a network where simply interacting with others can do wonders for you and your business as well. Wisely chosen or created business network offers you the right place with the right people, to do the business.

5. Recruiting Platform:

No matter whether you need to recruit or to be recruited, in either sense business network can be helpful. By making yourself visible in your network, you can easily be remained in the mind of those who are the part of this network. Business network works like referral programme where the most visible ones are highly refered as well. Once you get referred or having a referral, respond positively. It will create more chances for you in future.

6. Refines communication skills.

When we discuss business networking, it also means communication between the two individuals. This interaction helps in learning that how a team leader deals with the staff or how a businessman responds in a crucial matters and takes decision. Business networks enable to learn the suitable human behaviour in various situations. Keep interacting with others because only the practice will bring perfection to your communication skills.

7. Refines Target market

Every businessman goes for some market research to find its target market where the offered service or product is highly needed. The loyal and trustworthy members of the business networks help in cutting down the research expenditures and directly targeting the refined market. You may also share your knowledge to strengthen this bond because business network is all about mutual interests.

8. Your network is your personal asset too!

Remember that you are social being at first and to keep socializing is the basic need of any human being. Business network built on pure relationship is one of the most precious assets you have. So don’t hesitate in making strong relationships much more worthy than your business. For more information on the topic , please follow the link: http://www.cbsnews.com/8301-505125_162-28245723/10-reasons-why-your-network-is-your-biggest-asset/

9. Networking ,the top CBM for today’s business

The concept of business rivalry is fading because the concept of business network has made it possible for the key rivals to sit on a same table or to connect via internet and discuss the common interest of each other and threats being faced .Thus, business networking is working like confidence building measure for the two rivals. Not only the rivals, the two strangers connected through a network also start believing in each other because of the connection built through this network.

10. Business Network-a multiplying factor

Business network is all about mutual trust, which leads to cooperation and finally makes it possible to have a multiplying factor in each sense. This mutual cooperation can lead to the joint ventures or increase in investments and much more. You only need to focus on strengthening your relationships with other members of the network. Be loyal and trust them to get the same in return. For more tips you may follow the link: http://business.financialpost.com/2013/05/27/6-tips-on-how-to-get-the-most-out-of-business-networking/ Using the web for your business is an art and those those who are running their business from home, surely needs mastery because here the situation is quite different from the ordinary business. The guardian pays more light on the issue in the following link: http://www.theguardian.com/small-business-network/2013/feb/25/niche-business-networking-groups

Nokia Sheds Iconic Phone Unit in an Attempt to Re-bundle Itself

Virtually all its shareholders gave their approval, and with a stroke of pen the Finnish firm that once dominated the global mobile phone market officially announced the sale of its mobile phone unit to Microsoft Corp yesterday.

The $US 7.4 billion deal will see Nokia transform its business model into a telecom equipment and network services provider, a major step towards re-bundling itself into a super networked business. The move was given a green light by virtually all Nokia equity owners, who saw it was time to let go of a high-fixed-cost and increasingly-low-margin division. The company has been lagging behind at number 8th in the smartphone arena, although it still maintains number two position in the overall mobile phone market according to Gartner. Chairman Risto Siilasmaa told investors. “We have no doubt that this is the right decision.”

Talks surrounded Nokia’s string of wrong turns in the past such as investing in the smart phone technology too early (as noted by former chief executive Jorma Ollila), and reaping poor results from software design efforts. “Nokia’s high fixed costs signal underlying issues in its supply chain management.

The network of supplies has not been optimally selected and articulated to maximize its product offerings to the end customer. At the same time, both Apple and Samsung have created partnerships to leverage their business network to the maximum. For example Samsung’s partnership with Android allowed it to bypass costly software development that plagued Nokia. Similarly, most of Apple componentry is still manufactured by its business network partners” – said Vivek Sood, author of “Move Beyond the Traditional Supply Chains: The 5-STAR Business Network.”

A key reason cited for the poor performance of Nokia’s phone division is not enough innovation. While its rivals such as Apple and Samsung continue to gather momentum with their smart phone lines revamped utilizing the core of their business network partners, Nokia’s only notable attempt was when it embraced the Windows operating system in 2011. Even so, the move did not substantially lift Nokia to its market leading position decades ago. Life after mobile handsets for Nokia will include attempts to make its existing business units profitable, by focusing on its infrastructure. Speculations are already underway about the new moves.

For example acquisition of Alcatel-Lucent’s wireless-equipment unit could build a substantial competency base to enable robust market competition. A super networked business is created by a business forming strong supply networks that allows efficiency and effectiveness in three core competencies: customers, infrastructure and innovation. Vivek Sood, who is the CEO of Global Supply Chain Group, said: “Now that Nokia has freed itself of its past legacies, it is the perfect time to focus on its core competency and cherry-pick its partners that can complement the gaps. If done properly, Nokia can then re-emerge as a super networked business again ready for the next few decades.” Click here to get first three chapters of the book The 5-STAR Business Network

Dropping an Anchor – Strategic Thinking on Centralisation vs Decentralisation

The chief mate was on the forecastle with the bosun and 3 sailors preparing to anchor the ship. Master was on the bridge of the ship with the second mate, a helmsman and a lookout.

The ship had just arrived in the pearl river delta after a long sea voyage, and this being the middle of the night there was no means of communication between the bridge and the forecastle except for flashing lights, a loud ships horn,  or a loud voice though a megaphone.

We are talking about 100 years ago, the ship was relatively small and still ran on coal fired boilers. The communication between the ships bridge and the engine room was even more difficult. Coal fired steam boilers were very messy, and the steam engines were extremely noisy. Engine telegraph transmitted the bridge commands from the bridge to the engine – such as full steam ahead, or half ahead, or stop, or half astern. There being no brakes on the ship, the master was extremely good at anticipating the next movement necessary and transmit the command to the chief engineer in the engine room, as well as to the chief mate on the forecastle.

These two men had to be also extremely adept at not only understanding and following the orders from the ships bridge, but also as understanding the entire complexity of the situation in their respective stations and taking actions that would facilitate the final outcome – safely anchored ship without any damage to the ship, anchor, chain, propeller or any other ship.

For example, if the chain was running out too fast, the bosun, or chief mate would have no way to ask the master what was the depth of the water on the chart map or how high the tide was expected to be. They would have to use their own judgment to let go the anchor with sufficient force for it to hold the weight of the entire ship for several days, yet not too much force for it to take out the entire windlass with it. They were aware of other ships which accidentally let go anchor in far more depth than anticipated, and did not control the force in time so that the anchor chain just ran out and broke the windlass.

The chief engineer’s job was even more complex. He had no visibility of what was happening on the bridge, or the forecastle. Yet, he was somehow expected to anticipate the engine movement and respond in time for it to stop the ship so that the anchor can take hold and ship can swing into the tide.

The master relied on these two highly skilled operators who each has their own teams of skilled operators to help them.

And, then, the walkie-talkies were invented.

The master and chief mate are constantly talking to each other about the situation. The engine room can be reliably controlled from the navigation bridge so engineers in the engine control room stay there only for emergency coverage. Chief mate can now provide accurate information from the forecastle station, and master can issue precise instructions of what to do, and when. Chief mates, chief engineers and even masters do not need to be so highly skilled in the ‘art of anchoring’.

Reliable and constant flow of communication has made it unnecessary to anticipate and act. Co-ordination is a lot easier. Less need for contingency planning at each station.

Dropping an anchor, even in the middle of the night and/or in a busy channel with high current, wind or tide, has become a relatively far simpler exercise.

Communication technology always leads to possibilities of centralisation.

How much to centralise, and how to create a new operating system is an art.

The debate continues in every company.

How much to centralise? How to centralise? Why to centralise?

Strategic thinking is a must. No school can teach this – not even with the best case studies. Experience is the best teacher.

Strategy Is An Easy Game – Especially for the Good Yachtsmen and Navigators

It appears a bit extreme now – but it was very common at time when I was a navigating cadet.

As a 17 year old cadet learning to navigate a large 28,600 metric tonnes vessel, one of first things I was asked to do was to make sure that I learnt the entire ‘International Rules of Road’ by heart. Almost all the cadets had to do this. The intention seemed to be that you must have no doubt in times of panic. At a time of impending collision there would be no room to think or maneuver – and the reaction must be automatic.

The Chief Mate (mentor for the cadets) would ask us any rule at any time, and expect the cadets to be able to recite these line, chapter and verse.

Here is short video of the perils of sea – mainly to put thing in the right context.

Most good yachtsmen and navigators would have these rules stuck in their memories no matter how much time has passed since they did their MoT (navigators’ license).

For me, after more than 30 years they are still alive, and many of them serve as good guidelines for practical decision making in strategy.

 

Here is an example: RULE 7 (COLREGS 72)

NAVIGATION RULE STRATEGY GUIDANCE
(a) Every vessel shall use all available means appropriate to the prevailing circumstances and conditions to determine if risk of collision exists. If there is any doubt such risk shall be deemed to exist. Every company should use all available means appropriate to the prevailing market conditions and competitive landscape to determine if significant risk to profitability exists. If there is any doubt such risk should be deemed to exist.
(b) Proper use shall be made of radar equipment if fitted and operational, including long-range scanning to obtain early warning of risk of collision and radar plotting or equivalent systematic observation of detected objects. Judicious use should be made of diagnostic tools and methodologies that are available and appropriate, including long-range forecasting to obtain early warning of risks of significant profit drops, and benchmarking or equivalent systematic observation of risks identified.
(c) Assumptions shall not be made on the basis of scanty information, especially scanty radar information. Assumptions shall not be made on the basis of scanty information, especially poor diagnostic information.
(d) In determining if risk of collision exists the following considerations shall be among those taken into account: (i) such risk shall be deemed to exist if the compass bearing of an approaching vessel does not appreciably change; (ii) such risk may sometimes exist even when an appreciable bearing change is evident, particularly when approaching a very large vessel or a tow or when approaching a vessel at close range In determining if risk of significant profit drop exists the following considerations shall be among those taken into account: (i) such risk shall be deemed to exist if the performance of an appropriate benchmark does not appreciably change; (ii) such risk may sometimes exist even when an appreciable performance change is evident, particularly when approaching a turbulent market condition, or when benchmark itself has become irrelevant.
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Open secrets from Ancient Network

Extract from the book “The 5-Star Business Network”, written by Vivek Sood 5star-book

“Plus ça change, plus c’est la même chose”

Alphonse KARR, Les Guêpes 1849

Before we embark on the journey of exploration into the current realms of business networks, let us take a journey into the past.

A logical question always is whether all this is new or has this been done before. After all, as the quotation above says, the more things change the more they remain the same. This is true of the business networks too. In a way, the networks we are talking about in this book are not new at all. Some features, such as speed, trust building mechanisms, outcomes and science of network creation and harnessing are new.

However, similar networks have existed in formally or informally through the ages. And each time, they have been very effective in creating value for the participants, business community, and society in general. In this chapter, let us briefly visit some of these networks through the centuries and see what we can learn from them. History is our best teacher. At this point it is appropriate to note that we will keep these discussions of historical business networks brief, neutral and non-controversial. The reason, besides efficiency, is that our objective is not a detailed study of characteristics, pros and cons, or even moral rectitude of the participants. Rather, it is more mundane exercise in finding parallels with the current business networks and their key characteristics.

The silk route – a vast ancient business network

Travels_of_Marco_Polo-300x153Without going too far back into the antiquity, let us start our journey at the silk route of the Middle Ages. At its peak, the silk route extended nearly 4000 miles from the coast of China through the territories of China, Central Asia, India, Persia and Assyria to the Mediterranean coast of Levant and onwards by sea to the fabled city of Venice and beyond. The term silk road creates an image of a road, perhaps even a boulevard traversed by a camel train laden with expensive cargoes and well protected by security.

The truth is, however, is far more complex. In reality it was a complex network of caravans, camel trains, serais, traders, money lenders and ships extended across the known world of the time to carry merchandise as diverse as silk, spices, wool, fabrics, tea, porcelain, carpets, ivory and other such items of high value. Each of the main cities in this network – Kashgar, Samarkand, Turfan, Baghdad, Tyre, Allepo or Alexandria – was a veritable hub of activities related to trade facilitation.

The participants in this network – whether a Sugd merchant, or a Chinese caravan owner, or a Florentine ship captain – were handsomely rewarded for their enterprise and ability to work their part in harnessing the power of the network. Marco_Polo_traveling-300x188Let us look at how the network was organised in practice. In the agrarian society of the Middle Ages, the most precious commodity traded by the business network was the spices.

Before the advent of refrigeration, spices were necessary to preserve food as well as mask the flavor of spoilt or rancid ingredient. Many spices such as pepper, cloves, mace and cumin, ginger, nutmeg, cinnamon and saffron traded for margins up to 3000 percent and some of these were regularly sold for prices more than their weight in gold. With such high margins, demand was never a constraint, the extent and security of the  supply route was. It was usual for the goods to change ownership more than 25 times between the producers in the east and the eventual consumer in the west.

Each middleman added his own margin as well as embellishment to the story. For example, Arab merchants told their European buyers that the cloves were netted out of river Nile and cinnamon came from the birds. Without any central command, the entire network was organized towards one end – production, collection and transportation of the spices and similar produce to the destinations in Europe.

Numerous middlemen – camel caravan owners, merchants, ship owners, and financiers participated in this chain – each within their own territory and with their own margin. It is estimated that the middlemen’s share of the profit in this enterprise was more than 90 percent.

Read more on The 5-Star Business Network

Finally, An Innovation from Apple That is Worthy of Steve Jobs’ Name

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? Steve_Jobs_with_the_Apple_iPadFrom 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.

Five Key Cornerstones of The 5-STAR Business Network

There are five key Cornerstones of success in building and harnessing effective global business networks

So what are these 5 key cornerstones of the super networked businesses that lead to these networks being called the 5-STAR Business Networks? As an aid to memory, I have given them mnemonic names in order, shown below (see the complete structure in the book):

5 STAR Business Networks enable businesses to do these regular activities in a much better manner than would have been possible otherwise. As we will see with the help of several examples and cases studies, aided by technologies, an open collaborative mindset and a focus on the bottom line, these businesses are achieving better results through superior methods.

We will examine each of these five cornerstones of the 5 STAR Business Network in great detail in the five chapters  in the book. In this article, we will use an example of one company that is positioning itself as the super networked business of this century by using all five of these very astutely.

Amazon is a successful example of an emerging Global Business Network

 

When Amazon was founded in 1994, it was but one of the hundreds or thousands of businesses aspiring to make it big on the Internet. Just like all its peers, initially the markets and analysts were starry-eyed about Amazon’s success, and later, when the dot-com bubble burst, and the trend reversed, few people gave it much chance of success. Yet it defied the naysayers and continued to sell at PE ratios exceeding 100 on the stock markets.What is the secret of Amazon’s success? What allowed Jeff Bezos to build the largest online retailer in the world, where customers can acquire anything that they desire over the Internet?

Admittedly, the company started with a first-moved advantage in its segment: books. Amazon was one of the first major companies to sell books online.  The business was founded in 1994 and by 1995 the website was launched.  Initially, the company was exclusively an online bookstore. However, it transformed to sell millions of products to a large and valuable consumer base.  Today, the company sells everything from electronics to clothing, furniture and even food.If you had to ask this simple question to 100 people – “Who on earth today is the world’s most customer-centric corporation?”

Amazon would figure very high on the list.  Amazon has achieved low prices, a wide inventory selection, convenience, and truly gives customers what they want.  As a result, Amazon has evolved into a Fortune 500 business and continues to grow as a world-class electronic commerce platform.The company grew its annual revenue from US $19 billion in 2008 to US $24.5 billion in 2009 to US $48 Billion in 2011, all the while continuing to invest in future businesses and maintaining a healthy cash flow. How does it do this?

In an article in Forbes (April 2012) Jeff Bezos offers some tantalizing clues. Bezo’s main message is to base his strategy on tings that will not change.For Amazon, their purpose is simple: offer wider selection, lower prices and quick, dependable delivery.  Another significant lesson Bezos reveals is obsessing over customers.

Amazon starts with the customer and subsequently works its process backwards.  The company even designates specific roles performed by trained employees known as customer experience bar raisers.  This is one topic that Bezos takes exceedingly serious.

But, to some extent, every corner store does these things just as well. Why, then, is that would a corner store owner be lucky to grow his lowly sales by a couple of percentage points, while Amazon grew its sales to $48 billion from $24 billion in just 3 years.

Amazon achieves high marks on all five key cornerstones of success of Global Business Networks

Let us take a more in-depth look behind the curtains.

Jeff Bezos, on the record, said that you have to be willing to be misunderstood for long periods of time.  While several of Amazon’s designs look like a bust at first, if the new idea makes strategic sense to him, Bezos goes for it knowing full well that people will initially misconstrue the design. In general, this is what innovation is – people are going to misunderstand it because it is new. Overall, the business philosophy is rather simple: make online shopping simple and suitable so that the customer does not think twice about buying instantly with one click (Anders, George. “Jeff Bezos’s Top 10 Leadership Lessons.” Forbes. 4 Apr. 2012).

The complexity lies in how this simple business philosophy is translated into consistent action, resulting in nearly a billion customer visits a year. There is nothing simple in the complex execution of this simple business philosophy. Therein lies the dilemma of the modern business world – the quest for simplicity at the highest level, underpinned by the highest level of sophistication reminiscent of Nano-technology under the hood.

Almost all successful businesses do this dance of 5-STAR business network well, but Amazon does it exceptionally well on almost all 5 fronts. There are many other businesses – well-known ones – that could be a poster child for the emerging trend of global business networks we showcase in the book The 5-Star Business Network. However, no one is more successful, more visible, has higher potential and is more assured of its role in this revolution. That is why Amazon is a prime example of the 5 STAR Business Networks, demonstrating FAR Innovation, $t$ Efficiency, TOP, APP, and lastly, ROM.

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Supply Chain Segmentation – The Next Step in Delivering What you Promise in Digital Marketing

Trust & Care – Two Hallmarks of Supply Chain Segmentation

Supply Chain Segmentation Drives Today’s Digital Marketing – This is how I explained the situation to a group of a senior executives of the company I was consulting to recently.

The profitability was falling, and customers were abandoning the company (I cannot go into too much specifics of the case for obvious reasons of confidentiality). Let us say that each customer segment was unhappy.

High net worth customers were unhappy because they were not getting the premium service they expected.

They would place or order and get a very mediocre service (from their point of view). I do not want to go into too much detail of their frustration because I do not want to reveal more details of the company. But suffice it to say that the experience was akin to paying for a sports luxury vehicle, and getting a cheap low-end vehicle.

On the other hand, mass market was not happy either.

This was surprising! Everyone in the client’s team was astonished to see the data. But the truth could not be denied. A number of focus groups revealed that they were unhappy because they could get the same product for much lower price elsewhere.

The results were predictable – high customer churn, accompanied by falling profits.

The main reason was that all these various customer segments were being served by a single supply chain that was a happy medium of all their requirements.

If You Do Not Show Your Care to Your Customers, Why Would They Care For You?

No wonder, none of the customers felt that they were getting what they deserved. The company was clearly not showing their customers that they cared for them, and as a result most customers simply voted with their feet.

So, what is the solution?

Extend the segmentation effort beyond marketing – to the entire supply chain

Clearly, a segmented supply chain is required to demonstrate to each customer segment that the company is going beyond the marketing and positioning statements, to actually serve them with care that evokes trust and loyalty. This is not the only company that is in this situation. About 60% (estimate) companies I observe are not very far from this reality.

It is relatively easy to segment the market and come up with catchy marketing slogan for each segment that resonates with them. The hard work involves to follow up that marketing message with a tailored supply chain that delivers what your promised.

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