Businesses are gradually being chained by a number of forces so ubiquitous and accepted by all of us, that we fail to notice their impact on businesses, economies, and people. Today, most organizations become veritable bureaucracies as they grow bigger. Every person sits inside his/her own department and is very careful about making sure that their department doesn’t carry the blame if there is a mix-up. Covering the tracks becomes the norm. The resulting departmental silos create stilted communication.
Most of the McKinsey (or their clone) trained strategists ask me to show data to back up this assertion.
On the other hand, more intuitive executives (mainly from sales and marketing background, as I observe) ask me to explain the benefits of supply chain 3.0.
Finally, the third group – those who I call the transformational leaders ask a simple question – how can we use the power of supply chain 3.0 in effecting beneficial business transformations.
In this blog I will address the first question. I will leave for later blogs the remaining two questions and other arising questions such as: how does supply chain 3.0 differ from the previous versions of supply chains, and, why it was even necessary to ‘invent’ supply chains in the first place.
It is an important question – “where is the data to clearly demonstrate that Supply Chain 3.0 is real?” The data driven crowd has a legitimate concern lest a couple of isolated examples be seen as heralding a trend. Having trained at a similar top-tier consulting house during my formative years in consulting, I fully understand and endorse their questions.
Why? Because all of us have seen people taking isolated instances and exceptions and making them so big in their own and others’ perceptions that these appear to be the predominant trends. Nay-sayers will take a few stray instances of setbacks, blow them out proportion to support their naysaying. On the other hand, almost all investment projects also have their share of overly optimistic projectionists. In the end, only data reveals the overall picture and clarifies the confusion.
For this reason, when I wrote the book “The 5-STAR Business Network“, our team did a 6 year longitudinal study of the top 1200 corporations around the world. There were other reasons why this study was conducted – which are given in Chapter 14 of the book. The full research methodology and the resulting ranking of the companies is also given in the book, but for our purpose here it is interesting to note that 62 companies out of the entire starting sample of the top 1200 companies in the world scored 20 points out of 25, which is our cut-off for the Supply Chain 3.0.
Also, interesting to note is that Apple – the darling of supply chain crowd – is only ranked #60 in the rankings. And, due to its low margins, Amazon – just missed the cut. So who are the top 35 companies in these rankings? You can see them in figure 1 below. For the time being ignore the 5 colour coding, as well as funny three-letter acronyms (TLAs) in the figure. I am absolutely sure, that this figure is unlike any other figure you might have seen before.
Firstly, the companies themselves come from around the globe – Novo Nordisk is from Denmark while Fanuc is from Japan and Falabella is from Chile. That was to be expected – if you make your research wide and deep enough you will find good companies everywhere. No country, or continent has monopoly on excellence. So much for all the hype about the Asian century. Sure, development in Asia is creating unprecedented opportunities – but good companies around the globe are using that trend to their benefit. You do not need to be an Asian company to be excellent, but neither are all non-Asian companies uniformly good. Secondly, because this ranking is based on study conducted over 5 years (not at a single point in time) the standards of excellence are much higher. Also, this is a global study hence the sample base was much wider.
For this reason many of the usual suspects that you might have seen elsewhere in magic circles and quadrants etc. are missing. Another reason, the usual suspects might be missing is because we looked far beyond tactical operations into the strategic contribution of supply chains to corporate results. For example, rarely has anyone tried to gauge the impact of supply chain collaboration on innovation, new product development, pipeline of products, product phasing etc.
But in our research, we took these into account. For details of the research methodology, caveats, cautions and warnings about not applying these results for investment decision making please read Chapter 14 of the book “The 5-STAR Business Network“. This is critical because I do not want you to take the results out of context and make decision based on flawed assumptions.
Time has come to talk about the 5 funny acronyms in the figure. This is because we want to see how these are linked to the strategic contribution of supply chain management to overall corporate results.
So, what do these TLAs stand for? Figure 2 below shows the details: Figure 2: Five cornerstones of Supply Chain 3.0
Each of these names are quite self-explanatory and most people reading this blog will not need too much explanation. I will only briefly outline them here, because detailed explanation and examples mean that I will be recreating the book “The 5-STAR Business Network“ or a version of it in this blog. One more important conclusion needs to be drawn from the data presented in Figure 1.
You will notice that rarely is there a company which ranks high on each of the five key cornerstones of supply chain 3.0. Yet, all the 62 excellent companies that meet our criteria for supply chain 3.0 excel in at least three of the five key cornerstones. That shows you do not have to perfect to arrive at supply chain 3.0 – you only need spikes of excellence in at least three of the five key areas. In the next two entries, I will write about each of these five pillars in more details.
To combat the symptoms of departmental silos many organizations implement a very rigid Enterprise Resource Planning (ERP) system. This helps run their internal processes and coordinates inter-departmental communication. By their nature, these systems are very formulaic and prescriptive with a one-size fits all approach to planning. Now a different bunch of problems start surfacing as a result. If you’ve ever wondered why you see so much chaos, anxiety, blame game, and other such dysfunctional behaviors in businesses, this is the key reason.
There is a common assumption that every company’s supply chain should be similar, if not the same. Even learned professors at august institutions write highly prescriptive articles in highly regarded magazines such as Harvard Business Review saying these things. For example see this article by a Stanford professor, on which I had a running correspondence through Harvard Business Review. My rebuttal of the article was published in the next issue of the same magazine.
The reality, encountered in the rough and tumble of the real business world is very different. Especially in the world of start-up companies – even the unicorns – the supply chain looks very different.
In fact, our supply-chain maturity model shown in figure describes four stages of supply-chain, where each stage of product life-cycle is paralleled by a maturity stage of supply chain. As figure below shows, there are four relevant zones of operations determined by two key factors on product maturity and supply chain maturity. Zone 1 is the foundation zone in which both the product and the supply chain are quite immature. As the name implies, in this zone the foundation for the future business is being laid. The next zone on the top left quarter of the matrix – the Innovation zone – implies a relatively mature supply chain, but a developing product. As the name suggests, this is the zone where both product and process innovations are rapidly taking place. The profitability zone on the top right quadrant is where both the product and the supply chains are relatively mature and while incremental innovation might be still possible. This zone is primarily focused on enhanced profitability. Finally, the twilight zone on the bottom right corner is when the product is reaching the end of its profitable life cycle and the supply chain becomes brittle.
Needless to say the more time spent in the profitability zone the more a company can reap rewards of its efforts. However, to maintain fresh product lines, to constantly stay on cutting edge and to retain long term leadership, companies will have to also spend some time in the innovation zone. Intuitively, companies want to spend time in the top two quadrants and minimize their time in the bottom two quadrants. In fact, overlapped on the four zones is a typical supply chain maturity cycle we observe. We will discuss this conundrum in more detail in Chapter 11 where we observe the Advanced Product Phasing strategies of the 5-STAR Network businesses.
Initially, in the introductory stage of the product life-cycle, the supply chain is still very basic. In this improvisational stage of supply-chain, the key focus of supply-chain team is to really just gather enough material somehow, from somewhere, to make the product or to keep the research and development team supplied with raw material. They are not doing any advanced planning at this stage. They are not even aware of all the raw materials or all the parts, which will be required for making this product. Bill of Materials may not exist or, if it does, it is incomplete. There is no supply-chain planning mechanism besides this Bill of Material. There is no supply-chain control mechanism either. Even a budget does not yet exist, or it might be just a very rudimentary budget. At this stage of supply-chain maturity, the companies are not worried about its efficiency at all. There is no supply-chain collaboration with its partners for this simple reason: we don’t even know who they will be.
To read more get the book on http://5starbusinessnetwork.com/ or download 3 free chapters.
Almost single-mindedly he twice created a company that eventually became bigger than the economy of Spain (and many other countries).
Having grown up away from computers, I personally experienced his genius much later in my life than most people did; only when I installed a very expensive and clunky hard drive based music system in one of my cars I found out in a few months that his company had released a much more compact, mobile, versatile, far superior iPod, which made my costly, and clunky install redundant.
But today, when I reflect – almost every technology I use on daily basis has his finger prints on it – Microsoft Word, Windows, Android Phone – all have ideas inspired by him. It was his misfortune that ‘the look and feel’ was something that could never be patented – shows you how useless the patent laws really are when they protect what is not worth protecting and give no protection to what is worth protecting the most.
When I wrote my book ‘The 5-STAR Business Network’ I used Apple as a shining example of the first star – Innovation. The collaborative approach to innovation that Steve Jobs pioneered, and that is epitomized in the quotation above was worth emulating.
Admittedly, his is not the only company that does it – his company just used to do it better than anyone else. Using a business network of suppliers, suppliers’ suppliers and collaborators to co-create a product in far less time than anyone else could have created was a work of a genius.
He stood the Edison and Tesla model of innovation on its head. And, even Ford could have learnt a few things from him. What surprises me most is that despite the overwhelming evidence and a clear role model – why most companies still cannot get their act together when they sit back to create products that their customers would worship.
Why do they still settle for shoddy GM cars, or pills that do more harm than good.
I will end this blog with a quotation from Steve Jobs’ biography by Walter Isaacson:
“Because he believed that Apple’s great advantage was its integration of the whole widget – from design to hardware to software to content – he wanted all departments at the company to work together in parallel. The phrases he used were “deep collaboration” and “concurrent engineering”. Instead of a development process in which a product would be passed sequentially from engineering to design to manufacturing to marketing and distribution, these various departments collaborated simultaneously. ” Our method was to develop integrated products, and that meant our process had to be integrated and collaborative”, Jobs said.
He called it ‘deep collaboration’ – and we call it Supply Chain 3.0. Hopefully, we will have a lot more time to put it into practice. This tribute to the great man has been cooking up in my brain for a long time. The world is a much better place, for he was in it for a few brief decades. You cannot say that about too many people.
Disclaimer: I never had, and do not currently own, any shares in Apple.
And, she ended up taking a very long journey through the east.
On her return, I asked her how she felt. Her reply was that she had moments of pure joy, but most of the time she still felt the same.
Unfortunately, her travel only served to confirm her biases, without expanding her horizons. She carried her whole world with her, wherever she went.
But I have seen several people get out of the rat race successfully, and I talked to them about their methods. Two key points I learnt are these:
You are not a rat
It is not a race
If you feel like a rat on a wheel, it is because you have allowed others to make you feel like one. Rats are mammals of lower order, mainly run by a limited brain capacity and caught up in the game of procreation, nutrition and survival.
Obviously, for a human all three of these are important. But, if that is all that occupies your time then eventually you will feel like a rat.
So, what do you do to go beyond those three basics?
a. Invest in relationships: Relationships of the past were based on mutual dependence and need. They were really rooted in the three basics mentioned above. Only those who invest in relationships based on CARE, TRUST and INTEGRITY can manage to raise their consciousness above the level of the rats.
b. Speak your truth: Self expression is a necessary tool of expression. You can find many mediums – painting, novels, sculptures, inventions are just a few. The joy of creation will start to bring you up another notch.
c. Clear your perceptions: Constant barrage of 24/7 news channels is now supplemented with numerous social media channels with bait-and-switch headlines. Where does it end? You end up clogging your perception to such a high degree that you may not have a single original thought for months. What chance do you have of getting out of rat-race if this is all that occupies your mind?
d. Co-Create: Creating a child is only the most beautiful and pleasurable way of co-creation. But, that is not the only one. Join your consciousness with others’ and you will be surprised with the results. Those who do not see the need to do so must read this blog post on Steve Jobs.
Let’s talk briefly about the second point above. It is really not a race? Nobody took birth to race to his/her grave. If you don’t KNOW THYSELF and your purpose then you will surely get caught up in the race. Who has the biggest ‘______’ is not the way to measure the quality of your life?
It may be an expression of your contribution, or even of your truth – but there is no reason to stop your consciousness at that level.
Do not let your petty jealousies drive you – leave that job to your purpose.
So, how do you KNOW THYSELF, and your purpose?
Generally speaking points a, b, c and d above would have already brought you that knowledge.
All you have to do is accept the truth as it surfaces, and live it. You will never get caught up in the rat race, no matter where you live and what work you do.
That will be a true human life that knows its own value.
Interviewer: Michael Dresser of The Michael Dresser Show
Interviewee: Vivek Sood of Global Supply Chain Group
(author of The 5-STAR Business Networks)
Here is the entire transcript of the interview:
Michael Dresser: Welcome back! I’m Michael, you’re listening to the Michael Dresser Show, Vivek Sood with us, the author of the “5-Star Business Network” and the tremendous effect of supply chain in business networking. Social networks are proliferating and most people think that Facebook and Twitter are ultimate and power rich when it comes to networks, but no. Many marketers and businesses are missing another network that’s hidden in plain sight. Business-to-business networks, they’re called, supply chains, they are at least 2000 times more powerful and widespread. And now these networks are going global and also digital. Vivek is known among smart executives who might be CEOs one day for practical business strategies, practical because they’re crafted in real world, not academia. Vivek, welcome to the show!
Vivek Sood: Thank you, Michael! It’s a pleasure to be here with you.
Michael Dresser: By the way, am I pronouncing your first name right? I hope I am.
Vivek Sood: Yes, you are, absolutely!
Michael Dresser: Ok, great. Let me ask you this. What got you to take a look at business? Obviously there’s got to be that time in your life when you look at something and you say there’s something missing. What caused your journey, that search for what you found?
Vivek Sood: Michael, it’s been a long journey. I’ve been a management consultant to CEO for about 17 years now. I saw that lots of business transformations that companies are going through were failing for some very simple reasons. And those reasons had to do with business-to-business network of their businesses. And that’s when I started investigating these business-to-business networks.
Michael Dresser: You know, when we talk about it, we think business-to-business stay locally within a country. But we’ve expanded today. A business doesn’t do just work in their hometown, they do business globally. And if you are not aware of what’s available for you, and that rich that’s out there, a business that could be successful just won’t work, will it?
Vivek Sood: Absolutely! Michael, let’s go back a few hundred years’ time. All business was very local. The local village had all the artisans which could provide you with whatever you needed. Soon it became regional, because they could find better product, better artisans. And very soon after that we started looking beyond about this. Today the business is totally global. You name any product, you can track its journey all around the globe before it reaches the shelf. Before it reaches the customer’s hands, the product has traveled 5 thousand to 10 thousand miles around the world.
Michael Dresser: Absolutely! By the way, and the average consumer, we have a brand new consumer now. The e-consumer can sit in their house, press the button and track any button in the world.
Vivek Sood: Absolutely! Today I’m sitting in Australia, and I can order the best cold clothes, skis out of United States, track them and basically have them delivered to my home, to my office within a period of a week. And I have the world’s biggest inventory on my back and call, right there on the Internet.
Michael Dresser: By the way, Global Supply Chain group, which is the company that you founded. What’s the essence of the group, what does the group do?
Vivek Sood: Global Supply Chain group has only one purpose. We work around the world with large corporations, who have supply chains, but their supply chains are not what we call A class supply chain, the supply chain 3.0. We work with these companies to improve the performance of the supply chain, and the difference is huge. When you jump from C class to A class supply chain, your profitability goes up by 5 times. And that’s what we help out clients to.
Michael Dresser: When we deal with business-to-business networking, obviously you’re not going to have two businesses with the same offering. So I’ve got a business, I have an offering, you have a business, you have an offering. If the offerings can complement each other, do we what? Do we joint venture? Or each one advertise the other’s business?
Vivek Sood: Absolutely! Let me give you an example. Let’s take one of the world’s biggest corporations, Apply Corporation. Before iPhone came along, there were already smartphones made by Samsung, but the screens were really bad. I actually happened to own one of those Samsung Omnias. You had to press a button three times. Apply figured out that the best way to get a new iPhone much better than the existing technology is to work on the screen. Apply didn’t have the screen technology, it went out and found a business partner which had that technology. It made a deal with this partner, who supplied them with this screen and which in the end gave iPhone the edge over the existing technology.
Michael Dresser: So effectively, what we’re really doing is engaging the businesses. You know, the business-to-business, the name is ok, but the actual engagement, complementing each other, implementing that certain something that’s missing within the business that causes them not to get where they need to be. So we find the expertise in particular businesses, we tie them together, and in essence there’s one unit going out there, even though their profitability is individual.
Vivek Sood: Absolutely! Businesses do not compete as businesses anymore, they compete as networks of businesses. Imagine a pack of wolves hunting, competing with a lone wolf hunting in the middle of snow. Obviously, a pack of wolves would definitely win.
Michael Dresser: By the way, when you come down to it, there’s a lot of businesses out there today. Everybody’s doing Twitter, everybody’s doing Facebook and they really are not aware of the next step. I guess Global Supply Chain group is really the next step beyond Twitter, and beyond Facebook, and beyond LinkedIn. LinkedIn is really the business opportunity, but when you come down to it, it’s the ability to put these places together, the ability to reach out. And not just reaching out, knowing how to reach out, because there’s got to be a strategy behind it, it’s got to have a process.
Vivek Sood: Absolutely! These things are now state of the art technologies, they’re state of the art methodology. And yes, you have to find the right partners, to reach out to them in the right manner. A team players always like to play with the A teams. So if you reach out to them in a wrong manner, or if you play the game not the way they like to play it, very soon you will find yourself not the part of the A team. At the same time, the social network are useful. You can’t say they don’t have a role to play, but they have a role to play more on the consumer’s side, when you engage your consumer into a conversation, to understand what exactly matters to a consumer and to a customer. For business-to-business engagement you need a much deeper and much more involved strategy. And that’s where we basically help our clients.
Michael Dresser: When we take a look at it, I want to go back to when I was introducing you: “known among smart executives who might be CEOs one day”. Getting the information, getting to know it beforehand is wonderful, but is there a wall, is there a challenge to get into a business, that’s already a multimillion-dollar business, they could become a multibillion-dollar business if they would listen to what you have to say. Are there challenges to getting these people to take a look at what’s offered, because, you know, too many people are making a certain amount of money, they’re scared to make that move.
Vivek Sood: Absolutely! I think you hit the nail on the head. A lot of businesses are in a comfort zone and they don’t recognize the need to move beyond the comfort zone, to actually 5-star network or a business-to-business network. Still, the competition comes in and eats their lunch. So imagine a Nokia mobile phones, before Samsung or iPhone came along. They were in a comfort zone, they never imagined that an iPhone would come along and certainly Nokia mobile phones become totally irrelevant.
Michael Dresser: Now, by the way, that’s really the key, it’s looking beyond what’s there, and especially in today’s market place, today’s world. We have technology that is changing almost daily. I can go back and remember the first computers, they’d fill up a room! But today, you know, you can walk around with something in your hand and that will give you everything that they did. And it is, it’s taking that step and realizing that there’s more. But the only way that you find out there’s more, is you have somebody who is doing it. They’ve got to have somebody “symbolical”, holding you by the hand, taking you through, allowing you to find out what’s available out there and, more important, how to use it.
Vivek Sood: Absolutely! What you need to see is basically benchmark your competition, but also look outside your industry. Look outside other companies in other industries, who are doing much better than where you are and find out the reason why. And you have to be constantly staring, what are the new threats of the horizon, whether they are technological threats or socio-cultural threats, like for example, consumer preferences are changing very quickly as well. As a two-way conversation is becoming possible, you cannot just talk to a consumer anymore, you have to engage them, using things like Twitter and Facebook, but also many other technologies that are available at the moment.
Michael Dresser: I know that everything is globalized, and the world has been global for the last, probably, 20-25 years, at the most, when there was an intensity here. But do you find, because of the different cultures and the different countries that it’s hard to make that connection or, is there that certain something that cuts through all of it that is recognizable to anybody anywhere?
Vivek Sood: Michael, I worked in more than 150 countries now on supply chain projects and business-to-business network projects. What I found is that on the highest level, the corporations are very professional. They understand what is happening around the world in cutting-edge methodologies and they want to learn. On the other hand, tier 2 and tier 3, they are well within their comfort zone, they don’t want to get out of it. They like to blame the events, they like to blame the government, the other people.
Michael Dresser: For what I hear you saying, that’s business oriented, not political. And if you have people with the same mindset, “business-oriented”, it really doesn’t matter what country you are from, because business has a language of its own, profitability has a language of its own and there’s a commonality in interest, in goal-setting.
Vivek Sood: Absolutely! Because in the end the purpose of business is always the same, to find a customer who will profitably buy the product and they can build big enough business based on their customer segment. And that is universal, it’s all around the world. After that it can become a little bit more complicated: how you fulfill the customers’ requirements and that’s where the business-to-business networks coming to play. And the language of business is the same all around the world, Michael.
Michael Dresser: Sure, because when you come down to it, when you look at any country, administrations come and go, presidents come and go, but the one thing that stays constant is the business, because business stays focused on the end result. And I think that’s what we should look at. If more countries looked at the way a business was run, we would probably have less problem that we do today.
Vivek Sood: Absolutely, Michael. We have had this eighty-year experiment in the former Soviet Union and communist bloc, where governments were in the business, running business and that failed quite miserably. So we are now in an era where it is clear that business of business is business. Governments are needed, but not to run businesses. In the end, what creates value for society, what creates value for community is the business. And that is universal around the world.
Michael Dresser: I think that’s the key for America today. We shouldn’t have politicians there, and I’m not getting political, just the point here is that we should have people who understand business, who have been in business, who understand profit and loss. Because when you think about it, you know, most of the countries, and especially in America, we are cash in – cash out. What’s left at the end of the month and what’s not left at the end of the month, what’s the deficit? And we ran this country here more in a business fashion. Most of the problems that we have today, we wouldn’t have. We would not be in this kind of debt.
Vivek Sood: I’m obviously not a political commentator or a political adviser. What I can see is that government is getting more and more into business in America as it is in some other places, and I don’t necessarily see this as a positive sign. Quite the contrary.
Michael Dresser: And the reason for that is, and I’m not being political, is that you have to have someone who has been there, who understands what to do, not from a position from politics. And I believe, when you come down to it, “The 5-Star Business Network”, you do something like that with all businesses and the businesses are succeeding. And when the businesses succeed, you have jobs, you have opportunity and you have a flow of income.
Vivek Sood: Absolutely! If you look at CEO’s job today, Michael, it is probably one of the hardest jobs on earth today. They are asked to do more with less. On the other hand, they are facing so many political pressures, you can’t even imagine.
Michael Dresser: Sure, no question!
Vivek Sood: And on the other hand, employee loyalty is also disappearing. So what can get them out of all this is really business-to-business network, which can allow them to do more with less, which can also allow them to look beyond employee loyalty. Because that loyalty went out the window about 20 years ago.
Michael Dresser: Sure, and I’ll tell you why we have this employee disloyalty, so to speak. Because they don’t feel part of the business, they don’t have an identity within the business itself. When you have people who have identity within the business and they feel like they have an interest – not an ownership interest, it could be commissions, it could be perks, it could be something. But when they feel like they are part of their business and because of them, employees, the business is being successful, all of the sudden you have loyalty. We come up against with a wall, and that wall divides the business from the employees, the engagement isn’t there, being proud of what they are and what they do.
Vivek Sood: Absolutely! There are deeper socio-cultural reasons. When I started work at 17 as an apprentice, I owed everything to a company which taught me what I learnt. Those kinds of apprenticeships are now almost history. Today young people stay in college till they’re nearly 30.
Michael Dresser: I remember my very first job was 1.65 $ an hour, a hundred years ago. We are just about out of time, so let me ask you this: website we can find you at.
Vivek Sood: Yes, my website is www.viveksood.com. So my first name is Vivek, last name is Sood.
Michael Dresser: If anybody misses it, it will be up on our website.
Vivek Sood: The website of the book is www.5starbusinessnetwork.com.
Michael Dresser: Wonderful! And by the way, thank you so much for joining us today.
Vivek Sood: It’s been a pleasure, Michael. It’s a pleasure to talk to your audience.
Michael Dresser: Take care!
Has Apple learnt the lesson that Dell never learnt?
Apple has grappled with this conundrum for a while now – when, if at all, to dump Samsung? There comes a point in every business network when the erstwhile suppliers become more powerful than the ‘customer’. Dell continued to rely on its suppliers in far east while they were eating his lunch. Look where it landed Dell?
Dell’s supply chain conundrum is not well explained by the market analysts – many of its suppliers are also some of its biggest competitors. Ten years ago, when Dell was a far bigger company that its much smaller suppliers it Asia, this did not matter much. But they have now copied Dell’s business model to perfection – making its business model redundant. They won market share by under-cuting Dell in the market place, while Dell could not invent a newer business model. No wonder Dell lost the competitve advantage it had created so assidously in the 90s by shrinking the cash-to-cash cycle and building volume.
Apple is concerned that Samsung is doing exactly the same thing to it in the mobile devices market. While it continues to persist with its lawsuit against Samsung, it does not yet desist from continuing to buy critical components from Samsung.
At the same time it also continues to expand its business network – e.g. see its attempt to enrol Intel into its fold. The news report from BGR explains:
The move could improve the quality of Apple’s mobile chips thanks to Intel’s leading process technology, and an added benefit for Apple would be to finally sever all ties with rivalSamsung (005930), which continues to supply components for various Apple devices.
However, this move may not be an easy one. Intel itself is re-inventing its own business business model in the post-pc world. With the shrinking margins in the PC market, and the growing volumes in the mobile world, Intel needs to get into the mobile chip market in a much bigger way than it currently plays in that game. Yet, ‘Intel Inside’ branding strategy may not be popular at Apple. Afterall Apple knows where that left the PC makers in their business networks.
This newsreport from Reuters explains the situation better:
After Intel upped its capital spending budget by $2 billion to $13 billion this year, speculation grew that Apple could ink a deal to use Intel’s leading process technology to make better chips for its iPad and iPhone. Doing so could help Apple end its foundry relationship with Samsung, which has become a fierce competitor with its own smartphones and tablets.
Sunit Rikhi, vice president and general manager of Intel custom foundry, told Reuters last week his group is ready to take on a potential large, unidentified mobile customer, although he declined to discuss Apple specifically.
Intel spokesman Chuck Mulloy said the chipmaker is in constant discussions with Apple, which buys its PC chips, but he would not comment on negotiations about a potential foundry relationship. An Apple spokesman declined to comment.
That is the conundrum then, On one hand is Samsung, a known follower who keeps becoming into a bigger rival. On the other hand is Intel, a hard negotiator where only the paranoid survive.
I talk a lot more about Apple’s business network efficacy in my book 5-STAR BUSINESS NETWORKS – it appears that unless Apple continues to come out with some more designs and gadgets, it will have to now play this game on both fronts.
The first business book that I read was “In Search of Excellence” by Tom Peters and . It was a gushing account by two ex-McKinsey consultants truly in search of excellence among American businesses, and plethora of advise that to my then untutored mind (after all, I was still just an untutored merchant navy officer at that time) appeared rather obvious – for example walk around your operations to see what is going on.
What struck me most about the book was that in the intervening 13 years or so, between the time this book was written and I read it, most of the companies singled out as excellent by the authors were already in trouble. That impression – that companies once lauded as excellent can quite rapidly lose that mantle – has never left my mind as I read more than 5,000 business books, countless book summaries, business commentaries and news reports. Invariably each of these writings tries to generalize the key determinants of success from examples of certain companies. In more cases than not, those companies singled out as models of success falter in a few years times, sometimes victims of changing circumstances and at other times victims of their own success.
Today, it seems, that the success cycle has shortened even more. As George Colvin notes down in his recent Fortune magazine article (The World’s Most Admired Companies: Built for brilliance):
Success in today's economy seems volatile, momentary, evanescent. It's tempting to conclude that nothing lasts very long anymore. Yet that clearly isn't right; two of this year's top 10, Coca-Cola and IBM, are over 100 years old. The more accurate conclusion is that nothing today lasts very long without constant attention. That is a major change from 30 years ago. In an industrial economy based on physical products, plenty of things actually did last a long time on their own.
I think he makes a very good point in the article. Information networks have increased the speed of both – success and failure.
The speed of success has increased because you can use upside leverage of your business networks to to make up for your company’s weaknesses. The allows rapid deployment of new business models, and faster testing of these models in the marketplace. In that sense, your business networks may be even more valuable assets that your business infra-structure. After all, in the down half of the cycle your company’s physical infra-structure is always a millstone around your neck; just ask the airlines who have to park thousands of planes in the desert during recessions.
The speed of failure has increased too, because your competitors can outleverage you, using similar business networks. Beware of smaller, nimbler players with big business networks. They do not carry the overheads and yet can project their business power as far and wide as their much bigger competitors.
I discuss all these concepts in much more detail in my forthcoming book – The 5-STAR Business Networks – which will be released in April 2013. I invite thought leaders to contribute to the discussion by reading a synopsis of the book and providing feedback and recommendations – selected feedback and recommendations will be published on the book itself.
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.