Owners of cars made by a range of manufacturers such as Ferrari, Mercedes-Benz and Volvo will be able to voice-command their vehicles using iOS devices this year. Apple will unveil CarPlay, the integrated infotainment system, at the 83rd Geneva Motor Show, which takes place from Mar 6 to 16, 2014.
The first ever Apple integration into cars will be showcased, with vehicles effectively becoming “the second screen for the iPhone”, according to Frank Gillett, an analyst at Forrester Research.
“We’re looking at the coming together of some of the most powerful brands on earth, Apple – the most valuable brand – is leading the change in automobile entertainment by using its attractive installed base and business networks”, says Vivek Sood, CEO of Global Supply Chain Group.
At a glance, the new system will give drivers a familiar iOS interface for maps, music and Siri-based voice controls while incorporating standard knobs, dials and buttons in the car. Other basic phone functions can also be accessed, such as making calls, messaging as well as a host of third-party apps.
“CarPlay lets drivers use their iPhone in the car with minimized distraction,” Greg Joswiak, Apple’s marketing vice president for iPhone and iOS, said in the statement.
Currently, CarPlay will only support the latest generation of the iPhone, which means iPhone 5, iPhone 5S and iPhone 5C, and will be available as an update to iOS 7.
A report by Accenture in December says consumers are increasingly looking at in-car technology as the deal-breaker, even more than power and speed as their first consideration.
“Apple again has seized the spotlight, after signalling its attempt with the iPod and car audio systems a decade ago, and then fine-tuning its product family before finally announcing “We’re ready””, says Sood, who also writes the book “5-Star Business Network”.
Other carmakers expected to follow suit include big names such as BMW, Ford, General Motors, Honda, Hyundai, Jaguar Land Rover, Kia Motors, Mitsubishi, Nissan, PSA Peugeot Citroën, Subaru, Suzuki and Toyota.
In December 2013, Google announced the plan to work with Audi in developing a similar system. However, nothing has been heard since.
Google’s Android OS has also come under intense competition with the upcoming launch of Ubuntu-run smartphones and Samsung’s decision to ditch Android for Tizen in its smartwatches.
I always start my analysis with a simple disclaimer that no matter how many Ivy League degrees one has, none can predict the future. With my near perfect GMAT score in quants, when it comes to analytical capabilities, I am confident that I am close to the top level. Yet it is necessary to note down this simple caveat at the beginning.
Because no one can predict the future, every acquisition is essentially a leap of faith – just like every marriage is. And, the parallel does not end there – similar to a marriage, probability of success of an acquisition is also rated just below 50%. Thankfully, that scary statistic does not stop people from marrying out of love, and companies from acquiring other companies out of – whatever leads them to get the urge to merge.
The cheer squad is out justifying the deal – rolling out measures such as MAU (monthly active user), revenue per MAU, valuation per MAU and such numbers. It reminds me of the go-go days of the last internet boom where valuations per eyeball led companies such as Webvan, pets.com and others to use similar statistics as the justification of their valuations and shaky business models. As an example, here is one list of top ten dot com flops. Here is another one compiled by CNN. Curiously, both of them missed Myspace.com, the Facebook of 2005, acquired by News Corporation for an astronomical sum of $580 Million.
Here is a snippet from Andrew Beattie:
In the year 1999, there were 457 IPOs, most of which were internet and technology related. Of those 457 IPOs, 117 doubled in price on the first day of trading. In 2001 the number of IPOs dwindled to 76, and none of them doubled on the first day of trading.
Why do I quote these numbers and examples? Only to remind you how short memory can be despite figures and statistics being set in stone. I will not go on and on with digging the graves because I have a couple of very important points to make.
First is this – what are other comparable businesses to WhatsApp? You could say none – but that is not true. Essentially, both Viber and Skype do similar things and have a wide reach. I have been using Skype since 2000 and Viber for at least 3 years before I started using WhatsApp. In addition, there are many other apps, including iMessage that allow online messaging. So what is the source of magic in this deal?
Let’s first compare the number of users, because they are the sole reason for astronomical valuation. Skype has reported more than 300 legitimate users. Many of them pay substantial sums for the privilege of using its services. For example I pay between $50 and $200 every year for its service. Yet Skype was sold to Microsoft for $8.5 Billion in 2011.
Yes, there are nearly 450 Million users of WhatsApp – but what do WhatsApp users pay? Zero, nada, zip – most of them pay the company nothing. In fact that is its biggest attraction! And, also the reason why it is so popular in Africa and parts of Asia. How much revenue can derive from serving ads to populace with limited buying power?
Now this is where the story gets very interesting. Indeed, as pointed out by Prahlad in his book “The Fortune at the Bottom of the Pyramid“, there is indeed a fortune to be made there. WhatsApp’s business model was finely tuned by its careful founders. And they have made a fortune by selling to Facebook at the right time, at a very fortunate price.
The key question is will Facebook be able to make a fortune out of its purchase? The demographics of Facebook users and WhatsApp users are significantly different. As I said in one of my recent posts on Quora “I think social media will start differentiating itself further. Facebook is fast becoming a housewives’ platform while LinkedIn is fast becoming a recruiters’ platform and Twitter is becoming a journalists’/politicians’ platform. I know this is still a gross generalisation, but consider this – many Facebook groups (such as HARO) have now started their own social platforms that are growing very successfully. This phenomenon is only going to accelerate as the technology evolves. Generic social platforming technologies as not yet commercially available easily. But they will be. Similar to what happened with message board technologies, blog technologies and countless other similar plug-ins. Once that happens – potentially every LinkedIn group, Facebook group, Yahoo group and Google+ group could evolve into an independent social platform with its own sub-culture and rules.”
For this reason I think the current deal is yet another case of Easy come, Easy go. In this article, the authors (Andrew McAfee, associate director of the Center for Digital Business at the M.I.T. Sloan School of Management, and Erik Brynjolfsson, professor at the M.I.T. Sloan School of Management, director of the Center for Digital Business) note that WhatsApp is a company of 55 employees and $19 Billion valuation, asking “Are we building a jobless economy?”
My view is different. I think in this case, we are barely building any economy at all. As noted in my Quora post above – when the dust on social media segregation settles, and the users self-select to fall in the right camp for the right activity the valuations will settle down closer to the norm. At the moment, driven by relentless quantitative easing, and lack of real investment opportunities, anything that looks remotely promising is being valued way higher than it should be. In this dot-com bubble on steroids, looking for logic in investment valuations is akin to hang gliding in the eye of a storm – you may think you are safe, but that is just a temporary illusion.
I write my blog mostly because I enjoy writing on the topics I cover. But I have noticed an interesting side-effect which is starting to bring home to me the power of electronic media and blogs.
I never thought that the effect will be so direct, immediate and measurable, but I notice it every time! Whenever I write a new blog and share it with my audience, I notice a significant spike in the sale of my recent book The 5-STAR Business Network.
Not being a marketing or sales professional, till now I was only aware of the link between the positive online word-of-mouth and online sales of products. For the first time in my life, I can actually see this link visibly and tangibly demonstrated in practice. Many of you who are more familiar with online sales and marketing, social media and such channels will regard my amazement with a touch of ‘of course we know it’.
In my book The 5-STAR Business Network I talk about how the old business models have changed due to globalization of supply chains, morphing of business entities into interlinked business networks that act in cohorts, and application of newer technologies such as internet, nano-tech, and others to old business models. Most companies that are thriving today, and others that are building a platform for thriving into the next few decades are all making use of this major upheaval in business models to create transformative changes in their industries, and sometimes into adjoining industries. For example, see how Amazon is gradually re-inventing a new publishing industry.
Not content with merely selling books published by the established publishing houses, Amazon is foraying far wider and deeper into the publishing world by reaching out to the content creators and facilitating their efforts in a systematic manner. This not only allows Amazon to harness the creative potential of those who have a meaningful message to convey, but also, it allows Amazon to sit right in the middle of the new industrial revolution – one of business networks.
So, instead of investing thousands, even tens of thousands of dollars in publishing, printing and promoting the books, now it is possible to create meaningful conversations from your living room, when it is convenient to you (e.g. on a rainy weekend – as it is for me today). And instead of book signings and tours, it is possible to use blogs, articles and forums.
Traditional publishing industry will of course continue to resist these changes – just as the candle makers union continued to resist electricity. Eventually, though, most candle makers will switch trades and learn electricians’ trade because that is where the future lies.
If you want to read more about the newer business models and how they are being created in the modern commercial world see The 5-STAR Business Models here.
When I wrote my just released book The 5-STAR Business Network I included just one paragraph on Bitcoin, using it as an example of emerging business network of dubious quality. Here is what I wrote in the book:
An interesting phenomenon that is just emerging is online currencies being traded between the informal networks. These go far beyond online payment and clearance systems such as PayPal and serve as crypto-currency. So far these crypto-currency networks such as Bitcoin and its clones are operating at the legal fringes of most economies. Further developments are being watched with interest by the central banks, supra-national bodies and the political economists. We will draw the line here for our discussion of semi-underground networks because one can go too far in researching and describing these and stray into illegal or unethical networks quite unknowingly.
I did not really expect most readers of the book to be familiar with Bitcoin, or any of its clones. I wanted to mention in passing that such networks could eventually lead to something worthy of distinction or die away. Little did I know that barely before the book was released Bitcoin shot up in notoriety, first by rising phenomenally, and then by falling equally hard. The rise and fall of Bitcoin, in short run, or even in long run is not my concern here. There are plenty of news-stories filled with theories about the gyrations of this crypto-currency, now that Bitcoin is almost a household work.
The key question I ask is the long term impact of the emergence of this phenomenon on the businesses and 5-STAR Business Networks around the world. To look for clues, I turned to National Intelligence Council’s (NIC) latest Global Trends report, Global Trends 2030: Alternative Worlds, which forms a fascinating read. I encourage the reader to download it for free from this link, and peruse it at their leisure. This 140 page report covers a wide range of topics but I will quote the most important bits below:
The empowerment of individuals and diffusion of power among states and from states to informal networks will have a dramatic impact, largely reversing the historic rise of the West since 1750, restoring Asia’s weight in the global economy, and ushering in a new era of “democratization” at the international and domestic level.
We have more than enough information to suggest that however rapid change has been over the past couple decades, the rate of change will accelerate in the future. Accordingly, we have created four scenarios that represent distinct pathways for the world out to 2030: Stalled Engines, Fusion, Gini Out-of-the-Bottle, and Nonstate World.
Multinational businesses, IT communications firms, international scientists, NGOs, and others that are used to cooperating across borders and as part of networks thrive in this hyper-globalized world where expertise, influence, and agility count for more than “weight” or “position.”
No doubt then, that the report writers see a future made up to such non-state actors forming multitude of cross-national networks, and Bitcoin in just one such network, though it sits more on the fringe rather than in the middle of the business world. It is also starting to gain legitimacy. As per The Economist
On March 18th the Financial Crimes Enforcement Network, an American government agency, proposed to regulate Bitcoin exchanges; this suggests that the agency is unlikely to shut them down.
While as a store of value, Bitcoin or its clones may or may not be a suitable replacement for money. Wild gyrations in prices tell us that they are neither good investments, nor good store of value. Unknown complex computer algorithms that create new bitcoins somehow do not create the perception of scarcity that deep underground tunnels for gold mining do.
However, as medium of exchange Bitcoin or its clones may be on to something. In a world where most supermarkets, or even book-stores are not complaining when they earn a margin of 2%-5%, it appears ludicrous that credit card companies can command a transaction fee that is equally high. These high fees, and the processes that accompany them were designed in the days of coaches and buggies when none of the efficiencies of modern communication and transportation were available. Whatever happens to the lawsuit with $7.25 Billion settlement in “eight years of antitrust litigation that accuses Visa and MasterCard of conspiring to inflate retailers’ interchange, or swipe, fees on credit card transactions“ (Reuters) in the long run sophisticated networked shoppers will become aware of the power of crypto-currencies to facilitate cheaper international transactions. As per the Economist
“Some legal businesses have started to accept Bitcoins. Among them are Reddit, a social-media site, and WordPress, which provides web hosting and software for bloggers. The appeal for merchants is strong. Firms such as BitPay offer spot-price conversion into dollars. Fees are typically far less than those charged by credit-card companies or banks, particularly for orders from abroad. And Bitcoin transactions cannot be reversed, so frauds cannot leave retailers out of pocket.
<span”>No doubt this is just the start of a big trend for the future. However, The article in Economist notes rightly that just as Napster started a revolution in digital music that eventually led to iTunes and beyond, Bitcoin may have already started a revolution in the digital payments that could lead a long way away.
What are your thoughts?
Intel has long been the model of Innovation. In particular, its famous tick-tock product development strategy has been hailed as a case study for learning how to balance the current product profitability with the pipeline of future products. For example, when I was researching an appropriate public domain case study for my book The 5-STAR Business Network I could not find a better example of Advanaced Product Phasing (APP) than Intel. At that time I wrote in the book:
Gordon Moore, Intel’s founder, predicted that the number of transistors on a chip would double every two years. Moore’s law was put in practice for many years and it ultimately led to Intel’s tick tock strategy. Intel’s ‘Tick Tock’ strategy was developed in 2007 and refers to the change in their processor technology. Each year, the ticks and tocks alternate, ticks refer to downsizing of the previous microarchitecture and tocks refers to new microarchitecture. During a tick cycle, new process technology is developed, which enhances the performance of previously produced microprocessors. A tock cycle consists of an entirely new processor or product. Many say that this rhythm of development sets Intel apart from other companies, as having a fixed timeline allows the business to produce products at pre determined intervals, and yet manage the product profitability carefully. ‘Intel has successfully alternated and delivered the next generation of silicon technology as well as new processor microarchitecture year after year’ (podtech.net). —
— Overall, Intel appears to be doing the impossible: investing in new technology while simultaneously maintaining and investing in their existing product line-up developments. This system creates a pipeline of continuously flowing products, which are both innovative and sold in large volume, making Intel one of the most successful Fortune 500 companies while producing the largest amount of microprocessors in the world.
Intel managed its transition from a manufacturer of memory to micro-processors admirably. During the transition from memory to microprocessors, Intel’s number one concern was becoming the best microprocessor company. Former CEO Andy Grove created a system called Strategic Long Range Planning. Essentially, this strategic framework allowed Grove to do things his way. ‘I became very distinctive in prescribing the strategic direction from the top down. This defined the strategy for all of the groups, and it provided a strategic framework for different groups at different levels of management.’ (Grove as quoted on aomonline.org)
However, the next transition – to mobile processors is proving to be far more challenging. To start with, Apple is not as easy a customer as IBM was for PCs. Samsung produces its own processors. Other players in smartphone market are too small to give any economies of scale in large scale manufacturing.
While quaterly profits do not tell a full story, Intel has just annouced the second quarter in a row where its profit fell more than 25% – this report in Wall Street Journal carries the full story. In its press release Intel said:
“Amidst market softness, Intel performed well in the first quarter and I’m excited about what lies ahead for the company,” said Paul Otellini, Intel president and CEO. “We shipped our next generation PC microprocessors, introduced a new family of products for micro-servers and will ship our new tablet and smartphone microprocessors this quarter. We are working with our customers to introduce innovative new products across multiple operating systems. The transition to 14nm technology this year will significantly increase the value provided by Intel architecture and process technology for our customers and in the marketplace.”
No doubt, the continued softening of the PC market is not only hurting HP and Dell, but also partly responsible for what is happening at Intel. The key question is that while Intel is extremely good at Advanced Product Phasing (APP), is it capable of proving itself adept at Fire-Aim-Ready (FAR) Innovation? Without innovation, and creation of new product for where the market is moving too – cloud based mobile gadgets, Intel is likely to continue to lose ground.
What should Intel do in this scenario? Make a deal with Apple at any cost? Invent its own mobile gadgets? Help create an equivalent of Dell for the mobile market? What else? You comments are welcome below:
Whenever a company announces a cost-cutting drive, the markets respond with enthusiasm, driving up the share price. There are at least four assumptions underpinning this enthusiasm:
In most cases where I have been personally involved in cost-cutting exercises (and these number in hundreds by now), these assumptions hold true. Indeed, the projects are created only when the evidence of excessive fat is readily available. Diagnostics are carried out intelligently and implemented diligently. Long term unintended consequences are minimized by taking these into consideration during the strategy formulation.
However, there are ample examples in press of one of the four assumptions above not holding up. This news-story from a recent edition of Bloomberg Business Week tells us the case of Walmart. As per the article:
Wal-Mart Stores (WMT) has been cutting staff since the recession—and pallets of merchandise are piling up in its stockrooms as shelves go unfilled. In the past five years the world’s largest retailer added 455 U.S. Walmart stores, a 13 percent increase, according to company filings in late January. In the same period its total U.S. workforce, which includes employees at its Sam’s Club warehouse stores, dropped by about 20,000, or 1.4 percent.
A thinly spread workforce has other consequences: longer checkout lines, less help throughout the store, and disorganization. Last month, Walmart placed last among department and discount stores in the American Customer Satisfaction Index, the sixth year in a row the company has either tied or taken the last spot.
The article goes on to compare the current woes at Walmart with the HomeDepot experience a few years ago.
That’s what happened at Home Depot (HD) in the early 2000s, when it tried to trim expenses and boost profits by cutting staff and relying more on part-time workers. Eventually customer service and satisfaction deteriorated, and sales growth at established stores fell.
Perhaps this is symptomatic of the dilemma faced by all brick-and-mortar retailers. As the customers move to online channels, and increasingly use traditional retailers as mere show-rooms to get a touch and feel experience of products that they later buy online after comparison shopping using smart apps, all retailers are experiencing challenges that require ‘fresh thinking’ and ‘newer business models’.
However, as per the article, not all retailers are exhibiting the same symptoms of mis-guided cost cutting. The article quotes the case of a shopper who finds the shelves in competitors’ store amply stocked and serviced, as follows:
Margaret Hancock long considered her local Walmart superstore her one-stop shopping destination. But during recent visits, the retired accountant from Newark, Del., says she failed to find more than a dozen items, including certain types of face cream, cold medicine, mouthwash, bandages, and hangers. Walmart’s loss was a gain for Kohl’s (KSS), Safeway (SWY), Target (TGT), and Walgreens (WAG)—the chains Hancock visited for the unavailable items. “If it’s not on the shelf, I can’t buy it,” she explains. “You hate to see a company self-destruct, but there are other places to go.”
This article, and the example quote above, has hit a nerve among Walmart customers – setting the cybersphere abuzz with comments, mostly quoting similar experiences, or worse. Walmart’s drive to cut-costs has not gone un-noticed by its customers. No doubt, online retailers such as Amazon are fast gaining market share due to their lower overheads and drive to gain market share at the expense of margins. It will be very interesting to see the outcome of this particular battle.
More interesting question is, however, What should be Walmart’s strategic response to the current challenge?
iPhone 6 has not been released yet and the crowd that likes to call itself THE INNOVATORS is waiting with bated breaths to again stand in queues for whole nights for the next re-incarnation of the great innovation.
Here is the challenge for this crowd – and a thought experiment for the rest of us.
Why not design and build your own iPhone 7, or at least a phone that rivals the features and functionality of one?
You might imagine that is impossible – but the facts speak otherwise. In fact, we will talk later in this post about a man who has actually done something of that nature.
Afterall, the chipset, the screen, the key componentry – even the assembly service can all be sourced from third parties. A rival operating system can do pretty much what the iOS does. And, the best news of all is that the sum total of all the parts and services add up to far less than what it costs to buy one. Of course, it is not as easy as I make it sound – there is a question of minimum volumes, inventory management, marketing, selling and supply chain management.
But, as I explain in my forthcoming book 5-STAR BUSINESS NETWORKS, even these services can be modularized and outsourced.
Who is already doing this?
Sammy Ohev-Zion, the Chief Executive Officer of Bluproducts is in news this week. In the article titled Meet the tiny, Florida-based phone maker that thinks it can beat Samsung, by David Pierce, his story is covered in quite a lot of detail. The article quotes Sammy as follows:
Ohev-Zion told me, “for a startup company to be able to manufacture — if you weren’t one of these billion-dollar companies you didn’t have the access or the technologies to make your own mobile devices.” But that’s all changed, and Ohev-Zion found that he could build a good phone for the same price as the other guys, and sell it for a lot less. He used his connections to get Blu phones in stock at Amazon, Newegg, Best Buy, and others, and began rolling out newer, better phones at a blistering pace. He believes, and says without a moment of hesitation, that Blu is going to be a real player in the smartphone industry sooner rather than later.
If it costs no more than $299 to make a phone of equivalent quality and features, where does it leave the big mobile phone manufacturers when smaller, nimble players such as Bluproducts start creating and using their 5-STAR Business Networks to bring better products to the markets faster and cheaper. The article goes on to quote the features vs. price comparison as below:
Ohev-Zion, CEO of Blu Products, a relatively unknown manufacturer based in Miami, Florida, says it would cost $299. That’s how much the company’s latest flagship phone, the Blu Life One, will cost unlocked from Amazon or a handful of other retailers when it’s available at the end of April. It’s a 5-inch HD phone with a 13-megapixel camera and stock Android 4.2 (save for a Blu wallpaper), in a thin and light body that appears to hold its own next to the Galaxy and Droid devices of the world.
And the reasons for the price differences you ask? Well as per the article it is all in the marketing budgets and corporate headquarters costs of the big guys (which sound at least partly true). I am sure as a reader you will have your own opinion on that – which you can share below.
But a bigger question to reflect on is this – are we likely to see someone come along and do to mobile phone equipment market what we saw Michael Dell do to the PC market?
When will be able to buy customized hand-sets – with just the right combination of hardware components and features to suit our particular needs? Seems like that day is not far off!
Interviewer: Ric Bratton of This Week In America Interviewee: Vivek Sood of Global Supply Chain Group (author of The 5-STAR Business Networks)
Here is the entire transcript of the interview: Ric Bratton: Welcome back everybody! This Week In America, thank you for joining us! Our website is www.thisweekinamerica.us. As promised, coming up in a program an interview with the man who has the world’s most interesting job. He once was a ship captain like Captain Phillips, had a real-life fight with pirates at sea and now he helps CEOs and their companies with business transformation to boost profits and do it rapidly. He has more than 400 projects, they’ve spent approximately 84 countries and 5 continents with clients ranging from Fortune-500 companies to innovative green-technology companies. And he says he has more fun every day at work than he could ever imagine. Vivek Sood – our guest back on the program, representing “The 5‑Star Business Network” – that’s his book. Vivek, welcome to the program, it’s great to have you with us! Vivek Sood: Thank you, Ric! It’s a pleasure every time to talk to you. Ric Bratton: Oh, it is! Are you still having fun every day? Vivek Sood: Oh, yes! The fun never stops, this is a beautiful job. Like I said last time, doctors save lives and we save livelihoods. Ric Bratton: That is so true. When you go in and you are able to offer a lifeline to some of these companies, it really has to mean so much to them. Vivek’s website is www.5starbusinessnetwork.com. The book is called “The 5‑Star Business Network”. Information, of course, is on our website www.thisweekinamerica.us. Let’s start off by talking about something very important, we touched it last time. You said that the world economy is changing forever. It should get people’s attention, that is now changing forever. Talk about that. Why all of a sudden we are seeing this shift? Vivek Sood: Ric, there are many factors. I guess the biggest factor really is Internet or connectivity. Global connectivity has made services and knowledge available to people, that was never available before. In a way, basically, you cannot trade on information asymmetry or, in other words, the arbitrage opportunity. The ability to fool somebody, because you have more information than them, does not exist anymore. That is probably one of the biggest shifts that has happened on a global level. Along with that, of course, China and India, two very big nations, each one of them is 1.3 billion people or so, they are now finally joining up the global economy after about 150-200 years of being in hiatus. Such a massive shift is definitely going to cause an upheaval in the global economy, there are no two ways about it. Ric Bratton: I mentioned that you’ve worked in a number of countries, I think you visited and traveled to 150, you have clients in 80-85 countries. And looking at what we are in the United States, Vivek is coming to us from Australia as we are doing this. As for the Unites States and out companies, are we positioned in a good shape or are we playing catch-up with this? Vivek Sood: Ric, the best US companies are still the best in the world, there is no doubt about that. You look at companies like Amazon or Apple, they are definitely some of the best companies on earth. But there is also another hard fact, that US being a very large country of nearly 300 million people, as well as a very rich country, has never had to look outside its shores for business. Small to mid-sized enterprise, even a large enterprise really looks outside US almost as an addendum to its core business. So US is seen as the core business and the rest of the world are seen almost like incidental business. That is probably one of the biggest problems that a shift to globalization hasn’t happened in the minds of many large companies, let alone small or mid-sized companies. Ric Bratton: Our guest on This Week in America is Vivek Sood. His website is www.5starbusinessnetwork.com and his book is called “The 5‑Star Business Network”. World’s foremost authority in global supply chains. And let’s talk about that. Exactly what are we talking about when we are talking about global supply chains? Vivek Sood: OK, global supply chains are very easy. You look at an iPhone, iPhone 6, for example, which has just been released by Apply. Obviously, one of the biggest markets for their product is the United States of America, but when you look at the product itself, well, it is designed in California. The parts come from all over the world, there are companies in Taiwan, in China, in Malaysia and many other locations, which are manufacturing parts, which finally are assembled in a place in China. And that’s how this product is being made, and then it is being sold all over the world. Now that is a massive shift from how computers were manufactured when Apple first started manufacturing the computers in California. So that’s what I mean by globalization of supply chains. Ric Bratton: How are businesses responding to the shift? Are most of them on top of this? Vivek Sood: Some are, definitely, like Apple, the example I just gave you. They are totally on top of it. They are not only using global enterprises to manufacture, they are also using the global enterprises to design, in fact, even understand the consumer preferences around the world and create products that are acceptable to consumers around the world. Others are still thinking of it in a very narrow way, where people inside the company are telling the CEOs. I can even give you an example of a Korean company, which is one of the biggest competitors to Apple, they are still thinking in a very narrow way. They want to do everything in house, perhaps just within a small national boundary. And the more they are trying to do that, the more they fall behind their competitors. Ric Bratton: Vivek Sood is our guest on the program on This Week in America. We are talking about his book “The 5‑Star Business Network”. Business-to-business network, something that we talked about on the last program, you talked about in the book and something you stress as being really important. Explain exactly, how that is. It sounds very simple, and some businesses go “yeah, I’ll get a Facebook page and I’m part of this new wave, this new phenomenon”. Talk about business-to-business networking and how it’s done right. Vivek Sood: OK, so what people think of LinkedIn or Facebook as very large networks, which they are and they are very useful as well. But when you look at business-to-business networks, the scale is absolutely staggering, it’s mind-boggling. Facebook is about, let’s say, a hundred billion dollars. But when you look at just one industry – let’s say, automobile industry, the global supply chain of automobile industry runs into trillions of dollars. So all the ancillary unit providers, which are based in Far East, for example, combine that with all the assemblers and designers, and suddenly you have a global supply chain, which is worth trillions of dollars and works like a clockwork to put the next model of automobile out in the market place. This is just one example, you can think of chemicals industry, you can think about pharmaceutical industries, you can think about retail industry, – each one of them has a very diverse, a very widespread, very tightly neat global business-to-business network, a global supply chain, where the enterprises are working together with each other to put the final product in the hands of the consumer. Ric Bratton: You’ve said that most miss the network that is hidden in plain sight. When you think about it, it’s sometimes too obvious, you are trying to make it more complicated than what it is. Vivek Sood: I’m actually trying to make it simpler than what it is, Ric. In the end, they are actually very complicated networks. Think about it this way: today, if you wear a leather jacket, the cow comes from somewhere, the leather is tanned somewhere else, after that it is cut in another place, perhaps 2 thousand miles away from there. Then it is stitched into a jacket in another place, and finally it is packaged and sold in totally different place. It is far more complicated than most people actually think. And management of that global scale as well as scope of business-to-business network, and actually extract profits out of it, it is an art and it is a science, it doesn’t happen just by coincidence. Ric Bratton: Vivek Sood, our guest on the program. His book is called “The 5‑Star Business Network”, his website is www.5starbusinessnetwork.com. Of course, this information is available on our website www.thisweekinamerica.us and you can link on directly to Vivek’s website and get information. Why do so many companies seem to get it wrong and struggle? Vivek Sood: Ric, look at what is happening inside the companies. If you look at the senior executives or CEOs, they have come through the ranks in pyramid structure and they are used to work in a particular way. They face very intense pressure, by the way from their investors, from the Wall Street, who want the profits, who want to take advantage of the shift in the global business scenario. However, when they go internally to talk to their own teams, the internal teams basically have done business in only one way in the past, and that is the only way the know of doing business. So what they see around them, if you are a C-level executive, you see a massive waste around you, you see a massive loss of opportunity. And you just don’t know how to wrap your arm around it, and how to actually squeeze the waste out of the system, and how to actually get rid of the confusion and complexity. That is perhaps their biggest blocker, in my mind. Ric Bratton: When you go in and you deal with companies, – and I mentioned at the beginning that you deal with companies of all sizes, all around the world, – when you go in and start laying out your ideas, and again, you mentioned that sometimes the corporate culture is very slow to respond, what kind of response do you get when you go in and you say: “OK, here’s what I think you should be going, here are the changes that really need to be made to be competitive on a market place today”? What kind of response do you get? Vivek Sood: Ric, the most important thing we do for our clients is basically get rid of the complexity. So what we do is very clearly, we lay out the supply chain in a very systematic manner as it exists right now, and then we look at several different models of supply chain within their industry, but also outside the industry and we have now a track record of 50 years of doing this in our company for a variety of industries. We have these models in our mind, but we also work with the internal teams to create this permutations and combinations. And finally we choose the best model that works for this particular company. In each case, inevitably we end up saving humongous amount of money for the C-level executives and their companies. Ric Bratton: You know, what’s interesting is, so often you hear of companies and when they decide to go through a transformation, it’s downsizing, it’s reducing force, it’s redundancies, things like that. Can you downsize your way to success? Vivek Sood: Never, very rarely. In fact, in my view, if you have come to a point where you have to go through mass redundancies and just last week a very large IT company had to declare mass redundancies again, in my view, it’s already too late. Somebody has missed the obvious writing on the wall, the massive waste within the company was overlooked for long enough, so that the situation has come to a point where the knee-jerk reaction is that the Wall Street or the investors want results. And what’s the quickest way to get results? Let’s do downsizing. But that’s a very temporary solution. In the end, that will end in eroding the core competency of the business itself. Ric Bratton: We talked about the companies, which are getting it wrong and struggling. Let’s talk about some of the companies, that you could say they are doing it right, and how they are doing it, because they are thriving and they are positioned to take advantage of this global economy. Vivek Sood: Oh yes, there are lots and lots of companies that are doing it, and I continue to have this conversation with companies and work with them. Yesterday I had a very interesting conversation with three different companies, each one of them is a massive company, and each one of them is actually on the path upwards! Yes, many of them are sort of trying to stumble their way into that kind of new paradigm with new supply chains, but many others have become very systematic about it. How to take a supply chain, from supply chain 0.0 to supply chain 1.0, to supply chain 2.0 and then further on to supply chain 3.0. Now these are all a little bit technical terms, I understand that, but there is a massive difference between these. It’s almost like three different models of an aircraft. Ric Bratton: Interesting! Vivek Sood, our guest on the program, his book is called “The 5‑Star Business Network”, it’s available on Amazon, all across the country, all the places where books are sold, and at his website, which is www.5starbusinessnetwork.com. Information available, of course, at our website. Vivek is a supply chain corporate strategist, managing director of the Global Supply Chain Group. A couple of minutes left of the program, let’s talk about some of the benefits of business-to-business networks. We’ve talked about the role it’s going to play in this transformation, it’s a network that’s there for you. Let’s talk about some of the benefits, tangible benefits that businesses will see, trying to engage their business-to-business network. Vivek Sood: Absolutely. So, Ric, first thing is of course, as you cut out the complexity, you create much better understanding of the very complex business-to-business networks and supply chains in the business. With this understanding comes the ability to manage, the ability to control, ability to actually have much more influence that you ever had before. That’s probably the first benefit. Once you have an influence, you can actually start moving the ship in the right direction. I used to work in a ship, so imagine, if every time you turn the radar, you don’t know which way the ship is going to turn, just because you don’t have the control. Once you have that kind of control, you can actually start taking ship in the right direction. And, of course, with that comes higher profitability, much happier customers, for example, because your service levels are much better. More innovation, creating better products faster, working with your suppliers and suppliers’ suppliers, as well as working with your customers to create products that the consumers actually want, to get higher margins on those products, to actually customize the supply chain in a highly segmented manner, where each supply chain is structured for a particular customer segment and getting the maximum profitability out of the segment, because now they’re much happier with what they’re getting than they were ever in the past. I see this on a daily basis, by the way. Ric Bratton: Yeah, and this is not theory that you’re dealing with, you had over 400 business transformation projects and the success rate of 100%. So you are actually able to take this into the market place and literally turn businesses around. I’m sure, keep some businesses fluid and allowing them to hire people, to keep the business going. Vivek Sood: Absolutely, that’s what gets us out of bed every morning. It’s like a doctor who is very happy about saving lives as we’re saving livelihoods! In the end, having that kind of impact on businesses and creating much more effective as well as efficient businesses is rewarding itself. Ric Bratton: Well, it’s a pleasure to have you back on the program. Vivek Sood, the book is called “The 5‑Star Business Network”, his website is www.5starbusinessnetwork.com. Information, of course, at our website www.thisweekinamerica.us. The book’s available at Amazon, all across the country and you can order the book by going to the website www.5starbusinessnetwork.com. Vivek, it is always a pleasure! Thank you so much for joining us, look forward to having you back on the program. Thank you and keep smiling! Vivek Sood: Thank you, Ric! Very nice to talk to you again! And have a very good day! Ric Bratton: Thank you! I love the passion for what you are doing, it’s a pleasure to have you on the program!