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
This article is an extract from The Five Star Business Network, written by Vivek Sood
“It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.” Steve Jobs (1955 – 2011), Business Week, May 25 1998
“In most people’s vocabularies, design means veneer. It’s interior decorating. It’s the fabric of the curtains of the sofa. But to me, nothing could be further from the meaning of design. Design is the fundamental soul of a human-made creation that ends up expressing itself in successive outer layers of the product or service.” Steve Jobs (1955 – 2011)
When Apple first launched its iPod music players in November 2001, no one had an inkling what it would lead to in a decade’s time. The first salvo that Apple fired in what eventually became a market domination of the mobile phone market, did not look like a mobile phone at all. Indeed, none of the mobile phone players – whether market leaders such as Nokia or Ericcson or followers such as Samsung, Siemens, LG, and many others – displayed any sign of discomfort at the launch of iPod. The entire battle of iPod and iTunes was fought on the turf of the music industry’s drive to save itself from $0.99 per tune pricing policy of Apple.
Fire-Aim-Ready Innovations keeps your competitors guessing your intentions
Ironically, an industry which was half decimated by music piracy was busily fighting the very network which could save it – while the industry that would eventually be decimated was cheering on. When the iPod first came out, all the competing products in the market were clunky, large and erratic in their functioning. Transferring music files from CDs to computer to digital music devices was a major task, and piracy and peer-to-peer sharing was rife on the internet. Many observers doubted the wisdom of selling tracks on iTunes when they were freely downloadable on the internet. With its white headphones, small form factor, easy to use interface, user friendly computer link to both Mac and Windows, iPod quickly became an epitome of ‘cool’ from 2001-2006. As successive versions of iPod were issued (we will cover version update in much more detail in Advanced Product Phasing) newer features, more capacity, updated iTunes software for computers were introduced luring the customers to buy many more versions of iPod. Newer products in the same genre – iPod mini, iPod Nano, iPod shuffle, iPod Touch – were introduced to further capture the market, each with its own round of successive generations.
Each step in the Fire-Aim-Ready Innovation generates multiple platforms for future innovation
Apple was making huge inroads into the hearts and minds of the customers – especially non-Mac users who had no previous experience with the iconic brand. At the same time it was gaining expertise, knowledge and experience in small portable gadgets learning how consumers interacted with these, learning what the missing pieces in the existing gadgets and most were importantly building key connections with the network of suppliers, developers and other network participants who would eventually make the iPhone a resounding success. Meanwhile, smart phones were becoming popular with consumers and Blackberries with the corporate markets.
When Apple fired its second salvo in the battle for mobile phones, it was still not fully ready in the traditional sense. For example, most corporate IT barons scoffed at the idea of using iPhones for corporate emails and networks because of the missing security features. Even the cameras on the first version were far more basic than those on the other smart phones on the market at that time. However, the first iPhone was still an outstanding success which can be attributes to its massive consumer following from iPods, its ‘cool’ advertising, far superior user experience, reputation for delivering on its promise, and a number of sticky and unique features which were marketed very well.
Behind the scenes, Apple had already assembled an outstanding network of suppliers ranging from Foxxcon – the Chinese assembler to Fingerworks – the developer of the then unique touch screen software to the ARM the licenser of the CPU. Working closely in a huddle with these suppliers, who were each sworn to secrecy, Apple retained its leadership position in product development time compared to its competitors by outpacing them significantly, while at the same time raising the product quality to level that leapfrogs the competitors.
Its innovations were truly disruptive in the industry, even though it always leapfrogged the competitors rather than take the low road to disruption as suggested by Clayton Christensen in his theory. The disruption in the industry is evident from the fact the RIM – the maker of Blackberry – is now on the ropes unsure of its own financial future.
If this article interested you, you can read more in the book
This picture prompted me to write the blog post. Like many other people, I am a great admirer of Steve Jobs – his integrity, his passion and his sense of design.
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.
When I am doing difficult mathematical problems with my son, if he does not yet know the right answer (or the method to solve the problem), generally he will give several answers in the hope that at least one of them might click. I am trying to train him up to be a good thinker, besides being a good mathematician.
So, I encourage precision and brevity. The art of hitting the nail on the head really separates the good carpenters from the bad ones, and good mathematicians, and good product designers from the not-so-great ones.
When I was reading the book “Good Strategy, Bad Strategy” by Richard Rumelt, I was struck with the realisation that the bad strategists do exactly that same thing. If they are not sure of which two or three (or four) things will make all the difference in a situation, in general they will recommend a number of solutions (sometimes as many as 20-30) in the hope that at least some of them might click.
That is the reason whenever I see an article with a title saying 7,8 or 9 reasons…(also called listicles) – I know it will just be a laundry list of things of marginal importance. Watch out for strategists who offer a laundry list of unrelated solutions – in most cases they have not really diagnosed the problem adequately, and try and tackle the symptoms rather than the root causes.
This is how Richard Rumelt describes the difference between good strategy and bad strategy:
“The most basic idea of strategy is the application of strength against weakness. Or, if you prefer, strength applied to the most promising opportunity. The standard modern treatment of strategy has expanded this idea into a rich discussion of potential strengths, today called “advantages.” There are advantages due to being a first mover: scale, scope, network effects, reputation, patents, brands, and hundreds more. None of these are logically wrong, and each can be important. Yet this whole midlevel framework misses two huge incredibly important sources of natural strength: Having a coherent strategy—one that coordinates policies and actions. A good strategy doesn’t just draw on existing strength; it creates strength through the coherence of its design. Most organizations of any size don’t do this. Rather, they pursue multiple objectives that are unconnected with one another or, worse, that conflict with one another. The creation of new strengths through subtle shifts in viewpoint. An insightful reframing of a competitive situation can create whole new patterns of advantage and weakness. The most powerful strategies arise from such game-changing insights.
It is a great book, and I thoroughly recommend it. In it Richard talks about his meeting with Steve Jobs and his discussion about Apple’s strategy. He was struck by how unique that strategy was especially when compared with all the other tech CEOs that Richard interviewed.
That brings up to the difficult topic of Apple Watch which was launched today.
Being a bit of tech buff I spent several hours trying to understand exactly what does the watch do and looking for those two or three essential things that would make me buy it.
Yet, I could not find anything that will make me keep all my other watches away. When Apple launched printers – they were clear about two or three things these printers did which no other printer did as well. Steve Jobs explains this in one of his videos very well:
Itunes allowed people to rip CDs, store music and buy single tracks better than any other product. Ipods allowed listeners the most convenient way of storing a large selection of music. Iphones allowed the best user interface among smart phones (I used to own the best smart phone before Iphone came along – and it was badddd!). So, I looked and looked, trying to find those two or three things in the Apple watch that will make all the difference. I am sorry to say that I did not yet find them. If there is something in there, they have carefully hidden it so far. I will take another look when the Apple watch comes out in the market. What does it have to do with Apple strategy overall? Well, if Apple does not ‘innovate’ another killer product like those earlier ones, very soon it will lose its shine!
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? From 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.
Just one day after Microsoft announced its phone-based voice assistant Cortana, Apple made known its plan to dramatically improve Siri. With 15 acquisitions under its belt in the last fiscal year, Apple’s latest purchase is of Novauris Technologies.
The UK-based speech-recognition software company has a team of former Dragon Systems R&D employees. Some of its clients in the past include Panasonic, Verizon Wireless, BMW and Samsung for speech recognition system integration.
Apple’s acquisition, of undisclosed amount, is said to actually have happened last year. Analysts have pointed out that the tech giant seems to be working on Siri’s offline capabilities. One of the shortcomings of Apple’s signature voice command system is its reliance on an Internet connection to function.
“Given Apple’s recent CarPlay initiative, the importance of having stable voice command functionality while on the road is increasingly apparent.
“Meanwhile, we can expect to see intense competition from rival Microsoft’s Cortana, which is set to become smarter. Apple is quietly swallowing a number of smaller companies, giving it the advantage of fast integration and turnaround,” says Vivek Sood – CEO of Global Supply Chain Group.
Unlike its rivals such as Google and Facebook who routinely spend billions of dollars on high-profile purchases, Apple tends to acquire smaller tech companies along with their technology before launching new products or features.
In fact, Siri came to life after Apple’s purchase of a company of the same name in 2010.
Kristin Huguet, a spokeswoman for Apple, says: “Apple buys smaller technology companies from time to time, and we generally do not discuss our purpose or plans.”
Also recently, Apple is looking to improve product displays and battery life through a potential purchase of a Japan-based company. Renesas SP Drivers, a unit of Renesas Electronics, develops LCD chips for mobile devices and owns about one-third of the global market share.
Investors are expecting a lot of product launches from Apple, who have just rebounded from the worst monthly loss in a year. Among the anticipated products are Apple’s iTV and iWatch.
Not only developing new products, Apple is also trying to protect its patents. The most recent, yet familiar lawsuit against Samsung, has evolved to include Google.
At the same time, Amazon is taking on both Apple and Google on the TV device’s front. The world’s biggest online retailer unveiled Fire TV priced at US$99 on April 3rd.
“One of the biggest challenges in this TV gadget market is setting up a network of partners that lets you fully showcase your product’s functionality.
“Google’s Chromecast has had recent issues persuading British media companies, Apple is negotiating with Time Warner, while Amazon’s Fire TV already includes Netflix and Hulu applications. The winner will be the one with the most extensive reach within its business network,” said Sood, author of the book “The 5-Star Business Network“. “Gone are the days when companies used to create products on their own and market them on a standalone basis. In today’s networked business world, both product creation as well as marketing required strong ties with an A-class business network.”
In the previous blog entry of this series, I have outlined a customer centric business model, which is also captured in my book The 5-Star Business Network. Now let us delve into the evolution of supply chain models, or how Supply Chain 3.0 came about.
The customer centric model mentioned in the previous post is still a model of last decade and later in this piece we will see the reasons for this assertion. First, let us examine the impact of this model in practice of the commerce as conducted by many companies today. Due to persistence of traditional supplier-buyer relationships, when this model is applied across multiple organisations it morphs into an unworkable hierarchical structure shown in Figure 1 below.
Imagine if 5 of more organisations are linked in a multi-layer structure shown above. Unfortunately, that happens to be the case with many large organisations that compete with Apple in the market-place today. While such a structure minimises cost and responds predictably to all external stimuli, it is not suitable for the world of rapid change we live in today.
Today, businesses collaborate in a robust network
Success of Apple has shown that in the next decade this model needs to be supplemented by an even more evolved model which we have called Efficient Global Leadership model (EGL model for short). In this model we recognise that no single organisation by itself is in a position to service all the needs of a customer relating to even a single product. The fact is that two or more, in general three organisations come together as a supply chain, work together collaboratively, to fulfil the customer’s need.
As shown in Figure 2, each one of these organisations work in close harmony with each other, where the research & development teams of each organisation work together as do marketing teams and even sales teams of these organisations.
To create products, and then to manufacture those products, the production teams and the procurement teams work together to put those products in customer’s hands. In such a model, close collaboration is required among the supply chain partners to create market and sell the products.
Similarly, close cooperation is also required to produce the products, move the products and store the products in such a way that highly innovative products are produced in shortest period of time at a fraction of the cost of traditional products and put in customers’ hands extremely quickly.
Needless to say, when Apple manages to put out one innovative product after another in the market place, it is not only its own innovation but also an innovation of all its partners, which is at play here. Only when companies work together in such an efficient leadership model, do they achieve the level of success which Apple has achieved over the last 5 to 10 years. Figure 3 reminds one of the team huddles as shown below:
When an individual works on his own he is neither very efficient, nor very effective. That is the key reason, from early civilisations, humans have created organisations that give them the benefit of either effectiveness, or efficiency, or a bit of both. Figure 4, on the other hand reminds one of camel trains or dog sleds – where one animal is closely following another as shown in the picture below. Now imagine what would happen to the whole camel train, if the first beast lost its way!
Naturally, the question is why is this important? Think about it for a minute. In fact, stop reading and just reflect on the metaphors. A camel train was a great technology – but is now largely redundant. Moreover, with a limited room to collaborate, it is essentially a command and control organisation. In periods of rapid development, if such organisations stick to the tried and tested, they get left behind by their more innovative peers.
If you would like to see how Supply Chain 3.0 differ vastly from its predecessors, please read the next blog entry of this series.
As everybody knows, three giants in the tech and software world have amassed an incomparable power in recent years from their networks and their strategies. With a vast range of products, they have stitched up the market amongst themselves. But what are the strengths and weaknesses of each giant?
What are the deep business and supply chain implications of the battle of these Titans?
Each one of them is a Business-to-Business Network in its own way with excellent partners and supply chain participants. Apple has its own ecosystem, which is not just their customers, but also thousands of programmers and app developers as well as millions of sellers on iTunes. That is Apple‘s biggest strength.
The same goes for Amazon, with an ecosystem including a very large customer base as well as thousands of sellers that sell their products on their website.
On the other hand, almost everybody uses Google as a search engine, which means they have the largest market share now in the mobile operating systems with Android. Google also owns YouTube and many other digital properties. Each one of them has a formidable Supply Chain, Business-to-Business Network or Supply Network in its own right.
Yet now, all three of them are facing problems in different ways.
Apple is facing problems because its success has always been based on creating the next big product, especially if you look at Apple’s history (iPod à iPhone à iPad). Now, Apple is launching the new Apple watch, which is not a very successful product in my mind. IPhone 6 is obviously just a minor update of the previous successful iPhone. That is where Apple is currently failing. However, they are creating some really innovative services such as Apple-Pay, which allows you to use your mobile as a NFC-based payment option, and Apple-SIM, which allows you to roam at a very low cost in foreign countries.
Apple continues to profit from past supply chain and product successes, and sits on top of huge pile of cash. Amazon, on the other hand, does not make much profit, although it has a very high growth rate of revenue (it grew by around $24 billion in two years) and still growing.
But they invested in a number of things, which did not turn out that well. This type of experimentation is in the DNA of the company, and at the moment, it is not a big problem, at least not yet. Nonetheless, a couple of these investment, noted by analysts and commentators, have raised red flags in my mind. Amazon Fresh seems to be a resurrection of the business model of an failed company called Webvan, which invested $1 billion in this field and went bankrupt in two years.
Amazon also continues to invest in expanding its business in India, which is a very competitive environment. With local market players who know the local characteristics much better, and a chaotic marketplace, this is perhaps the most uncertain field for Amazon in my view. The competition may not even be from other B2C e-commerce companies; every man with a mobile phone and a bicycle is a potential competitor. Amazon persists in investing in these two markets.
This could be much more harmful to Amazon than their mobile phones or other hardware devices that they keep creating every few months. They are losing money on those but for a purpose: they are trying to lock customers into the Amazon Network. Nevertheless, these products will never replace iPhones/iPads or equivalent Samsung products and will always be number two in customers’ minds.
The question is: Where is Amazon’s next platform for growth?
Amazon’s “unsexy” B2B business, a “$8 trillion bet”, has been growing silently in the background, perhaps making it eight times bigger than Alibaba and the biggest 5-STAR Business Network on earth.
AmazonSupply, a wholesale and distribution hub, started in 2005 and has grown to carry 2.2 million products, ranging from office equipment to industrial components, materials and more. After nearly 15 years of languishing on the wayside, the B2B exchanges are finally coming true, slowly.
Already, wholesalers are whispering about the threats from AmazonSupply; although many specialty wholesalers and distributors are somewhat confident that their turf is safe from the giant’s claws due to their highly segmented market.
Nonetheless, AmazonSupply, Alibaba, or B2B exchanges, could become so powerful that they will suck small players into their enormous vacuum of suppliers. The process can even accelerate if trust keeping mechanisms are built into B2B exchanges.
Seller and buyer ratings, as well as seller/buyer protection seen on sites such as eBay and PayPal are not enough to cover the sheer size of B2B transactions. Even the current rating system on Alibaba will not suffice, should this attractive market grow in the years to come.
Looking at Google, basically revenues of advertisements relating to search engine are stagnating/saturating. Fake clicks are being identified much more easily. People are becoming more careful of what they are spending on online advertisements. Android and YouTube are two engines of growth for Google. Google has declared a strategy of continuing investment in its YouTube products
It is easy to argue that Apple has the best chance of leading the pack in 5 years’ time depending on what kind of new hardware they manage to create in the next 2-3 years. Google and Amazon are probably equal second depending on whether Amazon succeeds in its strategy to capture Business-to-Business markets or whether Google manages to monetise YouTube as much as they can.
Equally likely, new competitors might emerge on the horizon – like superUber! That will be very interesting to see.
ABOUT VIVEK SOOD:
Vivek is the Global Supply Chain Strategist and Author who works globally with large and mid-size corporations to FIX their Business-to-Business Networks in order to their multiply profits.
In that last 14 years he created several new breakthroughs in Supply Chain – including business transformations led by SCM 3.0. His more than 400 projects have spanned approximately 84 countries on five continents, with clients ranging from fortune 500 companies to innovative green technology companies.
Get free extracts of his books and see why thousands of executives at the world’s leading corporations trust Global Supply Chain Group to build brilliant business-to-business network strategy.
We are rapidly growing and hiring. Exceptional (world’s best) Outsourcing Experts, Logisticians, Strategists and Supply Chain should contact me directly.
Follow Vivek here and @GlobalSupplyCG
If you are a HR professional, recruitment or HR consultant – and you think your clients might benefit from these insights about business transformations – feel free to forward this blog series via email or linkedin. The nature of your industry is changing rapidly as a result of forces mentioned in this article.
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.
In this series, I will address the second question raised at the start of the previous blog series – “What are the benefits of supply chain 3.0?” Before answering that question, let me go over the three type of responses I generally get when I explain to people that supply chain 3.0 is real.
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.
First a caveat – no benefit accrues to those who do not act. And, not just any random action will suffice (though, in most cases, any action is better than no action); you need action based on cohesive, strategic thinking. That is the reason for the word “can” in the title of this post – all benefits are just potential energy till converted into reality by your kinetic energy.
Of course, I have not yet talked about how supply chain 3.0 differs from its previous version – supply chain 2.0. While the full detail of that is a subject for a future blog post, it will be necessary for us to know that these are different, and that supply chain 3.0 is a step change above supply chain 2.0. So, we will briefly delve into various avatars of supply chains as we look at the benefits of supply chain 3.0.
To understand the potential benefits of supply chain 3.0, let us look at the current business context. The best way for me to get you thinking along the same line as me is show you the following slideshow with just 14 slides from UNDERCURRENT:
It will probably take you no more than 7 minutes to quickly peruse this material and I have no intention of taking credit for the original thinking by the makers of this slideshow. That is why I am neither paraphrasing it, nor taking from it – something I see happening with my material more and more, even in the erudite circles.
My personal takeaway message from the above slideshow is that something immense is happening across the world of business. Combination of globalisation, bandwidth, rising standards in the east and financial adjustments in the west are creating both opportunities and threats everywhere.
Recently, someone sent me the link to a cartoon by marketoonist.com, which I show below for comment. They quipped to me that retail business model is toast. I agreed, but asked in return “which model is safe”. Think deeply enough, especially in line of the material in the slideshow and you can see the same threat lurking everywhere in many different forms.
But the old cliché is right. Every threat does hide an opportunity. I believe this despite the fact that I do not know enough Chinese language to attest to the fact that the Chinese character for threat and opportunity is the same (unfortunately, I could not learn any Chinese through-out the translation of my book into that language).
There is a lot of talk about VUCA – Variability, Uncertainty, Complexity and Ambiguity – when strategists discuss the business environment today. It is a bit ironic that so many military terms get incorporated in the strategy parlance during the time of duress.
However, one thing is clear – that old organisational models are not adequate anymore. New challenges need new responses. In the next entry of this blog series, I will discuss about business models, how they have changed and the effects on supply chain.