Good solid supply chain thinkers are in high demand and low supply.
I would know, I run this company called Global Supply Chain Group for the last 17 years.
It appears that it was not too long ago (when we formed this company) – most business people were struggling to understand what is supply chain and what does it do. We have come a long way since then.
Every politicians speech today is laced with references to global supply chains and business networks that run the commerce on earth today. Companies that are seen as supply chain trend setters are leaving everyone else (even in adjoining industries) biting the dust.
Take a look at the chart below:
But Amazon.com is not the only one.
Current trend is becoming clear- companies such as Apple, Zara, Uber, AirBNB have one thing in common – Supply Chain Leaders as CEOs. Integrators are in high demand. Optimisers rule the roost.
Every era has its own heralds and the mantle changes every few decades.
As as example, it only one or two decades ago that strategists coming from McKinsey or 3Bs (BCG, Bain, Booz) were the prime candidates for the role of the CEOs. What made this necessary was the need for strategic thinking that was missing at the highest level before that. But clearly the mantle has passed on the the integrators / real supply chain leaders now. Here are the previous trends:
I know, you are asking where is the proof. Take a look at the picture below:
It will take a long time to explain the picture above, if you don’t get it by seeing it. It is also perhaps unnecessary in that case. Suffice it to say that two skills are becoming critical for business leadership:
Integration – of various parts of the 5-STAR Business network, internal and external resources, into a complete unit that delivers the customer experience
Optimisation – that enables sound profitability while delivering the customer experience
I have many other pretty pictures to expound these points, but I would rather focus on the outcomes.
So, what would you expect if above two skills were available in abundance? For sure, you would expect good business outcomes. These could take the form of any of the 5 possible themes:
This is the topic I cover in great deal of detail in my book THE 5-STAR BUSINESS NETWORK – so I will not talk about it in this post. Rather I want to focus on the reason I wrote this blog:
Now, if you have read it this far, there is a good chance that you know someone who will benefit from this information. Earn yourself some brownie points by letting them know – by sharing directly, or via groups. It only take 15 seconds.
Integration – of various parts of the 5-STAR Business network, internal and external resources, into a complete unit that delivers the customer experience.
Optimisation – that enables sound profitability while delivering the customer experience
If I have seen it once, I have seen it a hundred times. A new person is brought in with a clear mandate. The things are meant to change. Out with the old, and in with the new. The new person comes in with a great fanfare, and takes over. Then he/she starts taking stock of the situation. And takes more stock of the situation. Gets the consultants. Does a study. And, more studies. And more stock of the situation.
Meanwhile, the chairman is stewing in his chair. The board is exasperated. They see a lot fancy reports from the consultants. But they are waiting for action. Which comes in small dribs and drabs. Seems like one step forward and three steps backward. They start saying things like – ‘even the wrong action is better than no action.’
And, that is when you know that the single biggest mistake in business transformation is being repeated again.
Here is a typical scenario:
It had been two months after the internal announcement about achieving a milestone, and no one had seen the spark of business transformation yet. The momentum has been lost. When employees clapped their hands a couple of months ago on hearing the speech about successfully increasing efficiency by 10%, an impressive quick win, management should have taken the opportunity to introduce the next initiative.
Unfortunately, cases like this are not rare. Driven at the wrong speed without an appropriate line-up of actions will extinguish the initial enthusiasm, causing boredom and even withdrawal. As we have seen in my book UNCHAIN YOUR CORPORATION, the journey from supply chain 0.0 to 1.0, to 2.0, to 3.0 is very interesting, and challenging. Here is the relevant framework from the book:
Obviously, if your company enjoys healthy margins and is in relaxed circumstances, you can move just one step at a time – from SCM 0.0 to 1.0 or from SCM 1.0 to 2.0 or from SCM 2.0 to 3.0. All you might need is a slow evolution over number of years, where your company comes to the realize the need to change over 2-3 years, and then gradually carries out that change over another 2-3 years.
During this process, if the market conditions change and, margins experience a squeeze, your company can always hasten the cycle by deploying professional change managers, where a six-year planning and execution cycle can be easily halved to 2-3 years.
However, companies can also jump one step in the process, from SCM 0.0 to 2.0, or from SCM 1.0 to 3.0 by deliberate supply chain transformation, which helps them achieve faster results, with less risk of always chasing the trend. In this particular case, the danger is real that the process can be carried out too slow or too fast, depending on how the transformation is created.
To give you an example of a transformation which was carried out too fast, let’s consider the case of British Petroleum and its oil rig in the Gulf of Mexico. The full case study is our book Outsourcing 3.0 but here we will repeat just the most pertinent facts. Obviously, their supply chain 3.0 was configured with a number of suppliers of BP, including the owner of the rig, the operator of the rig, the supplier of the underwater equipment used on the rig, which failed, and the user of that underwater equipment. Unfortunately, the transformation had been carried out so rapidly that the risks were not being managed prudently enough. As a result, a small failure in the supply chain resulted in massive losses, amounting to tens of billions of dollars and a blame-game at the end of it all.
On the other hand, examples also abound where companies drag out the transformation too long, at the pace of slow evolution or change management. We have seen numerous companies go bankrupt, rather than hasten the transformation process.
In fact, take a look at any company declaring bankruptcy, whether in automotive, aviation or any other sector, and you will see apparent signs of failed transformations due to a slow pace, or a lack of understanding of the various stages along the way.
On the other hand, if you want to see examples of companies that have carried out the transformation just right, try and examine those whose share prices have gone up significantly in comparison to the market benchmarks, and then discern whether this result is due to a stroke of luck – for example, a fertilizer company getting lucky thanks to the right amount of rain 3 years in a row – or whether it is the result of a professional business transformation, carried out from one stage to next in a systematic manner.
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.
Global Business Networks are essential in nowadays’ business world, we have no choice but to accept this fact. In effect, no business can survive now without building a proper business network beforehand. This is the first reality anyone has to understand before starting his business. This is the root of all the worse problems your company could encounter. This is the key to avoid many problems, but this is also the solution for many problems that may happen anyway. Business Networks can make the difference between success and failure.
First of all, your business network will provide you many opportunities of creating value through collaborative relationships with your partners all over the world. In fact, collaborative relationships are very crucial for business networks to be efficient, as mentioned in Vivek Sood’s book, The 5-STAR Business Network (http://bit.ly/5-STARBN).
If you have built a great business network, you can decide to outsource and implement a process very quickly and safely. Indeed, once you already have a network, everything becomes much easier and faster. Any time you make a decision, you can choose among your partners and the results will appear very soon.
If you decide to use outsourcing to achieve better results through costs savings and new value creation, your business network will be very helpful in this situation. Let us say you have a global business network, with partners all over the world, and you want to outsource a specific task in the production process. Once you made that decision, you can have a look among your partners and see what they can offer. If one supplier’s proposition does not suit your project, you just have to look at other proposals from other suppliers. Having many partners all over the world will provide you different solutions, which can be applied to different problem and solve them very quickly.
Imagine a supplier that does not provide as good results as before, you can find another one, maybe right next-door! This is the beauty of business networks today. Partners are many and can be replaced any time, according to what your business needs. If a supplier does not match the requirements and goals anymore, your business network will offer you other solutions to solve the problem.
If you look at outsourcing stories, you will rapidly realize that this is true and that business networks are very crucial to your business survival. Let us look at the Red Bull example. The success story of Red Bull is mostly due to its business network. In effect, Dietrich Mateschitz, the founder of Red Bull is someone who perfectly understood that and used his business network to lead the company to the success. Red Bull is a company that outsources almost everything and this has been possible because of a great business network. He once said, “I support the concept of free competition”. Obviously, he is in favor of global business competition because he knows perfectly how to deal with it and how to benefit from it! Business network is the key, and that is what he understood faster than his competitors. He was able to use the global business network to achieve great results for Red Bull.
Many cases of failure are due to improper business network management or simply undeveloped business network. Old companies that used to achieve good results often happen to sit back and stay on their achievements, but this will lead them to bankruptcy. Companies have to follow the wave and become more and more global, expanding their network, if they want to survive against world competition.
by Anais Lelong
Award-winning author Vivek Sood’s eagerly anticipated new book, The 5 Star Business Network, is due for release later this month. With further distressing economic news from Europe – Greek bank shares are plummeting and Portuguese shares have fallen too this week – the book could not have come at a better time. Examining complex inter-business relationships and synchronicities, acclaimed international business guru Mr Sood has produced a thought-provoking and inspiring work for any business. Mr Sood shows how in the changed reality business networks are replacing the 3i’s – infrastructure, inventory and interest – to enable businesses to do more with less.
Mr Sood uses current examples to provide engaging demonstrations of the power of 5 star business networks in the modern marketplace, showing businesses both how they can improve and which pitfalls they can easily avoid. The 5 Star Business Network draws on Mr Sood’s extensive international business expertise to show how every company can achieve synchronistic advantage through the appropriate development of its business network.
With influences from mathematicians, historians and psychologists, The 5 Star Business Network is a comprehensive guide to ensuring corporate robustness, expansion and effectiveness. With the global economic downturn continuing, if chief executives read only one business book this year, it needs to be this one.
Research firm IDC, which has been tracking the IT industry’s sale of PCs for nearly 20 years, has reported that global sales of PCs plummeted by 14% in the first quarter of 2013. The increasing popularity of tablets and smartphones is thought to be behind the slump.
With technology developing so fast, the importance to businesses of using the best IT tools and running slick, efficient IT development projects is constantly increasing. Mistakes in this area can be extremely costly and time-consuming, allowing competitors’ businesses to capitalize on the errors and race ahead with taking market share.
Using high profile examples of successful and unsuccessful IT system deployments, leading international businessman Vivek Sood examines the critical issues in his much-anticipated new book, The 5 Star Business Network. Mr Sood shows businesses how to develop their 5 star business networks while leading IT projects with vision, planning them with exactitude and executing them with precision.
The already-popular author commented,
“I felt the time was right to share my ultimate business network development secrets. The 5 Star Business Network shows every company how it can become more efficient and profitable, including in relation to its IT infrastructure and project delivery.”
The 5 Star Business Network is due for publication later this month.