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.
On the face of it, the two companies could not be more widely apart. One is the paragon the new paradigm, while other is an old dying breed! I am, of course, talking about Facebook and NewsCorp. That is what all the pundits will tell you. They will also explain the logic of why News Corp bought MySpace in those terms.
Admittedly, NewsCorp business model was broken in 2005 and it had hoped that MySpace would provide the much needed fillip. That never happened, as it could not have happened. NewsCorp let MySpace go after 6 years for $35 million, a fraction of the $580 million it had originally paid. People have their own opinions on what MySpace has become by now, and I have nothing to add to that discussion.
However, Facebook is a company of intense interest at the moment. If you have studied the business networks for as long as I have (in fact I wrote the book ‘The 5-STAR Business Networks) you will also start thinking of it as a company more akin to NewsCorp than to MySpace.
Most people think that Facebook has a minor problem that teens are losing interest in the platform. I think the problem runs deeper – its business model is not sustainable. As explained by 2veritasium in this 7-minute video
(great Australian content – original, thought provoking and myth-shattering) which has already had more than 1.3 million views in nearly 6 weeks, the problem with Facebook is that it is already starting to resemble the old-age companies – almost like “The Curious Case of Benjamin Button“.
As the video hints, companies do resort to desperate measures in desperate times. That is the reason why Facebook’s purchase of WhatsApp reminds me of the deal between News Corp and MySpace. Only time will tell whether Facebook’s decision to start a new chapter with WhatsApp will lead to a bitter “divorce” or not.
Why do companies achieve far worse performance than what could be feasible with their superior hiring and training capabilities? It appears as if there are some invisible chains that are constantly pulling these companies back all the time. Something significant yet intangible is acting as a brake that inhibits the functionality of the business, causing each component to operate at less than its full value. Everyone is doing their best under the circumstances and their personal and departmental priorities, yet there is always a gap in the inter-functional integration.
What is this gap, and how does it happen? How does this gap harm you and your company? In my newest book, Unchain Your Corporation, I explore these questions in greater detail.
There are a number of factors that have ensured that business have been struggling in the current economic environment. Technology has made many business models defunct, incomes and profits are falling due to cost cutting and price conscious consumers and off-shoring has hollowed out entire industries. Given this reality, business networks are essential to struggling companies to help turn their fortunes around. Here are five ways you can use your business network to turn your company around – the five cornerstones of a Five Star Business Network.
Businesses are gradually being chained by a number of forces so ubiquitous and accepted by all of us, that we fail to notice their impact on businesses, economies, and people. Today, most organizations become veritable bureaucracies as they grow bigger. Every person sits inside his/her own department and is very careful about making sure that their department doesn’t carry the blame if there is a mix-up. Covering the tracks becomes the norm. The resulting departmental silos create stilted communication.
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.
Business books, blogs and literature are full of secrets of success. A recent experience taught me that it need not be too complex. Why do I call it the only one key to success? Hopefully, that will be clear in the next 5-10 minutes it takes to read about this incident. This post is simple – it is simply a recount of a true incident. It involves another person who worked in our company Thomas Radrigan and I have his permission to post it. We were working on a supply chain diagnostic project for a client (sorry, we do not reveal clients’ contextual information or identity) and the final presentation to the senior executive team was due the next day. The CEO and some other executives were flying in from places as far away as 5 hours. We had booked 3 hours for the presentation, over 6 weeks in advance, and people were coming in just for this meeting. We had been working hard since the last executive update 2 weeks ago, and had done great analysis with some brilliant insights into key supply chain problems. We had a slide pack of about 35 slides with supporting appendix of another 50 slides. This slide pack detailed our recommendations for way forward based on a very thorough fact based analysis. Around 7 pm in the evening on the day before the presentation, with just the last couple of slides left to be polished, and the rest of the team already having left for the day, I asked Thomas to finish the two remaining slides and email me the final presentation. I had to go and pick up my son from his swimming lessons and take him home. On arriving home as I prepared for dinner with my family, I poured a glass of red wine and was having conversation with my sons about their day. I was also waiting for an email on my phone with the final presentation from Thomas, and silently getting worried when the email did not arrive as anticipated. Suddenly I got a harried call from Thomas asking whether I could come back to the office. He explained there was some problem with his laptop and that is why he could not send me the final presentation so far. On arriving in the office, we found out the the hard drive of Thomas’ 2 month old laptop had crashed (I am fighting temptation to name the manufacturer of the hard drive and the laptop). Worse still, despite very strict policies around backups, Thomas had forgotten or ignored to allow backups for the past few days (the excel files were huge and even his brand new laptop slowed down considerably while backing up – that was his reason/excuse). We looked at the available backups and found one from 4 days ago. However, sifting through the backup copies of data files and finding the usable versions took another 2 hours. So, here we were, two of us sitting in office, with about 25% complete presentation at about 11 pm. The one saving grace was that all the material was fresh in our memories because the crunch work was only done in the last week or so. It still had to be put back in proper format and backed-up with data. I asked Thomas whether he wanted to call any of the other analysts for help. He rightly decided that would take too much time. He committed to do WHATEVER IT TAKES to make the presentation right before the meeting at 10 am. Two of us buckled down – recreated all the lost analysis and excel charts, and put these into the presentation. Obviously, it was not as polished as the original presentation, and some marginal insights were missing because we could not remember everything. However, we managed to recreate 80% of the original work by about 3 am when I dropped Thomas at his apartment. (3 am is the shift change time for taxis in Sydney, and sometimes they take as much as half an hour to arrive after picking up the bookings). Next day we made the presentation to the executive team who commended us very highly for the depth of analysis AND the QUALITY of the presentation. I briefly mentioned that most of the presentation was hurriedly put together by Thomas between midnight and 2 am, and, it was not really up to our usual standards. On discovering the full story, most people could not believe it. The CEO commented that Thomas was more committed to his company than he was. The entire team gave Thomas a standing ovation for his commitment. Needless to say that the project went on to be a huge success for everyone. My learning from the incident was that there is only one simple key to success – DO WHATEVER IT TAKES. There come those occasional moments of truth in life where we can back off, or do whatever it takes to succeed. Thomas, of course, became one of the big stars in our company and even when he wanted to move countries to pursue his personal life agendas I was very reluctant to let him go. I tried to do whatever it took to retain him – but in the end his love interest won out. All the best to him.
For every business or economic activity, there is a time when it falls behind its competitors. No matter whether the situation comes to you at the initial stages or you are facing a sudden challenge right after touching the tip of popularity, you surely have to find out the way to get back on the track until or unless you have decided to roll back your investment. For every type of business, there are some specific solutions but some typical strategies offers workable solutions for almost every business. Here are five of them which can save your company in critical situations. 1. Timely research Almost a century after the legendary disaster faced by the “unsinkable ship” RMS Titanic, fact finding teams & under-water experts are still trying to find out the lost pieces to complete the jigsaw puzzle that how the ship broke into 2 pieces. Their research cannot bring back the lost lives but still it is necessary to avoid more disasters of the same nature.Same formula can be applied to a sinking business but here time has much more importance. In-time research is strongly needed to find out the root cause for the downfall of any business. This type of research can be helpful in finding the latest trends as well. Selling your business is an art and in-time research can act like an advance recharge to keep it working. 2. Confidence & Cooperation: Famous business writer Vivek Sood says, in his latest of the series about business solutions “The 5 Star Business Network” that Co-operation creates the elusive thing called synergy that makes it possible for 2+2 to become 5. For this co-operation confidence is inevitable factor. In order to build the co-operative relations among the team leader and other staff, creation of such an environment is surely needed where anyone can trust to share his ideas or reservations regarding a proposed business strategy and so on. No matter how small is the scale of your business or it is spread over countries these 2 Cs positively affects the growth of your business and help to transform it into a strong business network. 3. The network effect (synchronicity) I have no other option except to quote again the idea defined in “The 5-Star Business Networks” by business guru Mr. Sood because before reading the book I have only heard about the network effects which results in the downfall or a flourishing business. Vivek suggests that the network effect has re-defined the idea of collaboration. Without being the part of a business network, it is almost impossible for a businessman to breath. This network effect helps in transforming 2+2 into 22, acts as the shield in hard times and is defined as synchronicity. In order to have a detailed look that how this synchronicity works as the strong strategy to compete with your business rivals, I would definitely recommend to get your own copy by ordering here: http://www.amazon.com/The-5-STAR-Business-Network-Corporations/dp/061579419X 4. Unique relationships: It took almost one and half decade to Red Bull to come up on a stage where it is more or less untouchable by its competitors. Initially the manufacturer of this Thai soft drink, Dietrich Mateschitz had to face strong challenges in shape of rumours regarding the health effects caused by the drink which also made the health authorities reluctant in granting permission and the unfamiliar taste which had nothing to do with appetizing effect usually associated with the soft drinks. But Dietrich Mateschitz didn’t lose hope and keep focusing on building strong relationships with suppliers, marketers, logisticians and offcourse loyal fans. The relationship between Dietrich Mateschitz and his advertising agency was much more than the relation of a customer-service provider. Similar relations were built with others involved in the business. The strategy helped Dietrich Mateschitz in stabilizing the business at small scale and to flourish it on a larger scale as well. So don’t forget to build exclusive relationships to get the back up support when it is strongly needed. These types of unique relations are also seen as the best critics, which help to correct the mistakes and shortcomings in the opted business strategies. 5. Courage to take risks: Though in times of hardships, the idea of taking risks may seem like a big blunder but only courage to take risks can lead to the level of creativity and innovation, where others find it difficult to even follow your path. Don’t forget that you cannot be perfect in each stance and there is no guarantee of 100% profit in any case.So why not to be innovative? Keep experimenting with your ideas. It will not only help you in bringing more and more new products in the market,but it will also give a tough time to your competitors and keep you ahead of them. Always remember that accelerating a business is not rocket science, only vigilant mind with new ideas and eager to take risk & to imply the ideas can do wonders in the field of the business. For further readings you may follow these links: The article focuses on five simple points to bring new life to your business. For details click on: http://business.time.com/2013/08/09/take-your-business-to-the-next-level/ This research focuses on the needs of the customer and help to find out their view point regarding your business plans and their way of looking at your failures. To read the complete article click https://www.helpscout.net/blog/customer-experience-strategy/ For launching a mega project, you always need to start at the limited scale. This article helps to find out the stratgeis to excel small level business and turn it into a big hit. http://www.investopedia.com/articles/pf/09/keep-small-business-afloat.asp