Monthly Archives: November 2007

Increasing Your Global Presence

As a nice follow up to my When Going Global – Don’t Forget the Context post, I’d like to draw your attention to the finer points of an article that interviews Chris Zook, author of Unstoppable: Finding Hidden Assets to Renew the Core and Fuel Profitable Growth, over on Knowledge@Wharton called Achieving Full Potential: How Companies Can Increase their Global Presence. The article, which starts off by noting that over the next decade, 25% of the companies that exist today will disappear, either because they will merge with others or go bankrupt, discusses some of the major problems companies encounter during growth and some of the solutions they should be considering.

According to Mr. Zook, and the research undertaken by his consulting firm Bain & Company, only one in ten companies worldwide achieve more than a modest level of sustained and profitable growth (at least 5.5% real revenue and profit growth). Very few achieve aggressive growth. The major problem is that industries are becoming turbulent at a faster, and faster, pace. The most profitable activities are shifting quickly, and competitive differentiations are becoming harder to maintain.

A company needs to decide if should stay focused on core business (Focus), expand its core business beyond its current markets and geographies (Expand), or begin the search for hidden sources of new potential growth (Redefine). It’s the third phase that is the most interesting, and the most challenging. According to Mr. Zook, successful redefinitions are based on “hidden assets” — customer assets, growth platforms, or underutilized capabilities which suddenly assume a center role in how you look at your business going forward.

Hidden customer assets are undervalued market segments and under-exploited customer insight. Focusing on a different market segment can greatly increase market-share. (The example given is Hartman International that gained a 40-fold increase in market value by focusing on automotive OEMs and home entertainment consumers.) If you look closely at what your customers are buying and asking for, that can often tell you what you should be offering. Amazon.com, FedEx, and American Express evolved their business by focusing on the customer, and look at where they are today.

Undervalued growth platform often takes the form of a secondary product line or strong support services that have developed over time around your core offering. For example, let’s say you have an OLAP product that can understand native output of 20 different databases – chances are your ETL tool on its own is now a valuable product. Or lets say that you support your enterprise application on Linux and Windows – maybe your Linux support division knows more about properly configuring enterprise Linux installations than most of the integration houses.

Underutilized capabilities, which are the processes and methodologies used to get things done, are the hardest to pin down – and successfully monopolizing on these will require a lot of innovation. The example Mr. Zook gives is Apple – faced with a rapidly shrinking share of the computer market, it decided to utilize its unique UI strengths to create a music device (the iPod) that was much easier to use than anything else out there and it took the consumer world by storm. A lot of companies build hardware and software products, but very few have mastered the art of user interface design as Apple has. Underutilized capabilities will be those that are not only unique in your company, but relatively unique in your industry.

All in all, great starting points, but I was a little disappointed it left out under-utilized human resource assets. Every decent-sized company has them, but few are willing to utilize them. The fact of the matter is that many corporate executives and managers typecast people to their roles. They think that if you’re an IT manager, you can’t possibly have any good ideas on how to improve the physical supply chain or innovate new business service offerings. Or, my favorite, you’re a scientist / architect – you don’t know the first thing about management.

I have personally worked with, and for, a large number of start-ups and small companies, and many of these as a technologist in my early days. And what I discovered is that many entrepreneurs were not only poor managers, but poorer still at making use of the people they would assemble. They were the first to typecast you into whatever role you filled and assume you didn’t know anything about anything else or, if you did, not more than them. Many of these companies are no longer around, and most didn’t even survive a third of the 14 years that Bain & Co. calculated as the average business life span. And in most of the later cases, I could predict that early on. I’ve found that many entrepreneurs are great at ideas, but poor at running a company, managing a team, selecting the best marketing plan, and choosing the right technology. Similarly, I’ve found that many career managers are poor at innovation. The successful entrepreneurs and successful managers are those that are able to identify talent and use that talent to their advantage – taking the best ideas that their team is able to have to offer versus just the best ideas they can come up with.

In summary, if you want to take your presence to the next level, Mr. Zook has some great ideas, but I’d start with your people first – they are the biggest assets you have and they are the ones who will figure out what customer assets, growth platforms, and capabilities you have at your disposal. (You might need to bring in a consultant to lead this initiative, as they will be able to look at your people more objectively, but the ultimate goal is to get to the point where the consulting team you bring in to do a project complements the skills your team already has. )

the doctor Is A Blogger!

A couple of weeks ago, I told you the doctor is not an analyst!. This inspired a counter-post from the one and only Jason Busch, which in turn inspired a plethora of comments, including some that argued against what the comment authors hallucinated I said (which, of course, makes for good entertainment value, so you should consider checking the comments out as well as the post).

In this post, I’m going to summarize some of the finer points made by myself and others, left out of my first post, as to why I think it’s better to be a(n independent) blogger.

Independent bloggers don’t have to write about anything we don’t (fully) understand.
As an analyst, if a company is paying your company for a piece about them or their software, chances are you have a publication date you have to meet. Maybe that’s enough time to get a good grip on what the company and / or product you’re writing about does, maybe it’s not. Either way, you have to hit the deadline or risk repercussions. As an independent blogger, I can choose whether or not I want to write about something. If I don’t think I understand something well enough to write a decent post, I can sit on it for a while.

Independent bloggers can choose whether or not we want to respond to events “almost in real time” and whether or not we want to write a “report”.
Needless to say, when I posted the above comment, at least one reader hallucinated that I said “independent bloggers don’t write about anything they don’t (fully) understand”, which is obviously not the same thing. It doesn’t take much surfing to figure out that many bloggers are compelled to respond to events almost in real-time and quite happy to publish their initial half-baked half-wit thoughts on whatever just hit the newswire. However, just because an independent blogger chooses to do so, doesn’t mean he or she has to do so. (Note that I keep saying “independent blogger”. Bloggers who work for publications often have daily blogging as part of their job requirements and, like journalists and analysts, have deadlines to meet. Thus, they may not have the choice as to whether or not they respond to events almost in real time.) Also, there’s nothing stopping us from writing a “report” if we so choose – and publishing it all at once or as a well thought-out multi-post series.

With respect to software, in order to perform a deep and accurate analysis, you really need to to understand what code and architectures can – and can not – do, and this holds true for bloggers as well as analysts.
Eric Strovink summed it up best when he said that what the Excel power user would not be able to evaluate, though, is a new technology for spreadsheets that could have downstream implications far beyond the external functionality of Revision One Point Zero – for that sort of insight, you do need a reviewer with a strong technical background. While I will admit that it is true that an Excel power user is perfectly capable of reviewing a competing spreadsheet product with respect to functionality and usability, it’s not necessarily true that such a reviewer would be able to understand the capabilities, merits, and applicability of an entirely new type of spreadsheet product – or a spreadsheet 2.0. In the sourcing context, if you’ve only ever been exposed to e-Auction products as a means of collecting bids and allocating awards, would you be able to adequately review a combo RFQ-Optimization product? Would you even understand what it was? And, more importantly, if it was implemented correctly? You really need a strong technical (and, in this, also a strong mathematical) background to review such a product.

However, even more important than these comments,
Independent Bloggers can say what they truly think of a new product offering (within reason) – whereas analysts can’t completely shred a product if said product is made by a company paying their company hundreds of thousands of dollars a year for research and analysis pieces.
If I think a new product is a piece of junk, as long as I express that as my opinion (hey, even bloggers can theoretically be sued for defamation or libel if they present their opinion as a statement of fact – especially if they reside in the US), I can say I think it’s a piece of junk. Now, to be fair, one should also indicate why one thinks something is a piece of junk, because it’s mean to trash anything without a reason. Unless, of course, one thinks the reason is obvious, in which case they can just resort to satire ( which is protected speech ).

Achieving Supply Chain Visibility

Supply & Demand Executive recently ran an article by Aatish Goel & Murali Krishnan Sundararajan on The Flat Supply Chain that noted that globalization has created a massive increase in supply chain complexity and that supply chain visibility is emerging as a critical differentiator for companies to stay ahead of the competition.

The article also suggested that companies should manage supply chain visibility according to the process-technology-organization framework, and recommended the following from the process angle.

  • Effective S&OP Process Deployment
    An effective S&OP process brings the right information in front of all stakeholders in a timely manner.
  • Internal & External Inventory Turns Review
    Use a multi-echelon inventory visibility system that allows for regular review of inventory status inside the company and inside the supply chain as a whole.
  • Alerts & Exception Management
    The amount of data produced by a well-run supply chain at any point in time is huge and almost impossible for anyone to review manually (even with great analysis and reporting tools). Thus, it is important to have exception reporting and alerts to bring critical incidents and issues to the immediate attention of the right person.
  • Alignment of Supply Chain Metrics with Business Goals
    Use process-based metrics that complement business goals to monitor and improve the process.

This was a good starting list, but I’d also add at least the following:

  • Integrate PoS data and forecasting across the supply chain
    A supply chain view of inventory is not very useful if you do not know how much product you should have at any given location at any given time, and given that demand can fluctuate, using static forecasts to plan inventory is not optimal.
  • Use collaborative issue resolution processes
    When a critical incident occurs upstream in your supply chain that effects you, it’s important not just to insure your supplier, or your supplier’s supplier, starts working on a resolution immediately, but that you work with the supplier to not only insure a quick resolution, but to understand why the critical incident happened in the first place. Then, you can pass that knowledge onto your other suppliers and make sure it doesn’t happen to them.
  • Regular Review of Transportation Timeframes
    When calculating inventory requirements, it’s vital to understand how long, on average, it will take to restock a location in order to insure that you can handle demand spikes and not lose sales. If it takes 7 days, but a demand spike due to an upcoming promotion could wipe out inventory in 3 days, then it might be wise to temporarily increase the inventory requirements of that remote location.
  • Use Process Models
    Standardized, Integrated, S&OP processes are good – but streamlined process that are sound and complete are better. A process model will help you analyze your processes to make sure they are of just the right complexity. If your process is too simple, you could miss critical incidents or key data that could significantly change your forecasts and inventory requirements. Too complex, and you could lose the ability to react quickly.

From an organizational technology angle, the article had the following to offer:

  • Use an extended enterprise system.
    This will allow you to create a centralized data store, on which you can execute the data mining applications needed to detect exceptions and critical incidents, the analytic applications need to determine required inventory levels and transportation timeframes, and the reporting applications necessary to insure key information gets to key stake-holders in a timely and comprehensible manner.
  • Extend it with specific business solutions.
    The article recommends inventory optimization tools, business intelligence tools, and master data management tools.
  • Look at Service-Oriented Architectures (SOA)
    This can enable flexible collaboration at a lower cost.

This is a great start, but you should also consider the following:

  • Look at On-Demand SaaS
    Building a completely integrated supply chain management framework, even using SOA, will be a very time-consuming and costly endeavor even for the most technologically sophisticated organization. Starting with on-demand SaaS can allow an organization to get a fairly sophisticated system of supply chain management tools up-and-running quickly and cost-effectively.

In conclusion, the authors have it right – with supply chain complexity having increased exponentially in the last decade thanks to globalization and increased outsourcing, visibility is becoming key to managing risk and total cost and the time to do something about it is now.

the doctor Goes Mental on Myths I: Collaboration & Knowledge Sharing

The elephants in the room and the barney deals aren’t the only problems plaguing our industry. Dangerous myths are constantly infecting the minds of those who will listen to the fear-mongers and the melancholics. Some of these myths are fairly well known, like the myth that once prices are locked in a contract after an e-Auction, those savings are guaranteed. But some of these myths have not been adequately exposed, which is not surprising as some myths are still being promulgated by the major vendors (like the myth that a “supplier network” has value in and of itself and that a supplier should pay for the privilege of just being a member).

Thus, in addition to exposing the elephants in the room, no matter how quiet they are or how hard they try to hide behind that floor lamp, I’m also going to tackle some of the more dangerous myths now and then. Today I’m going to make Skeptic, who apparently didn’t like my Feel-Good Friday post on Collaboration, happy and admit that collaboration and knowledge sharing doesn’t necessarily add value.

I know right now you’re probably still in shock from that statement, especially since I constantly promote how valuable collaboration and knowledge sharing can be, so I’ll give you a few seconds.

Okay. That should be enough time. That’s right, what should be among the most valuable activities you undertake does not necessarily add any value to what ever it is that you’re doing. The reality is that a collaboration initiative or knowledge sharing initiative, like any other initiative, is only valuable when done right.

Specifically, collaboration will only be valuable when it is undertaken with honest intentions and each side makes a genuine effort to make it work. Just like you can have a barney deal, you can have a barney collaboration project. Each side sits down at the table, says they’ll work together, but then goes their separate ways and rarely says two words to each other again. That’s not collaboration. That’s lip-service.

Collaboration requires both parties to work together as a team on a regular, often daily, basis. To jointly plan, implement, and monitor the project. To work together to identify a problem when it arises as well as its solution.

Similarly, knowledge sharing will only be valuable if real knowledge is shared that’s relevant to the project or problem. Simply sending over the contract that was struck the last time the project was undertaken with no accompanying explanation or twenty documents that may or may not be related to sourcing direct materials is not knowledge sharing. That’s nothing more than a data dump. And a rather useless one at that.

Knowledge sharing requires actual knowledge to be shared that is relevant to the project being undertaken. It requires the knowledge to be in a form that is digestible by the party that needs the knowledge. Furthermore, it requires the amount of knowledge to be appropriate. Too little knowledge and the recipient will be left more confused than before she started the project. Too much and the information overload will prevent the right knowledge from being appropriately absorbed.

Do you have any myths you’d like the doctor to go mental on?
Send them his way (the doctor <at> sourcinginnovation <dot> com).

Everything You Know Is Wrong

Sorry if I burst your bubble, but the statement is true if we don’t put a time limit on it (and consider what we will learn between now and infinity). As noted in Shift Happens (on YouTube), it is estimated that over 1.5 exabytes of unique information was generated worldwide in 2006, that this is more information than what was generated in the previous 5,000 years, and that the amount of technical information is currently doubling every two years and predicted to be doubling every 72 hours by 2010!

That means that everything you think you know today, if it’s not already wrong, is likely to be wrong in the near future. Even everything the doctor knows today will eventually be outdated! That’s staggering. That’s why continual education and self improvement is critical.

More importantly, you have to be the one to take on this initiative – to update your knowledge and your skills – because the likeliness is that, at least if you live in North America, your company isn’t going to do it for you. Survey after survey finds that the amount of education and training that the average company in North America provides their employees is dismal, if they even provide any at all. Considering that the current rate of knowledge generation implies that everything you learn in first year of University is likely to be outdated by the time you graduate, this is dismal because by the time you’re in a job five years (assuming your job still exists in five years), if neither you nor your company made any effort to keep your skills up, every bit of technical information you know now will be outdated, as will all of the processes that were molded to use the technology that was leading edge five years ago.

That’s why Next Level Purchasing is my vendor of the week. Realizing that it was up to procurement professionals to keep their skills current, it was the first private training company to develop an affordable training program tailored to the individual who could take the courses on her own time, at her own pace, wherever she happened to be, and, if she desired, end up with a recognized industry certification (the SPSM – Senior Professional in Supply Management). Moreover, Next Level Purchasing recognizes the rapid shifts that are taking place in the industry and makes it a point to review and update the core certification courses every year*1 so that the knowledge you receive is always up to date. Furthermore, Next Level Purchasing also publishes articles and informative blog entries on important topics every week so that you can keep learning even after you’ve completed the certification and they’ve collected their fee. That’s a dedication to student and professional education that you can respect!

*1 It updates all of its courses on a regular basis, but not necessarily yearly if they are not core certification courses and the majority of the material is still relevant.