Daily Archives: February 27, 2008

Putting McKinsey’s Business Technology Trends into Practice Part I

The McKinsey Quarterly recently published an article on eight business technology trends to watch that was not only quite good, but a good summary of the trends that you should be implementing, appropriately, in your supply chain. In this two part series, we are going to review each of the trends and give you some examples of how you can apply them to improve your sourcing and supply chain practice.

Distribution of Co-creation

In more innovative sectors of industry, companies routinely involve customers, suppliers, small specialist businesses, and independent contractors in the creation of new products. Today’s technology allows companies to delegate substantial control to outsiders by outsourcing innovation to business partners that work together in networks. By distributing innovation through the value chain, companies may reduce their costs and usher new products to market faster by eliminating the bottlenecks that come with total control.

If you’re not already doing this, you can start by adopting one or more collaboration platforms that allow you to work with your supply chain partners. Not only can you enable engineering and production by helping them work with partners to design cost-out before you even have to source the goods, but you can work with your suppliers to identify optimal supply networks that keep transportation costs down and raw materials that you could procure on their behalf cheaper than they could procure them.

Using consumers as innovators

The more innovative companies are looking upon consumers as potential sources of innovation. Companies that go out of their way to engage with customers in design, testing, and marketing and to find out what they really want get better insight into customer needs and behavior and often reduce the cost of customer acquisition, retention, and development. As long as the company is careful to focus on the immediate needs of the majority of customers, as opposed to the long-range needs of a vocal minority of customers, it increases its chances of meeting the needs of its customers when compared to its competition.

In sourcing, your customers are the other groups in the organization – engineering and production that need the raw materials, marketing that has to market the finished product, finance who needs reporting and justification that the money you’re spending is on compliant goods, and sales that has to sell the finish product. A good sourcing and supply chain organization forms cross-functional teams that involve each group early in the sourcing effort to insure that the award that is finally made is appropriately balanced to meet the needs of each internal customer, but a great sourcing team asks each organization for ideas that could help them increase profitability, efficiency, and / or quality. Not all ideas will be winners, but you never know where the next gem of an idea is going to come from.

Tapping into the World of Talent

Thanks to recent advances in collaboration and communication tools, companies can outsource increasingly specialized aspects of their work and still maintain organizational coherence. Furthermore, top talent (like the doctor) can be found anywhere. The best person for the job might be a state, country, or even continent away. Innovative companies are building capabilities to engage best-of-breed talent or contracting with talent aggregators that specialize in providing such services. The competitive advantage will shift to companies that can master the art of breaking down and recomposing tasks in ways that can take maximum advantage of best-of-breed talent.

The best sourcing and procurement groups are those that assume that they don’t know how to be the best at everything and aren’t afraid to engage consultants and thought leaders to show them how to do things better. The great thing about this trend is that it’s easy to start with – you identify your largest gaps and weaknesses, or your most significant technology and process needs, and then bring in best-in-class talent to help you fill those gaps and needs and take you to the next level. Most importantly, you find the best-in-class talent that will help your people achieve this next level after the the foundation that is required to get you there is implemented. Helping you select and implement a new platform or process is good, but helping you learn the new platform or process and get the most out of it is better.

Extracting More Value from Interactions

As the article points out, the application of technology has reduced differences among the productivity of transformational and transactional employees, but huge inconsistencies persist in the productivity of high-value tacit interactions which involves negotiations, knowledge, judgement, and ad-hoc collaboration. Improvement is more about increasing their effectiveness by focusing on interactions in a context that create value than it is about increasing their efficiency.

The key to good interactions is high EQ and efficient access to the right knowledge at the right time. You can increase your team’s EQ by giving them access to the training they need, and, preferably training that will take them down the certification path (towards the CPSM or SPSM, for example). You can begin your effort to make sure that your team has the knowledge they need, when they need it, by developing a knowledge management intranet site that uses content management, wiki, and forum technology to capture all of the relevant information that flows through your organization – from your employees, contractors, and partners.

As the article states, creative leaders can use a broad spectrum of new, technology-enabled options to craft their strategies. These trends are best seen as emerging patterns that can be applied in a wide variety of businesses. Leaders will reflect on which patterns may start to reshape their markets and industries next – and on whether they have opportunities to catalyze change and shape the outcome rather than merely react to it. As the doctor has demonstrated, each of these trends can be co-opted by your sourcing and supply chain organization to literally get more for less. Check back tomorrow for the next four trends that you can use to improve your operations!