Monthly Archives: September 2010

Why You Should Fear the Indian Juggernaut

When you think big consulting firm, it’s likely that you still think Accenture, A.T. Kearney or McKinsey, but I’m betting it won’t be long before you think Infosys, TCS, or Wipro. The Indian firms are on the rise, and it’s not just because of the cost. They are hard-working, driven, and, most importantly, the new generation of India companies is focussed on the right skills and attitude.

If you’re a North American company, the statistics in a recent article in the Harvard Business Review on leadership lessons from India should scare you. The skills that Indian leaders value most are the ultimate keys to success:

  • strategic thinking, the creativity to envision and articulate a path, and the ability to guide the organization there (61%)
  • inspirational, accountable, and entrepreneurial (57%)
  • careful talent selection, grooming, and the establishment of advanced business goals (52%)

In contrast, few supported the following the skills:

  • optimizing organizational structure and articulating core values
  • understanding competitors and markets and managing outside relations

Which is what I see too much of these days. If you don’t have a functioning team, reorganizing the organizational chart for the third time in a row isn’t going to magically create cohesion and bring prosperity. Leaders don’t articulate values in meaningless mission statements, they instill them in everything they do. And while competitive intelligence is important, it’s more important to understand your customer’s problems and the type of solutions they really require. It doesn’t do any good to build a better mousetrap if the house is infested with termites. And you can’t take on the world if your own house isn’t in order.

Furthermore, while they’ve been carefully selecting, training, and elevating talent through successively challenging real world projects, you’ve been cutting your top performers left and right simply because they fall to the right of the bell curve as you’ve yet to figure out that, in today’s information economy, you need more than a warm body in a seat. While it might not make sense to pay a janitor, security guard, or even a middle manager (who does nothing but convey messages up and down the ladder) more than the median, the same does not hold true when it comes to technology. The reality is that your top talent is worth their weight in gold while your underachievers would be worth more if you instead invested their salaries in coal. (Assuming your top earners are earning their wages on merit,) This is a case where you generally have to cut those who fall to the left of the bell curve. (The ability to cut & paste HTML and CSS does not a web developer make!) One of the big reasons you’re suffering so severely is because you’re asking under-performers to do more with less, when, chances are, they couldn’t even manage before the cuts.

They’re focussed on building companies, while you’re focussed on how to maintain your seven figure salary just for showing up to work. This is one place where Europe generally gets it more than you do. While compensation structures based on performance should be unlimited, salaries should not. Executives don’t deserve ten times the salary of their reports just for showing up to work. Salary-wise, a CEO should make the same as a lowly VP, who shouldn’t make much more than his top performer. The rest of her compensation should be based on corporate performance. If she grows the company valuation by fifty million, then she gets her million dollar bonus. If the company tanks, she gets nothing but her salary. It’s ridiculous that, in this climate, executives are still getting seven and eight figures for leading their company into bankruptcy, and then multiples of that when they are shown the door. If the only way they got the new Lamborghini was to work for it, maybe we’d see some progress.

And finally, they’re focussed on long term strategy while you can’t see beyond the next quarter. That’s why even the average multinational has a life expectancy of less than 50 years and why 85% of market leaders get displaced in a recession. If we don’t return to long term thinking, then the rising multinationals in India who are looking 30 to 50 years down the road, when they surpass us in GDP, will win. And since they have almost four times as many people, it’s very likely that they’ll stay at the top when they get there.

So unless you’re going to take a page from India’s playbook, you better start fearing the Indian juggernaut. Because the way things are going, I don’t see how it can be stopped.

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It’s Your Turn To Join The Great Strategic Sourcing Debate!

Over the past few weeks, ever since Dalip Raheja of The Mpower Group decided to stir the supply chain hornet’s nest with his posts on how Strategic Sourcing is Dead and how The Sourcing Emperor Has No Clothes, we’ve seen a flurry of activity from the blogging heavyweights who were quick to weigh in with their opinions, including:

This flurry of activity was followed by Dalip’s insistence this morning that Yup, Strategic Sourcing is Still Dead, as it would seem that, in his view, we collectively did not do enough to revive the patient.

So now it’s your turn! I’m opening up the forum to anyone who wants to throw their 2 cents into the money pot. Simply send a well worded, well argued, piece to the doctor < at > sourcinginnovation <dot> com and I will post it here on Sourcing Innovation. Contributions will be posted in the order they are received, so get yours in soon for a speedy posting. (Just be sure to follow the posting rules and keep the marketing out of the material.)

Tuesday Webinar Wackiness I: Webinars This Tuesday

The Sourcing Innovation Resource Site, always immediately accessible from the link under the “Free Resources” section of the sidebar, continues to add new content on a regular basis — and it will continue to do so.

The following is a not-so-short selection of webinars THIS TUESDAY and Wednesday that might interest you:

Date & Time Webcast
2010-Sep-28

14:00 GMT/WET

 Leverage Billing to Drive Performance & Add value to your FSSO

Sponsor: BillTrust
2010-Sep-28

14:00 GMT/WET

 How Tyson Foods Ensures Compliance and Develops Better Products More Efficiently

Sponsor: Oracle
2010-Sep-28

14:00 GMT-04:00/AST/EDT

 Tie up all loose ends; Practical means to start managing Supply Risk today!

Sponsor: Zycus
2010-Sep-28

14:00 GMT/WET

 Ensure Compliance and Develop Better Products with Smarter PLM

Sponsor: Oracle
2010-Sep-28

14:00 GMT-04:00/AST/EDT

 Managing Safety and Workers’ Compensation Risk in a Recovering Economy: The Challenges Manufacturers Face and What You Can Do

Sponsor: Zurich Financial Services
2010-Sep-28

10:00 GMT-04:00/AST/EDT

 e-Invoicing benchmarking special – Compare your performance to world class projects

Sponsor: Ariba
2010-Sep-29

13:00 GMT-04:00/AST/EDT

 A Preview Into The ASN Study

Sponsor: Compliance Networks
2010-Sep-29

13:00 GMT-04:00/AST/EDT

 Validating Excel Spreadsheets: A Detailed Road Map to Compliance

Sponsor: Elsevier Business Intelligence
2010-Sep-29

11:00 GMT-07:00/MST/PDT

 Driving Compliance with an Integrated Sourcing Solution

Sponsor: SAP
2010-Sep-30

12:00 GMT-04:00/AST/EDT

 Perspectives and Potential of Asia’s Hotspots: China and Philippines in Focus

Sponsor: Global Services Media

They are all readily searchable from the comprehensive Site-Search page.

The Strategic Sourcing Debate, Part VI: Yup. It’s still dead!!

Today’s guest post is from Dalip Raheja of The MPower Group, who declared that Strategic Sourcing is Dead, and who has returned to poke the hornet’s nest once more.

A very special thanks to those who engaged in a substantive debate, whether you agree or disagree with us. I am grateful for your time and kind consideration of our arguments and hope that you will continue to engage in the conversation. That was the Intended Consequence. The Un-Intended Consequence was the tone and tenor of some of the reactions. Let me apologize to those who got quite offended by my writing/language skills. As I have said in almost every conference I have spoken at over the years, I am a 3rd world immigrant trying to make a living here and learn the language at the same time, and that is still obviously a challenge for me.

I did not realize that this was a contest and that the doctor was playing Simon Cowell. Had I known this, I at least would have gotten a haircut and put on a nice suit! But let’s forget for a moment who won or lost, according to the doctor, and let’s look at the substantive points made by a number of the respondents. I will address some of them here, and others in a later post.

Clearly, Tim Cummins (IACCM, The Death of Procurement) and I mostly agree on the substance of the hypothesis. Where we may disagree is how to solve some of these issues. What is unique about IACCM is it represents a very innovative nexus in that it brings both the buy and the sell sides together. Especially if you fundamentally believe at the end of the day that the Intended Consequence for both sides is to establish relationships (commitments according to Tim) which create and deliver mutual value beyond the contracted transaction. In fact, there are organizations where both of these functions (buy AND sell side contracting) have been organized under a single leader and we think that is just a fascinating opportunity to maximize value. We call it the JANUS model (feel free to come up with your own name). We think one of the Next Practices the community should adopt is that the Sourcing/Supply Chain function should be an integral part of the sales process (Mpower Blog). Let that sink in for a while and hopefully you will agree. For a detailed discussion between Tim and me on this topic, you can listen to a recording of the webinar Tim and I just delivered:

It is also interesting to note the most recent post entitled “(The) Strategic Sourcing (Debate Part V): My 2 Cents” where the author states in his opening paragraph:

“It’s called strategic, but it’s not used strategically.”

           Strategic sourcing, for the most part is seen as a procurement function, and typically, a transactional process leveraging tools such as RFx and Reverse Auctions in a tactical manner. Some large consulting firms, who offer services, treat Strategic Sourcing services similarly and mainly are utilized as “staff-augmentation”. For manufacturing organizations, where materials can be 60%-80% of the cost of goods, sourcing of direct materials needs to be approached as a Supply Chain challenge. Take the direct materials at the point of consumption and work backwards in the supply-chain several tiers, and understand costs. When the Supply Chain is worked cooperatively with suppliers, an organization can ask the question “How we reduce each others costs without adversely impacting each other’s margins”?

No disagreement with what he has to say. He does go on to give some examples of exceptions and while I don’t agree with all his examples, I would be very happy to agree there are many examples of pockets of excellence and we should find them and extract the Next Practices. However, I still maintain that to make the kind of dramatic change we need to make, mere CPR at this stage may not be enough.

In the post titled “Where does Strategic Sourcing fit in?”, the author shares a very similar professional background as mine (been there/done that, speaker and advisor) and has clearly posted a very thoughtful, measured response and I could not agree more with the gist of what he has to say. He lays out three questions, which he writes are even more fundamental, and I am happy to concede his point for a minute. What becomes obvious is we both end up in the same place … it hasn’t worked, it ain’t working, and it needs fixing right away.

“Do your senior executives understand the enormous potential of modern supply management (only one element of which is strategic sourcing)?“

I concur with this totally and this is exactly the argument we are laying out. What the author calls the “enormous potential” is what we are referring to when we talk about the destroyed value. And it is very clear senior executives do not understand that their Sourcing/Supply Chain organizations can help them get at this value because they only see their Sourcing organizations focused on cost/TCO.

“Do your senior executives understand how to achieve that enormous potential — i.e., how to build the transformation roadmap and how to support it?“

The quick answer is no. The more detailed answer is almost all organizations assume if they keep investing in their infrastructure (the consonants), they will get the results. And if the past few years have proven anything, it’s that this misses the whole issue of the vowels … how will these practices and the latest gizmos and technology be Adopted, Executed, Implemented, Optimized and Utilized?

“If the answer to the first two questions is ‘no’, are you prepared to take a leadership role in helping your senior executives achieve the necessary awareness? If not, then debating the ‘strategic sourcing is dead’ question is moot at the company level.“

And this gets at the crux of the issue because in a large majority of the cases, the answer to number three is a resounding NO!!! Furthermore, the follow-up question is why are we still where we are after 25 years? Until we understand that issue, I’m not sure how we go about determining how to fix it. Our research suggests that the biggest reason is the singular focus on cost (TCO etc.) gets in the way of senior executives achieving the necessary awareness because cost is but one element of their decision criteria and that is why we must fundamentally alter the sourcing process and initiate the process with their decision criteria while not abandoning cost.

The author then goes on to say:

  • Believe it or not, 25 years after the birth of strategic sourcing, many companies of all sizes still are not aware of “true” strategic sourcing.
  • Equally astonishing, a surprising number of companies believe they are using strategic sourcing, but in fact are not.
  • Perhaps as a reaction to the need for “quick wins” in the current business environment, some companies who previously used a true strategic sourcing process have since “dumbed down” their process into a tactical ghost of what it used to be.
  • As noted above, trying to introduce and embed strategic sourcing without the supporting pillars of a transformation roadmap is likely to generate only short-lived benefits.

And to all of the above, I have a simple one word response … AMEN!! And that is exactly why we are issuing the clarion call to acknowledge that it hasn’t worked, it ain’t working, and we need to fix it right away. It was also very heartening to see a reference to a Transformation Roadmap because that is exactly what we have been recommending and delivering to clients for more than a decade. I will agree we are going further and saying the current approach and process (even with the latest technologies, decision optimizers, risk simulators, etc.) ain’t gonna work; and, we can either keep trying to fix it or we can all agree that we need to apply a fresh perspective and come up with something totally different.

So please join the debate, and yes, debate implies a conversation. All I ask is that we keep the confrontations constructive and stay away from the name calling, innuendo, and disparaging comments. We will be the first ones to admit that if we are now right, then obviously we too have been wrong in the past. And if you are truly a committed defender of the status quo, our best wishes to you. I will respond to some of the other commentary in a later post. I will also provide my reading of the Doctor’s TVM and Gartner’S DDVN.

Thanks, Dalip!

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Lean: Do You Know What it Means?

Now, I thought that the definition of lean was relatively well understood among lean practitioners while the implementation was not, but after reading this recent piece in Industry Week on Lean Confusion, I’m wondering if it’s not the other way around?

According to the author, people are confused — both about what defines lean and how to implement lean. As an example, she uses the reaction to an article that the Wall Street Journal published in July that outlined component shortages and Nissan Motor which concluded, that, in part “the drawbacks of lean manufacturing methods” were to blame, augmented by an overstretched global supply chain. It’s a good example — Apple’s not about lean and, as one proponent countered, it’s obviously yet another example of shoddy reporting from the WSJ where the supply chain is concerned.

So what is lean? Simply put, it’s maximizing customer value while minimizing waste. It’s not any particular set of processes, methodologies, or technologies — those are just tools of the trade. Lean is not just the tactical implementation of a new system or process, it’s the strategic redesign of your operation to maximize value while minimizing waste. That might involve new systems and processes, but that’s not lean. Lean is a strategic mindset, not a tactical exercise.

It’s a good article that makes a good point. Check it out.

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