Monthly Archives: September 2011

Patent Pirates Are Still Plundering

According to this recent article over on CNN Money, patent trolls have cost investors Half A Trillion Dollars over the last 20 years. Half A Trillion Dollars! That’s an awful lot of innovation down the drain!

At this point, I’m wondering which pirates are worse? The pirates off the coast of Somalia, who have escalated their attacks and brought ocean piracy to an all time high this year, with 142 attacks in the first quarter alone (and 346 attacks as of September 27). Now, it’s true that the attacks are sometimes violent and that 15 people have been killed this year, but for the most part, the Somali pirates are more focussed on taking hostages in return for ransoms, and release the hostages when they get the ransom. And while the ransoms are getting higher, with the average ransom reaching 5.4 Million in 2010, total payments in 2010 were only 238 Million. Yes, this is a big number, and 20 times 238 Million is a bigger number at 4.76 Billion, but that’s only 1% of losses that can be attributed to patent pirates. One percent!

And the “contributions” that the patent trolls supposedly make to innovation are essentially nonexistent. They’ve funnelled less than 10 Billion to R&D, or less than 1/50th of what they’ve cost investors and innovators. All they do is create a disincentive to innovate. And in SI’s view, they should be made to walk the plank.

High Definition Adoption Measurement Part V

Today’s guest post is from John Shaw (Senior Director, Adoption Services) of BravoSolution, a leading provider of spend analysis, (e-)sourcing, supplier performance management (SPM) and healthcare sourcing solutions and a sponsor of Sourcing Innovation (SI). It is the fifth of an eight (8) part series, which, when complete, will form a white-paper that BravoSolution will be releasing to the general populace next Wednesday.

Yesterday’s post (Part IV) provided a case study that describes typical challenges faced by a large global manufacturer. In the case study, a 30,000-foot view would show positive progression, even though a number of users would not be using the system to maximize supplier value. The case study described symptoms, likely causes, and potential actions by the adoption team to increase value received.

Today’s post focuses on the process that Company A would follow to transition to high definition.

Understand the Category Impact

The interview concept is very important because each Category is different. Patterns that emerge at the 10,000-foot level may seem like problems, but may be a natural result of the constraints of sourcing a Category. In order to make the most of this data, the Adoption Team must be willing to learn about the characteristics of each Category. Just as an e-Sourcing solution isn’t “one-size-fits all” for each company, and it isn’t “one-size-fits-all” for each Category.

The process of interviewing Category managers and discussing data trends observed by the Adoption Team creates an additional layer of data, and it is in that layer of data that we transition to a High Definition view of adoption.

Transitioning to High Definition:

As we drop down from our 10,000-foot view to our High Definition view, we are going to expand beyond the Category and User dimensions to include Category-specific targets over time. We move to this view as we recognize that each Category not only has its own characteristics, but that the strategies deployed in that Category should change over time.

In most organizations, a Category’s overall strategy is determined as part of a periodic review process. As the strategy for each Category is established, the Adoption Team becomes a key stakeholder in this process because it is their job to help the Category Manager use the tools in a way that supports the strategy.

The examples below highlight how adoption goals can be tied directly to the strategy for a particular Category:

Category goals.

It is at this point, when you have aligned both Adoption Measurement and Adoption Opportunity Assessment directly with both your organizational objectives and Category-specific strategies that you have achieved High Definition Adoption Measurement. Your Adoption Team is now in a position to directly enable and monitor progress towards you business objectives.

Part VI will provide an example case study that describes some of the adoption challenges of an energy company operating in a (European) regulatory environment.

Stop Hoarding and Invest In Your Supply Chain

By now you might think SI is a broken record, since this is the third day in a row it has complained about the fact that the “Global 2000” are hoarding cash like it’s never to be seen again, but when even decides companies are hoarding too much cash, as per its recent article on how cash isn’t king, this should drive the point home.

And the situation is even worse than Financial Director and Hackett reported. According to a recent Forbes article, the Federal Reserve reported in June that U.S. businesses were saving cash at unprecedented levels, with balances climbing to 1.9 Trillion! That’s 2.23 times the cash reserves of the top 1000. If the situation is the same in Europe, cash reserves must be topping 1.6 Trillion Euros (or 2.16 Trillion US). That’s an estimated 4 Trillion in cash reserves! To put this in perspective, this is 100 Million jobs for one year at the average US salary, and unemployment is roughly 74.7 Million across the US and the EU. Get the picture?

Now, saving for a rainy day sometimes makes sense, but when you start saving to the point where even your investors are concerned that cash is not being put to work earning a reasonable return, not only are you helping to tank the economy, but you are biting the hand that feeds. And given that, due to the lack of innovation and planning, which is largely due to the lack of manpower to do innovation and planning, your transportation costs are about to soar, your commodity costs are rising across the board, and your current talent pool is overworked, unhappy, and ready to change jobs as soon as the next better offer comes along (with job satisfaction at an all time low), how much longer can you really afford not to invest in new talent and new technology to help them innovate your way to a better future?

Then, as the Forbes article points out, as the ever increasing gap between high-quality borrowers (you) and low quality borrowers (your cash-poor suppliers) widens, more and more of your suppliers will experience cash flow issues (as you are not only hoarding all your cash, but borrowing from limited funding reserves to do so). This will lead some into bankruptcy and failure, which will create disruptions in the supply chain that will disrupt your operations and cost you sales and brand equity and, in the end, time and resources to regain your customers’ trust. But all of this can be prevented by investing into your supply chain up front. It’s your choice. Spend and profit. Or hoard and lose.

High Definition Adoption Measurement Part IV

Today’s guest post is from John Shaw (Senior Director, Adoption Services) of BravoSolution, a leading provider of spend analysis, (e-)sourcing, supplier performance management (SPM) and healthcare sourcing solutions and a sponsor of Sourcing Innovation (SI). It is the fourth of an eight (8) part series, which, when complete, will form a white-paper that BravoSolution will be releasing to the general populace next Wednesday.

Yesterday’s post (Part III) discussed the concept of adoption from 30,000 feet and how this typical view is both useful and useless from an adoption perspective. While it is usually directionally accurate and good for identifying low-hanging fruit, it typically does not indicate if supplier value is increasing, transparency is improving, or efficiency intensifying. For that, more visibility is needed.

Today’s post will provide an example to illustrate this claim.

Company A: Measuring Supplier Value

So let’s go deeper into the challenges of each of our example companies. Company A is a global manufacturer who has been using their e-Sourcing tool for some time. At the 30,000-foot view the project appears to be progressing nicely. However, a key question that is important to Company A remains unanswered: “Are users using the system in a way that helps them to maximize supplier value?”

In order to answer this question, we must first understand what system behaviours drive supplier value. If we start simply, we can conclude that an event should have some basic characteristics:

  • Supplier Participation:

    Maximizing qualified suppliers generally increases award quality.
  • Event Structure:

    Well structured events facilitate a better understanding of supplier capabilities.
  • Spend Value:

    Managing greater volumes of spend increases potential event value.

Next, we create simple measures at the User and Category level. This becomes our 10,000-foot view. We are drilling deeper into the current situation and finding our next layer of adoption improvement opportunities.

Using this level of data we can now begin to look deeper into understanding how system activity is correlating to our business objectives.

By creating a few simple metrics for each of our basic event characteristics we can see the symptoms of poor adoption emerge.

Symptoms of poor adoption.

These patterns become a roadmap of improvement activities for the Adoption Team to explore. Notice on the chart below that Adoption Team activities typically start with an interview and continually ask more questions!

Part V will discuss the importance of understanding the category impact and its implications for the transition to high definition adoption measurement.

Is Good Corporate Citizenship At An All Time Low?

In yesterday’s post we noted that working capital has bounced back in Europe and that Europe’s biggest companies have seen the most significant revenue growth in five years. We also noted that, at the same time, these same companies are hoarding their cash and, in many cases, borrowing to do so, while smaller companies remain starved for capital and unemployment remains near 10% in the EU. And SI stated that this is, in its view, disgusting. A lack of jobs is resulting in significantly reduced spending across the board because the people out of work can’t spend while the rest of the people are fearing that they are next on the chopping block given that it’s been all bad news in the job market for a few years now. This reduced spending has significantly contributed to the global economic decline which has brought entire countries to the brink of defaulting on their (sovereign) debt.

Now, as per this recent article over on BNet on how bad corporate management is killing the economy, we find out, from a recent study by CFO Magazine and REL (a division of The Hackett Group), the thousand largest companies in the US are sitting on cash reserves of 853 Billion. Given the relative equality between the power, and cash position, of US and European multinationals these days, it’s probably a safe bet to say that the Global 2000 is probably sitting on 1.5 Trillion in cash reserves. Now, while it may be true that this is likely not enough to solve the economic crises of the world, given that the US National Debt is almost 15 Trillion, we have to remember that there are only 11 countries in the world with a GDP greater than 1.5 Trillion. We also have to remember that the national average wage in the US is slightly under 41 K, and that this means that these companies could collectively employ another 36.5M people for one year without going into debt. To put this in perspective, at the current published unemployment rates, there are only 27.9 M unemployed people in the US and 46.8 M unemployed people in the EU. That means half of the unemployed people could be working at the top 2,000 corporations in the US and the EU. This would give effective unemployment rates of 4.5 and 4.8 in the US and the EU. The last time the unemployment rate dropped below 4.6 in the US was back in 2000, and the economy was booming.

So while it’s not an absolute that corporations can fix the economy, it should be pretty clear that the author is right and that big corporations are killing the economy when they could be the economic saviours. Instead of hoarding cash, they should be focussed on innovation and hiring bodies to propel that innovation forward. That’s how you print money in a knowledge economy, and with the current state of affairs in most public sectors and banks around the world, they are the only organization left with a license to print cash. But they have to be willing to use it.