Category Archives: Best Practices

Collaboration: Three Views from the Harvard Business Review, Part II

In part I, we discussed how “true collaboration grows the pie” while false collaboration just splits it and how the Harvard Business Review recently ran a special series of articles and posts on “Making Collaboration Work”. Some of these articles were quite insightful and a good read for any Supply Management professional looking to improve the efficiency and effectiveness of her supply chain. In this post, we are going to address the insights from two recent HBR posts that capture some key insights.

In “collaboration as an intangible asset”, the authors state that the most important intangible asset an organization has is the ability to collaborate. This is because it’s the willingness on the part of people to work together to solve problems when they could just as easily pass them along to someone else that usually means the difference between “good enough” and “outstanding” and differentiates an average organization from one that is constantly innovating. And given the price-earnings multiple fetched by companies like Amazon or Apple, it’s easy to see why “ability to innovate” and “brand management skill”, which is a product of great collaboration, is important to any company that wants to become a Global 3000 leader.

As a result, the authors argue that it is important to monitor and manage collaboration, and one way to do that is through social network analysis (SNA). SNA allows an analyst to see the patterns of interaction — information sharing, problem-solving, coaching, and mentoring — that make up the less visible, often informal side of an organization. This makes it possible to depict the networks that underlie or exist in parallel to the formal organization charts and process diagrams and, in turn, assess whether reogranizations or other efforts to improve collaboration are likely to have the desired impact. In addition, it can uncover the existence of parallel innovation efforts. This allows the organization to combine teams, and efforts, and get the most bang for their buck by minimizing effort in a way that maximizes the chances of success.

Finally, in “quantity vs. quality in collaborations”, the author addressed the potential of the web for crowd-sourcing innovation, as Innocentive does. Not only does crowd-sourcing bring more ideas, but it brings more opportunities for collaboration, which, in turn, creates more ideas and increases the chance that a great idea may knock on your door. And it also increases the chance you’ll find a great collaborator who can help you to better interpret this wealth of insights, to recognize the value of ideas that is not often visible at first, especially when it comes to radical change, and to identify a novel strategic direction. And that just might be the key to your collaborative success.

Collaboration: Three Views from the Harvard Business Review, Part I

Recently, the Harvard Business Review ran a special series of articles and posts on “Making Collaboration Work”. Some of these articles were quite insightful and a good read for any Supply Management professional looking to improve the efficiency and effectiveness of her supply chain. In this two part series, we are going to address the insights from three recent HBR posts that capture some key insights.

In “collaborate to grow the pie, not just split it”, the authors tell us that far too many retailers and manufacturers opt for pie-splitting instead of collaborating to come up with pie-growing strategies and, as a result, the majority of money spent each year on trade promotion just shifts share from one retailer to another or one manufacturer to another. This results in short-term, unsustainable results where companies are merely “renting share” and destroying long-term industry profitability for everyone involved.

As support for their argument, they reference a recent Neilsen Company macro study analyzing trade promotion across 30 grocery categories which found that only 13% of trade dollars actually result in category growth while 15% result in brand switching, 17% result in store switching, and a whopping 55% just results in subsidized volume (where no new consumers or incremental units are purchased). In this last case, customers who would have purchased anyway get a discount while corporate profits are gutted. And while a manufacturer or retailer might think that consumers only want lower prices, a recent analysis across dozens of categories by the Cambridge Group found that only 10% to 30% of households are truly price sensitive and the rest (who make up the majority) want new benefits and innovation and are willing to pay for them.

Thus, manufacturers and retailers need to collaborate, upfront, on innovation strategies with the consumer in mind and grow the pie. If they do, they can actually increase market share, either by creating a new market (because the product is the first to sail a blue ocean) or by robbing share from a different market. Jimmy Dean is an example of the latter. By expanding its frame of reference beyond just breakfast sausage into convenient breakfast meals centered around sausages, it grew the overall category 25%, drove 2/3rds of the growth, and tripled its frozen breakfast sales. Manufacturers and retailers both won by stealing sales that would have likely gone to fast food establishments instead.

In Part II, we will discuss two more HBR posts that address the inherent value of collaboration.

Why Should You Include Simulation In New Product Design?

As per this recent article in Industry week that proclaims that “the computer-aided-engineering revolution is here”, proper utilization of simulation in New Product Development:

  • creates products that are more sustainable and energy efficient,
  • enhances performance and ergonomics,
  • improves value and affordability,
  • provides options for differentiation, and
  • considerably reduces NPD timelines as simulations can be created and run much faster than prototypes can be built and tested.

It’s a great article, and simulation is a great counterpart to optimization, which will allow you to optimize costs and supply before the product is finalized.

For A Believable Vision Of Procurement 2020, Head Back To 2008

Long Before Ariba published their 20/30 Vision of the Future of Supply Management and Aberdeen took us back to 1999 with their vision of the next decade of Supply Management, the leading Supply Management minds at Hackett sat down and came up with their vision of Procurement in 2020 which was a heck of a lot better than most of the stuff I’ve seen this year (with a notable exception being Bob’s Next Level Supply Management).

In Hackett’s 2020 Vision For Procurement: A Revolution Through Evolution of Capabilities and Value (which was released as their Procurement Executive Insight on April 15, 2008 and followed by their 2020 Vision: Delivering on the Evolving Value Proposition of Procurement which was detailed in their 2008 Book of Numbers), Hackett identified the emerging trends that will define tomorrow’s world-class performance and help an organization move up the capability path. Realizing that transformation in most organizations is evolutionary, and not revolutionary, Hackett’s leading minds lay out an evolutionary path that takes organizational capability from reactive to strategic in a four-step process that passes through planning and alignment along the way.

The authors note that while an average Supply Management organization starts out with the goal of assuring supply, this is a very reactive strategy. Supply Management has to get to the point where it is harnessing the power of supply markets to maximize the value it is getting from its spend, to enable business strategy, and to optimize its tactical execution. Along the way, Supply Management will progress through TCO and demand management. As it progresses to harnessing the power of supply management, the organization will continually expand its circle of influence, dig deeper into its customers needs, and provide better service as time goes on.

In addition, it will also need to acquire the following strategic capabilities:

Business Process Sourcing
Supply Management will need to become the starting point of BPS activities and skillfully integrate disparate methodologies surrounding core competency analysis, resource management, service delivery models, business process management, and portfolio management into its overall supply management practice so that it is the first business unit consulted, and not the last, in any conversation surrounding business process (out)sourcing.

Supply Performance Management
Supply Management will go beyond simply managing the inbound supply chain to shaping strategies, goals, and objectives for the business as a whole based on its knowledge of global supply markets for materials, talent and technologies. It will need to seamlessly integrate supply planning with financial planning and operational planning so that each decision is best for the business overall.

Knowledge Management
It will need to master content-driven analytics which integrate external data into internal data models for supply prediction, planning, and risk mitigation that will allow it to build robust and agile (virtual) supply models that can be redesigned as needed in response to significant events.

Talent Management
Supply Management will need to adopt a cradle-to-grave talent management framework that includes knowledge management and advanced training models that allow it to advance its personnel to the next level. The framework will need to contain an innovative “brand management” model that will differentiate Supply Management as the career path of choice for new talent.

New Product Development and Introduction (NPD/NPI)
Supply Management will have to include advanced design-for-supply support that incorporates multi-tier cost modelling, scenario
planning and optimization that will allow the organization to understand the critical relationships between requirements, specifications, costs and constraints and make the best design decisions for the business overall.

Supplier Management
Supply Management will have to proactively engage suppliers and extend internal competencies and knowledge into suppliers’ operations
to increase their process capabilities, financial health and goodwill toward the buyer. Supply Management needs to progress to the point where it is able to detect a potential problem before the supplier detects the problem, and then step in to help the supplier resolve it before it materializes.

Next Level Strategic Sourcing
Strategic sourcing has to advance well beyond TCO modelling and the application of the best e-Sourcing tools to the point where it is using deep supply intelligence to identify unseen risks and anticipate supply capabilities that can deliver breakthrough improvements in innovation, environmental sustainability, new market entry, brand enhancement and other key business strategies. It will utilize scenario planning on the extended supply network to provide visibility of opportunities and risks that will guide Supply Management to the right buy for the organization every time.

Value Add is Taking Precedence Over Cost Cutting — This is a Good Sign

The Summer issue of the CPO Agenda summarized their most recent six month survey in “growth curve” which found that a broader focus on value adding instead of cost cutting alone is emerging, highlighting once again that businesses are gearing for growth. This is a good sign. As SI has been repeating again and again over the last few months — a Supply Management organization will not advance to the next level unless it adopts, first and foremost, a focus on value and advances beyond operational excellence to a state of strategic business enablement.

There is still a pressure to reduce and control costs, as 2/3rds of organizations are reporting an intensified pressure to reduce costs, but this is down 25% from six months ago, which means the leaders (who never compromise more than the top 20% of organizations) have shifted their sights back to value. Plus, only 1/4 of the organizations are reporting delayed investment decisions for new technology or expert consulting, down from 1/2 a mere six months ago. Plus, 41% of organizations said they are preparing for growth and recovery and 2/3rds of organizations have either undergone a transformation program in the past 12 months or are planning one with the number one goal to achieve greater alignment with the business. Good news indeed. Let’s hope that these organizations follow through!