Category Archives: Miscellaneous

Some Great Ideas to Revitalize the Innovation Engine, Part I

A recent article over on Chief Executive that reviewed Henry Nothhaft’s recent book Great Again summarized some great advice on How to Revitalize our Innovation Engine. Tackling the link between innovation and prosperity that is diffused throughout society, Henry is worried that there are numerous forces that are severing this link. These forces include:

  • the divorce of innovation from production
    that has allowed other countries to advance, and become leaders in, technologies that were first developed (and patented) in the US, such as solar power (AT&T Bell Labs, 1957)
  • the lack of jobs in today’s web-based (social media) firms
    While Facebook has 500 M users and a market cap of up to 100B, it employs a mere 1,400 people while Sony (27 employs 170,000, Disney (75 employs 144,000, and Boeing (55 employs 157,000 people. Even Google had only 11,000 people at a comparable stage.
  • a lack of sustainable business(es) models
    since companies that are here today and gone tomorrow don’t have long to innovate

The first three suggestions he offers are the following.

  • Liberate Entrepreneurs from Start-up Killing Tax and Regulations
    Not only did a 2008 World Bank study find that a 10 percent increase in the effective tax rate reduces the investment-to-GDP ratio by 2.2 percent and foreign direct investment by 2.3 percent, indicating that lowering the effective tax rates for start-ups would likely have very positive results, but start-ups are expensive and taxes on necessary hardware and headcount are stifling. If a manufacturing start-up needs 10M of equipment, and the taxes on that equipment are 10%, that’s an extra 1M out of its pocket. While nothing to an established multi-million manufacturer, an extra 1M can sometimes break a start-up.
  • Fix the VC Engine
    In the 1990s, when most VC firms were staffed with executives with operational experience, firms were trying to build companies for the long-term. Today, most VC firms are led by financial types who want to “flip” companies for a quick return like PE firms do. They don’t want to invest unless you already have a product, beta customers, and the headcount to get the job done. At that point, a company could almost self-fund growth with customer partnerships and debt. It’s getting to that point that companies need money.
  • End the indifference to domestic manufacturing
    Most countries understand that manufacturing strengthens an economy and sustains a middle class like no other form of commercial activity. As Henry notes, decades of outsourcing have left the U.S. without the means to invent the next generation of high-tech products. Plus, R&D depends upon close contact with manufacturing for success. A design must be able to be manufactured efficiently and cost-effectively to be a success. R&D cannot be completely disconnected from manufacturing.

And they are all great. Tomorrow we will discuss his fourth suggestion and what your Supply Management operation should do to help revitalize the innovation engine.

Beware the Perils of Hyperspecialization

A recent article over on the Harvard Business Review on the age of hyperspecialization said that we are entering an era of hyperspecialization and that it will convey a pulsating, world-spanning flow of knowledge work. Heraliding it as the continuation of Adam’s Smith division of labour, it notes that hyperspecialization reduces costs most dramatically when a company can turn to an expert instead of having to reinvent the wheel and alow the company to achieve a better utilization of their own employees’ time.

However, there can be just as many perils, if not more. The article, which clocks in at seven pages, briefly passes over these five perils:

  • Digital Sweatshops
    In developing economies, enterprising industrialists might use hyperspecialization to create “digital sweatshops” where workers, sets of whom specialize in specific tasks, are exploited for low wages by those who have the means to do so.
  • Astroturfing
    If work is divided into small enough parts, it is possible that a worker may not know what they are working on and may be contributing to something counter to their personal beliefs, or even the law. For example, a mathematician could design a new lottery game or a “greeting card writer” could be creating text for e-mail spam.
  • Electronic Surveillance
    Not only can every aspect of the work be monitored, but it may even reach the point where the work in progress, and the person doing the work, is monitored from start to finish.
  • Dull & Meaningless Work
    Even Adam Smith noted the deleterious results when a person’s work was reduced to “a few very simple operations” back in 1776. If tasks become so refined that they become monotonous, there surely will be ill psychological effects.
  • No Guarantee of Payment
    While spec work is not new, today, most spec work is confined to proposals. In hyperspecialization, workers will actually be doing the work and whether or not they get paid could be at the whim of the company that issues the task.

But misses the most important peril of all:

  • Loss of Vision
    If everyone works on a tiny little piece of a puzzle, over time there will be fewer and fewer people who understand how a puzzle is to be put together. This will seriously stifle innovation as the creativity that results from exploring beyond your horizons diminishes as horizons shrink.

1999


Oops out of time
So tonight I’m gonna party like it’s 1999
Yeah

1999, Prince

Somehow SI gets the feeling this song was playing on the oldie’s station when Aberdeen was penning their recent piece on “The State of Strategic Sourcing: Building a Context for the Next Decade”. In a nutshell, their required actions would have been okay if penned in 1999 as necessary actions for leading supply management organizations for the next decade (although, in reality, they would have only taken an average organization through 2007). But in 2011 for 2020? Let’s just say SI liked Ariba’s predictions that data will predict the future, outsourcing will explode, and sourcing geeks will go the way of the dodo better. (Even though I hope it’s just a ruse.)

Normally SI ignores Aberdeen, as they haven’t, in SI’s opinion, put out anything good in years (as they lost their last senior analysts in the space a few years ago), but after having this particular piece brought to our attention, SI just can’t ignore it and how behind the times it is. Let’s put it this way, if a supply management organization thinks that the required actions are new and next level, it belongs in the bottom of the barrel in the laggard category. Let’s look at these required actions from the executive summary:

Leverage e-Sourcing solutions to drive higher savings and automate manual strategic sourcing processes
Just like every leading supply management organization has been doing for the last 10 years? This is advice for 2020? An average supply management organization has already squeezed every penny they can out of simple automation and standard reverse auctions, which most e-Sourcing suites revolve around. e-Sourcing is still the foundation, but now it is just the beginning of your Supply Management journey, not the destination.

Utilize spend analytics to drive visibility into corporate spending and forecast savings for future planning and budgeting
Wow! Two big problems with this. First of all, after the last two years, every executive and his dog has a “spend analysis”, “spend visibility”, or “spend reporting” tool that tells him just how much the organization is spending. What he needs to know is where the savings opportunities are. Just because the organization is spending 50M on fuel doesn’t mean there are any savings in the category. Maybe supply management saw the sharp prices increases coming and locked in low rates just in time. Maybe the real savings is in temporary labour where only 10M is being spent but where rates are still, despite recent increases in average labor rates, 20% above the norm. Secondly, spend analytics can’t forecast future savings. That depends on demand and input costs. Basic spend analysis just tells you what you spent, not where prices are going or where demand is going. The organization needs a real data analysis tool as well as good demand and price forecasting tools to get that picture.

Align overall sourcing activities/processes with the goals and objectives of the greater organization
Really? And should we also put our underwear under our pants? Supply management leaders have only been saying this for how long? Maybe SI should lighten up a little as it’s the only piece of advice that’s right, as supply management must be aligned with the rest of the business to be successful, but if this is not common sense to any supply management leader (who is also a business leader), there’s a fundamental problem in the organization that no action will fix. Plus, it’s a requisite, not an action!

The only action for success that SI can give you where this report is concerned is to burn it. The same-old, same-old is not going to get your supply management organization through the next decade. That’s why SI is spending so much time discussing next generation supply management and highlighting the efforts being taken by thought leaders such as Greybeard Advisors, The Mpower Group, and The Hackett Group to get the word out there. Supply Management must get to the next level, and it’s not going to do that rehashing technology from a decade ago.