Category Archives: Miscellaneous

In the Words of the One And Only Wil Wheaton

It’s time to mulch MySpace, frack Facebook, trash Twitter and spend more time back in the analog world, even if only for a few hours a day.

While this will likely be a tough thing to do (as you would probably want to give up coffee, alcohol, and every other addictive substance you can find first), you will be happier for it. As Wil says, It’s really nice and quite convenient to be plugged in all the time, but, for me at least, it comes at a price that I wasn’t even aware of until I wasn’t paying it. If you can handle going offline, even if it’s only for an afternoon, I highly recommend it; there’s a lot of people and world out there that you don’t even know you’re missing.

Wil’s right. If you can’t take my word, take Wil’s word before Twitter makes a twit out of you.

For Real Value, You Must Own the TCO

CRM Buyer just published one of the best articles I’ve ever stumbled across. In TCO, ROI, and the Difference Between Price and Cost, the author makes a point that is overlooked far too often by far too many buyers when they are shopping for new supply chain solutions:

      Customers must be sure that THEY own the definition and calculation of TCO and don’t allow the vendor to drive the agenda.
      

As the author clearly states, vendors will try to manipulate and obfuscate the true TCO of their solution and it will be different for each installation. Plus some of the costs, like risk and opportunity, are nebulous and hard to define. Vendors will try to make other vendors’ solutions look risky when, in fact, for you they might be less risky.

That’s why, on multiple occasions, I’ve tried to lay out the true, long term, costs of supply management solutions, as I did in this post in Uncovering the True Cost of On-Premise Sourcing & Procurement Software, in this post The Total Cost of Ownership Equation in a Green Economy, and this post on Know Your Software TCO & TVM, for example. The true, long term, cost is always more than you think and much more than the vendor will let on. It’s like the car example given in the article. If you’re going to sell after five years, the total cost is the price plus five years of maintenance and repairs (and insurance and gas) minus the expected selling price, and when everything is factored in, a more expensive car that costs more but retains its value might be worth more than a cheap car that loses the majority of its value and costs four times as much to maintain.

Before you make a decision, you have to determine the total cost of each solution over the intended lifetime. Only then you can decide if the solution with the greater (annualized) cost truly brings more value. If a solution costs 20% more but increases productivity by 40% or decreases risks by 30%, it might be worth it. However, if a solution costs 100% more but brings no additional value of any kind, it’s not worth a second look. And this is not something you will know until you slice through the vendor obfuscation and normalize the costs, which is something you can only truly do if you own the calculation.

Look to Niche for Innovation

In a recent post, I asked if now [is] the time of niche. Upon further reflection, I think it is for those companies looking for true innovation. I realize this may sound a little counterintuitive at first to those of you following the market and the M&A buying sprees going on where the big players like SAP, Oracle, JDA, and, now, Ariba, are doing their best to buy everything (and everyone) under our sun, but if you think through it, I believe it is quite logical.

First of all, if all of your time and effort was going to into buying and selling companies and divisions, how much is going into true innovation? In all likelihood, zero. And while the product or technologies being bought may be innovative to you, your customer base, and, if you’re lucky, the market at large, all products or technologies have an innovation shelf life that ends as soon as a more innovative product or technology hits the market. And while the more innovative product or technology could theoretically be the next version of your product, there is only a chance of this happening if R&D on the product or technology is continuing. Thus, if everything is put on hold for an M&A activity that could drag on for months (or years), there’s no way that the companies involved are going to maintain their innovation edge.

Furthermore, as highlighted in this recent Industry Week article that asked “what would Steve Jobs do”, to be innovative in today’s economy where time and resources are at a premium, you have to be focussed on a small number of products or solutions. You have a limited number of people with a limited amount of time and creativity and a fixed set of resources to support them. If you split your focus 1,010 ways and try to be everything to everyone, there’s essentially zero chance that you are going to stumble upon any truly groundbreaking innovation. But if you say no to 1,000 things and focus on the handful (5 to 10) of products or services you excel at where you have a chance to truly make a difference, the chances of real innovation increase exponentially.

So if you’re looking for truly innovative products and services to revolutionize your supply chain, look to the niche players that specialize in spend analysis, decision optimization, or predictive analytics. When you plug these into an end-to-end framework enabled by one of the big behemoths (that specialize in end-to-end platforms that can serve as a good foundation), or assemble your own from best-of-breed e-Sourcing, e-Procurement, and e-Logistics vendors (if you are tech savvy enough to do it, possibly with some third party expertise), that’s when you’ll start to see the truly innovative results that deliver double digit percentage returns year after year after year (and not just one-time reverse auction savings that disappear once you’ve sucked all the fat out of the supplier’s margin).

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