Category Archives: Miscellaneous

Are You Strange Enough (for a Competitive Advantage)?

Browsing through the Knowledge @ Wharton site, which is another one of those sites (like the Economist) that is just as important as the supply and spend management sites you visit every day, I stumbled upon an article published this summer that asked “If Your Workforce Is Strange Enough to Guarantee Competitive Advantage”. It’s a very good question.

The article excerpted part of Chapter four of Daniel M. Cable’s book, Change to Strange that notes what characterizes successful companies these days is a “strikingly different, obsessively focussed” workforce, one that — compared to competitors’ workforces — is “downright strange”. More specifically, to get the best results, companies have to build a workforce “that is extraordinary in a way that customers care about”.

In the excerpted chapter, the author argues that a successful organization is built around measuring and gaming performance drivers – and this is what results in a strange workforce. The development, measurement, and enactment of the performance drivers is what provides the required insight into what the organization is creating, and not creating, that is required to differentiate it from its competitors, attract customers, and, most importantly, win.

The process starts by identifying the outcome metrics that provide a valid reflection of what you think your organization exists to create. Then you find a way to make these metrics move in a way that your competitors are not willing or able to pursue. For example, if you’re a procurement outsourcing organization, you might decide that what customers value most is spend under management and spend put through the system. If this was the case, then you’d find a way to integrate best of breed on-demand SaaS technology into your offering so that not only could you put every purchase you make on behalf of the client through the system, your clients could also put every purchase they make against the contract through the system. Then, used meticulously, your customers would find over 95% of their spend against a contract you cut on their behalf would be in the system and that their spend under management goes up as a result. If your competitors think that the most important metric is total leverage-based purchasing power, you’re in a unique position if you’re right as to what customers want.

It’s also important to answer each of the following questions when you believe you have identified an outcome:

  • What produces the number – and what makes it go up or down?
  • What are the two or three most important beliefs our customers need to have about us relative to our competition to affect this outcome? How do we measure our progress toward our goal of having these beliefs accepted by the majority of our target market?
  • How can we influence the outcome in a way that is valuable, rare, and hard to imitate? What are we willing to do that the competition is not in order to drive this outcome?

For example, if you were a procurement outsourcing organization, you might come up with the following answers:

  • Spend through the system is calculated as total dollars on contracted items spent through the system divided by the total dollars spent on contracted items. It goes up when maverick spend is down, and down when maverick spend is up.
  • The two most important beliefs a customer has to have is that we mean what we say and we eat our own dog-food. We do all of our spend through the system. We measure our progress towards this goal by determining the percentage of outsourcing deals we are getting invited to bid on versus the total number of outsourcing deals that are currently happening in the marketplace.
  • We can adopt an open book policy on our own spend, and let prospective clients (under NDA) access the system and verify that our claims are valid – and this is something our competition might not be willing to do. We can also offer an on-demand spend analysis solution to our clients as part of our service offering so that they can calculate for themselves how much spend goes through the system, how much maverick spend is happening in their organization, and what commodities or categories we should be handling for them.

Thus, even though it might be a little too academic for your tastes (as the book was written by an academic who used a Business School as the example – ick!), the article had a very good point and asked some very good questions once you isolated the core of its message. If you want to be the best, it’s not enough to just work harder and more productively than everyone else … you have to be just a little bit different … and maybe even a little bit strange.

Increasing Your Global Presence

As a nice follow up to my When Going Global – Don’t Forget the Context post, I’d like to draw your attention to the finer points of an article that interviews Chris Zook, author of Unstoppable: Finding Hidden Assets to Renew the Core and Fuel Profitable Growth, over on Knowledge@Wharton called “Achieving Full Potential: How Companies Can Increase their Global Presence”. The article, which starts off by noting that over the next decade, 25% of the companies that exist today will disappear, either because they will merge with others or go bankrupt, discusses some of the major problems companies encounter during growth and some of the solutions they should be considering.

According to Mr. Zook, and the research undertaken by his consulting firm Bain & Company, only one in ten companies worldwide achieve more than a modest level of sustained and profitable growth (at least 5.5% real revenue and profit growth). Very few achieve aggressive growth. The major problem is that industries are becoming turbulent at a faster, and faster, pace. The most profitable activities are shifting quickly, and competitive differentiations are becoming harder to maintain.

A company needs to decide if should stay focused on core business (Focus), expand its core business beyond its current markets and geographies (Expand), or begin the search for hidden sources of new potential growth (Redefine). It’s the third phase that is the most interesting, and the most challenging. According to Mr. Zook, successful redefinitions are based on “hidden assets” — customer assets, growth platforms, or underutilized capabilities which suddenly assume a center role in how you look at your business going forward.

Hidden customer assets are undervalued market segments and under-exploited customer insight. Focusing on a different market segment can greatly increase market-share. (The example given is Hartman International that gained a 40-fold increase in market value by focusing on automotive OEMs and home entertainment consumers.) If you look closely at what your customers are buying and asking for, that can often tell you what you should be offering. Amazon.com, FedEx, and American Express evolved their business by focusing on the customer, and look at where they are today.

Undervalued growth platform often takes the form of a secondary product line or strong support services that have developed over time around your core offering. For example, let’s say you have an OLAP product that can understand native output of 20 different databases – chances are your ETL tool on its own is now a valuable product. Or lets say that you support your enterprise application on Linux and Windows – maybe your Linux support division knows more about properly configuring enterprise Linux installations than most of the integration houses.

Underutilized capabilities, which are the processes and methodologies used to get things done, are the hardest to pin down – and successfully monopolizing on these will require a lot of innovation. The example Mr. Zook gives is Apple – faced with a rapidly shrinking share of the computer market, it decided to utilize its unique UI strengths to create a music device (the iPod) that was much easier to use than anything else out there and it took the consumer world by storm. A lot of companies build hardware and software products, but very few have mastered the art of user interface design as Apple has. Underutilized capabilities will be those that are not only unique in your company, but relatively unique in your industry.

All in all, great starting points, but I was a little disappointed it left out under-utilized human resource assets. Every decent-sized company has them, but few are willing to utilize them. The fact of the matter is that many corporate executives and managers typecast people to their roles. They think that if you’re an IT manager, you can’t possibly have any good ideas on how to improve the physical supply chain or innovate new business service offerings. Or, my favorite, you’re a scientist / architect – you don’t know the first thing about management.

I have personally worked with, and for, a large number of start-ups and small companies, and many of these as a technologist in my early days. And what I discovered is that many entrepreneurs were not only poor managers, but poorer still at making use of the people they would assemble. They were the first to typecast you into whatever role you filled and assume you didn’t know anything about anything else or, if you did, not more than them. Many of these companies are no longer around, and most didn’t even survive a third of the 14 years that Bain & Co. calculated as the average business life span. And in most of the later cases, I could predict that early on. I’ve found that many entrepreneurs are great at ideas, but poor at running a company, managing a team, selecting the best marketing plan, and choosing the right technology. Similarly, I’ve found that many career managers are poor at innovation. The successful entrepreneurs and successful managers are those that are able to identify talent and use that talent to their advantage – taking the best ideas that their team is able to have to offer versus just the best ideas they can come up with.

In summary, if you want to take your presence to the next level, Mr. Zook has some great ideas, but I’d start with your people first – they are the biggest assets you have and they are the ones who will figure out what customer assets, growth platforms, and capabilities you have at your disposal. (You might need to bring in a consultant to lead this initiative, as they will be able to look at your people more objectively, but the ultimate goal is to get to the point where the consulting team you bring in to do a project complements the skills your team already has. )

Everything You Know Is Wrong

Sorry if I burst your bubble, but the statement is true if we don’t put a time limit on it (and consider what we will learn between now and infinity). As noted in Shift Happens (on YouTube), it is estimated that over 1.5 exabytes of unique information was generated worldwide in 2006, that this is more information than what was generated in the previous 5,000 years, and that the amount of technical information is currently doubling every two years and predicted to be doubling every 72 hours by 2010!

That means that everything you think you know today, if it’s not already wrong, is likely to be wrong in the near future. Even everything the doctor knows today will eventually be outdated! That’s staggering. That’s why continual education and self improvement is critical.

More importantly, you have to be the one to take on this initiative – to update your knowledge and your skills – because the likeliness is that, at least if you live in North America, your company isn’t going to do it for you. Survey after survey finds that the amount of education and training that the average company in North America provides their employees is dismal, if they even provide any at all. Considering that the current rate of knowledge generation implies that everything you learn in first year of University is likely to be outdated by the time you graduate, this is dismal because by the time you’re in a job five years (assuming your job still exists in five years), if neither you nor your company made any effort to keep your skills up, every bit of technical information you know now will be outdated, as will all of the processes that were molded to use the technology that was leading edge five years ago.

That’s why Next Level Purchasing is my vendor of the week. Realizing that it was up to procurement professionals to keep their skills current, it was the first private training company to develop an affordable training program tailored to the individual who could take the courses on her own time, at her own pace, wherever she happened to be, and, if she desired, end up with a recognized industry certification (the SPSM – Senior Professional in Supply Management). Moreover, Next Level Purchasing recognizes the rapid shifts that are taking place in the industry and makes it a point to review and update the core certification courses every year*1 so that the knowledge you receive is always up to date. Furthermore, Next Level Purchasing also publishes articles and informative blog entries on important topics every week so that you can keep learning even after you’ve completed the certification and they’ve collected their fee. That’s a dedication to student and professional education that you can respect!

*1 It updates all of its courses on a regular basis, but not necessarily yearly if they are not core certification courses and the majority of the material is still relevant.

What Does the doctor Do? For Executives

Note: You might also want to review What Does the doctor Do … For You for specific, packaged, offerings. 

the doctor does Innovation for the Real World, whatever that happens to be. I know simply by the fact that you’re reading this blog – since readers of this blog are intelligent, driven, and keen on innovation – that you understood exactly what the doctor does after reading the initial post, What Does the doctor Do?. However, since there was no noticeable change in the number of e-mails I received after the post went up, I know that, unfortunately, some of your decision-making and / or check-signing executives, who still look to Dilbert’s Boss for guidance, did not. This post is for them.

To make it even easier to understand what the doctor does, I’ve broken out what it is that the the doctor can help an organization with by organization type. (The organization types have been segmented into Sourcing & Procurement Technology And/Or Services Provider, Consumer of Sourcing & Procurement Technology And/Or Services, and Conference Organizer / Professional Organization.)

Sourcing & Procurement Technology And/Or Services Provider

Technology

  • Analytics, Optimization, & Modeling
    the doctor has a Ph.D. in Computer Science and has particular expertise in optimization, analytics, and modeling. Thus, the doctor can definitely help you understand how you can improve upon your current offerings and what you need to do to get there.
  • Architecture
    the doctor used to work as a software architect and has a solid understanding of today’s technology. He can help you select the right architecture for your proposed solutions.
  • RoadMap & Planning
    the doctor can not only help you select the right problems to tackle (as discussed below) and the technologies, architectures, models, and algorithms that you can use to get where you want to go, but he can also help you optimize your roadmap, taking various constraints into account.
  • Research
    Ph.D. implies Research. Lots of it. the doctor has also held senior research roles in technology companies. Research is not a problem for the doctor. It’s the solution.

Business Development

  • Strategy & Positioning
    the doctor has an astute understanding of the sourcing and procurement market – the major players, the major offerings, and the major problems that need to be tackled. He is one of the few individuals uniquely qualified to help you select a strategy and development plan that will help you stand out from the competition and meet the current and emerging needs of sourcing and procurement organizations around the globe!
  • Messaging & Marketing Materials
    As you may have noticed, the doctor is pretty damn good at this writing-thing. White papers, position papers, etc. are no sweat for the doctor.
  • Growth Opportunity Identification
    the doctor can also help you identify potential growth opportunities through untapped markets, under-served customer segments, and partnership opportunities. Think Different is not just a slogan to the doctor – it’s a way of life! (the doctor can not think homogenously. It gives him a migraine to even try!)

Operations

  • Process Modeling & Improvement
    the doctor is good at modeling and optimization – period. (Maybe it’s because he despises any task that’s unproductive.) He can help you model, analyze, and optimize your business processes if there are improvements to be had (which there are the vast majority of the time). (Or is that the vast, vast majority of the time?)
  • State-of-the-Company Review
    If you really want to know how much the doctor can do for you, invest in a one-to-two week review (depending on company size and solution breadth) and have the doctor review the current state of your operations, marketing & positioning, technology, and solution offering from the viewpoint of someone who understands what best-in-class is (especially from a start-up and small-to-midsize company perspective). This is especially valuable if you are thinking about engaging the doctor for the mid-to-long term to help you with your technology and business development, as his productivity skyrockets once he has a solid understanding of where you are and where you want to be.
  • Management
    Running a start-up or small company on a day-to-day basis is challenging – especially if it’s your first time. If you think the management style employed by you and / or your management team may not be the most effective management style for your operation, the doctor may be able to help. the doctor has been involved with a large number of start-ups and small companies over the past decade and has seen way too many fail not for lack of a good solution (most had solutions which kicked major ass), but for lack of either good sales, good marketing and positioning, or good management – with the last issue being the most common. Let’s face it – management’s tough enough without a Board of Directors breathing down your back, media dissecting you under the microscope, and governments demanding more paperwork than you can keep up with. So, if you think your ship isn’t running on full steam, think it might be because of management, and are truly serious about finding out why and what you can do to fix it, contact the doctor. I’m happy to discuss with you how I might be able to help.

Consumer of Sourcing & Procurement Technology And/Or Services

Technology

  • Assessment
    the doctor can help you understand where you are on the technology curve and what you have to do to reach the leading edge (or, if you’re truly ambitious, the bleeding edge).
  • RoadMap
    the doctor can help you put together a roadmap and project plan to get where you need to go (after he’s done an assessment to help him understand where you are).
  • Selection
    the doctor can help you with specific technology evaluations along with the questions you should be asking the vendors and the answers you should be looking for.

Operations

  • Process Modeling & Improvement
    the doctor can help you model, review, analyze, and improve your sourcing & procurement processes and methodologies to make optimal use of best practices and today’s technology.
  • Initiative Management
    the doctor can help you manage your new sourcing and technology initiatives, acting as an innovation project manager.
  • Train-the-Trainer
    the doctor used to teach in academia and used to do industry training. the doctor can help you train your power users and star performers on new processes and technologies and bring them to the level they need to be at to disseminate that knowledge to the rest of the organization.

Conference Organizer / Professional Organization

Professional Services

  • Speaking
    the doctor used to be a University Professor and an academic – where you’re measured not by the quality of your work, but how many courses you teach, how many papers you publish and how many talks you give. It should go without saying that he’s had some experience here.
  • Positioning & Content Planning
    Membership stagnant? Event attendance down? Let the doctor help you understand what the emerging issues might be and what topics you could consider addressing to pique interest.

And more! As long as you’re truly focussed on innovation, the doctor is interested in how he can help you. So feel free to e-mail the doctor (<at> sourcinginnovation <dot> com) today to find out if the doctor can help you take it to the limit! (And yes, the doctor does understand what a limit is.)

the doctor Thinks Your Brand Is A Terrible Thing To Waste

I know that some of you, especially those of you that only read the intro and / or first chapter to books like Your Marketing Sucks, don’t really believe in the value of the brand – instead believing that what really matters is sales, and marketing efforts that directly impact sales. And if you work in a company where marketing does suck, I can understand why you might think this way. But, as hard to measure and intangible as brand is, it does have value – and for some companies, a lot of value. Do you think Coca Cola is the largest beverage company in the world because it has the best cola? Do you think Microsoft is the largest software company because it has the best operating system? Do you think GM is the largest auto company because they produce the best cars? If so, then I’ll have what you’re having!

A lot of people might prefer coca cola, but if you didn’t know what coca cola was and did a blind taste test with half a dozen no name colas, I doubt you’d get a 9 out of 10 cola consumers agree – or anywhere close to that. Microsoft hasn’t been able to solve basic multi-threading problems in its OS that mainframe systems, such as the Compatible Time Sharing System, solved as far back as 1962. And in terms of quality, I’m not alone in thinking Toyota and Honda have surpassed GM in quality. Lots of industry rankings agree.

But these companies are still #1 in their game – and all Fortune 100 (GM = 3, Microsoft = 49, Coca Cola*1 = 94). In each of these cases, it’s because of their brand. In Coca Cola’s case, it’s because it continues to have the best brand in the world, as per BusinessWeek’s Interbrand rankings. In Microsoft’s case, it’s because it continues to have the second best brand in the world. And in GM’s case, it’s because it was the best car brand for an entire generation – a generation that will likely be loyal to that car manufacturer until they die! That’s brand power.

Furthermore, there are ways to calculate the effect of “brand” value. It’s true that they all have disputable elements, but I think that any method that starts by deducting operating costs (including sales and marketing), taxes, and capital charges from projections based on five years of earnings and then uses standard methodologies (such as those employed by VC firms) to assess and subtract intangibles such as patent portfolio (and associated license revenues), such as what Interbrand does, is on the right track. If after all these deductions from revenue you still have a positive amount, it’s an extremely good bet that a large percentage of this is attributed to brand. In Coca Cola’s case – that’s 67B. In Microsoft’s, that’s 57B. And in Toyota’s and Honda’s case, the brands for the new car buying generation, that’s 28B and 17B, respectively. I don’t know about you, but I think that’s an awful lot of value – value which will dissipate, and quickly dissolve your current Fortune 500 status, if the value of your brand goes away.

And that’s precisely what will happen if you don’t properly manage your supply chain, as pointed out by a recent article in Industry Week that tells you to Strengthen Your Supply Chain, Protect Your Brand. Every recall that you’re associated with decreases the value of your brand at least a little in the eyes of a consumer*2. Every time your product is not on the shelf when someone wants to buy it, the value of your brand diminishes a little more. And every time you produce a product that is of poor quality your brand diminishes a little more still. Each of these issues negatively impacts your brand, and not one of them has anything to do with marketing. The sad reality is that even though marketing and advertising may still get most of the credit when it comes to brand building, it’s really supply chain that ultimately determines the value of the brand. Because if supply chain doesn’t deliver, any perceived value created by marketing evaporates like the morning dew on a hot summer day.

So no matter how good you think your supply chain is running, take another long, hard, look. Statistics say you can expect at least one major disruption in the next two years. And if you don’t figure out what that is now, it’s going to happen. And I wouldn’t want to be in your shoes when it does!

Remember, if it’s your brand, I don’t care what contracts you have in place with your suppliers – it’s still ultimately your problem! Passing the buck won’t save your brand – or your ass when the CEO has to take drastic action in an attempt to satisfy shareholders. That’s why I also talk about the larger context of visibility and supply chain management on this blog – so that you know where strategic sourcing fits in the larger picture of supply chain management and have the knowledge you need to do it right. So next time you think you don’t need to read one of my longer essays on the subject, think twice. There might come a day where You might just find that you’re glad you did.

*1 I know Pepsi is 63, but it’s not just a soft-drink company anymore – it’s a snack food company. This move, and associated acquisitions, which started back in 2003-2004 may have moved it up the Fortune 500 list relative to Coca Cola, but Coca Cola is still the largest from a pure soft drink perspective, as well as having the best brand in the world, as per the Business Week Top 100 Brands.
*2If you happen to be a food producer or provider and people became very ill and / or died because of a supply chain failure, your brand value will be impacted very significantly.