Category Archives: Knowledge Management

If You Still Don’t Think We Need a Leonardo da Vinci …

… then take a look at this recent Harvard Business Review blog post on “the decade in business ideas”. I found it thoroughly depressing. Let’s take a close look at the most influential management ideas of the millennium (so far):

  • Shareholder Value
    Yes, businesses exist to generate a return for their shareholders and yes they should, but there’s more to value than profit and there’s more to business than just creating profit. As the article points out, the pursuit of shareholder value eclipsed all and pushed the consideration of stock price effects deep into operational decision making, which is precisely where it does not belong. As Jack Welch proclaimed, “Shareholder value is a result, not a strategy.”
  • IT as a Utility
    IT may be, and in many cases probably should be, a service, but it’s not a utility in the traditional sense by any means. You just can’t equate ERP and Data Analysis with electricity and water. One powers your equipment, one powers your decisions. One refreshes your employees, the other refreshes your business. Saying IT is a utility is buying into the BS that BI can be used to automate business decisions. It can’t. Period.
  • The Customer Chorus
    Just because new, social network, technology has made it easier for customers to provide feedback in droves, this doesn’t mean that you should listen to each and every one. Just because every customer and his dog can describe their problems doesn’t mean that they know what the right solution is. Fact of the matter is, they usually don’t. And if you try to make everyone happy, you’ll end up pleasing no one. You have to pick a market, which is likely becoming more niche by the day, and go after it.
  • The Creative Organization
    Creativity is good, to a point, but only to a point. It’s one thing to encourage creativity when trying to innovate a new product, but another to encourage creativity across the board in marketing, sales, operations, etc. You see, not every new idea will work. In fact, many will fail. And while failures are good (as long as you learn from them), too many at once will take down your business. You have to make changes one by one, keep the ones that work, and replace the ones that don’t.
  • Behavioural Economics
    Economics studies the production, distribution, and consumption of goods and services and behavioural economics focusses on the selfishness of the economic agents that produce, distribute, and consume the goods. Now while it’s important to understand your audience, you can’t assume that your entire market is selfish … just like you can’t assume that your entire market is rational.
  • High Potentials
    Yes, high potential leaders are important, but so are leaders who have reached their potential and, more importantly so are good, talented employees. One man does not make a successful multinational.
  • Competing on Analytics
    What’s wrong with this? Especially since I proclaim the importance of good analytics on a daily basis? Well, the majority of firms are not competing on analytics. They’re competing on automatically generated reports from automatically “cleansed” and “enhanced” data from automatically generated “cubes” that are automatically generated from multiple “data feeds” that are never, ever, ever reviewed by a human. As a result, each stage introduces, propagates, and magnifies the error until a thoroughly inaccurate and useless report is produced. Firms should be competing on intelligence, backed up by analytics hand-driven by intelligent, educated, users.
  • Enterprise Risk Management
    Okay, this one isn’t too bad. Risks are multiplying, and you have to be prepared for them, but instead of trying to identify and manage risks after making a operational decision, wouldn’t it be a novel idea to identify the risks associated with each option before making the decision (and then choosing the one with the least, or most manageable, risk)? Or is that just too crazy?
  • Open Source
    Okay, this one isn’t bad either, but unless you’re planning to be a service company, you’re not going to even make enough profit to stay in business, yet alone achieve the “shareholder value” that everyone is so relentlessly pursuing.
  • Going Private
    This is one of the three, straight-up, good ones in the mix. It lets you get away from the relentless, and meaningless, Wall Street focus on quarterly earnings (which has killed long-term planning and the research labs that made North America great after WWII and made the US economy the most significant global economy by far for decades) and get back to business. However, it’s not really a “management idea” (as it’s a business structure).
  • Reverse Innovation
    This is the second of the three, straight-up, good ones in the mix. No reason innovation can’t come from foreign markets. However, this isn’t much of a “management idea” either (as it’s a form of innovation).
  • Sustainability
    This is the last of the three, straight-up, good ones in the mix. And while it’s not really a “management idea” either, it’s an important “management goal” because, let’s face it, you can’t make profits tomorrow if there is no tomorrow.

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Transfer Knowledge to Reduce Risk

Editor’s Note: This post is from regular contributor Norman Katz, Sourcing Innovation’s resident expert on supply chain fraud and supply chain risk. Catch up on his column in the archives.

As reported on August 15, 2009 in my local South Florida newspaper, two New Jersey police officers in their 20’s failed to recognize singer-songwriter Bob Dylan. Mr. Dylan was wondering around a low-income neighborhood when he was spotted by someone who apparently called the police to report a suspicious character. It’s important to note that Mr. Dylan did not have identification on him. The police officers escorted Mr. Dylan to the resort where tour management confirmed his identification.

[Editor’s note: People worry about a return to 1984, but this smacks of a return to 1963. For those of you old enough to remember, it’s alright, ma.]

Around this time I attended a business event and saw some folks I knew from my networking who invited me to join their group. During our conversation I made a reference to the classic rock band Deep Purple (one of my favorites) as we were discussing colors and shades for use in corporate marketing. A young lady in the group, I have no doubt in her 20’s, looked puzzled and said she was unfamiliar with this band. I asked her if she knew the song Smoke On The Water and did my best to hum the famous guitar riff. She confessed she still did not recognize the tune which is understandable if you’ve ever heard me attempt anything musical, though I suspect this was more related to a generational gap. (I did receive a follow-up e-mail from her a few days later stating that she was familiar with the riff but not the band behind it. She may have followed my suggestion and did a YouTube(R) lookup.)

More so in lean economic times companies have a habit of getting rid of employees with deep knowledge and replacing them with younger less-experienced and less-knowledgeable people. This is not a very wise decision when reliance on such knowledge is what separates the company from its competitors as would be the case in most companies.

(One only need look at the demise of Circuit City as an example: experienced floor sales people were let go to bring in a younger less-expensive sales force which failed to provide the same level of customer service and left customers taking their money elsewhere.)

Typical when experienced employees are (suddenly) replaced, there is a failure to transfer critical knowledge. Older employees must understand that they have a responsibility to their employer that goes beyond their own interest of self-preservation: Unless you work for yourself your knowledge belongs to your employer and they have every right to require that you document what you know and provide training to those less-experienced. Good sustainability and risk management practices require this and Sarbanes-Oxley compliance demands it.

Studies have shown that Millenials (aka, Generation Y, born between 1978 and 1989 depending on whose definition you look at) tend to be more result-oriented than process-oriented. This can be problematic in regulated enterprises and public companies. This can run counter to Lean thinking and Six Sigma methodologies that look to process improvements for efficiency. Entities such as ISO (International Standards Organization) rely on documented processes for their certifications.

Is it any wonder why Gen Y is so results oriented when knowledge can be so difficult to acquire and job performance tends to be based on results and not how those results were achieved? It’s important for enterprises to explain and show why the process matters and encourage process improvements that do not cross the line of regulatory or certification requirements.

Classic rock may one day face its own extinction in one form or another and the world will be a sadder place the day the music truly dies.

Enterprises have a more immediate need to and face a greater crisis in the short-term due to knowledge gaps. Risk is reduced when knowledge is transferred. Enterprises should work towards closing generational gaps by creating teams that use the best characteristics of its generational members. Each generation needs to respect the other and acknowledge the benefits each brings to the table. Torches will forever be passed and this does not require that anyone get burned in the process.

Norman Katz, Katzscan

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Maximize Your Supply Management Learning With All Of The Free Resources Available To You

As a regular reader of the Sourcing Innovation blog, I know you’re a consummate professional always on the lookout for ways to enhance your capabilities and advance your career. One of the best ways to do this is to take advantage of the wide range of free resources that are available to you. Today’s World Wide Web, which has enabled an unprecedented level of information sharing since it’s introduction by Tim Berners Lee in 1990, contains a wide array of resources that you can use to increase your knowledge and supply management skill sets. In this article I will introduce you to some of these and the advantages they have to offer.

Free Newsletters

While some free newsletters amount to nothing more than spam marketing by the sender who wants to sell you something (that you may or may not need), others can be packed with informative articles that can help you expand your knowledge base. There are a number of good, informative, newsletters in this space. Some of the ones that I’ve found to be very informative include Paladin’s Checkmate News, Aptium Global’s GunPowder, and Denali’s e-Whitepaper
Newsletter. You can find more in the growing newsletter directory on the resource site.

Free Whitepapers

Free Whitepapers from independent analyst firms and supply chain bloggers can give you an unbiased educational view into important issues and innovative technologies. Aberdeen makes many of its benchmark studies freely available for a limited time, and both Spend Matters’ Perspectives and Sourcing Innovation Illuminations are free as well. Plus, Charles Dominick has made it a weekly wont to review some of the better whitepapers that are freely available in his Whitepaper Wednesdays on the Purchasing Certification Blog.

Leading Blogs

Bloggers delight in providing you with free information, and in addition to Sourcing Innovation, Spend Matters, Supply Excellence, and Deal Architect have deep content archives of over a thousand deeply informative posts that address best practices, technologies, and innovative developments going back three, four, and even five years. Plus, you can find over 100 supply chain and related enterprise blogs indexed in the Supply Chain Blog Directory on the resource site. (Just remember that not all of them will publish as regularly as the aforementioned blogs.)

Web 2.0 Wikis and Social Networks

As a regular reader of this blog, you’re probably familiar with Facebook and the Next Level Purchasing Facebook group in addition to the new Sourcing Innovation Linked-In group. But that’s just the tip of the iceberg.

The e-Sourcing Wiki, the Safe Sourcing Wiki, and the WikiSCM are jammed packed with dozens of white-papers and hundreds of entries on a wide variety of subjects that are sure to increase your supply management awareness.

In addition to the univerally known Facebook, we have the supply chain social networks that include iProcurement.org, the SCM Profesionals group, the Buyers Meeting Point, and the Shared Services Outsourcing Network. On these networks you can interact with, ask questions of, learn from, and even educate your peers anytime, anywhere. These wikis and communities are indexed, with others, on the Resource Site.

Webinars and Podcasts

Educational webinars and podcasts can be a great supplement to the deep content that you find on leading blogs like Sourcing Innovation and Supply Excellence. That’s why the Sourcing Innovation Supply Chain Resource Site indexes over sixty archived podcasts and three hundred and twenty archived webinars that you can access at your leisure to dive into a wide variety of topics, all indexed and searchable from the Search page.

Spend Matters on SCM: Data, Data Everywhere …

This is part three of a three-part series.

Two days ago, we overviewed the key points that Jason “The Prophet” Bush, the Spend Master of Spend Matters, is making in his annual soapbox road tour, including his five — new and improved — predictions for the procurement world of tomorrow. Yesterday we discussed what it means if he’s right. Today we focus on his response to my question that put him on the spot.

A few of the presentations at the recent 6th International Symposium on Supply Chain Management, sponsored by PMAC and the DeGroote School of Business at McMaster University, were about ERP implementations and how, done right they can save you time, money, and paper-based nightmares. But for every success story bloggers like Jason and I have ever heard, we can recount twice as many failures, including fiascos that have cost organizations hundreds of millions of dollars and put more than a couple out of business. (Some of the greatest supply chain failures of all time, including the collapse of more than one Billion dollar enterprise, can be blamed on bad ERP implementations.) So I had to ask, what’s the right solution: ERP or Best-of-Breed?

But in yet another instance of blogger brilliance when pinned to the wall, he managed to sidestep the question entirely and point out, consistent with a couple of points in his presentation, that it’s not about the application … it’s about the information … and the future will be applications that enable the acquisition, access, and and application of information, which makes the ERP vs. BoB question irrelevant. But what are you to do if you’re an average organization with …

Data, data, every where
And all the tables burst
Data, data, every where
It can not get much worse

… and a Bloomberg terminal for sourcing is still a thing from an uncertain future?

You need an answer. And you need it today. Because you might not be around tomorrow if you make the wrong decision today.

So what’s the answer? Hard to say … it still largely depends on your specific organizational needs, and that’s likely why the question was sidestepped. However, I believe it’s still possible to provide some starting guidance which will at least lead you to ask the right questions and, if you are unable to come up with the right answers, call in some expert advice (and yes, this is one area where the doctor can help you).

So what does the doctor recommend?

It depends on whether or not you already have an ERP. If you do, you keep the core and use it for what’s it good for — data warehousing and transactional processing. Most ERPs were designed to be transactional powerhouses … and that’s probably why so few are good at supporting the best of breed strategic applications of today … and they should be used simply as the transaction processing engines they are. Then, you find compatible best-of-breed applications to support your strategic sourcing and decision making functions, such as true spend analysis, decision optimization, and demand forecasting, and utilize their strategic strengths to complement the tactical strengths of the ERP backbone. You also audit your ERP implementation and make sure that you don’t buy, or, in many cases, maintain, modules you aren’t using and that you don’t buy more licenses until you are sure you are using all the licenses you have. (The average organization has roughly 30% more user licenses than users actually using the system. Add this to the maintenance cost of blindly paying support for modules that were thrown in as part of a “package deal” that you never use, and the costs add up quickly … and significantly. And if you don’t believe me, ask Vinnie.)

If you don’t have an ERP, you figure out whether you can get away with a good data store and a functional ecosystem of best-of-breed products that can be integrated rather seamlessly using standard XML. In other words, can you start with a solid, well documented, standard schema relational database, like Oracle, and then build your perfect supply chain support platform on top of it by integrating the right sourcing, procurement, and supply chain management solutions? I say solid, standard, and well-documented because it clarifies why SAP is rarely, if ever, the doctor‘s first recommendation. Oracle exposes it’s schema. As a rule, SAP does not. This is very important if you need to do custom development, as it’s easier to develop off of a standard, documented, relational database whose base schema rarely changes from version to version as compared to a system where the only data access is through APIs, which are constantly evolving, and where the schema is subject to change at any time. This might be meaningless to you as a user, but as a former enterprise system architect, it’s VERY meaningful. Does this mean I’d recommend Oracle iProcurement over SAP SRM? Not necessarily. It’s a good transaction engine, and it has some good features, but it all boils down to whether it supports your processes and best-practices. If it does, use iProcurement. If not, use the underlying high-performance Oracle RDB and transaction engine and stick a best-of-breed solution, like Vinimaya, on top of it.

And make sure to consult an expert with supply chain and supply chain technology expertise before finalizing your solution. Sometimes your first-choice products will play nice together, sometimes they won’t, and sometimes your second-choice products have some benefits that magnify when they are used in conjunction and will give you a better overall solution. The reality is, today, the only thing I can tell you for sure is that there is no one-size-fits-all solution and no vendor, SAP and Oracle included, that can meet your every need. (That being said, there are some independent consultants, not tied to ay product, that can help you piece together the right solution for you and you should take advantage of them.)

A Chief Executive’s Advice for Performance Improvement

In “Turnaround Time: Ways to Jump Out of a Slump”, Mark Gottfredson and Steve Schaubert wrote a remarkably perceptive article that outlined a clear and simple process for navigating your way out of a downturn:

  1. Diagnose the “Point of Departure”, or where your business went wrong
  2. Identify the “Point of Arrival”, or where your business needs to be at the end of a period of time to be successful again
  3. Define a small number of key initiatives that will sequentially get you from the “point of departure” to the “point of arrival”

Ok, maybe it’s not so simple as many business have a hard time identifying, at least internally, where they went wrong, have a harder time figuring out what will make them successful, and often have the hardest time of all identifying that sequence of innovative initiatives that will take them from here to there. However, the article does note that when businesses start to fail for performance reasons, the vast majority of the time it is because they violate one of the following four fundamental laws that, despite not being built on an economic theory, do capture, in an almost eery way, some fundamental truths of business:

  • Costs and Prices ALWAYS Decline
    It is a basic law that inflation-adjusted costs and prices in nearly every competitive industry decline over time. Raw material costs going up? Then you have to find an innovative method of production to keep costs done, or a way to make the product from an alternative, cheaper, material, or a way to make a higher quality product that carries more (perceived) intrinsic value. (Successful cell phone manufacturers live and die by the latter.)
  • Competitive Position Determines Your Options
    Leaders are always in a good position to gain more market share through investment or to raise industry standards in quality, service, and innovation. Followers are stuck with doing their best to keep up until they hit upon an aggressive innovation strategy that can move them into a leadership position.
  • Customers and Profit Pools DON’T Stand Still
    The desires of your customers will change over time, as will the amount of disposable income they have. You need to know what your most profitable customer segment is and meet their needs.
  • Simplicity gets Results
    In addition to simplifying your processes, you must also simplify your strategy, organization, breadth of product line, and, most important, usability. Apple understands this well.

The authors also give you a good working definition of “point of arrival”. Specifically, it means a set of defined, numerically specific goals that can be accomplished in just two or three years. In other words, don’t shoot for the moon if you haven’t even successfully launched a rocket into space yet. Although the goals should be bold and compelling, they must be realistic. No amount of motivational speaking will get your employees behind something they know is fundamentally impossible.

Finally, they give you some advice on how to select the right initiatives to get you there. Specifically, select ones with measurable metrics that address the following characteristics of the four laws:

  • Law 1: Costs and Prices Always Decline
    • Cost/Price Experience Curve
    • Relative Cost Position
    • Product-Line Profitability
  • Law 2: Competitive Position Determines Your Options
    • ROA/RMS
    • Market Share Trends
    • Capability Assets and Gaps
  • Law 3: Customers and Profit Pools Don’t Stand Still
    • Customer Segments and Trends
    • Customer Loyalty
    • Profit Pool Migrations
  • Law 4: Simplicity Gets Results
    • Product & Service Complexity
    • Organizational & Decision Making Complexity
    • Process Complexity