Category Archives: Market Intelligence
Strategy is Not Always an Academic Pursuit
And a consideration of market leading companies should put this into perspective. the doctor was reminded of this while reading a recent piece over on the HBR Blogs on “Apple Versus the Strategy Professors” where the author noted that the how of Apple’s fall (or continued rise) will hinge on strategy — because strategy has driven its success.
In the article, the author referenced Michael Porter, famous for his five force analysis, W. Chan Kim and Renee Mauborgne, and their blue oceans, Clayton Christensen, and his disruption model, Michael Raynor, and his successful growth strategies (co-devised with Clayton Christensen), Carl Shapiro and Hal Varian, and their information economy, and Amar Bhide, and his hustle. He then illustrated how Apple has drawn on the teachings of all of these professors (of the Harvard Business School, INSEAD, UC Berkeley, and Tufts) to achieve their transformation and market leadership of the last decade.
It does a great job of demonstrating how strategy is key to success, and, more importantly, how strategy has to be taken beyond the classroom to be effective. Apple didn’t subscribe to any one philosophy or methodology, it borrowed from the teachings of all of the greatest management and strategy thinkers of our time and incorporated those that made sense. But it didn’t do so randomly.
What Apple really did, and what you need to do if you want to ensure consumer success, is figure out what your customers need and give it to them before they have figured out what they need. It took note of what it could do, and then searched for products that would fulfill what people wanted in blue oceans. For example, going back to the iPod, it realized that consumers wanted a portable music device that was easy to use AND easy to manage.
At the time, the mp3 players available were few, used different, proprietary operating systems, and were difficult to use. Furthermore, even if you weren’t a computer geek, getting music on and off was a pain in the backside, and the whole experience — compared to popping a cassette into a Sony Walkman — was unpleasant. Apple realized that people needed an end-to-end solution — a great device, a great software tool for managing the device, and, equally important, an easy way to acquire legally licensed music in the appropriate format. Hence, it developed, and released, in order, iTunes for easy mp3 (and device) management, the iPod, and, finally, the iTunes Store that negated the need to get music from third parties. It was an end-to-end solution that even the most novice of computer users could master — and it was cool. Market dominance was just a matter of time.
While your customer might not be able to tell you what they want when you ask, they know it when the see it and, if you listen, can give you lots of hints. For example, Apple’s future customers were saying things like: “I want my music on the go.”, “This portable music player is cr@p., and How do I manage a library when all I can see is 1 song at a time.” “I can’t figure out how to get the music files I buy from Mperia onto my mp3 player.” All they had to do was listen closely, come up with an entirely new solution that met all the most common wants, and find a way to make it desirable (cool, sexy, fun, etc.). Yes, that’s a tall order — but not that tall when you think about it.
And when you figure out not only what your customers want, but what you are going to give them to make them want your product over the competition, that’s when your supply chain can really give you an edge by getting involved early in the NPD (new product design) effort and finding creative and innovative ways to keep costs down, quality up, and value-add at the right level for maximum reward.
What is Necessary to Get a Grip on Risk before You Select a Supplier for Outsourcing?
Outsourcing ain’t going away. The best we can hope for is near-sourcing, but that will depend on the ability to find the needed expertise and scale at competitive rates (at least until oil and transport across large distances becomes so expensive that labour rates don’t matter). So we need a way to select a supplier that won’t increase risk to ridiculous levels and almost guarantee that, at some point, our supply chain will come to a grinding halt when the supplier goes bankrupt, gets cutoff from its supplier, or gets cut off from us.
One way is to get an assessment of risk for the supplier, the city the supplier is located in, and the country the city is located in, build a composite picture, and determine if there is any serious risk of supplier failure, inbound supply chain failure or inaccessibility, or outbound supply chain failure or inaccessibility. But where do we get that risk assessment? And how do we know it’s the right one for us?
Where is external to the organization. We go to an organization like D&B, Resilinc, or Neo Group which has been collecting data on the supplier, city, and country and get their report. But how do we know we’re getting the right report? This is the toughie.
First of all, are they using the right risk model? If you refer back to the World Economic Forum’s annual Global Risks report, you see that, at the very least, you have to consider societal, environmental, geopolitical, economic, and technological factors at the region level, but since you will be conducting business with a supplier at a physical location, business, legal/regulatory, infrastructure, and local quality of life will also play a role. When you start talking about suppliers, you need to look at their financial stability, associations (clients/partners), governance, workforce, and (service) innovation (leadership) capabilities.
But how do you define each of these in a way that can be measured in a standard way? And will such definitions incorporate all that is relevant to your organization? For example, when we’re talking economic we’re talking inflation, currency, fiscal deficit, GDP growth, stock market performance, reserves, etc. However, when we’re talking supplier service capability, we’re talking workforce education level, tools, language proficiency, incentives, etc.
It’s a very tough question. And often what matters is category specific. I’ve reached out to a couple of the big providers of Risk Monitoring solutions. Let’s see if any take me up and provide their viewpoint.
Blue Friday
Apparently this Monday was Blue Monday, the most depressing day of the year, as determined by the following non-sensical calculation:
[W + D -d]TQ
|
where d, D, M, Na, and TQ are a bunch of random variables arbitrarily considered to be correlated to mood.
But if you really want to be depressed, consider the following stats:
- 64% of companies do not have a person responsible for managing supply chain risk, down a whopping 1% from 2008, but 80% of companies are vulnerable to a major supply chain disruption!
- companies without e-Sourcing and e-Procurement solutions are over spending by 170 Million on every 1.17 Billion of spend (a rate of 14.5%), and when you consider that less than half of companies out there have either solution, less than 25% have both!
- and up to 17 Million of this overspend is due to over payments, duplicate payments, missed rebates, missed dicounts, lost credits, and fraud because they don’t even have a decent e-Payment / Recovery solution in place!
In short, chances are that your organizaton is grossly overspending, paying your richest suppliers twice (while bankrupting your poorest suppliers with your 200 day payment terms), and at risk of a major supply disruption that will financially ruin you because you won’t see it coming! That’s a real reason to be blue.
Let’s hope this is the year you stop sitting on that cash reserve and:
- implement integrated end-to-end e-Sourcing and e-Procurement
- put a solid monitoring and recovery solution in place to make sure every negotiated cent of savings is captured
- hire a risk manager and get a grip on risk so you can identify, and if needed, source around it before a disruption costs you every dime of savings you negotiated over the past three years and
- actually get some training on modern processes and technologies so you implement and utilize the new systems properly.
Have We Reached the Supply Chain Plateau? Part II
Yesterday, we noted that Lora Cecere discovered, after reviewing balance sheets of process companies over the last decade, that the average process manufacturing company has reached a plateau in supply chain performance. And, moreover, that the majority of progress improvements over the last decade came from lengthening days of payables and squeezing suppliers. That’s Not Progress!
So have we reached the supply chain plateau? SI doesn’t think we have, but agrees that growth has stalled. But why has it stalled?
Lora conjectures that while complexity has increased, many well-intentioned executives lack the understanding of the supply chain’s potential or how to manage the supply chain as a system. So, while individual projects are getting great results, departments as a whole are not performing as well, and being managed even worse. SI has to agree.
Why? One hypothesis, as implied in Lora’s pot, is supply chain technology, and ERP (and forecasting) systems in particular. As Lora notes, the current state of supply chain technologies is such that, in an average company, the greatest gaps are in the areas of the greatest importance. Gaps in supply chain planning are high, and the ability to use the data from ERP and order management remains a gap.
This is true. And SI has to agree with Lora when she says that there is a discontinuity and we need to declare the APS and ERP systems of the 1990s obsolete and start again. But SI doesn’t think this is the core problem. The core problem is manpower capability. Not only do most executives not understand the supply chain from a holistic perspective, treating each step as its own function (and disassociating NPD/Design from Sourcing (a manufactured product) from Logistics and Distribution, when they all have to be examine and managed as part of an integrated supply chain, but neither do the function managers. Moreover, these function managers often do not even understand the best practices associated with their job.
Why is there a manpower capability issue? A lack of education. These people generally don’t leave college or university with a solid supply chain background, as few institutions offer such programs, and they haven’t been properly trained. Year after year training budgets are slashed and leaders are run ragged fighting fires and dealing with tactical issues instead of being given time to focus on long-term strategy, how the supply chain works, and how it should work for optimal performance and optimal corporate gain. Where supply chain is concerned, not only do we have the reality that you can’t manage what you don’t understand, but you can’t even manipulate what you don’t understand with any level of success. People have to be educated and trained at all levels of the function, and until that happens, up-to-date technology or not, there is not going to be any progress.
