Do you Know 25 year old Xuhua Zhou? Maybe you Should!!

ChainXuhua is a dropout from UCLA (PhD program) and has caused Lumber Liquidator’s (“LL”) to drop 2/3 – YES, 2/3 of its market cap (from $3bn to $1 bn) within a year!  He noticed a significant increase in their profitability compared to the industry, and in investigating why, discovered that their Supply Chain had a major risk exposure – mainly that LL had cut their supplier prices by buying flooring that violated safety standards – too much formaldehyde.  In addition to the loss of $2bn in valuation, LL was just featured on 60 minutes, the Senate has launched investigations, class action suits are being filed by investors AND consumers and their market share is diving….and the troubles have just started.  Ultimate survival of LL may be at stake.

For those of you who follow our research or are clients or alumni will remember our initially much aligned series called “Strategic Sourcing is Dead” and if not, it should be from a few years ago when we started preaching that the relentless cost focus of sourcing efforts was actually destroying value and Supply Chain/Sourcing organizations were headed for extinction unless they changed.  This is another example of a long list of organizations that continue to prove our point – and we wish we had been wrong.

Those that look at Supply Chain risk for their organizations should definitely take note of this new phenomenon – professional short sellers who are looking at your supply chain today, identifying risks that you may or may not know of and then exploiting those risks where it can pose an existential threat to your company- unless you are better at identifying and managing those risks.  Meet Whitney Tilson, founder of Kase Capital Management, who found Xuhua’s research, took it public and to 60 minutes while going short on the stock in anticipation of a major drop in share prices.  He has already made a killing.

While LL is trying to do as much damage control as possible, in the world of PR and reputational risk, if you are defending yourself and attacking the testing methodology used by investigators, defending your companies actions by saying you meet the standards (when you clearly don’t) and challenging the accuracy of what your suppliers are saying on TV – it’s a lost cause.

These types of risks in offshore outsourcing (Apple-Bloomberg) have been known for a long time (Toyota-USA Today) and therefore even if the market buys LL’s explanation that it did not know about this (despite suppliers saying that LL knew about it), the market is likely to still hold LL totally accountable and responsible.  The suppliers were clearly not meeting safety standards yet stamping the product as if they did meet standards. 

The discussion that was started about pursuing a low cost strategy is still valid The Next Practices  version of sourcing must identify the real Value Drivers of the company and then relentlessly make sure that the executives support this fundamentally different version of the sourcing process.  The days of putting undue pressure on suppliers to meet totally artificial “should cost” targets are long gone and the sooner we as a profession realize it, the better  our companies will be.  This fundamental shift has to occur and has to be Adopted by the organization or elsewe will continue to expose our companies to the types of existential threats that we cannot imagine.  Of course, this shift also requires a shift in the types of competencies we have but if you are a reader of this blog, you already knew that :-) .

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I Wish I had a Dollar for Every. . . . .

 genieidea. . .  recommendation that sits on a shelf, suggestion that is not acted upon, training dollar that has no return on investment, report generated that is never looked at, project that is started but never implemented or adopted.  My guess is that each and every person reading this has the same wish.  We participate in studies, surveys, trainings, brainstorming / feedback/ crowdsourcing sessions, and walk away, rolling our eyes because we know that it was a complete waste of time and going nowhere.

An article in Harvard Business Review entitled, “Don’t Ask for New Ideas if You’re Not Ready to Act on Them”  points out that many companies encourage people to contribute new ideas but then have no way to process them on the back end.  We find this to be the case with many, many of our client organizations.  They take the time to engage employees through surveys, contests or brainstorming sessions and then never do anything with the suggestions.  This leaves many employees feeling like their time has been wasted or worse – they are cynical about participating in any future exercises.  The initial intent of “engagement” is great but the lack of planning and follow-through can and will negate any good will that was created.

Now let’s take these examples and apply them to how we operate with our business partners, either internal or external, to examine whether we are guilty of the same behavior.  Have you ever surveyed your “customers” but never followed up with changes, let alone even a summary of the results?  Have you ever requested information or input from your suppliers, but did not take the time to plan what you were going to do with it once it was received.  Every time we do this, we are leaving behind a frustrated partner and one that will hesitate the next time they are presented with a similar request.

So, what do we do about it?  Start with PLANNING – that dreaded process that most people think they can do without, until they realize they can’t.    Before you get started:

  • articulate the problem you are trying to solve or the opportunity you are trying to pursue
  • determine the key questions you need answered to help you solve your problem or pursue your opportunity
  • determine the information you will need  to answer your key questions
  • determine  what you are going to do with the information you gather
  • provide a template to ensure that the information you are getting back can be easily sifted through and analyzed
  • determine how you want to keep your partners informed so they feel that their input was valued and considered (even it does not end up being acted upon)
  • Once you gather input from your partners USE IT

The same process can be applied to other data/information gathering exercises as well.  Let’s take training for example.  Whether you are sending your employees to training or attending a session yourself,  take some time to PLAN what you will do with what you have learnedIf you don’t have a PLAN for utilization, don’t do it.  No utilization = a negative ROI (X amount of cost with no corresponding benefit).  The same can be said for any exercise we go through that does not have a utilization / adoption plan.  In other words . . . . . I Wish I had a Dollar for Every  . . .  because that is the only Value I will see.

Let us know what you think and join in the conversation.

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Dalip Raheja and Anne Kohler Honored by Supply & Demand Chain Executive

ProToKnow_logo_watermark.548eec5ac0849.54ebcf82466c0The Mpower Group is in the business of Mpowering our clients to accelerate superior business outcomes by unleashing the full potential of their Strategic Sourcing / Supply Chain organizations. We are a global consulting firm dedicated to serving the needs of Fortune 500 Strategic Sourcing & Supply Chain organizations.

Dalip Raheja (President and CEO) and Anne Kohler (EVP and COO) have been honored by Supply & Demand Chain Executive magazine as 2015 Provider Pros to Know. This is the 9th  time Anne and Dalip have been listed.

As founding partners of The Mpower Group (TMG), Anne and Dalip have extensive experience in Strategic Sourcing and  Supply Chain Management, Competency Based Talent Management and AcceleratingStrategic Transformations. Both are known as thought leaders within the community and are active speakers and writers. Their efforts through TMG have helped make the sourcing and supply chain organizations of Fortune 500 companies a competitive advantage  and have resulted in multimillion dollar savings.  Their relentless focus on shifting from TCO to Value, Talent Development and Adoption of Solutions  continues to position them as developers of Next Practices, not just Best Practices.

“The Provider Pros to Know is a listing of individuals from a software firm or service provider, consultancy or academia who have helped their Supply Chain clients or the Supply Chain community at large prepare to meet the significant challenges in the year ahead. ”-Editorial Staff,Supply & Demand Chain Executive.

About Supply & Demand Chain Executive

Supply & Demand Chain Executive is the executive’s user manual for successful supply and demand chain transformation, utilizing hard-hitting analysis, viewpoints and unbiased case studies to steer executives and supply management professionals through the complicated, yet critical, world of supply and demand chain enablement to gain competitive advantage. Visit them at www.SDCExec.com.

 About The Mpower Group

The Mpower Group is in the business of Mpowering our clients to accelerate superior business outcomes by unleashing the full potential of their Strategic Sourcing / Supply Chain organizations. We are a global consulting firm dedicated to serving the needs of Fortune 500 Strategic Sourcing & Supply Chain organizations. We help our clients by:

  • Accelerating Strategic Transformation: Rapidly move client organizations along The Mpower Group’s Strategic Sourcing & Supply Chain Maturity Model to peak performance levels.
  • Building Exceptional Talent: Advance the competencies of our clients’ Sourcing and Supply Chain professionals to World-Class performance levels.
  • Maximizing Deal Value: Help clients realize full value from large and/or complex deals by focusing on A) Total Cost of Ownership before and during negotiations, and B) a sustainable implementation once the deal has been reached.

The Mpower Group is a World-Class Strategic Sourcing & Supply Chain consultancy that delivers big results with a boutique feel. We are Woman and Minority owned.

 For additional information about The Mpower Group please visit www.thempowergroup.com.

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Don’t Waste Any More Money on Training in 2015

trainingdollarsIt’s more than just a play on words – if you ask any senior leader what they are getting from their training investments, you will get a very frustrated response.  Yet at this time of the year, everyone is trying to figure out where to spend their training dollars.  I have a simple piece of advice – save your money and spend it on something else-unless you know the answers to the following Key Questions.  And if you are an alumnus of Strategic Sourcing/Supply Chain “U”, these will look very familiar…

What competencies do you need to meet your objectives? You would be surprised at how many organizations waste money on training without understanding the causal link between their organizational competencies and their ability to meet their objectives.  Hint:  If most of your training is in negotiating better deals with suppliers you may want to think again.

When will you need those competencies?  Remember that there is a significant lead time involved in developing competencies.  You cannot send someone to a cross cultural orientation class and send them off to India to develop a new supply base there.  So, if you need that Indian supply base in two years, it may be time to started developing those competencies now.

Do you know if you are going to “rent”, “build” or “rent to build” (TMG preferred model)? You must identify your critical competency gaps and have an overall strategy for each of them.  Are you going to hire consultants(rent), are you going to train people and provide them with the infrastructure-tools, processes, templates etc.(build) or are you going to have a hybrid model where your consultants are charged to help you deliver results as well as build internal capability.

Are you focused on just the functional competencies?   A trap that many organizations fall into is to focus on the “technical” or “functional” competencies not realizing that the Strategic (erstwhile soft skills) are actually far more critical and have a much more causal relationship with meeting objectives.

Are you clear that training does not deliver competencies, only Adoption does?  All research points to the fact that unless adults immediately apply (adopt) what they learn, retention drops to zero very quickly.  Additionally, any value to the organization from the new skills only occurs if and when the new skills are applied.  While both those points may seem very obvious, they are almost always missing from most training programs. TMG alumni will remember this as the Adoption Bridge.  Do you have an Adoption plan that will convert training into competencies?

Are you focused on organizational competencies – not just individual?  Many organizations send people off to training as individuals or in small groups and wait for the Organizational competency to rise.  Organizational competency is a factor of many elements – common process and tools, common training in teams, availability of tools, templates etc., an opportunity to share and learn etc, etc..  To impact Organizational competency you need to move towards Communities of Practice.

Have you thought about the other elements of a Competency Based Talent Management strategy?  While it is great that you are investing in competency development, to really maximize your return, you should also be looking at how you recruit, measure, reward, and develop people.

If you are trying to determine what to do with your training dollars this year, you may want to start by asking yourself some of these questions.  You may also want to make sure that your leadership team is also on the same page.  If you would like some help, we have a few very elegant and powerful tools that we would be happy to loan you to help you to get at some of these issues on your own.

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Avoiding Pitfalls in Strategy Execution

ExecutionPitfallsVery rarely do I find an article that catches my interest such that I read it and reread it several times to make sure that I capture all the gems.  “Why Strategy Execution Unravels – and What to do About It” from Harvard Business Review is a must read.   According to the article, “a recent survey of more than 400 CEOs found that executional excellence was the number one challenge facing corporate leaders” globally.  In addition, “. . . . two – thirds to three – quarters of large organizations struggle to implement their strategies”. 

The authors uncovered five myths and replace them with approaches that they believe will help managers execute strategy more effectively.

Myth 1:  Execution Equals Alignment

Most of the companies studied did a pretty good job in developing the strategy, translating that into objectives, cascading those objectives down through the organization and then putting in a measurement process and rewarding performance.  These tools help to create alignment but do little to ensure execution.  Studies have found that these tools may be effective in managing vertical performance / commitment but not horizontal (across business units).  Since the execution of most strategic objectives require collaboration from multiple functions or business units, that is where the rubber meets the road.  Structures to coordinate activities across business units is what is really needed to improve execution.

Myth 2:  Execution Means Sticking to the Plan

Most of us have been taught to put a plan or roadmap together and then stick to it.  Executives often “view deviations as a lack of discipline that undercuts execution”.  From a practical standpoint, “stuff” happens during execution – both challenges and opportunities – that organizations need to respond to.  Successful execution requires organizations to be agile (not be confused with the AGILE methodology – which does apply here as well).  Managers need to have the ability to be creative in finding solutions to problems that pop up or unexpected opportunities.  The world does not stand still while we are executing a strategy, so as managers we need to be comfortable adapting to that change.  Also, the willingness to reallocate resources freely as you are executing your strategy is key as well. Whether that is shifting budget dollars or moving people between business units to meet changing demands, this can be a critical success factor in execution.

 Myth 3:  Communication Equals Understanding

Many believe that relentless communicating is a key to success.  Communication is CRITICAL, but messaging needs to be targeted, simple and consistent to ensure understanding.  Once communicated, follow up to see that there is a common understanding of the message you are trying to deliver – this step is often overlooked.

Myth 4:  A Performance Culture Drives Execution

While it has been “found that a focus on performance does shape behavior on a day-to-day basis”, that is simply not enough.  We have already discussed they fact that collaboration is the key to execution so why is it that “past performance is two or three times more likely than a track record of collaboration to be rewarded with a promotion”.  In other words, agility, teamwork, collaboration and flexibility are key competencies that need to be present to drive execution.  “Performance is critical, of course, but if it comes at the expense of coordination, it can undermine execution.” 

Myth 5:  Execution Should be Driven from the Top

Strong top down leadership is important and can be a short term strategy.  Relying on the CEO to drive execution can be a costly mistake and can quickly unravel if the CEO departs.  “Effective execution in a large, complex organization emerges from countless decisions and actions at all levels”.  This is known as distributed leadership.  “Although execution should be driven from the middle, it needs to be guided from the top”.  Distributed leaders not senior execs represent “management” to most employees and have the best chance of driving execution.

In summary, companies spend millions of dollars every year to develop a strategy and fall short when it comes to execution.  Instead of throwing more process and tools at the problem it might be time to take a step and back and look at some of the root causes of the problems.  At the end of the day, execution is all about people and how they define it.  Reframing execution as “the ability to seize opportunities aligned with strategy while coordinating with others parts of the organization” will go a long way to helping managers understand where the pitfalls lie.

Let us know what you think and join in the conversation . . . . . . .

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