The Value of Having a Chief Value Officer

Chief Value Officer (CVO) and Supply Chain Management

What if each company had a head of “Value Creation and Management?”  Perhaps it would be a senior level executive with a title something like “Chief Value Officer” (CVO).  What might such an individual be tasked to accomplish, and how would this individual work with a Supply Chain to achieve greater value for an organization?  The concept of a CVO isn’t a new one, and the concept has been discussed and promoted by firms such as Deloitte for certain professional service firms, such as accounting firms.  But what if large manufacturing and other types of firms had someone with such a title?

We’ve written about value in these blog posts before.  Strategic Sourcing certainly needs to become more focused on achieving true value rather than simply price or cost reduction if it is to continue as a viable key business process in the future.  And achieving the most effective business results in all areas is likely to require organizations to take a new look at how they define goals and strategies and processes in the future.  The old rules of continually squeezing more dollars out of processes and relationships with suppliers and customers in order to meet short term business needs just don’t cut it anymore.  Collaborative approaches to generating value for all participants in a supply chain will become the norm rather than the exception in future years.

A Chief Value Officer would be responsible for ensuring that all business processes and organizational entities are focused on a single company-wide goal, the creation and maximization of value.  That includes the Supply Chain as well as the Strategic Sourcing process and organization.  The CVO would, based on inputs from various stakeholders, determine the definition of value in the organization, create single value goals for the company/organization, and work with each organizational group to develop goals and strategies that will lead to effective value enhancement results.  The CVO would be the focal point for value and would have specific value increase targets that are quantifiable, measurable, and easily understood by other stakeholders.

The impact on Strategic Sourcing would be profound.  With so many Sourcing programs and projects becoming little more than cost reduction exercises focused on generating cash for the current year, the creation of a value officer in the company could be the impetus for transformation of Strategic Sourcing from a cost reduction process to a true value adding strategic process.  If the Sourcing head understands that the program must achieve results that are consistent with the company’s value goals, then the Sourcing strategies developed will be more likely to be value based, i.e., more collaborative, more long term, more focused on leading stakeholders to achieve success in their piece of the Supply Chain.

The starting point would be a greater focus on defining who the customers are, internal and external, and then defining what real value means to each category of customer.  Value is what drives Supply Chain requirements, after all.  Value is what also determines a company’s pricing strategy, since the only thing a customer can use to justify a price is how much value has been received.  It’s not about a supplier’s costs or about meeting basic service requirements, or about providing a certain level of quality.  It’s about that intangible sense a customer has that what has been purchased from a supplier, whether a product or service, will make them more successful in their own businesses.

When a company determines that it will be measured on criteria beyond basic service and quality considerations, the strategic possibilities expand enormously.  If the goal is to be viewed as a premier leader in the market in innovation, creativity, knowledge, passion, or any of the other “value” related characteristics that employees in the new value focused organization will need to have, then value based strategies will follow.  Each of these characteristics is a component of certain advanced supplier/customer relationships, such as long term value based relationships where the key suppliers become part of the supply chain of the customer, and they participate in early product development programs as well as in customer research, manufacturing improvements, and supply chain streamlining.

The nature of core employee competencies will change as well.  No longer will performance of Supply Chain employees be measured based on some mechanical output measure.  Instead, less tangible measures such as the above, which measure individual character and approach to work, will increasingly become part of the recruiting process and the performance evaluation process for Supply Chain and Strategic Sourcing personnel.

Having a focal point for value in a company is an idea that needs to be turned into a reality.  A CVO can be the catalyst to achieve the transformation of Strategic Sourcing from its current cost focused mentality to a true value creating process.

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The Bagel Problem – Supply Chain Management 101

Just a Bagel?

Isn’t it nice when you arrive at work and find that one of your fellow employees took it upon themselves to treat the rest of the office with bagels or some other form of breakfast treat?  It makes you feel as if that Monday, when you’re running late and leaving the house without breakfast, really isn’t that bad.  Why do the bagels only come on certain days…special days?  Can’t every day be “bagel day?”  How hard could it be to make that happen?  We just need one person to pick up the bagels each day, right?

That’s what I thought.

My second day as an intern at The Mpower Group was when I was asked to find a “bagel solution.”  I honestly didn’t even know what this meant.  The bagels were getting here every Monday, Wednesday, and Friday, so what is the problem?  I realized the bagels were not arriving consistently at the same time.  Sometimes they would be here by 7am with the first person, but often not until 9am.  Sometimes two people would bring in bagels, and every-so-often no one would bring bagels.  The process needed a little more structure.  This way, the bagels would arrive at the right time every other day.  I developed a flow chart of the process and procedure in purchasing the bagels and getting them to the office.  Little did I know this was only the tip of the iceberg.  I was about to experience supply chain management 101.  Who knew it could be so complicated!

I started devising alternative solutions because the bagels were still not arriving at the desired time.  Employees were getting frustrated when the question “Who is picking up the bagels?” continued to circle around the office.  I tried setting up catering accounts with Einstein Bros. and Panera Bread to have the bagels delivered every Monday, Wednesday, and Friday.  This ensured freshness and no one from the office was responsible for picking them up.  The only downfall:  $50.00 minimum per catering order…that’s approximately 4 bagels per day for an office of 10.  I knew this solution was too good to be true!

I began thinking more strategically and approached this “bagel solution” as if it was a real supply chain problem…The Mpower Group way.

First, I communicated the desire for a new process and developed interview questions for each TMG employee.  These questions included:

  • Who eats bagels in the office?
  • How many per person?
  • What kinds of bagels are preferred?
  • What are the preferred cream cheese flavors?

After collecting this data, I asked for feedback on current process (i.e. what is currently working and what is currently not working.)  I then assessed the possible supply bases (including Dunkin’ Donuts, Einstein Bros., and Panera Bread) to make sure I was accommodating all employees’ needs as much as possible.  I then separated individual wants and needs to confirm that our priorities were straight throughout the development of this new process.

After making the executive decision to develop a standing order with Einstein Bros., our baker’s dozen, with all of our favorite bagels and cream cheese spreads, is waiting for pick-up at 7am every Monday-Wednesday-Friday; Sliced and ready to be consumed!

After figuring out the proper procurement and logistics for this process, the next items to be considered in this supply chain include storage, inventory, and maintenance.  I devised an easy-to-read flow chart (ordered by time) to organize the different responsibilities each TMG employee holds in this new process.  The responsibilities include:

  • Setting up the bagel station by a certain time
  • Clearing the station by a certain time
  • Marking the cream cheese with a date so that we know how fresh it is
  • Placing the bagels in sealed containers
  • Taking inventory of plates and knives
  • Discarding the bagels & cream cheese

So long as responsibilities are being handled properly, we will have the cleanest bagel station, along with the freshest bagels and cream cheese.

After considering storage, inventory, and maintenance, I found it important to have a process/solution measurement.  With this, I can receive feedback from all employees in regards to the new bagel process solution.  Every week, I have the opportunity to call Einstein Bros. and adjust my standing order to accommodate to the employees’ needs.  At the end of the summer, when I return to school, I will transition the monitoring and supply chain management tasks to another TMG employee.

Since my focus is to make this process simple for each bagel consumer, I took morning trends into consideration and thought about something other than bagels for a moment.  Why should the employees of this office have to walk into a different room in order to get their morning coffee?  They should be able to pour their coffee at the same time their bagel is toasting.  With this, I developed a coffee station right next to the newly developed bagel station.  This simplifies the morning processes and lessens the traffic within the office.

This project took a great investment in time, feedback, trial & error, and multiple attempts towards success.  Realizing that there was truly a glitch in the morning process’ supply chain was the first major step in developing an efficient and effective solution.  The main criteria for success included executing the new process under proper supply chain management after it had been developed.

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Get Fit! Thoughts on Reinvigorating Your Career

Getting Fit!

Many of my friends work out several times a week. My son, age 22, has taken up running five mornings a week. They are getting fit.  There are many types of fitness. They are getting physically fit, but what about career fitness?

As I consult with companies, I meet with employees who are bored, dissatisfied and generally unengaged in what they are doing. They lost interest in their job, department or even the company. They lost their passion, their mojo.

So how do you rev up your passion for the job, department and company? That is where career fitness comes in. Career fitness is very similar to physical fitness. It’s about gaining energy, health, enthusiasm, and empowerment for your own career. Thankfully, there is no gym, profuse sweating, or cardio involved. Although it does require thought, planning and taking action.

So how do I become a career athlete? In the “old” days companies laid out development plans for the employee, sent you to classes and conferences in exotic destinations. Most firms have done away with that in cost cutting measures. If these options are available to you, lucky you! Be sure to take advantage of them.

For those of us living on the other side of the fence, where cost cutting has occurred, I do have some ideas. Give these suggestions some thought, make a plan, and take action. Take time to record your progress.

  1. Find your passion. What made you chose your line of work? What interested you in the education you have? What made you love it? If you are not passionate about your work, check out local community services, not-for-profits, and associations. Volunteer your talent so you can contribute to someone else’s future and your own.
  2. Refresh and expand your skills. You want to be knowledgeable about your field’s current trends. Use the web to research workshops. Have you checked out webinars or online classes? Even if your firm will not cover the cost, invest in yourself. There are inexpensive classes to help you build skills, making you more valuable to your current employer and more marketable to future employers. Look for recommended reading lists, not just in your field, but in business trends. Use the local library to check these books out.
  3. Broaden your business experience pushing yourself outside your comfort zone so you can work in the widest possible range of situations and circumstances. Work on a cross-functional team or move into another business function. If you have always sourced for manufacturing, check out business services. Go to work for the parent or sister company. Take on a stretch assignment to broaden your skills. Stretching is part of fitness.
  4. Grow and nurture your network internally within your organization and externally. Join a professional network and attend regularly. Get involved in a professional organization. Maybe even take on a leadership role.
  5. Be a mentor to someone starting out. Find a mentor for yourself. Ask your boss and other colleagues for feedback, advice and ideas.
  6. Be sure to pace yourself with downtime and vacation so you can preserve and reinforce your enthusiasm and commitment to doing your best job.

I hope you have found these tips helpful in revving up your career fitness. Once you recapture your passion, optimism will follow.

If you have other suggestions for readers of this blog, please leave a comment.  I’m sure others will appreciate it!

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Getting By With A Little Help From My Friends

A recent article (Chicago Tribune May 18) mentioned that the Obama Administration is moving toward establishing an $800 million “slush fund” to help GM close 14 plants across the U.S.  The article brought to mind Ron Sanderson’s blog re: “Is Lobbying a Form of Strategic Sourcing?” Ron argued that lobbying can be a much more successful approach to reducing cost (or protecting income) than any special project or Strategic Sourcing process.  GM’s “little” slush fund raises some highly instructive (and potentially useful for the Supply Chain) issues in light of those earlier blogs.

First, it reinforces my earlier argument  that government ownership of key players in any industry is a major new factor in the supply chain (“Does It Matter if a 600 lb. Gorilla is Chinese or American”), and a significant  development in free markets across the U.S. and the Eurozone.  Whether it’s positive or negative will depend on how your company is positioned vis-a-vis the Gorilla.  Obvi., if you are GM you’re thinking it’s not such a bad thing!

But what if you are Ford?  You proudly worked harder and smarter than your competitors, avoided bankruptcy and a government bailout, and are rewarded by being put $800 million in the hole vs. GM.  How?  When Ford announced (in 2006) the tough choice of closing 14 plants, the cost had to be covered by its shareholders.  For GM, here’s a major cost of recovery that will be borne by the friendliest of all shareholders, the Federal Government.  Not only is there no “shareholder revolt” over reduced dividends, this shareholder is ponying up a huge sum of money to help the company out.  Nice deal.  GM, you can thank me and the rest of us honest American taxpayers later.

Second, if Ron was right, then we should expect more and more interventions like this on the part of the Federal Government as companies and industries begin to recognize that lobbying may, indeed, be a sourcing strategy. If this is a good bet for GM, why wouldn’t it be a good bet for any company?  And, it already happens far more than we typically realize.  As an example, legislation passed in 2007 will require the phase-out of incandescent light bulbs starting in 2012.  And who was one of the main forces behind that legislation?  GE!  Why would GE want to legislate one if its products out of existence?  Would it surprise anyone that GE quickly (almost as if they had counted on passage of the legislation) took a number of steps to capitalize on the ban.  Admitting that GE expected to make a lot of money from environmentalism, management shifted the focus from the (mostly American made) incandescent bulbs to the Made In China CFLs that carry with them a much higher profit.  While this may not seem significant, consider that, today, there are about 4 billion light bulbs sold annually in the U.S.  If GE gets a 10% profit on each type of bulb and the price goes from about 70 cents a bulb to over $2.00 a bulb, that amounts to $5 million + in additional profit.  And, unlike an oil company that can only point to the rising cost of crude to justify a price increase on its product, GE can piously point to a government mandated, environmentally friendly (?[1]) mandate.  Again, GE can thank America’s voters for that little bottom line windfall.

One final point if you are still wondering if these are isolated cases.  Consider the financial services arena.  The Federal government, over the past couple of years, has pumped something north of $1 trillion into bailouts and takeovers of, for example, AIG, Citibank, Lehmann Bros., etc.  With the passage of the Health Care measures, the federal government has again returned its efforts to “strengthen the regulation of the financial industry.”  It should come as no surprise to learn that industry has been heavily “investing” in lobbying efforts to the tune of over a half billion dollars in a, so far, mostly successful effort to mold that legislation (Warren Buffett said, “Do this and my profits go down” and Congress quickly dropped “this” from the agenda).

Try to follow me: The logical flow here is that the government is, in effect, subsidizing the “investment” and lobbying contributions that big financial companies like CitiGroup and Bank of America are making in order to shape and mitigate any fallout from increased government oversight of their activities.  Once again, thank the American taxpayers on the way to the next economic meltdown!

And here’s the real point.  As I suggested earlier, this is a trend that you overlook at your peril.  Active government involvement in the economy and targeted industries is going to increase.  On the one hand, how do you prepare for that tilting of what may already have been a less than level playing field?  How many ways can Congress come up with to send a little “seed money” to companies that have the right connections?  How will that impact your suppliers, you and your customers?  On the other hand, are there opportunities for you and your supply chain partners to take advantage of these trends?  How about a “slush fund” to help avoid moving a manufacturing plant offshore or to reverse a previous off-shoring decision?  The time has never been better for taking a creative approach to finding help from a friend or an Uncle.

What are your thoughts?  Is this an aberration or a trend?  Why is it happening now?  How might you be impacted if it really is a trend?  What can you do about it?  I’d like to see what you think.


[1] A key material in CFLs is mercury.  There’s enough of the stuff in those CFLs to worry a lot of people.  As reported on NPR, “General Electric …admits that the little bit of mercury in each bulbs could become a real problem if sales balloon as expected.

“’Given what we anticipate to be the significant increase in the use of these products, we are now beginning to look at, and shortly we’ll be discussing with legislators, possibly a national solution here,’ says Earl Jones, a senior counsel for General Electric.

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Change Management and the Health Care bill!

This is not a political post and I am not trying to convince you of my position on the Health Care bill.  There are however, a number of parallels that can be drawn between the strategy, tactics and process that the Obama administration deployed in securing support for the bill and the discipline of Change Management that all of us are familiar with (at least the TMG alumni :-) ) as it relates to Strategic Sourcing/Supply Chain Management.

I found this very detailed description of how the bill was passed and while on it’s own it makes for very interesting reading (for those of us who cannot get enough of political theater), it is striking in the way that you could replace the Health Care bill with any large complex Strategic Sourcing category with multiple stakeholders.The similarities are eerie.

Let me give you some examples and see if you agree with the parallels that I see with the Strategic Sourcing/Change Management process.  Feel free to add other parallels that you may see.  The relevant passages are in italics and my comments are in bold.

Sam Stein
stein@huffingtonpost.com | HuffPost Reporting

Barack Obama, Campaign Manager: How The 2008 Playbook Passed Health Care

……………
Shortly before 11 a.m. on a Sunday in mid-December, Senate Majority Leader Harry Reid was driving through Washington D.C. when he received a nervous phone call from one of his trusted deputies, Sen. Chuck Schumer.

Schumer wanted to know if Reid had seen Sen. Joseph Lieberman’s comments on “Face the Nation” that morning. “Lieberman (a key Stakeholder) seemed to draw a line in the sand,” the New York Democrat relayed. “You should check in with him. He seemed to rule out supporting the bill if it has the Medicare buy-in.”

Reid immediately called a staffer to get a transcript and find out if Schumer had it right. He did.

“Alright, I’m headed to the Capitol,” the Majority Leader told the aide. “See you in half an hour.”

A nearly year-long effort to shepherd comprehensive health care reform legislation through Congress faced a crucial hurdle. Throughout the past week, Reid and Schumer had worked with a group of ten Democratic Senators (five progressives and five moderates) to craft a compromise proposal in place of the public option — the government-managed insurance plan that had proved too controversial to get past a filibuster. Lieberman had been part of that group. And while in the closing days he had been sending a staffer to negotiations in his place, he had given both Reid and the White House assurances that he’d support an alternative plan that would allow people over 55 to buy into Medicare.

Now, suddenly, Lieberman was announcing on national television that he “would have a hard time voting” for the deal even though he didn’t know exactly what was in it.

Making his way toward the Capitol, Reid phoned White House Chief of Staff Rahm Emanuel to discuss the news. “You need to come up here. We need to talk,” he said. The hyper-energetic Emanuel, who was in a car as well (driving his son home from his bar mitzvah class) told Reid to hold steady for the time being. “I’ll be over to your office soon.”

By noon, Emanuel had arrived at the Capitol, dressed in blue jeans and with a cup of coffee in hand. Sitting in an office close to the Senate chamber, Emanuel, White House legislative adviser Phil Schiliro, as well as Reid and Sen. Max Baucus laid out the options (Schumer would arrive from New York City shortly). They could go back to Sen. Olympia Snowe, the one Republican who had offered support for reform. But that would require a dramatic restructuring of the bill.

“He just wasn’t honest with me,” Reid muttered at one point.

Also en route to the Capitol — at the summoning of Reid — was Lieberman, a Senator who once stood in line to be the party’s vice presidential nominee but now found himself on the outskirts of his own caucus.

The Senate Majority Leader wanted to call Lieberman’s bluff, bring the bill to the floor and force him to vote it down. Dare him to be the one to kill reform, the thinking went.

But before it could happen, Emanuel stepped in. “We need to get it done,” he told Reid, according to multiple sources briefed on the exchange. The end game was clear: the Medicare buy-in or any other iteration of a public plan would not get in the way of legislative progress.

(In the face of adversity, it was clear that Rahm was focusing them back on the end result – the vision. This is a very powerful technique to make sure that while obstacle may be there, we cannot lose sight of the end point – The Vision!)

When Lieberman finally arrived at the office, Emanuel spoke to him just as directly. “Find a way to get to yes,” he said, before insisting that if the objectionable provision was dropped, Lieberman would have to get off the fence.(Getting a stakeholder to state their objection and then forcing them to agree to that as the decision criteria allows you to secure that stakeholder’s commitment  and ensure that the stakeholder cannot then squirm out of the decision. Probably one thing that Harry Reid did not do?)

A deal was reached. Health care reform survived.
* * * * *

Months removed from the debate, aides still recall those tense hours on December 13 as one of the clearer illustrations of how the Obama administration attempted to move health care reform through Congress. Over the course of a year, the president had pursued a lawmaking philosophy that was, at once, hands off and reactive, comprehensive and flexible. It was a tack unique to recent presidents. Whereas Bill Clinton viewed Congress as a house of pawns that needed to be massaged and maneuvered, often against their will, and George W. Bush saw his role as ideological compass around which lawmakers united or revolted, Obama seemingly took a hybrid approach. He provided rules of the road but avoided, at all costs, overbearance. (This is a classical Change Management technique for a sponsor – provide the broad strategic guidelines and let the rest of the stakeholders churn over the details – then come in when they get stuck and move them along)

What exactly the president’s overarching theory of governance was, however, remained largely a mystery. To this day, actually defining the Obama legislative doctrine is a difficult task, in part because different people have different interpretations. Not everyone, in fact, is sure an actual doctrine exists.(This is the beauty and elegance of effective Change Management – the ones impacted don’t know what impacted them!)

But in more than two-dozen interviews with key negotiators, lawmakers, strategists and White House officials, a common theme did emerge. For the President and his key staff — many of whom had been with Obama as he plotted his political trajectory years earlier — the legislative process was derived primarily from the approach they took to electoral politics. The headquarters were different (the West Wing instead of Chicago). And the campaign dealt with a massive piece of domestic policy rather than an actual candidate. But the game-plan came from the same textbook.

“It’s having a long-term strategy and working backwards from that,” explained Communications Director Dan Pfeiffer during an interview in his West Wing office.
(This is again classical Change Management stuff – I think that President Obama must have been through some TMG training in his youth – start with the end goal – the Intended Consequence)


Success would be premised on building blocks. Moving the health care bill through the complicated committee process would be the equivalent of winning the Iowa caucus (necessary, as both were, for at least keeping Obama’s prospects alive). Persuading lawmakers to back the bill throughout 2009 would be like the delicate chase for super delegates in 2008. The final vote, in turn, was Election Day.

The tactics, likewise, were similar. There were core messages designed to appeal to moderates and activists alike (deficit reduction and expanded coverage) (Effective Communication Strategy based on a comprehensive Stakeholder Analysis). There was a clear invocation of this historical nature of the effort. And when presented with a numerical value for success — in this case, 60 votes in the Senate — the president and his team relied more on calculated maneuvering than big sells. Instead of pushing the entire caucus behind health care reform, they worked with individual members based on their relevancy to the process. It was the difference between trying to win every primary election and prioritizing states with strategic delegate yield. (This is again based on identifying key stakeholders, understanding their motivations and then addressing those individually as opposed to trying to win them all over at the same time)

More than any other mindset borrowed from the campaign, however, was the sense that politics is a sport of transactions. Handed a political landscape of broad competing interests, the best way to navigate is to offer a broad but concrete goal and jump hurdles. The only thing not to be compromised is success itself, in part because failure would prove so crippling. (Beautiful….just beautiful!! Just the way it is laid out in theory)

“First and foremost, passing health care defined the ability of us as a country to govern ourselves,” said Neera Tanden, a domestic policy adviser for the White House throughout most of the health care battle. “People forgot that when we face an imminent disaster this country actually could act.”

Over the course of a year, tension-filled negotiations, expletive-laced meetings, and stubborn lawmakers with provincial demands would put this legislative philosophy to a test. But when health care reform was signed into law — with Vice President Joseph Biden underscoring to the president just what “a big fucking deal” (no comment on Joe’s language or whether it was a good bill or not BUT, it clearly was a BFD!!) it was — the close circle of Obama advisers viewed it as a decisive affirmation of their legislative doctrine.

“There were places along the way that people would take a step back and say ‘do we need to revisit our assumptions,’” former Communications Director Anita Dunn told the Huffington Post. “But the overall strategy… has basically been confirmed by events.” (I’m telling ya…they went through some TMG training along the way….check your assumptions but DON’T compromise on the strategy)

Are you interested in learning more about how The Mpower Group uses Change Management to ensure the success of a Strategic Sourcing or Supply Chain initiative?  Drop me a line, I’ll be happy to discuss and send my thoughts on the topic!  DalipR@thempowergroup.com.

Cheers!

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