About Dalip Raheja

Dalip Raheja is President and CEO of The Mpower Group (TMG). Dalip has over 30 years of experience managing large organizations and change initiatives. He has worked across the spectrums of supply chain management, strategic sourcing, and management consulting.

$871 Billion – 33,000 Deaths-3.9 Million Injured-JUST in the USA

googlecarYou probably got in your car this morning to get to work and depending on where you live, it may have been a horrendous experience.  That is about to change in a big way because the entire “driving a car” paradigm is about to get disrupted big time.  And it is fascinating to watch how a well-entrenched auto industry is fighting this existential threat instead of embracing it.  Google’s self-driving car (already legally on the road) is going to change the ownership model to a service model.  You need to get to work – a “car” (more on that later) shows up and gets you to work-that’s it.  You don’t need to own a car, drive a car, maintain a car – and that is scaring the %^$# out of the auto industry.  And that explains why Google’s attempt at collaborating with Detroit has fizzled.

Detroit looks at the disruption and knows that it will relegate them to being nothing but hardware providers to a transportation service company that uses software to move people and therefore has decided not to collaborate with Google.  As a result, Google is looking at non-traditional Detroit options like Tesla or  bypassing Detroit altogether and going to their major suppliers like Continental.  We could see a  scenario where Detroit’s supply chain could eliminate their customers from the entire business model!!

Driverless cars also mean that the cost  ($871 billion-33,000 deaths) of humans driving cars will go away so it’s not just a convenience issue and that has many people even more excited.  This is, of course, not the only implication and here are a few more from Dan McLaughlin’s article,17 Ways Driverless Cars Could Change America:

  • “Car” design:  no driver needed so “car” could be a sofa on wheels
  • Roads and traffic patterns
  • Who can “drive”:  kids, elderly, handicapped
  • Auto Insurance industry
  • Car culture
  • Extending telecommuting:  you will be working while sitting on that sofa and moving from one place to another
  • No more taxi/truck drivers needed
  • No more privacy:  where you go and when is recorded
  • Disrupting law enforcement
  • Risk of “hacking”:  already an issue

These are just some of the implications – can you think of others?  Take a few minutes and force yourself to imagine driverless cars and what impact it may have on your life.

And as you think about it from a personal angle, don’t forget to think about the impact on your business – it may be significant!  Keeping tabs on Innovation is a critical issue and one that Sourcing and Supply Chain must play a critical role in.  Mining innovation in your supply chain is a major Value Driver for your stakeholders and it allows you to play a much more strategic business partner role and not just be a paper pusher.  This is an issue that many Sourcing/Supply Chain organizations don’t pay a lot of attention to even though it has a significant impact.  If your competitors are much better at finding and deploying innovation from the same supply base, you have just cost significant value loss for your corporation.  And if Google is successful in collaborating with Detroit’s suppliers, it may even be an existential threat.

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Are you Lionel Messi or Michael Bradley? Big Data takes over the World Cup!

soccer 4Unless you have been in a cave or just hate football (soccer to the uninitiated :-) ), you know by now that Argentina just beat the Dutch.  But did you know how many woodwork ( the goal used to be made of wood and not metal) shots there were – shots that hit the goal but didn’t go in?  Or that Argentina made 639 passes compared to 818 for the Dutch?  And by the way, Netherland covered slightly more distance than Argentina but significantly more distance with possession of the ball?  Or the completion rate of the passes and whether they were long, medium or short? And on and on and on.  Big Data has come to football and it may change the game as we know it.  I grew up playing soccer(despite what I look like now) and coached a travelling soccer club in Naperville(where the term soccer mom was invented and is fiercely competitive) and all I can remember is get the ball in the goal and stay on sides.

While the analytics movement started with baseball (remember Moneyball) and moved to other sports, the application of data analytics has also reached football in a big way.  Here is a small example of how it  is being applied to understand not just the effort being expended by a team and each individual player but also the effectiveness of that effort.  While Netherlands had a clear lead in ball possession, passes(both attempts and completed), and other categories, Argentina had more attempts on goal, more shots on target, equal number of corners, equal deliveries in penalty area etc.  If you knew enough about football, you could look at the post match data and draw a mental picture of what the match was like – and you would come very close?  You can tell the style of play of each team (controlled ball possession vs. counter attacks or individual attacks) by just looking at the data?  You can develop a counter strategy for each opponent based on statistical analysis.

Thanks to missile tracking technology, the analytics are being applied at an individual level also.  STATS is the company that has been tracking every football player in every single match through a system used for tracking missiles.   Kopp mentions that Michael Bradley from the US covered 10.4 miles in a game while Lionel Messi covered 6.6 miles for the same amount of minutes in a different game – that’s quite a stark difference.  That means Bradley covered 3.8 miles more in just one game – that is a difference of 60%!!!  Does that make Bradley a better player-a better athlete?  While some of the difference relates to their different positions, the different styles that each team plays, match conditions, opponent etc., it does not explain everything?  Clearly, Messi is doing a lot more with his effort in terms of effectiveness than Bradley.  His runs are shorter but faster?  He is able to conserve energy and then use it for short bursts of activity?  His running is often with the ball than without.  There are clearly many factors in play but the data does point to the difference between effort and effectiveness.  It clearly will make each manager rethink their team composition, their strategy, their training methods etc. etc.   Brian Kopp goes on to say that 2 of the top players at the World Cup in terms of distance covered are Americans so clearly the effort is there.  But the effort may exact a huge price in terms of energy left to expend towards the end of the game – where many games are decided.

So would you rather have Lionel Messi or Bradley on your team?  Are you measuring your people on effort or effectiveness?  What have you done recently to understand what competencies your organization needs and put in a training program to develop those competencies?  You could have a number of people who are running up and down the pitch expending tremendous effort but not having any impact at all?  Do you understand how to measure the effectiveness of your people and put in place a Competency Based Talent Management program?

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Managing Your Service Spend

ISBLOGThere is no doubt that spending on services is climbing and climbing at a rapid pace.  Most organizations have recognized this and have been trying to get a handle on this critical area.  MSPs and the various software solutions out there are a clear example of that.  While most of these efforts are very admirable and do a decent job of helping you manage this area, they still fall woefully short.  And the reason is that they are only focused on one aspect of the entire conundrum. 

Almost every time we help a client in this space, we are  told that our focus should be on helping them get better at buying services;  unfortunately that ignores what happens before the buy and what happens after. This is where a lot of leverage is left on the table – if you agree that leverage is far, far more than price.  Here is some content from a  slide from many years ago and is still mostly true?

“80 percent of F1000 enterprises do not have a formal process for procuring IT and business services.” – Gartner Group

“We have taken 20% – 25% out of our consulting and staffing costs through better sourcing and management of our providers” – Fortune 150 CFO

“Controlling and managing the cost and value derived from services expenditures is now an enterprise imperative.”- Meta Group

Strategic sourcing and related procurement initiatives almost always overlook a huge savings / value opportunity – complex business services”

We believe that focusing on three core areas will allow organizations to achieve significant benefits.

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Understanding what the review and approval process is for services spend is typically fairly basic, if there at all.  If you’re hearing statements like this, it should be a wake-up call.  It probably means that you don’t have a tight front end process which and are leaving a lot of leverage on the table.

“I don’t know if the money we spend on these services is justified. Sometimes I think we could have produced the same results.”

“Projects get approved which lack defined scopes, clear specifications or structured business cases.”

“We use consultants for some of our most critical projects, but we have no policy or process surrounding their use.”

You are, of course, familiar with the “sourcing” segment and have probably heard a number of statements like this?

“We don’t coordinate selection of our consultants or attempt to consolidate them.’

“I don’t know what we spend on consultants across the company. My gut tells me it’s more than we think…”

“Our evaluations suffer because we don’t have a formal process”

“Little, if any, sharing of experiences and knowledge occurs across our various buyers of consultants. “

What about the third segment.  This is where the closed loop process comes in.  If your organization is continuing to hire outside services for the same skill sets, perhaps you ought to be building that competency internally?  Are the initiatives actually delivering the results promised?  Did the project team come back and report results to the approving body?  These are all significant leverage points that are often ignored.

“We put significant effort into negotiating our contracts, but rarely use them to actively manage the provider.”

“We must manage our relationships better-I know we end up paying different rates for the same services…”

“Once the consultants are here, the projects always seem to expand.”

“Our current processes do not provide adequate control over consulting expenditures.”

So go source your services spend.  Get the best rates.  But make sure you have a systems approach to this area and are focused on the highest leverage points.  

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Why Are Females More Murderous Than Males? Or, What’s In a Name Can Kill Ya!

menvswomenAnd no, I’m not about to go on a sexist rant and label myself a misogynist…quite the opposite in fact.  Here is the conundrum – more people die in hurricanes with female names.  There are a number of explanations for this:

God is a female and when she is mad – she is really mad. No comment.

The hurricane center names the stronger storms with a female name – except that the names are decided in advance of the hurricane season and they alternate between male and female names so it’s purely random.

But then how to explain this: “social psychologist Sharon Shavitt at the University of Illinois at Urbana-Champaign analyzed the destruction caused by Atlantic hurricanes between 1950 and 2012. Even after eliminating storms like Katrina, which caused unusual amounts of damage, they find that hurricanes with female names cause more deaths than hurricanes with male names”.  In fact, they extrapolate that if storms named after males had been female names, the average death toll would have risen from 15 to 45 – a 300% increase.

It turns out that the death toll difference has nothing to do with the name of the storm but rather how people react to the names.  Male names sound a lot scarier to people and they start reacting and preparing much sooner – they take the warnings more seriously.  Our inherent sexism biases actually are quite harmful and can and do literally kill us – go figure!!  To prove that this was no random fluke, Shavitt actually ran some controlled experiments where she presented subjects with the hurricanes with different names but the same exact characteristics (e.g. category 4) and invariably the male named hurricanes were deemed to be more dangerous than the female ones.  In fact, within the female named hurricanes there was a difference between more feminine names (Cindy vs. Bertha) where Bertha was deemed to be more destructive.

 

Before we jump to the obvious conclusions and name all hurricanes with a male name, keep in mind that people will lose all credibility when most of the hurricanes turn out to be not that destructive.  The obvious lesson here is that names do matter and they drive social behavior and may actually have life and death consequences.  This becomes critical when you are dealing with change management initiatives and trying to change behaviors.  What you name your initiative and the language used to frame it has a large impact on how people react and more importantly behave.  If you are looking to change people’s behavior, what you call your initiative and the language you use will actually determine how people react and the choices they make.  Some would argue that those things have a more powerful impact than all the spreadsheets and analyses you put together.

There is a lot to be learnt from the social sciences in terms of how to shape and change behaviors inside our organizations.  And what we call things and the language we use has a lot to do with it.  That’s why we actually spend some time in working with clients around these issues – what are you naming your initiative, what is the language you are using to frame the discussion, what logo or mascot are you using to represent your initiative because we know that in subtle yet very powerful ways, these things actually do impact the outcomes.  So stay safe out there and prepare yourself equally for all storms – not just the male named ones.  Otherwise, it could kill ya!

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Lobster or Chicken for Dinner Tonight?

lobsterUnless it’s a special night, you’re probably picking chicken because who can afford lobster all the time?  Actually, you can since the price of lobster has dropped from $6/lb (1995) to $2/lb (2013) but you would never know it from restaurant or grocery store prices.  Because they know that if they drop the prices, the experience (and therefore demand) of eating lobster will diminish, which is counter intuitive as you would think the demand would rise as prices fall.  As James Surowecki points out, ” lobster is less like a commodity than like a luxury good, which means that its price involves a host of odd psychological factors.”  This should be something very familiar to all of the alumni readers who have been through the Advanced portion of the Strategic Sourcing/Supply Chain “U” curriculum where we take you beyond Sourcing and Category Management (the latest buzzword) and talk about Value Based Sourcing.  You may remember the section on identifying the real Value Drivers of the real stakeholders and that Value can only be defined by the consumer of said value and it always has more than just economic factors(lower cost) and includes psychological  elements.  This is the fundamental reason for the constant uphill struggle of Change Management that most of you face as you try to bring changes to our processes, etc.  You keep pointing out the significant cost savings (which may not be a value driver for your internal business partner) that you are delivering and then wonder why you cannot get your recommendations adopted (keep dropping price of lobster and wait for demand to increase).  Lower cost does NOT mean higher Value, for some and yet we keep trying to justify our recommendations based on lower cost.

There is a reason why people prefer cheaper wines in blind tests but change their opinions if they know the prices because they get more “pleasure” out of the more expensive ones.  People that pay more to eat at a buffet rate their experience higher (by 11%) than people that paid lessless (same buffet, same day, same time).  Restaurants put their highest margin wines as the second cheapest because they know people won’t order the cheapest(very humorous video here).  

Surowecki argues that most people assume a direct  correlation between price and quality(as price goes down, so does quality ) !! Now try to remember the reaction of the EVPs and SVPs sitting in a room and listening to your cost saving pitches.  Unless it is something that they don’t give a %^$& about (like pens and pencils), you are actually destroying Value for them with your lower costs and they are right.  If they care at all about what you are talking about, then a cost savings based business case or recommendation may be the worst possible scenario if that is NOT what drives their business.  Dr. Brian Wansik from Cornell points out, ”Pricing has a huge impact on how one interprets the experience…………..simply cutting the price of food at a restaurant dramatically affects how customers evaluate and appreciate the food”.

There are significant lessons to be applied in our Shared Services world – especially around Decision Making. .  We had caused quite a stir and got lots and lots of people riled up and up in arms when we declared that Strategic Sourcing is Dead in 2010.  Our apologies for being ahead of the times and I hate to say it but we were right.  The relentless focus on cost savings has caused and will continue to cause a perceived and actual erosion of Value.  If we don’t identify the real Value Drivers very early in our processes and then use them as the basis of decisions, we will continue to destroy Value in our organizations and face massive Change Management issues and never ever get a seat at the C table – I’ll bet you a lobster dinner and the most expensive(not the second cheapest) wine on the menu!

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