Tag Archives: Value Maximization

Why 2012 is Not the Year to Fear

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While predicting trends has sometimes been associated with parlor games, there are some trend spotters that we all should at least make ourselves familiar with.  Especially those that have a very good track record and clearly Marian Salzman is one of them.  By applying pattern recognition, they have been trendspotting for many years with a stellar performance.  We thought we would take some of the trends that might be most relevant to our community and start a discussion of their impact.  We would strongly encourage you to find the time and go through their entire report and make up your own mind also.  I promise a fascinating read.  I will discuss 5 today and 5 tomorrow.

EMERGENCE OF AFRICA AND LIPSTICK POLITICS: – They cite a number of trends (emerging middle class with high expectations, a much younger demographic, income disparity, culture clash, cheap smart phones etc.) and each one of them needs to be understood.  Clearly, this is an area that has the potential to be a major source of supply (materials, talent etc.) but also a very high growth market.  Early adopters have already starting to enter this huge segment of the world.  Look at the strategic investments that China has been making here for years.  The most fascinating trend was the emergence of women in roles of political power in Africa.  This will have a very fundamental, extremely positive effect on society and political/economic decisions on the traditionally male centric cultures.  By the way, we would include the Middle East for most of this discussion.

Value Opportunity:  Prepare a comprehensive strategic report on Africa and circulate it amongst your client base.

CORPORATE SOCIAL RESPONSIBILITY/EVERYTHING “ECO”: According to the research, this is no longer a fad but permeates everything, especially for the younger generation – as workers, as consumers and as citizens.  Social activism is here to stay and corporations are quickly figuring out that CSR is no longer a nice thing to do but a necessity to stay competitive and survive.  Tied to that is the entire eco movement and these combined are having an impact on fashion, food, travel, packaging etc. etc.

Value Opportunity:  Ensure that CSR/ECO issues are incorporated in your process and are real decision drivers that clearly impact value.  Engage with your supply base to drive home the importance of this to you.

INTERNET OVERLOAD: The “Facebook” phenomena may be at a cusp – GASP!!  People are getting quite tired of being “tethered” 24/7.  They are tired of information overload and decision fatigue.  Internet addiction is a real issue.  Too much information sharing and the insatiable need to keep your information current is becoming quite a chore.  People are reporting drug withdrawal like symptoms in experiments.  I don’t quite think we’re at a Gladwell-like Tipping Point but clearly at a pause where people are slowly re-evaluating their relationship with technology.

Value Opportunity:  Make sure you have some kind of Knowledge Management strategy that incorporates this issue.  TMI is worse that not enough information and it can lead to action paralysis.

BRIC or BRIIC: Indonesia???  Yup – Indonesia.  One of the fasted growing economies and one that Marian and her team suggest should at par with the BRIC countries in importance.  Please see the section on Africa above for some of the same logic.  In addition, “new Credit Suisse report29 stating that “[t]he rise in personal wealth in Indonesia has been stunning since the year 2000, with average wealth growing by a factor of five.”  With that kind of explosive growth, it is clearly going to enjoy a significant surge in economic activity.  Oh by the way, it also happens to be the largest Muslim country in the world so looking at it as a supply source or market means fully understanding a set of cultural dynamics that are going to be relatively new for most of us(can you say Halal?)

Value Opportunity:  Make sure that your organization fully understand Indonesia as an arbitrage opportunity with a particular emphasis on cross cultural dynamics

SHOPPING GOES VIRTUAL:  We all know about Black Monday and increase in online sales but with technologies like Kinect, shoppers can now try many different outfits online and shop accordingly.  Price comparing apps are putting more and more power in the hands of the consumers.  Social networking also means that consumers can now exchange information and unite in providing feedback to the provider and that is changing the power dynamic in the market.  Amazon’s club means that delayed gratification is being eliminated as a constraint to onl9ine shopping.  All of these trends are fundamentally changing the way we shop and therefore will have a profound impact on supply chains.

Value Opportunity:  Highlight the impact of this trend on your business and start examining the supply chain for future fit.  For example, the supply chain from warehouse to store may have to dramatically change to warehouse to customer?

 

Which trends do you think are most likely to come true?

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Check back tomorrow as I list the next five.

Regards,

Dalip

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WHO ARE YOU?????

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For those that are classic rock fans, that is the title of one the iconic hits of that genre. But that’s not what we want to talk about today. I recently ran across a survey conducted by my good friend Tim Cummins at the International Association for Contract & Commercial Management (IACCM) and it paints a picture of YOU. Well, perhaps most of YOU at least. Because Talent Management continues to be a very high priority for our community and profession, we thought it would be interesting to answer the question that Pete Townshend asked in 1978….WHO ARE YOU??

• 54% have been in a contracting, negotiation or procurement role for 11 years or more.
• 41% have a Master’s degree
• 33% are over 50 years old
• 40% support both sales contracting and procurement
• 46% are individual contributors in their job role, with no direct reports.
• 52% would characterize themselves as having no career path or a very limited one.
• 60% say they like their job and are satisfied with their current position.
• 65% say they plan to work 5 or more years in their current career path.
• 40% said they liked their pay, the flexible hours, and location.
• The four things that people liked best about their job: Challenging work, Negotiating with customers or suppliers, Drafting and reviewing contracts, Managing customer or supplier relationships
• The three things that people disliked most about their company: Failure to invest in its people, Company culture, Pay
• The four things people disliked most about their job: Poor management/leadership, Administrative responsibilities , Lack of career path, Lack of clarity in roles/responsibilities
• The four most important skills and attributes for performing your role: Communication skills, Problem solving ability, Negotiation skills, Attention to detail
• 57% believe their company will help them acquire the skills and knowledge for a future in their profession.
• Out of a high score of 5 for what motivates people at work, Personal objectives received a score of 4.21; Company performance (bonus schemes) received a 3.51; Company control standards (audits, etc) received a 2.93; Company collected cycle time (metrics) received a 2.73; External professional standards (certification) received a 3.02.
• Compared to others in their profession, 75.5% consider themselves a high performer.
• 46% DON’T believe there are clear and meaningful rewards for high performance contract professionals in their company. (Click here for the full survey results)

Next week we will interpret the data and see what challenges and issues this information presents. In the meantime, let me know what you think of the data.

If you are interested in additional details, I am hosting an executive session at the IACCM Global Forum for Contracting & Commercial Excellence to discuss these very issues in Talent Management. On November 4th, the Next Practices Xchange hosted by us is being held at the Oak Brook Hills Marriott in Oak Brook, IL. All of our research will end up in a white paper that will consolidate all this research and try to make some sense out of it. Stay tuned!

Regards,

Dalip

 

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Hewlett-Packard and Seeing the Bigger Picture

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Back in August, Hewlett-Packard announced a complete overhaul of their business by lessening the company’s reliance on PC and splitting the company in two. The Chief Executive Officer at the time, Leo Apotheker, wanted to lessen the company’s reliance on PCs as tablets and cloud services have started becoming more popular. In many ways the announcement made sense as Michael Gartenberg, an analyst at Gartner Inc. stated “The hardware business has become a difficult business. In many ways it’s a commodity-driven business. This is a major strategic shift for HP.”

Fast forward two months and now there is a new CEO in town and she is looking at the change in a whole new light. According to the Wall Street Journal, Meg Whitman, the new CEO has been looking at the numbers and things don’t seem to be as cut and dry. The new analysis shows that the company might be better off keeping the division which contributes $40 million in annual revenue. The reasoning, however, goes beyond the revenue numbers. Separation would lessen the company’s economy of scale and diminish their buying power AND leverage with their supply base. The supply chain could also become more complicated and decrease profit margins on their other products as well.  Some feel that because of this, the spin-off isn’t worth it.

Let’s take a look at this situation beyond a cost perspective and focus on Value.  HP sold 14.9 million PCs in the second quarter of 2011 alone, which means they are a huge player in the marketplace – particularly with their suppliers.  That scale gives them leverage that can and should go way beyond cost.  They should be using that leverage with their suppliers to help them manage risk, increase innovation (which should impact H-P’s top line not just their bottom line), expand their product offerings, etc.  H-P should be using this “leverage” to help move away from being viewed as a commodity to their customers and start viewing themselves as a “Value” provider.  When approached from a value perspective H-P would be foolish to exit the PC market.

So what, if any, is the lesson here? For one, it shows just how far reaching and influential the supply chain organization can be.  In times when we constantly hear that sourcing and supply chain organizations are losing their influence, H-P shows that there is still some bite left in those functions.  I wonder whether Supply Chain even had a seat at the table when the original decision was made.  I guess they do now, which is a VERY good thing!

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Hitting a Strategic Sourcing Home Run

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I’m not a huge baseball fan, but my daughter gave me the book Moneyball (used at many leading business schools) by Michael Lewis and I was eager to see the movie.  Brad Pitt takes a break from his jet-setting life with Angelina Jolie to play Billy Beane, the General Manager of the Oakland Athletics baseball team. Billy Beane is well-known for fundamentally redefining the way baseball teams make decisions and challenging the way teams had been managed for over a century.  He essentially changes the decision criteria used to select players to a much more fact-based model, which focuses on the real value the players bring toward the Intended Consequences (getting a win).  Once he redesigns the consonants (People, Process, Technology), he quickly realizes that getting to the expected results is still far away. It’s not until he focuses on the vowels (Adoption, Execution, Implementation, Optimization and Utilization) that the results start showing up.  The constraints he faces should sound very, very familiar to everyone.  Follow the trail and tell me if you agree that we all need to be a Brad Pitt (no that does not come with Angelina Jolie).

  • Faces resource constraints in terms of total budget available – SIGNIFICANTLY less than the competition
  • Entrenched resistance
    • Scouts who still evaluate talent the way it’s been for decades (decision models and processes)
    • Salaries of players based on old metrics (reward system)
    • Players who define their roles based on those metrics
    • Middle management (Manager) a TOTAL barrier to change
    • Players totally fighting the change
    • An organizational attitude that accepts failure
  • An environment (the entire sport of baseball) that is openly hostile to every move he makes
  • Changing the entire Value Chain and redefining the way value is created(getting on base leads to wins)
  • Dealing with early losses and still getting the organization to stay committed
  • Getting rid of some of the players to set an example
  • Create value from a supply market (players) that has been sourced by the competition already

The parallels continue.  By the way, those of you not familiar with this particular story or baseball in general, a parallel might be what Lionel Messi and Barcelona have done in terms of redefining soccer away from long kicks and passes to short passes and a possession game.  Even though they have clearly proven that it is far superior to the competition, others have been very slow to adopt.  This concept is why you need Next Practices as a way to create an advantage while others chase Best Practices.

The more interesting question is what you do to stay on top while others adopt the same style and strategy.  And if you think I’m stretching the argument, you will find that since a large portion of baseball has adopted Billy Beane’s vision, his old techniques no longer provide the leverage.  In fact, he cannot compete because he does not have the resources that the other teams do.  And since they are sourcing the same pool of players using the same techniques, his leverage (exploiting market inefficiency) is gone.  This is no different than Supply Chain/Sourcing organizations going back into the supplier market using the same techniques that everyone else is using (Best Practices).  In fact, the best model of that are now the Milwaukee Brewers, not the Oakland A’s.  And even they have had to continuously adapt because everyone has adopted the same tools.  And oh by the way, we all assume in the Supply Chain world that the supply market has not adjusted to the techniques that we have been using?  If you think of it as a system that seeks equilibrium, that assumption just does not hold true.  If you would like a more detailed presentation on this, let us know.

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Troops in Afghanistan – a Dramatic Case Study for AEIOU

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Today’s post is from Anne Kohler, COO & Executive Vice-President, of The Mpower Group (TMG) and a contributor to the News U Can Use TMG blog.

What do these historic events have in common?

  • U.S. Invasion on North Korea
  • The Bay of Pigs
  • Watergate
  • Escalation of the Viet Nam War
  • The Hostage Rescue in Iran
  • The Challenger Disaster
  • The Bush Administration’s Invasion of Iraq

This list represents some of the biggest decision-making disasters in history.

A few weeks ago, the famous Washington Post White House author, Bob Woodward wrote an article entitled “Military thwarted president seeking choice in Afghanistan” which was all about the critical nature of decision-making.  What greater decision can there be than deciding the fate of tens of thousands of young U.S. men and women as they are sent into war-torn Afghanistan?   The article chronicles the process that President Barrack Obama undertook in finally deciding to send 30,000 additional troops as opposed to the 40,000 (which came highly recommended by his military leaders) in December 2009.

Obama discovered after months of negotiating with national security officials and being in the middle of a war entering its ninth year that three simple questions could still NOT be answered:

  • What is the mission?
  • What are we trying to do?
  • What will work?

In other words, what is the intended consequence in Afghanistan? . . . . . . . . . . . . . . . .

As it turned out, Obama’s military leaders wanted to provide a solution (40,000 new troops) without defining a strategy – the answers to those three simple questions (obviously not so simple!).  Obama asked for a strategy (the answers to those questions) and asked for options, but the inability to answer those questions kept leading back to NO viable options except for an option that was UNacceptable to Obama.

Having been well versed in decision-making disasters from the past (see above), Obama chose to follow a more structured decision-making process.  He knew he had many intelligent key stakeholders at his disposal and wanted input, alignment, and buy-in from all of them.  He actually made a meta-decision – he decided how to decide by answering the following:

  • Who needed to be included in the decision-making process (stakeholders)?
  • What role would each stakeholder play in the decision-making process?
  • How would the decision be made – what criteria would they use to decide?
  • When did the decision need to be made?

Obama did a thorough stakeholder analysis to determine who needed to be included in the decision-making process.  He realized that it was critical to include both military and civilian leaders.  He also determined each stakeholder’s role in the process; keeping the final decision for himself.  He then determined the decision criteria and insisted on being provided options by his advisors, which was critical.  Finally, he did not allow himself to be rushed into making a quick decision (his military leaders tried to do just that) which allowed him the opportunity to consider many alternatives.

At the end, he “sold” his decision to all his stakeholders and insisted that they put their full support behind it.  Obama said, “I don’t want to have anybody going out the day after [the speech] and saying that they don’t agree with this.”

Time will tell whether or not this was the right decision for the U.S.  BUT what we can glean from this article is the importance of having a disciplined approach to decision making.  Even if all of Obama’s stakeholders did not necessarily agree with the final decision, it appears that they did respect the process.  Right before the decision was announced Obama gave Robert Gates, his Defense Secretary, a final opportunity to dissuade him saying, “Can you support this?  Because if the answer is no, I understand it and I’ll be happy to authorize another 10,000 troops, and we can continue to go as we are and train the Afghan national force and just hope for the best.”  Gates did not take Obama up on his offer.

This is just one example of the importance of decision-making.  This is the one skill that most leaders are never trained in, even though it is the most critical part of their job.  It is one of the elements of our AEIOU model, which stresses that the best infrastructure (people, process, tools, and technology – the consonants) in the world is useless without the glue that holds it together (Adoption, Execution, Implementation, Optimization, and Utilization – the vowels that turn the consonants into a language).

Some of the most important events in history required effective decision making and yet we spend little to no time on developing the skills necessary to make good decisions.  The recent deaths in the California wildfires have been attributed to poor decision making by the firefighters.  The good news is that this has led to the addition of decision-making to firefighter training.  One of the most critical decisions that affects all of us is that of a jury.  Yet numerous articles have been written about the fact that our present system does nothing to provide jurors with the tools to decide the fate of a human life.

We need to think about this key skill beyond our politicians and public servants.  How about executives of any kind?  Supply chain leaders?  Sourcing teams?  This should be a critical leadership skill that is purposely taught to all professionals – let’s provide the vowels to complete the language!

Thanks Anne!

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