Written by 3:08 pm Digital Supply Chain, digital supply chains, Uncategorized

Side-stepping the Pitfalls of a Digital Strategy for 2022

It is that time of year. Yes, a time when well-meaning supply chain leaders share their strategy decks for the upcoming year and ask me for an opinion. In December, this is my life.

As I process the calls, I notice a trend of investment in digital for the sake of digital and then asking for help. The reason? Most because they are stuck. Their focus on technology for the sake of digital–doing the same things faster or hands-free–stalled out because of the lack of investment in human work systems. I gently probe with the groups and ask the question, “Why?”

For the courageous team that I know well, I press the onward button in my dialogue by pressing harder. “Why would we invest in making current systems faster without recognizing the fundamental disconnects???” “How can we move forward with a digital transformation program without designing the work systems to focus on carrots (benefits for employees) or shared rewards?” The well-intending IT team on the other end of the phone knows far more about software robots and hands-free order automation than I ever will. With the questions, I hear sighs, and the leader then responds, “Lora is right. Our version of success is not shared by our work teams. We implemented technology assuming that they would come along and support the program. They have not and will not with our current approach. Our executive teams are also not able to understand what is possible. We have work to do.”

What Does Digital Mean?

Supply chain leaders love shiny objects. IT teams love to bolt in software. The march continues with program after program, cool project name after cool name, and business transformation effort after business transformation effort. The efforts focus on business requirements gathering and deployment, but few drive meaningful outcomes. Why? In my opinion, few ask the questions of:

-How can we gather requirements if we are not knowledgeable enough on the Art of the Possible? Most organizations are out of step with their ability to imagine the future. Leaders invest in learning and then clearly define terms and outcomes. Laggards mosey down a path of vague terms and goals without questioning the need to reskill to drive process innovation. Most organizations struggle to understand the emerging world of technology. The traditional paradigms of locking structured data into relational databases and driving insights through traditional optimization is a barrier. For example, conceiving a world of decision support using cloud-based, NoSQL ontological sensing is too big of a stretch. A discussion on the differences between integration and interoperability is also a struggle.

Is it possible to drive digital transformation without asking the group to unlearn and untether themselves from existing norms and processes? I find that egos run strong through the psychic of supply chain leaders. It is hard for the average supply chain leader to admit that they do not have the answers or that they are open to new outcomes. Few companies ask the question of “What should they stop doing? And, for success, what does the organization need to unlearn?” The unlearning process needs to be structured and focused on learning new ways of working.

-What can work look like? How do we design work systems to align organizations and ensure that there is the right balance of reward systems with metrics? Is there a need to redesign metrics to move from a functional and traditional function to drive goal alignment? If so, how do we best accomplish this goal?

I define digital as the ability to redefine the atoms and electrons of the supply chain to drive value. For many, this might be too extreme, but in my work to understand the potential of what digital can mean, I continually ask the questions of:

  • When it comes to defining atoms, my questions center on the product portfolio. What is the role of 3-D Printing? The circular economy? How do we use products to redefine service offerings? What is the role of demanufacturing/recycling? How do we best manage the long tail?
  • My goal in redefining electrons focuses on planning/insights, networks and the use of analytics. My questions include, why can we not democratize planning? (The focus on advanced engines to serve 3% of the back office makes me crazy.) How do we seamlessly connect outcomes from optimization to drive policy, strategy, and rules?
  • When it comes to value networks, my questions focus on building multi-tier outside-in processes. How can we drive a digital dial-tone across networks? Drive interoperability through a network of networks? Why can we not drive accountability through authoritative identifiers and close the gaps in process visibility? How do we drive reliability sensing for supplier development teams?
  • The world of analytics offers many possibilities. Why can we not use disparate data–pictures, streaming data, and unstructured data–to sense and respond? How do we use market data to sense, translate and transform outcomes with mimimal latency and data distortion? How do we drive bi-directional orchestration across source, make and deliver? What is the best way to understand the impact of variability on today’s decisions?

I could go on and on, but there are no good answers in the industry. And, in the strategy documents that I review, most manufacturing teams are rebranding historical work as digital. In my world view, today’s systems and processes are largely legacy. The focus needs to be on outside-in thinking to help the supply chain sense, orchestrate and intelligently respond. The traditional supply chain only responds based on a latent and distorted signal.

How Do We Drive Progress?

Today, well-intended supply chain professionals are structurally encased into vertically-focused functional silos. In aggregate, supply chain leadership is weaker today than at the beginning of the last decade. Leadership churn through mergers/acquisitions and employee turnover tool a toll.

The focus of the past decade created the supply chain as yet another silo within an inward-focused organization. Over time, I watched the organizational scope change from a broad view of designing processes from the customer’s customer to the supplier’s supplier to a more narrow view of distribution, logistics, or procurement to improve functional metrics. In the process, the influence of the supply chain leader lessened. Too few Chief Operating Officers understand the supply chain as a complex non-linear system. The impact of inflation and variability will be a wake-up call in Q1 and Q2 earnings.

Most companies are implementing yesterday’s technologies despite the fact that few answer the requirements of today’s need state. As variability and complexity increase, the gaps grow. The challenges for the business leader increase. Consultants continue to hawk traditional approaches. (In these discussions with consultants, I fight to control the inner Lora that wants to come out swinging.)

The current state is worsened when financial reengineering to lower costs grows in importance. Efforts like tax efficiency programs, hands-free transactions, business process outsourcing–introduce additional complexity in the face of mounting risk and disruption. Too few companies are working on right-sizing complexity through portfolio and platform simplification, node reduction, supplier development, and flow design.

To drive change, the focus needs to be on process innovation. I strongly feel that companies want to change, but they want a clear and risk-free path to move forward. While all will shake their heads in agreement on the need for outside-in processes, there is no clear definition.

Over the past year, I attempted to rectify and clarify the definition of an outside-in process. In January, we kicked-off a program to define and test outside-in processes for planning with o9 in Project Zebra. When we wrapped up the project with a team of nineteen very seasoned and capable supply chain leaders, the change management themes abound and are far greater than the technology hurdles. The largest gap is unlearning and being open to learning new ways of working. The second-largest hurdle is the design of work systems to ensure success. The third is the openness of the executive team to change. For a digital program to succeed, the executive team needs to be forced to unlearn. A true digital transformation is not a program. Instead, it is a new way of working.

What Does It Mean For Work Systems?

In the design of the digital program, spend time on metrics and reward systems. Continually ask yourself, “If we are successful, what does work look like? How do we reward the right behaviors? How does this change the current incentives?”

As a part of Project Zebra, we designed a training program to help teams unlearn and rethink incentives. This virtual class is available for team participation in February. The cohorts across geographies, industries, and value chains. Each manufacturer can sign up two business leaders. If you are interested drop me a note at lora.cecere@supplychaininsights.com.

I loved getting this note from Christian last month. He was a participant in my last cross-company cohort on building outside-in processes and he has signed his team up for the Zebra training. You can listen to his story on the podcast channel. While many students felt that the topics of the course were too far-reaching from the scope of their personal jobs, Christian did not. He did a great job of influence management to help his team unlearn and challenge current processes as the pandemic hit. We need more Christians.

“It has been a long time since we last connected, but I’ve been keeping up with your publications. Was happy to read that you’ve since recovered from COVID. Hope there are no lingering effects, and that some semblance of normalcy is returning to life.

Here in Switzerland, things are gradually returning to a somewhat recognizable state, but still, not there quite yet. I’ve been fortunate enough to be promoted and now work alongside the Global Head of Supply Chain – developing and driving our future SC strategy here at Bayer Consumer Health. 

One of the main reasons I believe I have been successful is because of the Supply Chain Insights course you taught. I regularly refer to my notes and recall certain topics we discussed. I cannot emphasize enough how valuable and meaningful the course was for me personally, as well as for my professional development. “

Christian Sautter, Bayer Consumer

Next Steps?

With supply chain now a board room topic with frequent failures, strike while the iron is hot. Challenge the organization to unlearn, and embrace new ways of working. Don’t accept traditional practices as the way forward. Nurture the Christians and drive change.

I wish you and yours a great holiday season. I am wrapping up a decade of writing this blog and give thanks to all of my readers. Stay well, my friends.

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