The Dilemma

"We want to be an innovator, " states a supply chain leader. "Our goal is to redefine our processes using digital concepts. We think that there is a great opportunity to mobilize our resources and rethink what we are doing."

As the supply chain leader talks, I get excited. My heart skips a beat when I speak to innovators.  I love these types of conversations. However, my excitement wanes when he states, "Of course we don't want to be on the bleeding edge. You will have to help us build our business case by supplying industry references. We will need to talk to at least three-or-four manufacturers that are doing the same thing to move forward."

My Take

Today, the market is very confused about the digital supply chain. This morning, the CIO Journal spoke with Mr. Ruh, who serves as GE’s chief digital officer, to explain just why and how the company adopted a bimodal approach to its businesses. Here are edited highlights of the conversation.

"It’s not digital and industrial, which is the way a lot of companies probably would have done it, create a new unit and have our old stuff. It’s digital industrial. When we look at the world today, the asset is important. The asset is the form of the experience or the outcome the customer wants. Uber, Airbnb, even Apple …they own no assets, yet they are more valuable than the companies that actually own the assets. The reality is they create an experience and a business model that delivers an outcome that is just so much better than the outcome of a traditional asset.  When we really think about digital industrial, what are are saying is, if you just say I am going to be in the asset business and I am going to have this sort of ‘off to the side’ legacy software licensing business, you are missing the point. It’s got to be about a digital experience and an outcome that somebody is going to deliver in a better way, around managing the grid, and generating power, and maintaining jet aircraft engines. We always said we have to be the best at now creating the digital experience.

The second conclusion is that you can’t have this be a separate thing. It is going to be embedded in everything we do. You don’t go to Google and find non-digital employees. Every function, including finance, they are digitized, and they think that way. We are really going to have to shift.

We did two things. I was named the chief digital officer for GE. It is about someone who can lead the transformation of the company and the cultural shift, which is I think embodied in this: Six Sigma is the antithesis of Silicon Valley. It is get a process and once you have got it in place, don’t change it. Well, Silicon Valley is all about change, pivot."

The struggle is on for supply chain leaders. I agree that it is a way of doing business, but is owning asset(s) a bad thing? Should supply chain leaders abandon the hard work on process documentation and quality of conformance in the race to become digital? I don't think so. 

This discussion harkens me back to the dawn of eCommerce at the beginning of the last decade. In the middle of all of the eCommerce hype, the concepts were over-used. The early eCommerce processes worked well until we started moving physical goods. It was at that point in time, that companies realized that they needed to redefine their supply chain processes to embrace new business models. Today, a decade later, these new business models abound. However, it was not an assetless process innovation and it did not happen without a focus on continuous improvement. I think that the digital transformation is similar.

Last year, I spoke at the Pivotcon conference on digital innovation in supply chain. The room was filled with digital marketing leaders, and the prevailing thought that we are moving to a world where there will be no smokestacks. The expressed world view was that additive printing (3D Printing) and the collaborative economy (sharing of assets) will replace today's need for manufacturing plants. I laughed. At the root of the supply chain is process-based manufacturing: the conversion of molecules at factories into products that can be consumed by upstream customers. It requires a smokestack and leadership, and process automation. While discrete manufacturing--bolting together goods and machining parts--will be greatly altered by 3D manufacturing and robotics, the process industries are a different discussion.

Moving Forward

Today, digital concepts abound in marketing. In parallel, new technologies and processes are evolving for cognitive learning, robotics, Internet of Things (IOT), unstructured text mining, and B2B networks. Each helps to bring supply chain leaders into the digital age.

How will molecular conversion change with the evolution of digital concepts? The answer will take time. One thing is clear for me. It will not happen by waiting for companies to get three-to-four references to move forward on a concept. We need true innovation. The shift will require courage, leadership and a commitment to process innovation.

I would love to hear your perspective.

About Lora:

Lora Cecere is the Founder of Supply Chain Insights. She is trying to redefine the industry analyst model to make it friendlier and more useful for supply chain leaders. Lora has written the books Supply Chain Metrics That Matter and Bricks Matter, and is currently working on her third book, Leadership Matters. She also actively blogs on her Supply Chain Insights website, at the Supply Chain Shaman blog, and for Forbes. When not writing or running her company, Lora is training for a triathlon, taking classes for her DBA degree in research, knitting and quilting for her new granddaughter, and doing tendu (s) and Dégagé (s) to dome her feet for pointe work at the ballet barre. Lora thinks that we are never too old to learn or to push for excellence.