From Nature to Business Strategy -Digitalisation as a Competitive Advantage - Case Study

CEMEX, a Mexican cement company is the world's third largest cement company. Every day, it sends out fleets of ready made cement mix to different construction sites to fulfil their requirement of concrete mix thus significantly reducing the cost of operation of the construction companies.

However, there is a problem. Construction projects are notoriously never ready to proceed on schedule. So if CEMEX schedules a cement delivery in advance the site might not be ready to receive the consignment. As a result high cost workers hang around waiting with nothing much to do, if a delivery is delayed. At the same time, if a consignment is not delivered in time the cement starts hardening rendering it useless for operation.

Unfortunately, suppliers (the cement companies) and customers (the construction sites) have unhappily accepted this state of affairs as a part of their destiny. If we look at the situation logically, it can't be otherwise. A construction site's readiness is dependent on so many unpredictable elements that forces unintended delays.

But CEMEX defied that logic. It promised to deliver the cement where the customer wanted it and when the customer wanted it provided two hours notice was given to them. How was it possible?

CEMEX followed the simple rules ant's follow to scavenge a colony's territory with ruthless efficiency. So CEMEX loads its fleets of cement trucks/mixers each morning and dispatches them with no preordained destination. The trick lies in how the trucks make their rounds. Like ants scavenging a territory, they are guided to their destination by simple rules. Ant's use chemical messages to convey the instruction that guide them and others as to where to go hunting. CEMEX designed an algorithm based on - a) deliver as much cement as rapidly as possible to as many customers as possible and b) avoid duplicating the effort by staying away from the other cement trucks as far as possible.

At first it appears to be a scary strategy. The possibility of cement hardening before being delivered seems to be high. Yet the algorithmic strategy worked flawlessly. Business Results?

1. CEMEX wiped out competition in the eight nations where it operates including regions in the US.
2. CEMEX added $388 million per year to their bottom line.

Clearly, the critical success factor was to emulate a living system in their design and innovation through an algorithm.

Fair to say, that CEMEX sells promises and not just cement and converts such promises through a digital strategy thereby creating a compelling competitive advantage to gain market monopoly.

Reference: Surfing The Edge of Chaos, Richard T. Pascale, et al. Three Rivers Press, New York, 2000.