The Stupidity of Bimodal Supply Chain Strategies

Yesterday, I prepared my presentation to teach at the Rutgers Mini-MBA program on digital supply chain management. The workshop is on April 12th. Putting it together was like pulling teeth. It took the entire day because I had to carefully piece together prior research from cloud-based archiving. Why? I lost my laptop last month. The good news is that cloud-based services like Slideshare, Dropbox and Box enabled me to easily put together prior research. The bad news is that it took a loooooong time.

As I put together the materials, I reflected. I pondered how digital innovation helped my research model evolve over the last seven years. My focus is helping business leaders to better understand the potential of new technologies. I write for the early adopter supply chain leader. My business model could not exist without the evolution of digital technologies. I use my Linkedin Group of 304,000 people as a research panel. The final research is shared as a form of marketing. The research is independent (no advertising). It is differentiated from research by technology and consulting groups trying to push an agenda. Or academic research that is focused on backward-facing models. It is not altruistic. The open content model allows me to make money on speaking, advisory work with supply chain leaders, and small events. It is hard work, but fulfilling.

My philosophy is to "give to my followers" and in return I hope that they will give back to me by completing a series of "anonymous surveys." I never spam or reveal my sources. My goal is to help the industry.

In contrast, when I was an AMR Research analyst (now Gartner), published research was based on a paid panel. In this process, I could not confirm the role or company of the respondents. There was no ability to correlate results to financial balance sheets. Now, I have access to a panel that can be accessed easily and verified. Using public balance sheet data, I can correlate how business choices drove results. Digital transformed my model, and I strongly believe that it has applicability to most business leaders.

Preparing for the Course

Never in my lifetime have I seen the coalescence of so many promising new technologies that can transform supply chain management. The bad news? Many organizations are attempting to use new approaches to make their current supply chains faster. ...or hands free. ...or paperless. In other words, a continuous evolution versus adopting a step change in thinking. Much of the flurry is stimulated by an erroneous belief that companies can implement bimodal supply chain strategies.

Before I start the discussion on bimodal, let me tell you a story. In my travels, I work with many companies. The focus is how to rethink supply chain strategies. The reason? Companies struggle to drive improvement. At 95% of companies, balance sheet results at the intersection of growth, operating margin, inventory turns and Return on Invested Capital are going backwards not forwards. (Reference the Supply Chains to Admire research based on the analysis of public balance sheets.We have published this work for the past seven years.) It is hard for companies to drive improvement while performing above their peers in these important metrics. Overcoming this challenge requires strong leadership. Supply chain excellence requires focus.

In our research, we find that companies with better financial results have a better understanding of supply chain by the executive team. The focus is cross-functional process evolution and day-to-day activities are steeped in data-driven discussions. In contrast, laggards are reactive. They push functional agendas focused on source, make or deliver. (Please note that in the research, we considered 60 factors. There is no correlation to large projects like the implementation of Enterprise Resource Planning (ERP).)

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Reflections

Sometimes I use myself as a research instrument. When I stand in front of supply chain groups, I reflect and share my experiences. When I experience organizational patterns in more than fifteen groups, I take note.

This is the case for my experiences last month. In my sessions, companies articulated a brilliant digital strategy, the issue for execution was resources. Many were following a bimodal strategy. I see this time and time again. A focus on current projects focused on incremental momentum for digitalization--making current processes faster--versus digital transformation. It drains resources. The pull is strong like the Rugby team pulling on the rope in the header image. Continuous improvement of existing processes is known. Digital innovation is new and a bit scary for teams.

When I ask how supply chain teams can transform the atoms and electrons to improve outcomes (my definition of digital transformation), most teams struggle. Supply chain strategies follows business strategy, and companies are not clear. Most organizations are knee-deep in continuous improvement programs. The efforts focus mainly on cost reduction. For some it is a misguided foil for digital transformation.

In discussions on digital transformation I ask, "Should companies sell products or package solutions?" For Ford, this translates to strategies to sell rides versus cars. For healthcare, the question is, "How can hospitals digitally print medical devices in hospitals?" For a manufacturer of heating systems, "Should we stock spare parts or print on demand?" In agrosciences, it is the focus on selling seeds or crop yield? The narrative goes on and on.

 Groups are busy. Most organizations are stuck. The teams are caught up in the endless cycle of continuous improvement, current system upgrade challenges and functional programs. Available resources are a constraint. I see this over and over again. When groups are tasked to do both the urgent and the important, the urgent always wins.

Digital supply chain transformation requires companies to learn from the past to unlearn to drive transformation. Let's face facts. We don't have best practices in supply chain. The industry is full of traditionally-accepted processes propelled by technologists and consultants advocating large, self-serving projects. Unfortunately, there is no Hippocratic Oath to do no harm. Most do not hold themselves accountable to the balance sheet. If we did, the discussions would be far different.

What Is A Bimodal Supply Chain Strategy?

There is a nasty rumor in the market that companies can adopt a bimodal supply chain strategy with a focus on both continuous improvement of current processes and the building of digital transformation strategies. I don't think so. I think that we are fooling ourselves. The reason? The urgent always wins. We are better at product innovation than process redefinition.

Here is a definition of bimodal:

Bimodal - definition of bimodal by The Free Dictionary: Having or exhibiting two contrasting modes or forms: "American supermarket shopping shows bimodal behavior—careful, nutritious choices mixed with salty, high-fat snack foods" (Sheryl Julian).

How Do Companies Move Forward?

Instead, projects should be treated as small sprints managed by stage-gate governance. Adopt a new approach. Just as we manage new product launch through funding and progression through go and no-go stage gates, digital transformation should use the same processes. The greatest process innovations can only happen if we:

1) Don't Restrict Digital Innovation Projects to Fixed ROI. Process innovation requires funding. The greatest innovations happen when experimenting and driving innovation with new technologies. In these cases, the ROI is never certain.

2) Get Clear. Companies cannot confuse digital transformation with digitalization. When focused on digitalization there is an opportunity cost to the organization--there will never be enough resources to drive digital transformation.

3) Focus on Outcomes. Supply chain strategies need to follow business strategies. In the absence of clarity, supply chain leaders should share examples with business leadership. They must side-step the organizational momentum focused on continuous improvements, system upgraded and process improvement. This is linear thinking.

4) Admit Failure. Forward thinking can only happen if we accept the failures of current and traditional approaches of supply chain thinking. Customer service levels and inventory levels are worse in most companies that I work with than ten years ago. Companies need to rise above the group think of large consultants and technologists. Don't let your ERP migration strategies or a pretty Powerpoint by IBM on blockchain coopt your digital transformation programs.

5) Patience. Digital transformation takes time. It must be nurtured. I remember when Amazon was a seller of books. In 1998, when I signed up for Amazon services, I never imagined they would power movies for my television while delivering groceries to my home. The supply chain transformation defined and drove the Amazon effect, but it was based on Bezos' vision. Digital transformation is uncomfortable. Much like walking in new shoes, it takes time.

What is clear to me is that bimodal approaches take us down comfortable linear process paths. For example, it could be a SAP upgrade on HANA versus rethinking the role of ERP and the use of open source analytics.

My conclusion? It is just not feasible to do the important while entwined in the urgent. Digital transformation needs new leadership to ensure available resources. One of the most important questions for this leader is "What should we stop doing to be able to drive digital transformation?" Or, "How do I organize teams to focus on the important work of transformation?" The decision on where the organization is not going to focus is as important as where the organization will align to do work. Conscious choice is a gift to the organization.

Summary

Let's face it. Bimodal just does not work. I just don't think that it is feasible to put organizations into a lose/lose vice of attempting to move down parallel paths--of bimodal strategies-- with insufficient resources. If anyone suggests that bimodal strategies work, ask them for the research. Make your decision based on studying the impact of real companies making a tangible difference in their business models. Remember that the industry is not governed by the Hippocratic oath of "do no harm"; and while there are many pundits pushing opinion, at the end of the day, businesses are judged by their balance sheets.

For more on my writing and research in this area, check out these articles:

Avoiding the Digital Transformation Drinking Game

Too Many Sticks and Not Enough Carrots

Digital Transformation: Five Common Mistakes

Driving Supply Chain Agility

Building A Digital Supply Chain Strategy

Metamorphosis: Driving Digital Transformation