|
|
8 April 2008 Process Excellence Can Inject New Vitality into Ailing Manufacturers
 Picture this: you are the CEO of a venerable manufacturer that has been besieged by price pressure, increased imports and high capital costs. Revenue has been barely edging up, and profits have been negative three of the last five years. You have had to lay off a significant portion of manufacturing personnel, many of whom had been with you more than a generation.Your ship is still taking on water despite best efforts, and you do not know where to turn.
This was precisely the situation of several U.S. firms that took the unusual route of selling themselves to Indian firms that turned the companies around very quickly by applying sophisticated process and management expertise. In many cases, local employment increased because the companies became much more competitive. Here are two examples:
Continue reading Noodle VI: New from the Unorthodox Exit Strategy Department—Acquisition by an Asian Firm
5 October 2006 Part of the IDC Outsourcing Forum Midwest Report
 The Williams Companies is a Fortune 200 energy company that currently distributes 12% of all the natural gas consumed in the United States and is a major employer in Tulsa, Oklahoma. Marcia MacLeod, Vice President of Business Process Outsourcing, and Karen Caldwell, Director for Energy & Utilities at IBM, explained how the company pulled a Houdini in the early 2000s, using outsourcing to survive a near-death experience in which its stock dropped from $48 to less than one dollar. This case reflected outsourcing’s potential in dramatic turnaround situations while confronting some outmoded stereotypes about its impact on local employment.
Continue reading White Water Outsourcing: How Outsourcing Helped to Save Williams
30 September 2006 Part of the IDC Outsourcing Forum Midwest Report
IDC analysts Brian Bingham and Barry Rubenstein cited extensive IDC research to describe how outsourcing is developing as a business practice. Although they didn’t explicitly delve into adoption itself, their treatment of ITO (IT outsourcing) and BPO (business process outsourcing) provided significant insight into how outsourcing is being adopted by global enterprises. ITO is several years ahead of BPO for several reasons, namely that IT has traditionally been managed as a support function and cost center in most enterprises and, as such, it has been a textbook candidate for outsourcing. BPO is often more intertwined with the business’s core competencies; in addition, it almost always requires sophisticated IT support. Clearly, ITO had well publicized failures in the early 2000s, but this proved to be part of the normal learning curve, and ITO successes have emboldened buyers and providers to push further into the business. This contrast between ITO and BPO patterns is particularly instructive.
26 September 2006
At the turn of the 21st Century, converging social, technological and political changes demand profound changes in how organizations relate to their customers. These changes question many of the assumptions on which 20th Century businesses are built. To turn this situation to their advantage, executives need to approach how they create value for their customers, quickly and proactively. They must build a collaborative network of partners to discover, design and deliver differentiated experience to customers.
The new meaning of customer experience
- Pervasive e-business and global sourcing are creating new centers of excellence for knowledge, services and manufacturing around the world—these clusters of people and companies are technology-enabled, well educated and highly motivated. They will impact incumbents in several ways: 1) they represent new collaborative resources that can add significantly to the enterprise expertise network; 2) they are developing into high-growth consumer markets; 3) they will create new offerings that may change the rules of your business since their companies do not have legacy organizations and cost structures.
- Web 2.0 is mobilizing customers in high-value mature markets—”Web 2.0″ technologies are user-friendly, collaborative tools and work processes that enable customers to connect with each other and collaborate spontaneously. Examples are weblogs, meetups, mashups, and free global phone applications with integrated chat/video. Yesterday, Amazonites reviewed books and music; today, they discuss in detail the performance and relevance of everything sold by Wal-mart, exchanging information about their experiences and advising each other on what to buy. Yesterday, the simple workaround to pick the vaunted kryptonite lock was first shown on a weblog; increasingly, product shortcomings are demonstrated in full-motion video.
- Customer mobilization pressures the barely-adequate new product/service development processes—customers discover irrelevant new offerings and vapid product extensions overnight and pervasively. Most companies already have lackluster new product development track records, and they will perform far worse in this environment. There’s nowhere to hide.
- Emerging market customers are technology-enabled by default—for example, in Chinese consumers’ practice of tuangou (“team purchase”), people meet on-line, collaborate on learning about a product’s strengths and weaknesses, pricing performance and availability. Then they approach the vendor as a large group and strike deals. Think of them as ad-hoc buying cooperatives. Practices like this will change the rules for entry into these ultra high-growth markets.
- Consumer offerings will be forcibly unbundled through 2015, wreaking havoc with business models—As ultra-wired consumers grow in buying power, they recommend an ever-increasing array of products to each other. They will demand product and service componentization, so they can create their own products and services collaboratively. Yesterday’s music package was the “album.” Today, consumers buy songs, publish playlists and shuffle their songs at will. How much longer before book chapters go this way? Cameras? Amplifiers? Autos? Cosmetics? Consumers will specify components and force mass customization.
- B2B markets follow B2C innovation—all B2B executives are consumers, and their expectations are set by their individual experiences. B2C innovation is extremely relevant in your ability to create rewarding experience for your B2B customers.
- Emerging leaders will dominate by providing incomparable customer experience—Apple, Starbucks and Nordstrom create breakaway value by tuning into the experience a customer has; in fact, their “products” and “services” serve props in creating experience. Further, customers increasingly create collective experience; they describe their experiences and define how products and services are relevant to their experience. This will shorten product life cycles even more and pressure business models.
- Increased collective consumption will drive further commoditization—As the portion of on-line consumers continues to increase, the commoditization of mediocre products and services (those that do not provide differentiated experience) will accelerate.
- By 2015, 25-40%of enterprise business will be executed by global partner networks—The stand-alone computers of the 1980s are all but gone, and the enterprise will follow a similar path. It will be inseparable from its partner network, which will have redundant providers so that the enterprise will not be dependent on any node. And much innovation will come from the network. Outsourcing is a transitionary practice that enables companies to build collaborative practices while moving non value-add processes outside.
- India and China will emerge as innovation and intellectual property leaders by 2020—Making the world’s products, services and living standards available in radically different means and social contexts will demand unprecedented innovation, and these countries’ talent, motivation and need will create the perfect storm for an explosion of creativity and IP.
The new importance of innovation and collaboration
- Innovation is a repeatable process that creates discontinuous new value—it breaks the mold by: 1) catalyzing new thinking about customer experience; 2) structuring new thinking into actionable ideas and solutions; 3) testing the solutions’ ability to create the desired experience; 4) scaling and delivering the experience. Information sharing makes or breaks the process, and new collaborative Web applications and work processes can speed them up and increase accuracy.
- Collaboration is a style of interaction in which diverse parties work together to innovate—enterprises can collaborate by assembling cross-boundary networks of value chain partners and customers to operate short-cycle innovation projects that address all aspects of customer experience: design, service, disposal, collateral products/services vital to the experience, etc.
- Innovation is widely seen as the means to drive the top line, the traditional model fails consistently—innovation has rarely been practiced as a core competency due to the Industrial Economy’s long product life cycles. 96% of corporate innovation fails* because companies have practiced it as a secret process conducted by specialized experts, in internal “labs.” These experts too often did not understand customer experience.
- Customers demand true insight into their experience—marketing’s focus groups and database analysis take too long and are too error-prone because they don’t deliver a holistic view of experience. They are product-focused, not experience-focused. There are too many layers of management involved in “product development,” which, like technology commercialization, consistently fails because the process is too ponderous and do not invoke real customer insight.
- Leaders will engage customers to design their own products and services—and this process will attract customers to participate in innovation networks, which will pair diverse customers with various experts. The knowledge of each participant is vital, but the secret sauce will be orchestrating the knowledge to produce short-cycle, actionable results consistently.
The bottom line is that mobilized customers accelerate success and failure, and leaders will thrive by creating collaborative innovation processes.
14 September 2006 Clear Outsourcing Adoption Curve Emerges
The IDC Outsourcing Forum Midwest convened sourcing thought leaders from global enterprises, world-class outsourcing providers and IDC’s leading analysts in Chicago September 11-12, 2006. They shared pioneering experiences that are pushing the transformational boundaries of outsourcing, one of the most important management practices to emerge in the 21st century. Case studies from the Williams Companies, AOL, Lucent, Barry-Wehmiller and Procter & Gamble explained how to use outsourcing to satisfy multifaceted business objectives, and a clear adoption curve is emerging that describes how outsourcing is reshaping the world’s largest organizations.
6 September 2006 Part of the IDC Outsourcing Forum Midwest Report
Readers of U.S. and European press are too familiar with the plight of manufacturers—and how outsourcing is increasing cost pressures and sending even more jobs overseas. What is less known is that leading edge manufacturers are beginning to use outsourcing to increase local employment by making local companies more competitive.
Forum attendees will hear how Midwest U.S. manufacturer Barry-Wehmiller, which was featured in BusinessWeek’s The Future of Outsourcing, is creating a new business that turns around manufacturers by improving their business processes, which makes them more competitive and ends up increasing local employment in many cases. Forum presenter Vasant Bennett is President of Barry-Wehmiller International Resources (BMIS) and a chief architect of BWIS’s emerging service offerings. He spoke to the Global Human Capital Journal last week.
Continue reading Sneak Preview2: Surprising Manufacturing Case Study to Be Presented at IDC’s Outsourcing Forum
4 September 2006 Part of the IDC Outsourcing Forum Midwest Report
Midwest executives will have an excellent opportunity to learn how to take their outsourcing strategy to the next level next week, when IDC will bring their Outsourcing Forum to Chicago. Themed “Reinventing your business through BPO and ITO,” the Forum will feature speakers from Proctor & Gamble, Lucent, The Williams Companies, NiSource, Goodyear, Barry-Wehmiller and Hydro One Networks. In addition, world-class outsourcing providers such as Capgemini, IBM, Hewlett-Packard will offer practical advice, and several of IDC’s lead analysts will offer their insights.
I was able to catch up with event chairman Bob Welch, who previewed some of the Summit’s key themes. I also have information on a special registration deal.
Continue reading Sneak Preview: IDC’s Outsourcing Forum Will Debut in Chicago September 11-12
25 April 2006 Accelerating Forces Buffet the Enterprise
Volatility of customer wants and diversity of markets around the world will increasingly demand that enterprises innovate if they want to remain relevant because their current product introduction and innovation processes are woefully insufficient. In addition, several “structural enablers” are driving down the cost of collaboration—globalization, enterprise software maturation, e-collaboration tools and BPM solutions. I think it’s beyond dispute that “emerging” markets around the world look at India as a model, and there will be a cascading wave of new outsourcing providers entering the market in the years ahead, keeping downward pressure on supplier prices and forcing increased innovation across the supplier value chain. For example, many educated young people in these markets are native with e-collaboration tools, which should lead to new models of collaboration. SOA and Web services are increasingly ingrained in enterprise software, opening up legacy and new solutions to web-based, granular sharing of information. BPM, because it digitizes an increasing spectrum of the business process, is an enabler of outsourcing.
Reposition Outsourcing as Iterative Transformation
Outsourcing in 2006 is where e-business was in 1998, when the Internet was a tech playground in the mid-late 90s. The mission of “e-business strategy” was repositioning the Internet in the C-suite, explaining the vision, helping to create a future state and working with clients on their adoption processes. A similar repositioning needs to be done with outsourcing in the next 2-4 years, and early adopters will begin now. Outsourcing is not currently practiced at the enterprise level as a transformational activity. There is an opportunity to reposition it for the CEO agenda. Outsourcing can be an iterative approach to achieving agility by harnessing the drivers listed above to increase innovation, efficiency and responsiveness.
Missing Gold Pieces
The missing pieces are golden opportunities—if core represents 50% of an enterprise’s activities (methinks this is on the high side, but some companies claim theirs is), that means theoretically much of the rest could be outsourced, even allowing for Sarbox and other regulatory constraints. However, using current practices, companies can’t even come close to the potential because they can’t effectively manage the vendors they already have, let alone increase the number and diversity of vendors. Some “missing piece” opportunities are:
- Transform vendor management by borrowing from best practices in developing distributed systems (with outsourcing, the enterprise’s processes will become more distributed).
- Build business architecture to manage the increasing distributed nature of the enterprise. Apply best practices from distributed systems to business structures. IBM has some brilliant insight into this: it’s called Component Business Models (CBM).
- Grow knowledge-based practices and culture. The fundamental tie between high-performing collaborative partners is actionable knowledge exchange. Most companies are ineffective at this now. The industrial enterprise is, in general, a poor collaborator because command/control is a deeply ingrained management impulse.
The Two-fold Value Proposition
There is a rare opportunity to offer a fantastic value proposition: the “traditional” outsourcing value (save money, increased efficiency) plus the “missing pieces” in a continuous, iterative process that can deliver tactical cost and efficiency savings while building strategic adaptiveness to drive competitiveness for the long term.
21 December 2005 The current revolution in enterprise software is only a preview of a much larger, more pervasive shift that will transform the global economy within the next decade. Service-oriented architecture and Web services are two of the more well-known elements of the maturation of distributed computing, which is changing the rules of the vaunted software development life cycle.
In short, we are on the way to becoming a real-time market for global human capital whose ascendancy will increase with the growth of the knowledge economy and global standards for work processes. If we classify economic value according to knowledge/information, manufacturing and agricultural products and services, the knowledge portion has been steadily increasing its share of the value chain, and this trend is accelerating. Of course, information technology facilitates the creation, distribution and sharing of knowledge.
What does this mean for outsourcing and offshoring? By understanding how standards-based technologies have combined to transform enterprise software, we can learn how the coming standardization of work processes will drive explosive demand for an always-on market for knowledge workers and real-time value chains.
Read a longer version of the article published in the Technology Executives Club Journal. Forthcoming next month, my point of view will explain in more detail how we can apply learnings from e-business adoption and software transformation to pervasive outsourcing. This article is an hors d’oeuvre.
21 November 2005 When the U.S. saw manufacturing companies move significant operations offshore during the 80s and 90s, most people were unhappy, but many understood that certain industries were maturing, facing global competition and price pressures. Consequently, they were forced to remain competitive through lower labor costs. However, as awareness of IT offshoring spread in the context of the Tech Bust in the early 2000s, it sent a chill of fear up and down the collective spine: “How could the high tech juggernaut be outsourced and offshored? Would this development prevent its recovery?” Noisy gnashing of teeth, protectionist legislation and demonstrations. The longer term question was:
- As “the world” graduates many more engineers, MBAs and scientists than does the U.S., will they threaten the employment of U.S. high value professionals?
That’s an excellent (and important) question. The McKinsey Global Institute (MGI)published a significant study in June 2005, The Emerging Global Labor Market, in which they reported results of an in-depth analysis of the supply and demand of offshore outsourcing. In short, they found that:
- Offshoring will create a “relatively small” global labor market that will threaten no sudden discontinuities in employment or wages
- Demand by “developed countries” (i.e. U.S., Europe, Japan) will push up wage rates in offshore hotspots, although these will remain significantly below wages in developed countries
- The global labor market is in its infancy and is inefficient; in some locations, demand outstrips supply, with the reverse being true in other places
The study focused its analysis through eight industry “lenses”: packaged software, IT services, banking, insurance, pharma, automotive, health care and retail. The basket of “developed countries,” which represented demand for offshore services, included: Canada, Germany, Ireland, Japan, the U.K. and the U.S. Countries supplying offshore services were: Brazil, China, the Czech Republic, Hungary, India, Malaysia, Mexico, the Philippines, Poland and Russia.
Other thoughts:
- Studying the numbers and reflecting on the development of B2B markets, this makes eminent sense. Many of the engineers and other professionals, although they have some of the core qualifications to accept offshoring assignments in theory, in practice many are disqualified due to language, cultural skills and logistical barriers (don’t want to move to an offshoring hub).
- B2B companies typically have relatively complex business processes because they are part of one or more value chains that demand specialized tacit knowledge. There will be an adoption period in which companies will experiment to learn what works and what doesn’t. We are in Gartner’s vaunted “Trough of Disillusionment” with offshore outsourcing, and the results of offshore project failures document the shortcomings (For two examples, see Deloitte’s Calling a Change in the Outsourcing Market and PwC’s Less than Half of Large U.S. and European Companies Say Outsourcing is Cost Effective).
- It was easy for developed countries to talk about globalization when they assumed that they would dominate important categories of business. In a knowledge economy, however, market position is founded less on strategic control of limited resources and more on collaborating with ever-changing partners to create value for shorter product and service life cycles. It confronts developed countries to question their traditional advantages and to figure out where they want to play.
- In this context, the findings of the MGI study show that they have some time!
|
Social Business Resources
|
