Is Innovation Your Next Game-Changer?

Join the supply chain conversation at Think Supply ChainThe bold headline on the P&G site reads “Connect+Develop.” If you haven’t been there, you need to go. The site is designed to attract partners with whom P&G can collaborate to deliver innovative solutions to the marketplace. It is an interesting approach to attracting partners: “Got a great idea to help better meet people’s needs? Come to us first!” According to the site, the thought process is simple: “Times have changed, and the world is more connected. In the areas in which we do business, there are millions of scientists, engineers, and other companies globally. Why not collaborate with them?”

P&G recognizes that the way we do business today is vastly different than it used to be. Innovation used to happen within a company. Now, firms are working together to innovate across supply chains. A particularly interesting story on the site explains how the Tide Pods were developed.

Tide Pods are individually packaged units of laundry detergent. They are genius, if you, like me, have a tendency to put too much soap in your high efficiency washer (resulting in epic overflow). You just toss the Tide Pod into the washer, the coating dissolves, and the detergent is dispensed. Others must agree because, according to P&G “Tide Pods is on track to becoming a $500 million dollar brand in its first year … while still only available in one market.”

P&G collaborated with a long-term supplier, MonSol in Indiana, to design and develop the pods. While they had worked on similar projects in the past, producing this product was more challenging because, “three different cleaning solutions are encased in separate chambers in each pac, all of which need to remain separate until fully immersed in water. Additionally, the film surrounding the cleaning solutions had to be designed to dissolve in a range of water temperatures, from hot to cold.”

P&G and MonSol each have special competencies that they bring to the table when working together. Each organization trusts the other based on its unique competencies and the relationship they have built over the years. Taking the attitude that they were one team, P&G and MonSol professionals worked together until they got it right. So right, in fact, that P&G recognized MonSol with its 2012 C+D Partner of the Year award.

Trust and collaboration are important not only to fostering innovation, but to creating high-performing supply chains. Yet many firms continue to struggle with the creation of trust-based relationships. So I wonder, what gets in the way?

Find, Frame, Focus: Supply Chain Governance

Join the supply chain conversation at Think Supply ChainI drink fair trade coffee. Until this weekend, I never thought too much about it. On Saturday I started reading The Practitioner’s Guide to Governance as Leadership, by Cathy A. Trower. Richard Chait, professor emeritus, Harvard Graduate School of Education, writes in the foreword that governance practiced at the highest level allows boards to “find, frame, and focus on matters of paramount importance to the organization’s current and future welfare.” That got me thinking.

I googled “supply chain governance” and the most prominent results were related to the fair trade coffee movement. The fair trade movement began in the 1960s as a way to create supply chains in which small producers could receive a fair price on their labor. In 1988, an organization based in the Netherlends created a labeling standard for coffee produced by supply chains meeting certain fair trade standards. In 1998 the German organization FLO began to administer a supply chain certification process. This certification process is an interesting example of supply chain governance.

I am sure there are many other examples of third-party organizations involved in some form of supply chain governance. Yet I wonder if supply chain governance, like most governance, often takes the form of a contract between parties? These relationships are likely to be quid pro quo rather than based on a shared set of standards outlining common values and purpose. If we elevate supply chain governance to finding, framing, and focusing on the issues that matter most to successful relationships between suppliers and producers, will we elevate the performance of the supply chain?

How do you define supply chain governance? What examples can you share so that others may learn? Can any readers illustrate how excellent supply chain governance leads to excellent performance and results?

Innovation by Surprise

Join the supply chain conversation at Think Supply ChainI am about to embark into dangerous territory – at least for me – and make a sports analogy. Innovation is about field goals and touchdowns. Both can add up to victory. At least that is how I am summarizing comments to my last post. Bob Trent, Paul Pittman, and Chet Frame write about the process of continuous improvement creating a culture of innovation. It’s about the discipline and, as Chet says, “the daily commitment to working better.” Field goals.

But Kevin Wurtz reminds us that touchdowns can lead to big victories. The concept of inward- and outward-facing innovation really is interesting. Kevin states, “inward-facing innovation is expected, it is why we do what we do. Outward-facing innovation is a surprise we didn’t anticipate.”

Continuous improvement obviously is not easy to achieve. It requires a sustained effort, a supportive culture, and absolute belief in the fact that no matter how well we are doing, we can do better. Although it takes a highly coordinated and dedicated effort on the part of employees at all levels in the company, it is in management’s control.

Outward-facing innovation, the big idea that emerges in part from the arrogance of knowing what people want before they do, comes as a surprise. But if it is not planned, can it be cultivated?

I wonder how many companies we can name that, year after year, create demand for products we didn’t know we needed? At the same time, companies continue to make those products better. How do they do that? What is their secret?

Innovation: a noun or a verb?

Join the supply chain conversation at Think Supply Chain“I am starting to cringe when I see the word innovation. I have placed this word on a list of terms that I maintain that are so overused that they begin to lose their meaning.“ I know where Bob Trent, who commented on my last post, is coming from. In the world of business education and communication, most of us are guilty of picking up on trends in nomenclature and beating them to death until pointed in a new direction by different trends. The problem with naming is that it allows us to seemingly embrace concepts without really understanding them. We can lose the complexity or richness of meaning.

So perhaps it is best to focus on innovation as a process as opposed to an outcome. What is required for innovative thinking and action to become a part of the way firms do business? Jennifer Kevlin, Value Stream Manager, WW Client Supply Chain & Delivery Solutions at IBM, shared this weekend how IBM seeks to create a culture of “collaborative innovation” through the use of technology. IBM Jam Events allow individuals from all over the world to think together about issues in different ways, taking different perspectives. These are structured, facilitated events where the input received is carefully culled through and evaluated. The outcome of these events can be new projects that drive value to the customer, the firm, or society.

Harnessing social media to facilitate collaborative thinking is a powerful way to embed innovation in process. Yet gathering input is not the end of the process. Companies still need to be able to not only make sense of all the input received, but transform it into something that is actionable and that ultimately drives value to the customer.

What ways are companies creating a culture of innovation in their organizations? Is value being created as an outcome?

Built to Last?

Join the supply chain conversation at Think Supply ChainWinning, earning profits, or creating customer value: What is the best focus for developing supply chain strategy? Commenting on my last post, Joe Wikowski points out Michael Porter might disagree with A.G. Lafley and Roger Martin’s emphasis on winning as the foundation for developing strategy. Witkowski writes, “winning, or beating your rivals, in the context of Porter’s 5 forces framework, is too narrow.” He says, according to Porter, customers, suppliers, substitutes, and potential and existing rivals all impact a company’s ability to earn profit.

Intrigued by the distinction and wanting to know more, I came across an interesting, albeit biting, Forbes article written by contributor Steve Denning. The article, “What Killed Michael Porter’s Monitor Group? The One Force That Really Matters,” appeared November 20, 2012, and is packed with provocative comments designed to incite conversation. Decide for yourself whether Denning’s commentary is fair or not. However, citing Apple, Amazon, Salesforce, Costco, Whole Foods, and Zara, Denning makes the interesting point that the purpose of the successful firm today is to deliver “more value to customers through innovation.” Focusing strategy on driving profit for profit’s sake will not lead to sustained success, Denning suggests.

If a firm is successful at creating and delivering customer value, it is more likely to create more profit and win over time. But if the focus is on profit or winning for its own sake, customer value through innovation is not guaranteed. Denning recognizes this, and sees continual innovation as the only means to sustain success in today’s global marketplace.

Consider the focus of your supply chain strategy. What is the balance between creating profit and delivering customer value?

Strategy and the Risk of Opportunity Lost

Join the supply chain conversation at Think Supply ChainConsumer package goods (CPG) companies, such as Unilever and Procter & Gamble, have earned a special kind of admiration in the supply chain world. They are targeting emerging middle class markets and it is their supply chain strategy that makes this a profitable—and enviable—business. Supply chain leaders across a variety of industries and marketplaces want insight into CPGs supply chain strategy.

A.G. Lafley, former CEO of Procter & Gamble (P&G), has recently co-written a book on strategy with colleague Roger L. Martin, dean of the Rotman School of Management at the University of Toronto. In Playing to Win: How Strategy Really Works, the authors define strategy as a series of choices: What is winning? Where are we going to play? How are we going to win? Do we have the core competencies and capabilities to win? How will we manage and measure strategic process? Although Lafley and Martin do not specifically call it out with these questions, risk is inherent.

Risk management is a core supply chain competency that goes hand-in-hand with supply chain strategy. Greg Schlegel, CPIM, CSCP, and  risk and resiliency subject matter expert, recently shared with me an article published in Risk Management magazine. In the article, Lafley states that “fundamentally, your risk management choices, capabilities, programs, and processes come directly out of your strategy.” He goes on to say “you make your risk management bed when you make your strategy choices.”

But what about the risk of opportunity lost? Companies who boldly go where other companies do not are making a strategic choice to engage risk at a higher level than others. Taking hold of an opportunity that is high risk has the potential for high reward. Lafley makes the point that pushing into China to serve the emerging consumer class drove P&G’s supply chain decisions, such as manufacturing locally to keep distribution costs low. Although this introduced a good deal of risk at the time, it was an opportunity P&G leaders did not want to pass up.

What levels of risk do you address when creating supply chain strategy? Does your company evaluate loss of opportunity as a risk at the same level as other more tangible risks? What process do you employ to evaluate whether decisions made related to risk contribute to the success or failure of your strategy?