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Category Archives for "For Boutiques and Consultants"

What is Chaining Today’s Corporations?

A divided organization cannot stand together for too long

Within the organization, division of labor was a fine concept when it came out. Obviously, if people focused on their individual area of expertise, in general they can be a lot more productive, if there is a robust mechanism to integrate the fruits of their labor. Unfortunately, the attempts to integrate conflict with the human nature driven by divide and rule from the top, and interdepartmental jealousies at the bottom. If someone gave me a penny for every time I have to listen to a mid-level manager tell me about how everybody else in other departments is under - performing, I would be a very rich man by now.

Most organizations became veritable bureaucracies as they grew bigger. Every person sat inside his/her own department, and was careful about making sure their department did not carry the blame if there was mix-up. Covering the tracks became the norm, and a rigid protocol was developed for interdepartmental co-operational. The resulting departmental silos create silted communication and a culture in which inter-departmental planning is simply not possible.

So what are the problems you might notice in such a divided organization?
We have worked so long on projects where we see these symptoms that it will probably take an entire chapter to explain each of these root causes. So, rather than dwelling too much on explaining each of them here, look out for the case examples embedded throughout this book and see if you can do a quick diagnostic based on these symptoms.

Too much rigidity in planning can lead to discord and disruption

A common tools deployed by most divided organizations to achieve integration was very rigid Enterprise Resource Planning (ERP) system to run their internal processes that co-ordinate inter-departmental communication. By their very nature such systems were very formulaic and prescriptive with a one size fit all approach to planning.

If you are familiar with internal operations of a large corporation, and wonder why you see so much chaos, anxiety, blamegame and other such dysfunctional behavior, this is the key reason. The systems are not setup for the type of operation. Again, I am sure you and I both could probably write a book full of case studies illustrating these types of problems. My purpose in this chapter is just to highlight what is chaining today's corporations and not to dwell too much on it. 

Of course, if you do think of an extremely poignant case study which stands far above those recounted in this book, do send them through to me for inclusion in a subsequent edition of this book.

Customers hate companies with too much internal focus

As organizations free up their inter-departmental planning from rigidities of prescriptive, monolithic systems the communications start to bloom, and planning becomes flexible, fluid and adaptive. Efficiency improves considerably and everybody is running together, faster.
However, a higher set of problems emerge due to lack of external focus - on suppliers, on customers and on end- consumers
. Many times everybody inside the company is running together, faster in the wrong direction. For a quick example take a look at Sony Corporation. Unhappy customers, slower product development, key new products missing the mark are symptoms of such problems as shown in figure 1.3:

Let us now move quickly to the macro-level picture

At a macro level, we will discuss only a few of the shackles that chain today's corporations and that too at a very high level. The aim of this discussion is to name a few hidden drags on corporate  and economic  performance, whose full impact may be difficult to recognize at a first glance. Rest of this book does NOT contain much discussion on these so it is important to put these on record here.
Why? 
  Because like it or not, you will face this in your business. And, whether you can do something directly or not, you will somehow have to overcome these drags. So, when you are reading the rest of this material and working out how to use it in your business, keep in mind these chains as well.

Dropping an Anchor – Strategic Thinking on Centralisation vs Decentralisation

The chief mate was on the forecastle with the bosun and 3 sailors preparing to anchor the ship. Master was on the bridge of the ship with the second mate, a helmsman and a lookout.

The ship had just arrived in the pearl river delta after a long sea voyage, and this being the middle of the night there was no means of communication between the bridge and the forecastle except for flashing lights, a loud ships horn,  or a loud voice though a megaphone.

We are talking about 100 years ago, the ship was relatively small and still ran on coal fired boilers. The communication between the ships bridge and the engine room was even more difficult. Coal fired steam boilers were very messy, and the steam engines were extremely noisy. Engine telegraph transmitted the bridge commands from the bridge to the engine – such as full steam ahead, or half ahead, or stop, or half astern. There being no brakes on the ship, the master was extremely good at anticipating the next movement necessary and transmit the command to the chief engineer in the engine room, as well as to the chief mate on the forecastle.

These two men had to be also extremely adept at not only understanding and following the orders from the ships bridge, but also as understanding the entire complexity of the situation in their respective stations and taking actions that would facilitate the final outcome – safely anchored ship without any damage to the ship, anchor, chain, propeller or any other ship.

For example, if the chain was running out too fast, the bosun, or chief mate would have no way to ask the master what was the depth of the water on the chart map or how high the tide was expected to be. They would have to use their own judgment to let go the anchor with sufficient force for it to hold the weight of the entire ship for several days, yet not too much force for it to take out the entire windlass with it. They were aware of other ships which accidentally let go anchor in far more depth than anticipated, and did not control the force in time so that the anchor chain just ran out and broke the windlass.

The chief engineer’s job was even more complex. He had no visibility of what was happening on the bridge, or the forecastle. Yet, he was somehow expected to anticipate the engine movement and respond in time for it to stop the ship so that the anchor can take hold and ship can swing into the tide.

The master relied on these two highly skilled operators who each has their own teams of skilled operators to help them.

And, then, the walkie-talkies were invented.

The master and chief mate are constantly talking to each other about the situation. The engine room can be reliably controlled from the navigation bridge so engineers in the engine control room stay there only for emergency coverage. Chief mate can now provide accurate information from the forecastle station, and master can issue precise instructions of what to do, and when. Chief mates, chief engineers and even masters do not need to be so highly skilled in the ‘art of anchoring’.

Reliable and constant flow of communication has made it unnecessary to anticipate and act. Co-ordination is a lot easier. Less need for contingency planning at each station.

Dropping an anchor, even in the middle of the night and/or in a busy channel with high current, wind or tide, has become a relatively far simpler exercise.

Communication technology always leads to possibilities of centralisation.

How much to centralise, and how to create a new operating system is an art.

The debate continues in every company.

How much to centralise? How to centralise? Why to centralise?

Strategic thinking is a must. No school can teach this – not even with the best case studies. Experience is the best teacher.

What Two African Entrepreneurs Have Learnt from Amazon.com – Globalization in Action Serving Humanity

Boasting exponential growth since its inception in 2012, Jumia became the first e-commerce site to bring the coveted Play Station 4 to Nigeria. The company announced the offering after just two days of the release in the US. The Nigerian would-be Amazon is following the global giant’s footsteps in becoming a super networked business, although there is still a long way to go.

Jumia started with a relatively similar aim and manifesto to Amazon, which puts customers at the heart of its operation. In the same vein, the Nigerian site also reaps benefits from being one of the pioneers in Africa’s emerging online retail market. “Being first is good, but it is not everything. What fuels Jumia’s success so far is somewhat akin to Amazon’s evolution into a Five-star business network” – said Vivek Sood, CEO of Global Supply Chain Group.

Jumia is not shy of innovation either, given the fact that people are still skeptical about online retailing as well as online payment in Africa. The Lagos-based retailer launched a range of online payment options but steers its technology-shy consumers by accepting cash on delivery and offering free returns. “It’s very important that people know it’s not a scam,” said co-founder Tunde Kehinde. They even take a step further and deploy a direct sales team of 200 to educate Nigerians about secure online shopping, which also serves as a means to build trust. Now with pick-up stations spanning over 6 locations, a warehouse facility, 200 delivery vehicles in Nigeria and 4 other country-specific microsites, Jumia seriously strives to become a one stop shop for retail in Sub-Saharan Africa. “Here you are collecting cash and reconciling payments almost like a bank desk, here you are building a logistics company,” said co-founder Raphel Afaedor.

Both co-founders and Harvard Business School graduates built the business from $75 billion in funding and are bringing “a couple of million” dollars in monthly revenue, a growth rate of nearly 20%. Vivek Sood, author of the book “Move Beyond the Traditional Supply Chains: The 5-STAR Business Network”, said: “Jumia is taking the right steps towards building the five cornerstones of a super networked business: innovation, efficiency, profitability maximisation, product phasing and result-oriented outsourcing. With the promising results so far, perhaps we could see the next perfect example of a 5-star business network besides Amazon.”

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