Core competence and outsourcing

Little did strategy scholars C K Prahalad and Gary Hamel think in 1990 that "core competence" would become so central to the outsourcing decision and global B2B and supply chains just just over  a decade later when Thomas Friedman  declared that the "World is Flat."

Robert Weisman does a great job of highlighting how core competence perceptions by organization managers has been changing. From contractors cleaning facilities and managing food in the cafeteria today you have contractors doing part or whole of HR (including payroll,recruiting,evaluations,training), Finance and Accounting,IT, manufacturing, procurement, sales, new product development,customer service etc.etc.

So I decided to look up the latest web definitions of core competence. Currently the wikipedia definition states : A company’s core competency is the one thing that it can do better than its competitors. A core competency can be anything from product development to employee dedication. Earlier formulations of Core Competence  somehow had the notion of "doing it yourself" embedded in the concept. Today it is not important for a firm to actually "do" anything in-house – even if it is a "core competence". So long as you can protect your core competence from competitors through effective intellectual property management (eg. GE and Pfizer) and "not easy to duplicate" execution (as in Wal-Mart) you really can get everything done globally by networks of suppliers who are simply part of your "extended" organization. Indeed, wonderful opportunities for all involved in B2B whether as buyers or sellers.

Super bowl ads “people power” and “global outsourcing”

The Superbowl ads are always a great reflection of our times and more importantly changing times. For the very first time viewers have created an ad- The Crash the Superbowl-Doritos ad. The empowering of the amateur ad person i.e. "You" is a catclysmic change in the way clients and advertising agency creative people will work in the future.

The outsourcing phenomenon finds a prominent place with "Bud Light" and an accent training call center class in what could be India. The ad closes with a clearly geeky Indian IT professional in an American bar who just cannot pronounce "Bud Light."  But seems to be enjoying his Bud Light anyway.

Malcolm Gladwell “Tipping Point” and outsourcing

I read Malcolm Gladwell’s "Tipping Point" over the last summer while in India. I was impressed by Gladwell’s neat analysis of what causes rapid change. This is the tipping point kind off take-off graph. On the other hand diffusion of innovation scholars lead by the late Everett Rogers of whom I am a rather loyal follower see innovation diffusion more in terms of a gentle normal  distribution, something like this:

Innovation_adoption_curve_1_1 The problem is that some innovations simply take off like virus, with a sharp upward curve and no downslope in sight. This makes scholars like me swallow hard and look to journalists like Gladwell for some light ! The tipping point is the sharp rise of adoption with almost all people adopting something quite quickly similar to the way virus spread. Infact, it was the spread of the AIDS virus that spurred Gladwell to come out with the idea of the tipping point.

Global outsourcing is one such phenomenon. One other journalist (called Thomas Friedman) has been crying hoarse since 2005 about the impending "tipping point" in global outsourcing and business scholars like me have been arguing through papers,presentations and this blog about how Americans should deal with this phenomenon at the individual career level and how corporate American can leverage global outsourcing at a strategic level for enhancing innovation and market growth. People have started listening, slowly.

In the meanwhile, Information Week announced that Accenture CEO William Green has stated in Bangalore that India Accenture would have 35,000 employees while US Accenture will have 30,000 employees thereby having more people in India.Author Paul McDougall calls this the "tipping point" in outsourcing and I think Paul’s take is just brilliant. Company Presidents will indeed accelerate outsourcing as Paul McDougall suggests, but the question is whether American workers and managements see the global opportunities in this phenomenon? Or will companies continue not to talk about outsourcing and therefore mess up the execution and the media and public simply complain about US companies not looking after American jobs? I for one think that William Green of Accenture did the right thing and Paul McDougall did just great byat least talking about the "O" word!

Windows Vista launching tomorrow

So, tomorrow is the day for the launch of Windows Vista and Office 2007. This is a big day and Steve Ballmer is supposed to be at a Big Buy (or Circuit City ) tomorrow and Bill Gates spoke to Meredith Vieira on NBC morning show and all the evening television shows covered the launch. The inevitable comparison with the Mac operating system OS X reminds me of my friends in the ad and design world who swear by the Mac and say that "when you go to mac there is no going back." One report mentioned that it was as if the Mac OS X system was given to the Windows Developers and they were simply asked to clone it. Bill Gates bristled this morning when Meridith Vieira raised this "copying from Apple" thing with him. Bill Gates gave a good answer but not the real real answer why 90% use Windows.

Windowsvista_2 The real answer according to me, is that most people just want to use technology to get on with life. It’s just too hard to use software and technology that may be perhaps cheaper, more user friendly but which simply disrupts your life because it does not speak to each other. For example, recently a speaker at an event sent her presentation file on "word perfect" and that itself became a hassle for the organizers. Who has "word perfect" was the frantic cry! By the same token – I don’t see much headway that Zune will make against iPod simply because iPod invented the category and has been rapidly innovating since. If you ever used an iPod you’ll know what I mean. Similarly I think that "open source" type of products are good for  a segment of customers who are able to manage ambiguity in technology or performance. This number is small and is unlikely to become a majority in the near future. This is one reason that "Geeks on Call" Geeksoncall05 are a viable business. They simply help customers adopt technology and by doing so provide an invaluable service.

Technology adoption is a funny thing. It’s hard to do and Microsoft does not seriously expect existing users of XP to move over. However, new computer buyers are most likely to go for Vista which will have much better security features among many other improvements. Interestingly, in the NBC interview Meredith Vieira had concerns about how she was going to switch from XP and Bill Gates obviously offered to help out. For now Microsoft business seems secure!

Marketing,R&D,Innovation,Strategy changes at Coke

The recent management changes at Coca Cola headquarters are very interesting. In an earlier life I was in the packaging industry with lots of customers in the soda market and I had a huge interest in the doings of the soda marketers and Coca Cola in India is featured in my PhD thesis and an academic article.

Coca Cola is also a personal favorite  and I am totally amazed at the taste of Coke Zero Cocacolazerocompared to other diet colas. In addition, Coca Cola is "the greatest brand" on earth and serves as excellent example for my marketing classes.

Coming to the recent management changes at Coke – I was somewhat intrigued by the rather substantial coverage the departure of Mary Minnick as Vice President of Marketing,Strategy and Innovation has attracted. Ad Week really gets into details of the re-org.

There are conflicting reports about how the various departments of R&D,Strategy, Innovation,Marketing are being organized. Forbes reports that Strategy and Innovation will report to Chairman Isdell while Adweek quotes Isdell saying that R&D and marketing will have better co-ordination by reporting to new coke President  Muhtar Kent.

As the Coke re-org becomes clearer it will be really interesting to see how things pan out for Coke the organization. The media including the blogosphere will be watching closely!

Contact StratoServe.

What’s next for the US Small and Medium Manufacturer ?

The GNHCC Business Expo 2007 turned out to be a huge rallying of small and medium companies in the New Haven region. Tireless efforts of the organizers and various supporting organizations,associations and well wishers of New Haven businesses made the event a great success.  As I wrote earlier – I was on the  CAPM panel

From GNHCC Busines…

for "Procurement Strategies for a Global Economy". The event set me thinking about the future of the US small and medium manufacturer. The venue of the expo was the old Winchester factory that was closed down and renewed calls to "re-capture" the past "glory" of manufacturing left me somewhat confused. Is that possible or even desirable?

Unlike Japanese companies who take their good suppliers to overseas markets, large US companies simply expand overseas and do not take care of their US based smaller suppliers. I have no formal data but would guess that most small companies who supplied to larger firms who moved out had to fend for themselves. They embraced cost cutting and six sigma, cut manpower, alarmed young people into avoiding studying science and engineering and generally went into a downward spiral.

Even at the EXPO the tone was of "defending" manufacturing rather than "attacking" new markets. In my presentation on "5 Quick tips to add value to your global supply chain" I emphasized that new global markets like India and China had the biggest US companies and these companies were trying to develop a local supply base. For example, the Small Scale Industries Association of Kartnataka, whose capital is Bangalore has over 3000 members and many of them will be eager to tie up with the smaller manufacturer from New Haven and then help tap markets in South Asia,Middle East, Central Asia and Africa.

The question is – how much the small and medium sector is willing to venture globally? If they did actually appear in some form in other global markets I am sure that their old US customers who moved overseas will like to do business with them.

Procurement Strategies in the Global Economy

Coming up on Wednesday 17th January 2007 is the Greater New Haven Chamber of Commerce Business Expo 2007 organized by the New Haven Manufacturers Association and the Greater New Haven Chamber of Commerce. The very first panel discussion at 10.30 am is on "Procurement Strategies in the Global Economy" which is sponsored by the Connecticut Business and Industry Association (CBIA) and the Connecticut Association of Purchasing Management(CAPM).

I am on this panel with the topic " 5 quick tips on adding value to your global supply chain,"  alongwith members of the CAPM. At last count 35 people had registered for the session and I am putting finishing touches on my "5 quick tips". For this predominantly manufacturing audience I am going to emphasize the huge global opportunities there are for the entrepreneurial American manufacturing firm. As I mentioned earlier in this blog, for example India is buying commercial aircraft at the highest ever rate in the world. All these aircraft engines need overhaul in due course and US aircraft engine makers would be really pleased to see local repairers who are partners of known smaller US firms but are available in India to provide service. In other words my "first tip"  is  to encourage manufacturers to be "South " focused. "South" in my supply chain view is the customer at every downstream link of the supply chain and distribution channel. South also is Mexico ,Brazil and other low cost- in-US locations like Kentucky.

My next "tip" is to look " north" in the upstream supply chain – geographically to Canada and at every link upstream on  your particular supply chain. My third and fourth tip is "East" and West". These are  the geographies of new suppliers and markets ( East with China, India, Middle East and Africa) and the new West being former Soviet countries, new NATO members who are so keen to globalize. At a metaphorical level "East and West"  are looking at industries that are different but that can give huge ideas. For example as Eric Von Hippel says in his lead user research – the auto industry got the idea of ABS brakes from aerospace folks who had the urgent need to stop planes quickly and with no uncertainty on runways.

My fifth "tip" is to enhance your personal network. Just as I mentioned in an earlier blog, college kids today have 300 contacts on their Facebook. Each of those contacts would reply to a query pretty fast….. no matter where they are on the globe. There is no reason that an entrepreneur in the Greater New Haven Area cannot systematically maintain contact with at least those they already know.

In summary my "5 quick tips to add value to your global supply chain" is to look "South,North,East, West and Around" your own present supply chain!

If you are in the area do check out the Business Expo at 25 Science Park at Yale University, New Haven on Wednesday 17th January.

Alliances,mergers and supply chains

2007 has got off to a great start – the weather in the North East US is unseasonably warm and people are not complaining although there is underlying concern about "global" warming. It’s interesting that we have started looking at weather with a "global" perspective. Switching gears, I just finished a research paper on global alliances and innovation in high tech -high change sectors. High tech sectors like biotech,pharma,certain types of engineering involve lots of trials and rapid change. Global alliances have become a particularly useful and flexible organizational option to deal with expert knowledge domains on a "short term" basis. Joint Ventures (JV’s)have become less favored organizational forms because of rigidity ,high failure rates and the need of partners to fight over "control". Thus 90’s have seen a decline of JV’s and a rise in alliances. With the growth in Internet and web based "visible" global supply chains the demand for supply chain visibility can now be met.

Mergers and acquisitions on the other hand are driven by all kinds of reasons that look financially good (say one partner has valuable real estate,great scientists, a great new product pipeline) with one big downside. Merged organizations have huge management problems including managing combined  personnel and supply chains. M&A’s are therefore the opposite end of a working alliance in terms of being able to make the supply chain work in a non-duplicated and integrated fashion. Things become more challenging when prior due diligence does not have Supply Chain integration as a top priority as this report by Robert Malone suggests. I tend to agree with Jay Welsh of Accenture when he says that Supply Chain executives get involved after the merger deal is done. It’ll be nice to know how many acquiring companies really provide for adequate money and time that is required to integrate global supply chains particularly with multiple locations in multiple countries.

Global networks of innovation – a reality in 2020 ?

I have been thinking of the biggest change that 2006 has brought as we review 2006 on the last day of the year. Actually I had been studying this trend since 2005  when I happened to see the CBS 60 minutes report on Echo Boomers. Having a teenage son helped as was the opportunity to teach new product development to the older Gen X including some Baby Boomer MBA students. My task for over a year was to get several batches of MBA students think of the Y Generation/ Echo boomers/Millenials and devise new products and services for this target market. The Intelligence group featured in the 60 Minutes story kindly sent a senior executive to my fall 2005 class – much to the students delight.What struck me was the veritable alarm that Baby Boomers and X Gens feel in dealing with the Echo Boomers. Because , well they are different- so different that the Dale Carnegie Institute does a workshop to get these generations to work together in and across organizations.

My non-scientific survey with college students tells me that Echo-Boomers don’t use email but can have 300+ Facebook contacts and simply post messages on something like a digital board- in place of  email. This blog discusses this remarkable development. Consider the alarm older people feel in putting their entire life on a networking site. "It is an invasion of privacy," fumed a baby boomer friend!

As the Facebook and Myspace generation grows up and takes leadership the world is likely to become a friendlier and more trusting place. And that should have huge repercussions for global networks of innovation in 2020. ……only 20-20 hindsight will tell …

Wishing all readers of this blog a Very Happy New Year  2007 !

Rick Warren and “It’s a Wonderful Life”

Yesterday was Christmas Eve and  I was watching Tim Russert’s Meet the Press with   "Faith in America" that had Rick Warren of the "The Purpose Driven Life" and Jon Meacham the Editor of Newsweek.

"The Purpose Driven Life" is the all time best selling hardcover book in America according to MSNBC and is featured at no. 6 at Amazon.com. I had browsed the book earlier but had never actually seen a picture of Rick Warren. Frankly, I was completely taken aback by the man’s disarming and down to earth approach.

The text of the interview is here and several points simply jump out. The first is that 95% Americans profess "faith" and according to Rick outside Manhattan there is really no sizable "secular" group! Second, the important thing is to "do good" rather than be concerned about what religion or motive is driving the do-er. The third point was the one that gave me something new to think about- Warren emphasized the importance of freedom of religion as a major underpinning of of "balance and check" on pure greed of the individual. American capitalism is successful because of Judeo-Christian beliefs according to Warren, that caution the Businessperson to look after stakeholder  interests without "legally" being required to do so. Since all religions promote good ethics – religion and its freedom in a supplier country can be a potential predictor of long term global supplier performance.

Late at night we watched It’s a wonderful life and Rick Warren’s point came through beautifully..

Here is wishing Merry Christmas and Happy Holiday to readers of this blog in 350 languages….