Digital Enterprises Rely on Digital Supply Chains

Stephen DeAngelis

August 25, 2015

“The basis of commercial enterprise is information,” writes Kenneth Cukier (@kncukier), Data Editor at The Economist. “That hasn’t changed in thousands of years. However, those who feel that today’s big data is just a continuation of past information trends are as wrong as if they were to claim that a stone tablet is essentially the same as a tablet computer or an abacus similar to a supercomputer.”[1] Since the characteristics of information have changed, it should come as no surprise that Gerald C. Kane, Doug Palmer, Anh Nguyen Phillips and David Kiron assert, “Successfully incorporating today’s digital technologies requires companies to operate in new ways.”[2] They came to this collective conclusion from diverse perspectives. Kane (@profkane) is an associate professor of information systems at the Carroll School of Management at Boston College; Palmer (@dv_palmer) is a principal at Deloitte Consulting LLP and leader of Deloitte’s Social Business practice; Phillips (@anhphillips) is a Management-consultant-turned-researcher; and Kiron (@DavidKiron1) is the executive editor of the Big Ideas Initiatives at MIT Sloan Management Review. To succeed, companies must embrace the digital future and transform into digital enterprises. Kane et al. argue that this means more than simply adopting new digital technologies. They write:

“Simply implementing or using digital technologies is not enough. … [Your company must] be able to act quickly on the information the platform provides. In general, effective digital strategies are less about acquiring and implementing the right technology than about reconfiguring your business to take advantage of the information these technologies enable. Companies must bring together a variety of digital technologies integrated across people, processes and functions to achieve an important business advantage.”

Cukier adds, “The importance of all that information extends beyond simply being able to do more, or know more, than we already do. The quantitative shift leads to a qualitative shift. Having more data allows us to do new things that weren’t possible before. In other words: More is not just more. More is new. More is better. More is different.” All of the above authors have accepted the premise that big changes are underway and companies are either going to change or be swept away into the dustbin of history. Cukier predicts, “No area of human endeavor or industrial sector will be immune from the incredible shakeup that’s about to occur as big data plows through society, politics, and business. People shape their tools — and their tools shape them.” If you are wondering where your business should begin its transformation into a digital enterprise, might I suggest you consider starting with your supply chain.

As noted supply chain analyst Lora Cecere (@lcecere) has stated, “The supply chain IS Business, not a department within a business.”[3] Mark Jackson, Vice President, Contract Logistics Solutions, UPS Europe, agrees that big changes are on the way and that supply chains are not going to be immune. “This digital revolution,” he writes, “has led to huge growth in areas such as e-commerce, global collaborative research, development and manufacturing, as well as in logistics. There will be more to come — ubiquitous mobile connectivity combined with data gathering and analytics will drive the emergence of new services, products and business models in all industries — including healthcare, energy, finance and government. … When it comes to supply chain management, such rapid advances are forcing organisations to constantly re-evaluate their networks, and use digital technology to significantly enhance their services.”[4] Accenture analysts agree with Jackson. They write, “Digital technology is disrupting traditional operations and now every business is a digital business. The impact on supply chain management is particularly great. Businesses cannot unlock the full potential of digital without reinventing their supply chain strategy.”[5] They believe that companies must “reimagine [their] supply chain as a digital supply network (DSN) that unites not just physical flows but also talent, information and finance.”

Even though analysts are convinced that digital enterprises represent the future, Dr. Jeff Karrenbauer, co-founder and president of the supply chain consultancy INSIGHT, asserts that too many businesses are reluctant to change even though the benefits of changing are readily apparent. Karrenbauer told David Z. Morris (), “We can solve bigger, more complex problems. Problems that we couldn’t touch 10 or 15 years ago.”[6] Often the roadblock to transformation is internal company politics. Let’s face it, change is difficult. In his famous book The Prince, Niccolo Machiavelli discussed how difficult it is to change an existing organization and why one must expect to put his career on the line to effect change. He wrote:

“There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things, because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new.”

Karrenbauer told Morris, “The organization gets the behavior it rewards … What I see are silo objectives, silo metrics, silo rewards.” Silos are seldom a good thing for an organization, especially siloed information. An organization will never achieve alignment if its various departments and/or divisions are using a different version of “the truth” (i.e., each department has a different understanding of what is actually happening in the company). Morris writes, “At its most extreme, silo management gets you Eddie Lampert’s catastrophic restructuring of Sears as a viper’s nest of mutually competitive manufacturing, distribution, and retail units.” Accenture analysts insist that companies that manage to overcome obstacles to change will develop a “new breed of supply chain [that] is more connected, intelligent, scalable and rapid than traditional supply chain management.” They caution, however, that adopting a few digital technologies isn’t enough. “This [new breed of supply chain] is vastly different from digitally enhanced supply chains which (because they are never stronger than their weakest links) have less potential to help companies.” Key findings from Accenture research include:

  • Digital technology can engender organizational change; alter the nature of the company’s control points; change the role and value of data; shift the level of value creation at each stage of the value chain; create or destroy businesses and/or operating models. In essence, digital can render traditional supply chain models obsolete.
  • Four of our era’s most disruptive technologies — social media, mobile communications, analytics and cloud computing — set the stage for the emergence of the digital supply network. And reap billions of dollars in new revenue and savings.
  • The digital supply network is more connected, intelligent, scalable and rapid. Companies that realize more of these advantages have a better market and finance performance.
  • Digital technology can help companies mass-produce capabilities as effectively as they mass-customize products or services.
  • The difference between a digitally ‘enhanced’ supply chain methodology and a wholly re-invented digital supply network is immense.

Those findings beg the question: How can a company create this new breed of digital supply chain? Accenture offers four recommendations:

  • Determine the digital supply network vision for the organization. This becomes the holy grail which will drive the transformation.
  • Convert the vision into the actual business outcomes which need to be realized.
  • Create a digital blue-print based on the business outcomes. The blue-print identifies the people, process, technology and governance aspects of the transformation.
  • Break the digital blue-print into the tasks and technologies that need to be implemented across organization to realize the digital supply network vision.

Jackson concludes, “The dynamics of the modern digital age mean that businesses need to adapt quickly. Logistics and supply chain networks are increasingly being put under pressure to deliver to more complex networks due to globalisation and higher expectations regarding service levels. In order to achieve this cost-effectively, digital technology, smart network design, and optimisation are key to a company’s success in a rapidly changing world.”

Footnotes
[1] Kenneth Cukier, “Big Data and the Future of Business,” MIT Technology Review, 30 June 2015.
[2] Gerald C. Kane, Doug Palmer, Anh Nguyen Phillips and David Kiron, “Is Your Business Ready for a Digital Future?MIT Sloan Management Review, 16 June 2015.
[3] Lora Cecere, “Sage advice? Only for turkeys.” eft, 1 February 2013.
[4] Mark Jackson, “Supply Chains in a Digital Age,” Longitudes, 18 May 2015.
[5] “Digital supply network—The new standard for modern supply chain management,” Accenture, 2015.
[6] David Z. Morris, “Big data could improve supply chain efficiency—if companies would let it,” Fortune, 5 August 2015.