For any large organisation to be effective, it must be simple, former General Electric chairman Jack Welch once observed. Delayering, streamlining and asking targeted questions are all part of the process. When it comes to supply chain streamlining and lean management, simplicity is easier said than done, but the pay-off is immense.
For a large organisation to be simple, its people must have self-confidence and intellectual self-assurance. Insecure managers create complexity and often tend to use thick, convoluted planning books and busy slides to promote confusion. Leaders must have the self-confidence to be clear and precise to be sure that each person in the organisation understands what the business is trying to achieve.
The trouble is that many people fear being simple. They worry others will think they are simple-minded. The reality is the complete opposite — it is clear, tough-minded people who are the most simple.
Simplicity begets focus, according to Kellogg School senior fellow Sanjay Khosla and marketing guru Prof Mohanbir Sawhney. Growth through focus, they argue, is the best prescription for organisations seeking to overcome economic headwinds such as the ones we now face.
Growth through focus is not easy. Business leaders generally seek growth by extending product lines and brands and entering new regions. Such growth increases the complexity of operations. On the other hand, if leaders follow a systematic approach with a focus on three areas — strategy, simplicity in communication and empowerment in execution — they will have a powerful formula for driving profitable growth.
To deliver profitable growth in times when resilience, flexibility, speed and responsiveness across the value chain are critical, the supply chain has become a key business asset. High-performing supply chain leaders are no longer exclusively technical, operational people with a sole focus on cost reduction. They now play a fundamental role in supporting the company growth agenda through engagement with customers and suppliers. They tend to:
1. Focus on strategy: A Harvard Business School study found the difference between high-growth companies and their less successful counterparts was in their implicit assumptions about strategy. The latter took a conventional approach — their strategic thinking was dominated by the idea of staying ahead of the competition. In stark contrast, high-growth companies paid little attention to matching or beating their rivals — their strategic logic was "value innovation". The basic tenets of value innovation are:
Industry assumptions: Most companies take their industry conditions as a given, but value innovators don't. No matter how the industry is faring, value innovators look for blockbuster ideas and dare to make quantum leaps in value.
Strategic focus: Conventional logic leads many companies to compete at the margin for incremental share. The logic of value innovation starts with the ambition to dominate the market by offering a tremendous leap in value, investing resources to identify and deliver completely new sources of value.
Customers: Most companies do finer segmentation and greater customisation of their product offering to retain and expand their customer bases. Value innovation follows a different logic. Instead of focusing on differences among customers, value innovators build on powerful commonalities in the features that customers value.
Assets and capabilities: Value innovators are never constrained by existing assets and capabilities in the way conventional businesses seem to be. They assess business opportunities without worrying about where they are at a given moment.
Product and service offerings: Conventional competition takes place within clearly established boundaries defined by the products and services the industry traditionally offers. Value innovators often cross those boundaries. They think in terms of the total solution customers seek.
2. Simplicity in communication: Information visibility is the foundation for a supply chain to create and deliver value, yet most managers agree that complications occur when people are cut off from the information they need. For example, to improve communication up and down the ladder at General Electric, Mr Welch established the Work-Out programme. In multiple-day sessions, business groups evaluate their practices, consider criticisms and develop written contracts to implement new procedures.
3. Empowerment in execution: With strategy and communication filters in place, the most important and difficult step is execution. Execution has two key elements. First, everyone must be clear about who will do what in order to avoid ambiguity about roles and responsibilities. Second, decision-making must be moved closer to customers and consumers so the people responsible for results have the operating freedom they need.
In most organisations, the mistaken belief that the leadership team has superior knowledge has conditioned managers to assume success lies in pleasing the bosses rather than in winning in the market.
To transform this mindset, business leaders should demand a strong bias for action instead of calling for endless hours of preparation and meetings that usually lead to "analysis paralysis". They must promote external focus over internal focus and emphasise the future over the past.
Finally, a simple tone is vital to the success of growth through focus. The sun generates a tremendous amount of energy but gives only a warm glow. By contrast, a laser beam that uses a few kilowatts of energy can cut through metal.
Such is the power of focus, which organisations must harness to drive profitable growth.
Kanishka Ghosh is a supply chain practitioner and regular contributor to The Link. The Link is coordinated by Barry Elliott and Chris Catto-Smith as an interactive forum for industry professionals.
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