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Posts Tagged ‘strategic supply chain management

Business models in knowledge network industries

Earlier today, I commented on a post by Jon Husband and it released for me an understanding about university business models that has lain around in the back of my mind for a number of years.

Most of us see one side of universities – the extension of high school. We arrive as undergraduates and we can be forgiven for thinking the university is about us.  After all, we only see what we are involved with.

Universities don’t care all that much about undergraduates though.  Oh, yes, students are there.  And they must be taught properly.

But universities care about research.  And they care about research for a good reason.  Because when undergraduates are taught by someone who is actively developing the discipline, then students learn to think about where the discipline is going and how it will get there.

The ‘knowledge’ they acquire is very different from the ‘knowledge’ acquired from someone who knows the current state of the field but who sees it as a static subject.

Herein lies the difficulty for universties.  Knoweledge isn’t created within universities. It is created between them.  It is created in the give-and-take between active researchers in the discipline.

To be a ‘player’, a university must be able to fund a researcher. This means a salary, pension & insurances,  office space, computers, libraries, laboratories and international travel to conferences and meetings.  For all this, a lecturer (professor) normally delivers 4 lectures a week for about 25 weeks and hosts a handful of tutorials or labs.

In so far as money comes from government, clearly the amount provided must allow this level of activity and the quality of a university  is dependent on providing this funding.  A university can be a player in the great game of knowledge development if it has a lot of money.

Turning business models on their heads

Universities have tried to reverse this model where research activity brings in revenue.  This is all very well, but value is not created within the university.   It is created by having the “table stakes” to take part in the supply chain (or network)  that is cutting edge research.  Turning things on its head is a good try but it won’t work.

Consulting firms often try the same gambit.  They try to hire in staff hoping the staff will bring in the clients.

Turning business models the right way up again

The thinking needs to be turned around.

If we want to be players in the development of business systems in this town, then what will it take?  What endowment is needed to support the people who are working with other people in other firms to define the cutting edge?

For people entering either industry as researchers or consultants (as opposed to equity and working capital providers), then we ask other question?

  • What part of the supply chain/network do we want to work in?
  • Who takes up our work and on whose work do we depend?
  • How and where do we get together to work out goals for the whole of our supply chain/network?

That’s the thinking that turns us into  players.

Managing in knowledge network industries

For HR manages and other system designers, we have to remember this essential fact: we cannot produce knowledge within the firm.

Knowledge is created when we work on projects with people in other firms.   So we are not ‘in control’.  All we can ask is what does it take to be a player in this game?

When we undertand this question, and we depend on our ‘employees’ to explain the game to us, then we can broker the resources to allow us to host chunks of the game.

This is simply not a factory model where we make something and sell something.  This a game where we negotiate participation in a supply chain network that is advantageous to our stakeholders.

To take an example, in physics, obviously we want representation at CERN.   And so it goes with other subjects too.  Which are the frontiers where we want to be represented?  Why?  When we understand the what and the why, we might know who is motivated to pay.

We are brokers in these businesses, not managers or even private equity players.  If anyone suggests otherwise, you can be sure that business is not cutting edge.  It can’t be.  No enterprise has such a narrow knowledge base that it can be cutting edge and under the control of a handful of people.

Our job in knowledge work is to have knowledge workers on one hand and people who need knowledge on the other.   And broker the match.

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And after Toyota we have ?

The time has come when management is making one its momentus periodic shifts in thought.  The textbooks might take a little time to catch up.  Most university textbooks don’t do Toyota yet.  And after all, as we all know, Toyota is passed its zenith.  But as ever, the world moves on, and we learn from engine-makers and manufacturers.

This time it is Chinese motorcycles. How do they make them quite so cheap?

Chinese process networks & local modularization

I have been looking for good references to understand the phenonmenon of “local modularization”.   At last, I have found a good paper the motor cycle industry in Chongqing where this practice emerged. It is a pdf document presented at Davos 2006 by Hagel & Brown who are now part of Deloittes.

Working tips for finding work that will still be here in 10 years’ time

As ever, I’ve made a working checklist for my own good.  I imagine it might have been superceded by know, though. 3 years is a long time in today’s management practice.

Think supply chain not assembly line

The key to this thinking is ‘supply chain’ not the assembly line.  Now there are specialized master’s degrees in supply chain & logistics.  It is a serious business.  I have a very amateur take of what we can learn generally about where business is going but this is what I make of it.

#1  Pull vs push

Look for networks where people are asking you to do things.  Avoid networks and people are trying to ‘push’ services and products (spam you in other words).  You are looking for networks that are based on people putting up their hands and calling “I need  .  .”  You can go back to them saying “I can do X at this price.” Then neither you nor them have to say “Please buy . . .” and waste time and money on marketing. I haven’t seen any writing, other than a reference that I’ve listed below, on how networks make the change from push to pull.  Please tell me if you have!

#2  Change the game to give you and your partner permanent competitive advantage

Outsource strategically rather than tactically.  That is, form an alliance that changes the game.  Don’t just buy in finished goods.  A strategic alliance

  • Shares the goal setting with the outsourcing partner.
  • Expands the pie.
  • Deepens capability (and know how)
  • Is a long term relationship.

When you are calling for assistance, begin with the long term relationship.  Have a discussion about your long term goal.  The British aerospace industry have a cracking questionnaire on the questions to ask.  It’s worth a look.

#3  Talk long term but go with whomever delivers

At the same time, be loosely coupled.  Don’t try to specify the entire process or lock people in.  It’s a scary thought at first but every person and every supplier is redundant.  That is the natue of pull systems. Utterly redundant.

This feature may seem sem to contradict the second point and this is how the contradiction is resolved.  A long term relationship comes from discussing the long term goal.  In the past, one person specified the goal and others had to fall in in lockstep.  Now long term goals are jointly agreed but if a partner doesn’t deliver, the network simply closes over, just like the internet, and moves on.  The ‘self-healing’ of networks, ruthless as it is, is the biggest guarantee of quality (and also a worry for people who study exploitation).

#4  Go for good company rather than total dominance

Choose networks where you are one specialist link in a network rather than a dominant player.  You don’t need to dominate the network; you need a good network.  And good networks are full of people at the top of their game where the network, not just the members, gets better every day.

The British aerospace industy even have a programme to switch the whole industry over to strategically thought out relationships which though not quite pull, go in that direction.  I can imagine this point worrying people.  Certainly I would like to see work on how we protect ourselves from people who do try to dominate the network.

Moving from old styles of business to new

Hagel and Brown also gave me this checklist for managing our futures strategically.  It might be sufficient to answer my two unanswered questions.  How do we make the shift and how do we protect ourselves from ‘powerful pirates’?

  1. Where can we see the future?  Where shall we post lookouts?
  2. Where can we do things differently with other people?  Where can we work on innovative solutions?
  3. Where can we push the limits of organizational practice?
  4. Where is the “edge” or “boundary” that meets the outside world and informs the core?
  5. What sustains relationships?
  6. Where are we getting better and getting better faster?
  7. Which industries are unbundling and what is the patten?  In 2006, Hagel & Brown forsaw businesses unbundling into  infrastructure management, product innovation & commercialization, and customer relations.

I need to explore Hagel and Brown’s work more, on their own site and Deloitte’s. These lists are pretty rough but hopefully you’ll find these two lists useful in some way.  Comments?

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