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Tag Archives for " Business Model "

BIG PICTURE vs REAL PICTURE – What is Required for Business Transformations?

Global shipping is a very cut-throat business where you can make a lot of money just by buying and selling ships at the right time. So ships in operation are sold quite regularly.

When I was in shipping – there were two kind of buyers who visited the ships to inspect them prior to purchasing them.

The first kind were mainly the big picture guys who would come in and inspect all that voluminous paperwork, look at the ship’s bridge, paintwork and general layout of the ship and then spend a lot of time with the captain, chief engineer and chief officer in the hope that they would pick up nuggets of valuable information that could be reported back to the the prospective buyers. These people essentially relied less on their technical expertise in shipping, and more on their knowledge of human psychology to try and trip up the ship staff in revealing some defects or problems that could be used as leverage to lower the price of the ship during negotiations. Their reports looked very shiny and well formatted, and these were preferred by some prospective buyers who needed such reports – e.g. many banks and trading houses (mainly non-shipping entities).

The second kind would don the boiler suit the moment they boarded the ship and spend a lot of the time going into each and every double bottom tank, engine room bilge, forecastle store room and all the least visited parts of the ships. Frequently they would discover things that even the ships’ staff did not fully know. These people essentially relied on their shipping knowledge to assess the real condition of the vessel to report back to the prospective buyers a very thorough report of the ship, and points to watch out for if they bought the ship. They could also easily help the buyers work out a ship up-gradation program that was cost and time effective. Many of these folks wrote simple, factual reports that were not too professionally produced – but they were preferred by the shipping entities who were “in the game”.

Occasionally we would see someone who combined these two skill-sets marvelously and was a master at the game. When, post MBA, I moved to management consulting with a top-tier global firm I noticed many characteristics of the first kind. I will not go too much into the detail but many readers can likely fill in the picture for themselves, and it is also quite well known what kind of clients prefer these “brand names”.

I also saw there were many folks out there who were more like the second kind. Again, the readers would have likely encountered this type of management consultants too.

In nearly 20 years of management consulting, I have seen very few of the third kind. Whenever I do, I try as much as possible and get them to work with us. In our view that is when business transformation truly succeeds.

Plethora In Social Networks Are Mind Boggling

Facebook & Twitter are the dominant gorillas on social network. Whole gaming networks and other apps have cropped up-to services the participants Facebook and Twitter.

A plethora of other structures, such as social brand engagement, social marketing networks, social intelligence, social scoring and social referrals are cropping up. Most of them are too new to discern which models will eventually survive.

However, in this clamor, one thing is abundantly clear - social networking itself is revolutionizing the way humans live, work, interact and govern. While the Arab Spring in Tunisia, Egypt and many other countries is now a fading memory, the role of social networks in creating impetus and sustaining momentum cannot be underestimated.

Social networks are popular but business networks are lucrative

In 5-Star Business Network book, our focus is on Business Networks. We will not spend much more time on the social networking phenomenon; powerful, diverse and exploding though it is. A far more powerful, diverse and well-established network exists in the business arena. Every business relies on a network of suppliers and customers to sustain its operation and place in modern society.

So powerful is this network, in fact, that the basis of competition has long ago shifted from competition among companies to competition about supply networks. 

business network

Market leaders network with suppliers and customers who are market leaders themselves in their own arena to co-create, design, produce, market, sell and service a whole range of products and associated services the customers take for granted each day.

The renewable energy field is not only growing rapidly but there are also different applications - ranging from geo-thermal to wind and solar energy, which are competing with each other, as well as the traditional sources of energy. In a rapidly shifting economic landscape, with the volatile pricing of coal and oil, the relative attractiveness of any one energy source not only depends on the technological superiority of the concept itself, but also on rapid deployment of technologies to demonstrate superior results in action.

In such a scenario, the challenge emerges: How to create a network of businesses with complementary capabilities that can bring in the required expertise in research and development and use it to co-create a product or technology, where each business also satisfied while optimizing it's resource usage in pursuit of it core mission. 

Business Networks Ranges Into Trillions of Dollars

How big are the business networks we are discussing?

One estimate puts the combined worth of these supply networks into trillions of dollars as you seen in above picture.  

5-star Business Network

Each industry has a highly unique and valuable supply network that its participants have created in response to the circumstances, regulations, customer needs, and economic situation in the industry.

Either by trial and error or by intelligent design somewhere along the way, each of these networks has evolved over the past several decades to reach into its current state as a result of all the changes in economics, technology, regulatory requirements and customer tastes. Sometimes a new player, such as Red Bull, enters the industry and causes a major disruption to the established supply relationships and networks. In most cases, the established supply relationships and networks in every industry will go through a gradual evolution as the environment evolves. Most CEOs are now familiar with the power of supply networks transformation. Currently in many industries these supply networks are rapidly undergoing massive transformations as CEOs adjust their business strategies to global realities.

We will cover Business networks and supply networks in great detail in Sections II and III. For this reason, we will devote the rest of this chapter to looking at some other types of networks familiar to you.




Fresh Thinking For New Business Models

Old Business Models are Getting Redundant

When General Motors filed for Chapter XI protection in 2008, it also marked the closing of a type of business models in modern commerce.

General Motors was seen as the paragon of modern American management theory as popularized by Peter Drucker in the middle of the twentieth century.

It was at this venerable company that Peter Drucker formed his early thoughts about management as a profession, separation of the ownership from management of enterprise, the key functions of management, division of labour, theory of leadership of enterprise, indeed the very concept of the corporation.

His writings were the need of the time, and were picked up by ivy league business schools and corporations alike and formed the basic foundation of management profession.

Indeed there was a time when General Motors and the US commerce were thought of as interchangeable entities with popular aphorism that “what is good for GM is good for America and vice versa.”

Some people still think this is the case.

They see the decline of General Motors as symptomatic of a wider malaise in the US economy.

Others think that General Motors will rise like a phoenix again to become an industrial powerhouse.

While we do not know what will eventually happen to General Motors, we know that new models of commerce, new industries, new technologies and new ways of solving old problems will be required to build a stronger economy on a global level.

All of these will not necessarily come out of one country, one continent or even one region.

Drucker foresaw some of these changes in his writings on the information age, post-capitalist society and post-industrial man.

Prescient as he was, he did not yet fully see majority of the changes that have happened in the last 6 years since his death.

The rise of China and India, the global financial crisis, the zombification of the western economies as a result on intense focus on the rapid gains from FIRE (Finance, Insurance, Real Estate) industries, hollowing out of real capabilities are nowhere to be seen in his writings.

However, this is not just true of Drucker, most of the management thinkers, writers, academics and authors can be painted with the same brush.

It is not a surprise that the established thinkers find it difficult to think outside the box.

Since the times of Aristotle, Socrates and perhaps even before that (for the history of mankind maybe older than that), new thinking must come from new places – from outside the established order of thinking.

No wonder then that the most innovative companies in the US still choose to locate on the west coast, many of the most successful corporations were formed by the college drop outs and the most successful business models do not even have a name yet.

— Excerpted from the introduction of THE 5-STAR BUSINESS NETWORK

The Newest Way To Make Your Business Network Great

In his book The 5-STAR Business Network (http://bit.ly/5-STARBN), Vivek Sood mentions the concept of synchronicity, and focus on Carl Jung’s perception of it. The concept of synchronicity has a specific definition in Carl Jung’s mind.

For him, it is a causal connection of two or more psycho-physic phenomena. He started to use this word in the 1920s to describe two or more casually unrelated events happening together in a meaningful way. Although we could write pages on this concept, a short definition would be a coincidence that is not senseless. Carl Jung observed this phenomenon on a patient for the first time.

A patient dreamt about a golden scarab, and the next day, the same insect hit his cabinet’s window. The question that comes up with this kind of situation is: Was the relationship between the events random or was there some hidden force?

The concept of synchronicity has evolved through the 20th century and many studies exist about it, with many theories and explanations. However, this is Carl Jung’s thought in which we are interested. Indeed, his vision of meaningful coincidence is what I think happens with business relationships. Synchronicity is what enables our business networks to expand and to create more value.

To pursue his work, Jung started to collaborate with Wolfgang Pauli. This collaboration lasted for several decades, making conjectures about synchronicity. They conjectured that with a link between the apparently disparate realities of matter and mind were existing. Pauli called it a “missing link”.

While accretion and synergy are two other concepts that create value, synchronicity is the best. Indeed, synchronicity provides even more multiplied effects than synergy, whereas we usually think synergies are the best we can achieve.

Global business networks can become very valuable because of synchronicity power. While synergy provides a good value (2 + 2 = 5, whereas with accretion 2 + 2 = 4), synchronicity is the most valuable. Its mathematical principle is described as follows: 2 + 2 = 22. This is the power contained in this concept.

Therefore, you must focus on this concept to develop your business networks and make it more valuable than by using simple synergies or accretion. Visualization, if not faith, is compulsory to be able to understand this concept and make it work for you. Besides, the concept of synchronicity relies on key principles that may not be available for anyone. In fact, it is all about abundance of outcomes based on wisdom, creativity and cooperative effort. This is the cornerstone of the value of synchronicity.

Consequently, business networks are great and work successfully for your business when synchronicity is the main ingredient. This is the most powerful ingredient that can help you build a great business network. However, this is still a matter of coincidences, although they are meaningful. In fact, the economic metaphor that can be utilized for synchronicity strategy is the free networks.

Accretion relies on free markets. When your strategy evolves to improve the outcomes, through synergies, the appropriate term is “managed markets”. Then, the best strategy, which includes synchronicity, leads to free networks, which is much more significant and valuable than free markets or managed markets.

Thus, step-by-step, you can improve your business strategy, using your business network and gradually implementing strategies of synchronicity. Synchronicity will create the best value through a great business network.

by Anais Lelong

Understanding And Using Resistance – In Business Transformations Using SCM 3.0

19 years ago, when studying for MBA, our Professor in Change Management, Dexter Dunphy told us that Change Management is nothing but management of downside. I understood that his point was every change has a downside – and as a change manager, the most important job you have to do is to understand the downside of the change being proposed, and manage it well enough. When I became a management consultant with a top-tier strategy house after my MBA, I took his dictum to heart, and it served me well through several change management projects. Those who were most affected by change appreciated the fact that the change was managed in a sensitive and caring manner – rather than imposed abruptly.

After a few years, when we started our current boutique consulting house, I started to notice another pattern. This was that many companies could accelerate their change management by skipping one entire generation of Supply Chain Management (SCM) in their efforts to make their businesses more modern. In other words, change management would entail moving from SCM 0.0 to SCM 1.0 or from SCM 1.0 to SCM 2.0 or from SCM 2.0 to SCM 3.0. On the other hand, many companies would want to take up an accelerated path – jumping 2 steps at a time – e.g. SCM 0.0 to SCM 2.0 or from SCM 1.0 to SCM 3.0.

This enabled them to frequently leapfrog their competitors, and transform their businesses rapidly and systematically. This was nothing different from many companies skipping a generation of Microsoft Windows when they upgraded their operating systems – for example skipping Windows Vista and jumping from Windows XP to Windows 7.0. The reasons were different, yet the methods were similar.

While change management entailed managing the downside for those who were affected by change, business transformation was more about understanding and managing resistance. By now, downside management has already become a big enough industry – just look at the number of large outplacement consulting houses, HR consultancies, and the booming business they do through the ups and downs of business cycles. Business Transformations will lead to a second boom in these.

If a business keeps up with the SCM evolution and moves with it, there will be a greater need for leadership training, corporate cultural adjustment, collaboration training and less outplacement and redundancies. And, there will be a need for understanding, managing and using resistance to further business transformation. What is the nature of resistance? What is the reason? How to identify 4 different types of resistance? How to use resistance to accelerate positive business transformations? That will be the topic of my next blog.

Will Amazon Meet Its Waterloo In India

Sooner or later every empire builder starts a campaign which is too ambitious, too audacious and too resource sapping.

That is the first thought which came to my mind as I read in this morning’s paper that Amazon was making two moves – one into Grocery Shopping, and other into the Indian Online retail market.

For very different reasons, either – or both – of these could easily prove to be Amazon’s Waterloo.

Let me explain: When I wrote my recently released book, The 5-STAR Business Network, I was highly impressed with Amazon’s ability to use its supply chain expertise to create, sustain and harness a business network of related parties – suppliers, market-place participants, outsourced service providers, customers and developers. Amazon does this in a highly systematic manner to innovate, milk the cash cycle, optimize profitability of each transaction, develop a pipeline of new ideas, and leverage service providers.

While, Amazon was not the top ranking company in our 5-year study of more than 1000 companies (it ranked a tied 63, and the top honour belonged to a little known firm from Denmark called Novo Nordisk), I used Amazon case study extensively in my book because it was a shining beacon of good corporate decision making among mediocrity.

This is what I wrote about Amazon:

#5starbusinessnetworkOverall, the business philosophy is rather simple – make online shopping simple and suitable so that the customer won’t think twice about buying now with one click (Anders, George. “Jeff Bezos’s Top 10 Leadership Lessons.” Forbes. 4 Apr. 2012) [2]. The complexity lies in how this simple business philosophy is translated into consistent action, resulting in nearly a billion customer visits a year. There is nothing simple in the complex execution of this simple business philosophy. Therein lies the dilemma of the modern business

world – the quest for simplicity at the highest level, underpinned by the highest level of sophistication reminiscent of nanotechnology under the hood. Almost all successful businesses do this dance of 5-STAR business network well – but Amazon does it exceptionally well on almost all 5 fronts. There are many other businesses – some even well-known ones – who could be a poster child for the emerging trend of global Business Networks we show case in this book. However, no one is more successful, more visible, has higher potential and is more assured of its role in this revolution. That is why- Amazon.com is a prime example of the 5 STAR Business Networks, which showcase Fire-Ready-Aim Innovation, Seed-to-Store Ef iciency, Transaction Prof itability Optimization, Advanced Product Phasing, and lastly, Results-focused Modular Outsourcing.

To temper my optimism about Amazon’s role as the poster child of 21st century commerce using 5-STAR Business Networks, I also wrote elsewhere in the book:

The first business book I read was “In Search of Excellence” by Tom Peters and Robert Waterman. It was a gushing account by two ex-McKinsey consultants truly in search of excellence among American businesses, and contained a plethora of advice that to my then untrained mind (after all, I was then just an untutored merchant navy off icer) appeared rather obvious – for example, walk around your operations to see what is going on. What struck me most about the book was that in the intervening 13 years or so between the time the book was written and the time I read it, most of the companies singled out as excellent by the authors were already in trouble. That impression – that companies once lauded as excellent can quite rapidly lose that mantle – has never left my mind as I have read more than 5000 business books, countless book summaries, business commentaries and news reports. Invariably, each of these tries to generalize the key determinants of success from examples of certain companies. In more cases than not, those companies singled out as models of success falter in a few years time, sometimes victims of changing circumstances and other times victims of their own success.

This morning, on reading about Amazon’s move into the Grocery trade, I have a vague feeling – is Amazon turning into a victim of its own success?

Grocery business is notoriously low margin trade, with very high logistics costs, high level of perishability, and different customer buying behaviour than anything else that Amazon sells. Amazon’s reasons for this move are being documented well enough by the mainstream press. For example see this article in the Wall Street Journal. Here is a quote from the article:

The service harkens back to a time when Americans found fresh milk, bread and eggs delivered each morning to their doorsteps. Indeed, in Seattle, where the service has expanded over time to more suburbs, Amazon customers can combine their apple and butter orders with 100,000 disparate Amazon items including videogames, toilet paper and motor oil. “Amazon really could use this as a means to drive sales of general merchandise, which may have better margins than groceries,” said Matt Nemer, a Wells FargoWFC -1.53% analyst. “That’s what could really set them apart from the pure grocery delivery guys—they might not need to make a lot of money on the groceries themselves.”

It will be interesting to watch what happens.

10 Ways To Create Value Through Your Business Network

The key to realising value in your business is to use your business network. The marketplace has moved on from the time when competition was just among companies. Your business must now succeed  based on the quality of the your network of suppliers and customers.  You have to leverage trusted connections to help you design, produce, market, sell and maintain your products and services.

Below are ten ways you can leverage these relationships to create value:
  1. Optimise your online network: Business oriented social media like LinkedIn has made maintaining and building your online business network easy. You can source information, pursue warm leads and even ask your online supplier and customer contacts for inspiration for your next venture. You should maintain regular contact with these connections to stay up – to –date with where product trends and innovation are heading in your industry.
  2. Optimise your offline network: Despite the advent of online business networks, offline business networks still provide a very useful medium where you can meet your next supplier or customer. You can join exsiting groups such as the Freemasons, Rotarians and clubs including chambers of commerce.
  3. Understand the principle of the ‘network effect’:  Another way of creating value from your business network is understanding the concept of the ‘network effect’. The ‘network effect’ is the idea that the more value adding supplier and customer connections you make, the more valuable your network becomes, until it dominates others.
  4. Harness the buy-in of online contacts for your product or service: Online contacts such as LinkedIn connections can provide feedback on your business ideas and can provide case studies of their success in developing their own products and services.
  5. Realise that your business network is your most valuable asset: Your business network is your most valuable asset because of the latent energy of the participants in it. If you have a high quality business network, your suppliers and customers will invest in your success or help you to work out how to be successful.
  6. Use a high quality IT system to formalise your network: Your business network requires a high quality IT system and strategy to formalise it.
  7. Adopt the cornerstones of a Five Star Business Network:  A Five-Star Business Network adopts five principles: “fire-aim-ready innovation”, “Speed-to-Store Efficiency”, “Transaction-Optimisation-Profitability”, “Advanced-Product-Phasing” and “Results-focussed outsourcing and Modularisation”. Find out more information about you can add these principles to your business network by buying Global Supply Network’s award winning book 5-Star Business Network.
  8. Keep up to date with market information: Decision making technology has developed so much over the least 40 years that it has demands businesses keep up to date information. The same applies to your decision making. You need up to date information in order to make the best decisions.
  9. Apply the 80/20 rule: You will get 80% of the results in building your business network from 20% of the interactions you have with customers and suppliers. This rule still applies.
  10. Focus on serving deserving customers and suppliers.

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.”

Your Business Network Is Your Business’ Net Worth

Your-Business-Network-is-your-Business-Net-Worth— Excerpted from the introduction of THE 5-STAR BUSINESS NETWORK

Business Network is now the engine of the society and it will need newer models of commerce to fast track the recovery.

Hollowing out of skills out of entire societies without replacing them with another set of useful skills, very high level of youth unemployment (frequently disguised by serious looking play on iPads and tablets), growing economic imbalances risking implosions of unrest, civil commotion or even a great war have all combined to create a very alarming set of circumstances.

Whatever transpires in the short term, eventually the business people will have to lead the way to recovery around the world. It is evident that I am passionate about newer models that work better. In my projects and work around the world, I have noticed that in almost all circumstances there is always some way to make things better. We only have to look around and see where the guidelines are, what the trends are and which models will suit the trends.

Eleanor Roosevelt (1884-1962) famously said – Great minds discuss ideas, Average minds discuss events, Small minds discuss people.

While it is very tempting to discuss just one of the three key ingredients of life – either ideas, or events or even people, I prefer to discuss all three because all three of these are inextricably linked. People make events and create ideas. Ideas create events and help people become successful. And events shape people and give impetus to ideas. A book full of concepts and ideas but with no stories about people or events would be extremely boring and dry.

On the other hand, a book with just chronicles of events or people would hardly be worth bothering to read unless its authors possessed immensely entertaining style of writing (which I do not) and even then would be of little practical value besides entertainment. I mostly use events and people to illustrate ideas and concepts to make them more tangible for the readers.

Primarily, then, this book is about ideas and concepts – yet you will see enough discussion about people and events to be able to use the concepts. Most of the people and events discussed are relatively well known so that background contextual information is already present in the readers’ domain and I do not have to supply it. Occasionally I had to use events from case studies based on our work – only because we could not find a well known event illustrating the concept.

I do not make apologies for that or for disguising some data or names of the entities for obvious reasons of confidentiality. Every couple of decades powerful juxtaposition of the trends leads to unique and revolutionary way of commerce. Contrary to the portrayal by the gushing accounts and adulation of the commentators, most pioneers merely stumble on the these trends by a process of trial and error. Other companies, the more nimble and hungry ones, follow the pioneers closely and build strong businesses in their lead.

More established companies then follow suit and try and recover lost ground using their financial muscle and market power sometimes succeeding and sometimes failing in this. Many other companies are so caught up in hubris of their past success or internal politics or some other such attention sapping device that they fail to move at all, or move too late, often with disastrous consequences. Chronicles of such disasters would perhaps be more instructive than the starry eyed accounts of success. As Daniel Coyle points out in his book The Talent Code, the only way to succeed massively is by failing repeatedly at progressively more complex smaller tasks till you master them.

However, most writers and authors persist with the formula that has succeeded since the first bard told stories of the victories in war, and I have no doubt that we will continue to see many starry-eyed accounts of success for centuries to come. It is difficult not to get caught up in the current of adulation that surrounds a particular company at a point in time.

Any such apparent adulation in this book is despite my effort to be objective and cognizant of the cyclical nature of success. As defined earlier, the aim of this book is rather more solemn. It is to take a wide and deep perspective on business trends, define the useful trends as seen from user perspectives, and come up with useful information for the business executives and managers.

The biggest trend sweeping the world – business and non-business – today is networking. Just last week Facebook has announced its IPO filing, valuing the company at $100 Billion. Analysts, pundits and business school professors are still debating what entitles it to that kind of valuation when many others with similar business model – Orkut, MySpace and a plethora of wannabes – have failed to monetize the eyeballs to any great extent. It is not even validated how many of those numerous Facebook accounts are authentic.

— Excerpted from the introduction of THE 5-STAR BUSINESS NETWORK

To read a synopsis of the book, please click here 

To buy the book, please go here

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