The convergence of digital technologies enables smart supply networks.
Exciting innovations in technology come from the foundational capability that advanced analytics creates for ecosystem network connectivity. We still can’t “beam” goods to people, but we can “beam” data at the speed of light. Digitalization speeds the realization of a synchronized, zero latency supply network where material seldom pauses versus seldom moves along the journey from raw material sources to final consumption and disposition.
Simply put, digital technology adoption today is a competitive imperative. According to APQC research, for 20-plus years, performance leaders enjoy more than a 2-to-1 cost advantage over their median competitors and frequently a 5-to-1 cost advantage over laggards. Moore’s Law states technological innovation doubles and the cost is cut in half every two years. While the speed of technology innovation is that of the hare, the speed of technology adoption is more like the turtle. With cost falling faster than the perceived value, the turtle may not survive the race.
Leaders are adopting digital technology as fast it becomes available. Through pilots and trials, the leaders pave the path early to outpace the competition. The turtles are eventually forced to adopt or fall off the road; paying a greater price as the value is now well documented. Why are leaders leveraging the increased technology capabilities while the laggards keep crawling along?
Laggards look at innovation through the “as is” lens. They evaluate the “capabilities” of the emerging technologies and how they may improve performance in the short term. As analyst hype curves demonstrate, emerging technologies rarely provide immediate disruption or short-term ROI and the laggards don’t waste their time any further.
Leaders, on the other hand, look at the technology innovation through the lens of the “to be.” They evaluate the “opportunities” technology innovation offers. More importantly, they look at the “disruption” or ecosystem effect of the change. How will new data sources and analytics result in step change process improvements and market disruption when fully implemented? How far will this distance me from my competition? And the cost to pilot is low as the solution provider is trying to establish proofs of concept and market beachheads.
The point is that digital innovation, like change, is inevitable; competitive advantage and growth are optional. The leaders get it. They think of their market ecosystem versus their supply “chain.” We’re in “the connected age” where innovation and change ripple through the ecosystem at the speed of data causing tidal waves of disruption. The disruption often isn’t noticed until the ecosystem is engulfed. For example, the “Amazon effect” took more than 10 years to disrupt the retail ecosystem. How many companies have emerged from e-commerce opportunity and how many companies are failing by the inability to respond in time?
The leaders are transforming to compete in the new market ecosystems that digital technologies are creating. They are looking at opportunities, not capabilities, that emerging technologies create and are developing strategies and conducting pilots to assess the disruptive impact that they may bring. It doesn’t have to be hard. It just has to be done.
In 2019, the pace of maturity among digital technologies continues to grow. The distance between leaders and laggards also grows. Companies that have crawled through assessments, process and data mapping, pilots, and road map development are setting the standards for Business 4.0. Everything is moving to hybrid e-commerce/traditional digital commerce. Omnichannel is no longer just for retail/consumer industries. Companies that are prepared for the ecosystem impact will thrive, while traditional brand stalwarts fall to the wayside.
Rich Sherman is a senior fellow at Tata Consultancy Services’ Supply Chain Center of Excellence.
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