The biggest barriers to enterprise performance management are misaligned functional silos. Supply chain management is undergoing a fundamental transformation from “chain” management to “network” management.
Maturing digital technologies enable companies to transform to ecosystem thinking to digitally re-imagine, align and connect their functional silos to collaborative functions working together for the financial health and success of the company. In the digital economy, everyone and everything in the market ecosystem is always on and always connected.
In our experience, the biggest hurdle to market leadership that we see is having the right strategy in place, communicating the strategy, aligning all of the company’s resources and functions to the strategy, and creating a culture of ecosystems thinking that overcomes the traditional management “silos” that we have struggled with over the decades.
Digitization enables functional “digitalization” which in turn enables “connected collaboration”. In a disconnected organization, functions often unintentionally work against one another due to the inability to cross-functionally collaborate. With the right digital enterprise architecture, the company can break down the silos with shared information and process optimization.
What a lot of people overlook when considering the “Amazon effect” on their business is the overall strategic alignment that is ingrained in Amazon’s business functions and culture. Amazon, by design, is digital. They custom-developed all of their systems from scratch to support the central strategy or “flywheel” of growth. The company looks at absolute numbers: totals not percents. Their strategy is fundamentally driven by providing the best total customer experience supported by a lower-cost structure. Amazon Marketing Services, Amazon Fulfillment Services, and Amazon Web Services work together to maximize total profit, not increased margin. A small percent of a much larger pie is better that a large percent of a big pie.
A digitalized business strategy enables disparate functional workflows to digitally collaborate at points in the workflows that intersect. At Amazon, digitalization of workflows enables functional orchestration in real time. As the consumer is interacting with the marketing services, the fulfillment services are providing inventory and cost data to support an accurate customer experience in real time. When the order is placed (and now, in some instances before) the fulfillment services provide the optimal fill location and shipping method in real time — perfect alignment among functions. The consumer is delighted, will likely return, will likely become a Prime member — and likely tell everyone they know.
This can only happen when there is functional alignment of workflows to the business strategy and the technology supports workflows, processes, and functional collaboration that were never before thought to be possible in the linear world. Ecosystem thinking by design considers workflows holistically to consider the strategic implications to all functions and metrics that support the corporate strategy and objectives.
Companies must assess their current strategic state, map their workflows and material flow paths, identify points of behavioral intersection (e.g., when one process workflow can unintentionally impact another process workflow), and create a digital enterprise architecture that supports functional “connected” collaboration to achieve the business strategy.
In 2019, market leaders are outpacing their competitors on the journey to Digital and Business 4.0. Companies must align their business strategy and digital (IT) strategy immediately or face trailing the competition too far to catch up. Start with new cognitive analytics. Implementation of sophisticated analytics forces assessment, mapping and master data management. Think ecosystem, collaboration and alignment to change the culture. In 35+ years, one initiative remains the same: Management Commitment.
Rich Sherman is a senior fellow at Tata Consultancy Services’ Supply Chain Center of Excellence.
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