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MBA lessons from GM Bankruptcy

MBA classrooms across the world will reverberate with lessons from the GM Bankruptcy for future MBA's. Strangely though,since MBA's starting working for GM  in the 1970's the lessons were already there!  For example, MBA's  in the seventies knew that moving with changing customer needs was  the simplest way to win. But fuel efficiency and smaller cars was a "no-no" for Detroit. Important stakeholders like the Unions clung on to expensive health and retirement as the sun set on US auto as the world literally turned and changed.

As an industry old timer told me, it was plain arrogance, complacency and the unwillingness of managers to speak up,in time. It was easier to deride the Japanese automakers ( ha imports) rather than emulate them, at least in part.

On the labor front the UAW is reduced to   a shadow of its old belligerent self.  This probably gives no pleasure to retired auto managers who were given such a hard time when they wanted to change things when there still was time.

This blog has been talking about the US auto industry for some years but academics have been writing about key problems for decades. US Auto is forever changed - the question is -will managers really learn in other industries?

G-20 summit a success - is the world really getting "flat" ?

It is not just travel,communication and the Internet -that's turning the world flat as Thomas Friedman famously pointed out. The most amazing  image from the G-20 summit is of  Queen Elizabeth and First Lady Michelle Obama putting their arms around one another. When there was a gasp of protest from royal watchers, Buckingham palace quickly quashed any concerns about breach of protocol. It tells us a lot about the British Monarch  who recognizes the changing "flat world".

The camaraderie of the G-20 leaders also sent a strong message to businesses around the world  that we live in one world and must work together to solve the problems of our time, notably the current economic crisis.

Does this mean that all Governments are on the same page? Will global B2B and supply chains  become seamless - immediately?

Or at a more mundane level will wireless phone providers  start charging the same domestic price for global roaming? Not immediately but we'll get there probably sooner than we imagine!

Auto Industry Bailout next week ?

This blog discussed over two years ago how the US Auto industry has been ignoring the very research they funded and supported for decades.  These studies had clearly identified better supplier relations,more innovation and customer focus  as priority areas. Just handing out money is probably not going to change things  with the auto industry  leadership at Detroit. When they have successfully ignored consultants,researchers and professors for decades, it seems very unlikely that mere exhortations with bailout money will work.  In fact, unless there are decisive management changes, it is very unlikely that entrenched managers would change their ways.

Estimates of job losses in the upstream supply chain and the downstream distribution (dealer) channel are so immense that some solution must be found. When managers and company leaders neither manage nor lead-  they can bring ruin to their entire value chain partners and associated  stakeholders. In the auto industry that number could be as high as three million jobs lost. Clearly,  just too much is at stake.

Banking is a mess, B2B trust and Karl Marx smiles at "mother of all bailouts"

The "nationalization" of institutions like Freddie, Fannie, AIG and so on and so on reminds me of what we thought we had left behind, socialism, the socialistic pattern and communism. Marx would be smiling and his more moderate followers like "Fabian Socialists"  would be laughing more loudly. Nationalization protects the consumer somewhat but creates public sector monsters. But I digress...

B2B scholars, including myself, have been studying  trust the glue that holds business together for a while  (Read Morgan and Hunt's interview here). We all were studying industrial firms supplying nuts bolts and other verifiable stuff that went into a value chain. Then came along the Internet and the study of trust went on to "e-Trust" and so on.

Banking,Insurance, Finance  value chains were frankly not on the B2B scholarly radar. The fact that home values were being pumped up (by appraisers threatened by real estate brokers) , home owner incomes were not being verified ( by bankers - I am  not clear what the incentive/threat was ), and mortgages were instantly sold (at a discount as a fancy" instrument") and then resold again and again with no "value add" seem so obvious in hindsight. The truth came to me very sharply when someone on a TV talk show said that today bankers won't lend money to each other because they can't trust each other... this brings us to the mother of all bail outs aka nationalization and a smiling Karl Marx with a "V" sign.... more as things play out ..

How do you green the upstream supply chain ?

Recently there is a great deal of discussion about sustainability and the importance of going green with the supply chain. For example, SCDigest has a great summary of the recent McKinsey report that mentions that 80% of the carbon footprint for many companies comes from the upstream supply chain. Also, there was a Zurich summit in February that tried to put arms around greening logistics and transportation.

The question  is, how do you action some of these genuine concerns in the running of your upstream supply chain? For starters, just asking suppliers by way of introducing a clause in RFP's would help, straight away. Many suppliers would tell you that small lot orders  on a part-truck basis or by urgent airfreight simply add to the carbon footprint. Similarly rationalizing secondary packaging could go a long way in both reducing cost and improving the environment. "Green metrics" very similar to calorific values of foods would make decisions easy to make. The IT industry is attempting to do this, more traditional businesses need to follow suit in obvious,somewhat routine subjects  like a defining a "Green" RFP clause, coming up with a "Green Transportation metric" and reviewing secondary packaging "green" options.

Happy Earth Day -"Green" Value Chain and Clorox

Today is "Earth Day" and here is to wishing readers a very happy earth day! The Earth day movement has an interesting timeline  and there is much to celebrate in terms of the progress we have made globally. However, much needs to be done. I had written about how B2B folks can help with greening the supply chain. Essentially consumers have a preference for "green" today if prices are comparable. Marketing and Sales Managers being closer to their own customers can start with one product and work with their supply management and supply chain to introduce green. Many organizations in the grocery business are doing exactly that.

An  intriguing example corporate green initiatives is the "Green Works" initiative from Clorox. One would think that Chlorine is bad for the environment but the company has gone natural and here are their definitions. I have not got around to using their "green " products but I am sure impressed by the competitive prices and great in-store displays across different segments of retailers from Home Depot to Wal-Mart.

Supply Chain a Market Strategy differentiator

I was rather pleased to read the Aberdeen report , see the CNN summary here. 56% of the over 800 firms surveyed felt that supply chain management was a market strategy differentiator and could make all the difference in customer satisfaction and service apart from delivering sustainability in a firm's overall operations.

This seems fairly logical given the nature of the supply chain with the upstream concerned with supplying materials to the firm and the downstream distribution channel being the customer fulfillment end should be in-sync to deliver customer satisfaction at optimal costs.

Interestingly,however, that is not how either academe or the consulting world is organized. Supply chain is typically part of operations with a serious heritage of linear programming, queuing theory and so on. Distribution is somehow bunched with logistics and deals with the "Place" in marketing  ( of the 4 P's of marketing). One thread that ties this chain together is IT and it's  recent accessibility in web based software as a service (SaaS) applications. Perhaps the possibilities of the softwares that deal with the upstream supply chain and downstream distribution channel that is making managers realize the huge marketing strategy possibilities of the supply chain.

From a public phone booth in India

My winter break travels in India turned out to be great. Visited Delhi,Mumbai(Bombay),Goa and Kolkata (Calcutta)and got the distinct feel that the economy was on the move. Yes ITES ( Information Technology Enabled Services) are important and this sector feeds the notion of India as the global powerhouse of IT services. But what is more incredible is the booming growth of the local market and consumer demand. Consider the phone booth (right) where Devinder helped me set up my local India cell phone account and helped "refill" my phone balance several times.
    This phone booth is a temporary shack like structure and is actually owned by a blind relative of Devinder who has been awarded the space as part of India's efforts to help its disabled. There seemed to be about 10 people constantly on the counter , either making long distance phone calls or adding money to their cell phone accounts. So I asked - what's your sale per day? "About Rupees 5000 ( about $120 a day),"replied Devinder and I was skeptical because I was pretty certain that the guy had several hundred customers a day. "The customers buy small perhaps Rs. 20 ( 50 cents) of talk time by a cart puller or day laborer" explained Devinder. Incoming calls on India cell phones are free and the poorest are able to get on the mobile phone network by just arranging to receive "blank" calls that they don't pick up and understand when a pal or business associate is trying to reach out. Such communication turns out to be free- next best is the booming use of SMS via cell phones. SMS's are cheap and over 1 Billion ( yes billion) were exchanged when people wished each other Happy 2008 over the new year.
    Transactions at the phone booth are both paperless and computer less. You ask for a re-charge and the phone booth attendant has a cell phone agent's access to the phone company ( there are several companies) and the customer gets a SMS confirming the amount credited. Amazingly the poorest almost illiterate customers seem to be dealing with all this with aplomb and confidence.
    Seeing the continuing boom in India had left me wondering about the "bottom of the pyramid" and what was happening there. Close observation of these BoP folks at the phone booth assured me that the economic growth in India is far more deep rooted and fundamental than I had earlier thought!

Corporate Social Responsibility

Last week my article in the Inside Supply Management of December 2007 appeared in print. This is a short piece on Corporate Social Responsibility and what the supply manager can do to contribute to Corporate Social Responsibility. I talk about three areas first the Global Supply Chain and quality problems (eg. toy recalls), supplier diversity for global suppliers and greening of the supply chain. All three topics are important for the supply manager, going forward and things that would resonate with enlightened CEO's and company boards. Inside Supply Management is well circulated and is a monthly publication and covers some great and relevant content. The article itself can be downloaded here.