Three years before Mark Zuckerberg launched Facebook, Kodak acquired a photo-sharing site called Ofoto. The purpose behind the acquisition was to try to encourage more people to print digital images in order to support its legacy business of film-based photography. Kodak understood the digital photography revolution in its industry. However, it failed to realize that online photo sharing was the new business model, not just a way to expand the printing business.
The lesson from Kodak is that large, established corporations often witness and understand the disruptive forces impacting their business, but may fail to fully embrace new business models. This often relates to complacency as a market leader, focus on preserving existing assets and current operating model because of significant past investments, or a risk-averse culture.
Fast forward to today. Established corporations are witnessing many transformation forces, which may lead to disruptions similar to what happened to Kodak. The COVID-19 crisis served as a catalyst for supply chain disruptions and as an opportunity for change (see Navigate 5 New Realities Shaping Future Supply Chains). A key transformative force is the rapid evolution of technologies and the emergence of new digital business models — such as internet platform-based, direct-to-customers, pay-as-you-go, and circular economy.
In this context, more than half of supply chain organizations believe that they are at risk of disruption in the coming years, especially from a range of nontraditional competitors, including digital giants (Alibaba, Amazon, Apple, Tesla, and Uber, for example) and emerging startups. Most supply chain executives we talked to believe that nontraditional competitors have supply chain operating models that better fit to navigate the transformative forces impacting their businesses. Nontraditional competitors’ supply chains’ ability to deliver on the extremes of customer preferences — personalized, purpose-driven products and services anywhere and at any time, for example — makes them well-equipped to fit the needs of modern customers.
To compete against nontraditional competitors and avoid risk of disruption, CSCOs from corporate supply chains need to rethink many aspects of their supply chains. This comes down to being able to play the same game, which often means redesigning the organizational structure, the operating model, and people mindset.
Capabilities to Compete Against Nontraditional Supply Chains
Over the last few months, I have been researching the capabilities that make nontraditional competitors unique. I have been observing the operating models supporting the success of startups and technology giants. I have been working with several supply chain executives from across the world to learn what they are doing to compete. Four critical capabilities that CSCOs should develop to create a nontraditional supply chain emerged from these conversations.
- Close to customers — Avoid market-leader complacency and continue listening to your customers. Direct observation of the customer is one of the best practices to understand the customer journey. It is more insightful than being told by customers what they want. The supply chain function must be involved in understanding the critical touchpoints of the customer journey so it can design a supply chain that is able to respond to the extremes of customer preferences.
- Innovation mindset — Instill an innovation culture among your employees. Commit to making innovation a day-to-day responsibility across the entire supply chain and at all levels. Encourage employees to connect, open lines of communication, share ideas, and learn from each other. Allow employees to take risks and celebrate learning from failure.
- Agile organization — Create an agile organizational design. This starts by shifting the organization from siloed to end to end and by reducing hierarchies and chains of command. By embracing less hierarchical organizing and leadership models, CSCOs are able to engage more of their talent to develop new ideas across operations, products, and customer service. CSCOs should empower their people at all levels of the organization to use data to make informed decisions and foster collaboration.
- Operating models — Consider your global supply chain as a platform to win against both traditional and nontraditional competitors. However, one size does not fit all. Competing with nontraditional competitors requires different ways to produce and deliver a diverse portfolio of innovative products. Create a supply chain operating model that moves away from solely achieving efficiency. Embrace agility, resilience, and segmentation.
Embracing change and developing the capabilities that make nontraditional organizations so competitive is critically important for traditional organizations. For CSCOs of corporate supply chains, there is a revolution in the making. More details and findings of my research can be read from this Supply Chain Executive Report: Competing Against Nontraditional Supply Chains.
Gartner Supply Chain