Maung

Maung’s article

As companies have started to internalise (and for that matter, practice) the triple bottom line concept of sustainability, the focus now has shifted to issues beyond their walls of operations and manufacturing. In the world of outsourcing, globalisation and interdependence of suppliers, companies must look into making their supply chains more sustainable.

UN Global Compact (UNGC) and Business for Social Responsibility (BSR) define Supply Chain Sustainability as “the management of environmental, social and economic impacts, and the encouragement of good governance practices, throughout the lifecycles of goods and services. The objective of supply chain sustainability is to create, protect, and grow long-term environmental, social and economic value for all stakeholders involved in bringing products and services to market.”

What’s in it for my organisation?

Whether a company leans towards Freeman’s stakeholder approach or Friedman’s camp to maximise profits for shareholders the choice is clear. No matter the route one takes, grudging or proactive, there are clear benefits to be had. Companies simply need to get on the bus and reap the benefits!

There are different ways to slice the benefits – one could categorise these in three ways.

Business Risk Management: Avoid risk to image associated with bad

social /environmental practices of suppliers. Manage business risks associated with climate change.

Unsound practices (e.g., non-compliance) of suppliers could result in major supply chain disruption and cause delays in production. Labour challenges could create havoc to on-time delivery; safety and poor environmental management practices could result in production stoppage and poor productivity. These issues are realistic especially with increased sourcing from low–cost countries. In addition, companies are now partnering with fewer suppliers than before. Having a close partnership with these suppliers, ensuring a robust management system and its governance can help parent company mitigate these risks.

The climate change debate better be over by now. Thailand, in 2011, was devastated by one of the worst floods in its history. The economic damages were estimated at over $45 billion. Most of the loss came from the manufacturing sector with floods inundating seven major industrial zones. This resulted in major supply chain disruptions. Regional automobile production was affected. Flooding also caused a global shortage of hard disk drives. Disruptions to manufacturing supply chains affected regional automobile production and caused a global shortage of hard disk drives which lasted throughout 2012. These risks have to be taken into consideration and redundancy built into supply chain strategy.

Operations Excellence: Reduce supply costs, environmental footprint of its supply chain.

Responsible management of operational inputs, such as energy, water, natural and synthetic materials can greatly reduce companies’ procurement costs. Using operations excellence tools, such as lean sigma, companies can reduce cost of these operational inputs. In many cases, the carbon footprint sustainability goals of companies are indeed achieved by employing these tools and teams. By becoming more efficient (e.g., using less electricity and water, and creating less waste) companies can lower their COPS (cost of products sold), thereby improving profit margins.

Leading companies have also extended their best practices to key supplier partners in helping them reduce their footprint through collaborative initiatives. A leading pharma company extended its energy management and reduction know-how by partnering with a key supplier and helped it reduce its carbon footprint. Financial savings form the initiative more than off-set the cost incurred by the pharma company expenses in supporting this initiative.

Innovative Products: Build successful businesses by developing differentiated products with sustainability attributes.

A sizable number of consumers prefer eco-friendly offerings, and even those that do not or are at best neutral would switch to these products if these products provide price advantage.

Under the Unilever Sustainable Living Plan the company has integrated sustainability aspects into a number of their products. These include Dove, Lifebuoy, Ben & Jerry’s and Comfort. These products have contributed to Unilever’s growth, while reducing waste, water use in manufacturing, and CO2 from energy use has created cost efficiencies. Unilever now sources more than 55% of its agricultural raw materials sustainably, which reduces risk to its supply chain while benefiting producers and the environment.

Dutch giant Philips established its green products line in 2004 with a goal to reach 50% of overall sales by 2015. The goals was met (and exceeded) in 2014, contributing to over €11bn in sales. These products have improved environmental performance often supported by a recognised eco-performance label, developed through their EcoDesign process.

In order to make supply chain sustainability stick senior management buy-in is an absolute must. Without their drive and accountability sustainability can become just another short-term corporate initiative, a “flavour of the month” that quickly fades into oblivion. Change happens quickly when the C-suite decides to focus on sustainability.

However, a company also needs the right people to embrace the sustainability journey. So, recruiting and retaining the right kind of people becomes very important. Various researches suggest in the US that a majority of not just millennials but employees of all ages regard social responsibility and environmental commitment as important criteria in selecting employers. Companies that try to become sustainable may well find it easier to hire, retain talent as well as “sustain” their sustainability programs and culture.

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About the Author

Dr. Maung K. Min is a Board Member of Global Sourcing Council. The GSC is a non-profit organisation focused on sustainable, socially responsible sourcing practices. Dr. Min is an experienced management executive with over 25 years of track record of leading functions and initiatives in the areas of Sustainability, EHS and Supplier Management, IM, Manufacturing, and Quality Systems (including Operations Excellence/Continuous Improvement). He has led initiatives in the Americas, Europe and Asia. Dr. Min has held roles in Italy as well as in Puerto Rico and is passionate working in a global and multi-cultural setting.

Karen

Karen’s Article

Almost twenty years ago, my son responded to the ubiquitous inquiry “What do you want to be when you grow up?” His interlocutor was his Italian godfather (the Milanese not the Sopranos variety). There were certain implicit cultural expectations about the response, the godfather being both a lawyer, an aristocrat and an exceptionally cultured Renaissance-man: doctor, lawyer at one end of the spectrum, bookended by painter, composer at the other with the (yes, stereotypical) accommodation to age and gender of train driver somewhere in-between.

Henry’s reply was immediate and authoritative. “Je deviendrai un fabricant de nuages.” (“I am going to be a cloud-maker.”)

We might have, literally, in that moment imputed to our progeny a prodigious early interest in the wonders of nephology, or at a minimum, Henri as the future TV meteorologist on France ‘s equivalent to CNN.

With anachronistic hindsight, we might have imagined a stellar career with Alphabet, Google or others as an innovator in externally sourcing data storage.

Our hypotheses would have been wrong. Our kindergartener was indeed fascinated by the process of using a remote network of servers. Impressed? I hope so. However, the servers in question, as Henry painstakingly elaborated at our prompting, comprised a cloud team of four ladies and two men. (No issue with diversity.) They wore white coats, gloves and hats (reassuringly clinical) and black wellington boots. (Safety-conscious). These cloud-servers toiled by night, gathering up the leftover white things from the day: tissues, paper, candyfloss, feathers, blossoms, meringues and such. They heaved this harvest into the Great Machine for transformation. (Enlightened cradle-to-cradle thinking.) While the Great Machine processed its inputs into nebulous outputs, the “team” hit the drawing board co-designing the cloud architecture. (That, in case you wondered, explains why clouds’ forms vary. Their shapes are inclusively and collaboratively crowd-sourced and then, once set free can change themselves. Because, and I quote in rough translation, “It is beautiful to make a thing that always changes.”)

When the auroral moment came, whoever’s turn it was (nice distribution of decision rights in this team) would press the release button and out they would float: “Rows and flows of angel hair, and ice-cream castles in the air, and feather canyons everywhere.” We can surmise Henry would have subscribed to a Joni Mitchellesque rather than a prescriptive World Meteorological Organisation (WMO) view of his cloud classifications. We might jettison the dire tired expression “thinking outside the box” if we were a little more thoughtful about choosing our boxes in the first place.

Self-evidently, this cloud-sourcing career, outside of my child’s imagination, did not exist but neither then did Chief Officers of Cloud, Data, Digital, Diversity, Customer Experience, and Innovation amongst others that now, and for now, do. Even CTOs and CIOs were barely emergent two decades ago in non-technology sectors. So before we smile with kindly condescension on the fertile fictions of the child’s mind, let’s be mindful that – recent, controversial studies on doomed professions notwithstanding – we can still only imagine what’s next. In business, innovation and imagination are not the same thing but they coalesce inevitably because innovating demands of us that we imagine that which does not exist yet.

Of course, in the context of innovation as a management science, “imagining” constitutes informed extrapolation from data, trends and, without doubt, some mind-expanding “what if?” intuitive thinking. Henry was not entirely wrong about the Big Machine and clouds, literally. Anthropogenic clouds, most of them noxious or malevolent, have been continuously created since the last Industrial Revolution. He could not have known that Russia began cloud-seeding the year his mother was conceived and I am guessing that even now he may be unaware that China created 55 billion tons of artificial rain last year. (His cloud phase passed as quickly as a SKUD in a thunderstorm). Henry’s methodology of making up the future will not translate unmodified into effective commercial innovation practice. But there is a lesson in it. What is and what might be are not bounded by what we know – a truth that our commonest management practices and our defensible but all too prevalent cult of expertise and experience-worship obscure to our cost.

“Dally” is not a word much used in business except by me. As an antidote to treacherous “Yes, but” thinking I often invite executives to dally, suspend disbelief, pause and play around with ridiculous ideas for a moment. Microsoft, Airbnb, Post-it Notes, Netflix were all at one point silly ideas measured against received knowledge. Until very recently, the notion of a proliferation of robots, autonomous vehicles and the likes of Siri resided in the realm of imagination. How quick is the leap from mind to market. Henry the four-year-old aspiring cloud-maker alighted presciently if inadvertently upon an insight now quite concrete for maturing Millennials. The “Great Machine” will indeed shape the future of work and remove an ever-increasing tranche of it from human hands. The partly flawed but frequently flung-around mantra of innovation’s purpose as “better, faster, cheaper” will irresistibly find fruition in the machine age of colossal computing power, big data, advanced analytics and AI.

A lot of us, over the last 30 years, have looked at sourcing, to borrow from Joni Mitchell again “from both sides now, from up and down” across a panoply of economic, social and political perspectives. A decade ago, I co-founded the Global Sourcing Council as a forum to debate and evaluate these myriad perspectives. Some of outsourcing’s promises in the global north and south have proved “life’s illusions”, others not. The debate on the seemingly binary question of exporting jobs or importing competitive advantage still obtains and is whipped into a violent tornado of rhetoric during cycles both electoral and economic. Contributors to this magazine have offered more informative and illuminating content on this multi-faceted dimension of our hyper-connected, globalised world than I ever could. But, the “Big Machine” will have a thunderous voice in this conversation as work moves inexorably not from continent to continent but from man to machine. In her cloud lyrics, Mitchell looks at life from “win and lose”. The adults in Henry’s story assumed almost two decades ago that jobs would exist that do not. Eventually, we resigned ourselves to the depletion of manufacturing and business process jobs but we did not see our jobs as underwriters, lawyers, analysts and writers going away. It seems that the future, like it or loath it, is becoming more evenly distributed (to remodel William Gibson’s aphorism).

My preoccupation in all this is innovation. Innovations got us here. Outsourcing qualifies as commercial innovation – at least in the narrow context of the 20th century notion of the firm organising its resources and processes to maximise shareholder return. Our 21st century challenges place a stratospheric level of importance on innovation. Every organisation, process and system is perfectly designed to do what it does, so if we want a different, better outcome it is a design question. Good design begins with questions – as all human progress does – and the process of invention requires us to percolate those questions through our imaginations. The exhortation to innovate in business is often as amorphous as a shifting cloud. It is remarkably childish to wish for what we want. We must deliberately and attentively build it as a corporate competence. Strategic innovation is the science and art of creating commercial value which did not exist before, sustainably and scaleably. Innovation as a management practice is a discipline that will be nourished or starved by organisational design.

I have researched and studied strategic and tactical innovation for a very long time.

One insight is that the celebrated 20th century management practices that we still retain utility for managing – counting, controlling and predicting things – are often the enemies of innovation. This is problematic since we promote good managers to leaders in whom then the innovation responsibility is concentrated. Similarly our race to answers vigorously instilled in us educationally, and by organisational norms, can dangerously propel us either to increasingly elegant answers to the wrong question or to receptivity only to those responses within our preconceptions: doctor, lawyer, train-driver. In corporate environments, consciously and unconsciously, we self-edit. We constrain the one competence that the machine, however big, has not: imagination. Creative thinking is a limitless resource and a vibrant source of competitive advantage squandered every day by conformist cultures where daring and difference are dangerous.

I compared an imaginative view of clouds with the strict and rigid taxonomy of the WMO. Its International Cloud Atlas serves a specific purpose for meteorologists and restricts itself to clouds of “operational significance” in disclosing atmospheric conditions. This is scientifically apposite for the WMO and what it needs to get done. Management, however, is both art and science. A company is more than incorporation documents and share certificates. The science of innovation is not fluffy stuff but does need to heed Thoreau’s “What kind of science …is that which enriches the understanding but robs the imagination?” Answer: not the right kind for what modern executives need to get done.

I could perhaps have avoided decades of study had I more carefully contemplated the organisational attributes implicit in little Henry’s business: diverse and inclusive, appropriately clinical, shared identity, safety conscious (i.e. impact aware), enlightened by cradle-to-cradle sustainability, team- centric not ego-centric, co-creative and collaborative, purposeful and finding beauty in change. Oh, and impossibly aspirational… But as the change master and consummate leader Nelson Mandela observed: “Everything is impossible until it is done.”

Those of us who have been children are, without exception, innovative. All we need is an environment in which to innovate. We need to imagine and make a workplace where the release button on our uniquely human qualities is pressed every morning and sets them free. I hear Wellington boots and white hats are a good start.

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About the Author

Karen A. Morris is a Board Member, a co-founder and director of The Global Sourcing Council, a not-for-profit committed to economic and sustainable best practice in global sourcing. She is a strategy consultant, specialising in innovation and growth, and has designed unique methodologies and metrics for all aspects of commercial innovation; these have benefited diverse organisations around the world. Karen was AIG’s first Chief Innovation Officer and has supported businesses, not-for-profits and governments with their innovation agenda. An English barrister, Karen has over 25 years’ experience in law, management, underwriting and multinational business. This diverse international background inspires her insight on product, service and business model innovation. She is a frequent speaker and writer on Innovation, Sustainability, Leadership, and Ethics. Karen has served as an adjunct professor on the MBA program at Fordham University in New York teaching Innovation and customer-centricity. She has been a visiting lecturer at universities in France and Spain. She served on the Advisory Board of The Howe School of Business at The Stevens Institute of Technology and of The World BPO Forum. She is also an advisory council member of The University of Colorado’s RMI School, and a Senior Fellow of The Institute for Innovation in Large Organisations.

Bobby

Bobby’s Article

Varanasi_Headshot100x100

A PUBLISHED author, sought-after-speaker and commentator, Bobby Varanasi (pic above), Matryzel Consulting Inc chairman and chief executive officer, is also one of the world’s leading consultants on global business services (GBS) as a business model.

He is also the latest speaker to join the stellar cast at Digital News Asia’s (DNA) What’s Next conference, where he will join a panel discussion on Disruptive Technology: What’s Going To Hit/Boost Your Business with Red Dot Ventures managing director Leslie Loh.

While he is familiar with the latest technologies adopted in business, describing the next wave of human labour substitution by machines and software as a “capital deepening,” Varanasi has always urged organisations to focus on revenue growth, building resilience, and strengthening their sustainability.

Technologies, whatever form and shape they take, however sexy or mundane they may be, must always play a supporting role and not lead the business goals of an organisation.

In the following Q&A, Varanasi shares what’s disruptive, including the shift from transactional to intelligent workflows with not just technology playing a role but governance as well.

DNA: You are an interesting mix for a panel that talks about disruptive technology, as the GBS space is all about the interlink between people, process and technology. What’s so disruptive in your space?

Varanasi: Well, the corporate world has come a long way over the past five decades, particularly in its quest to leverage competencies and practices.

While the outsourcing world itself morphed into the GBS world we see today, this increasing maturity has not been as much a function of input factors (people, process, technologies) as much as the inability to deal with uncertain futures and ever-changing marketplace conditions.

This ‘disruption,’ as one would like to term it, isn’t about or because of technology. Today’s complex relationships amongst organisations are typically built around collaboration, mutuality, and co-creation. End goals may be many and distinct between partnering entities.

However, the common thread binding them cohesively is an agreed objective to build value for the future.

Outcome-centric collaborative endeavours have, and continue to deliver, substantial (and at times unimaginable) value to customers, employees and shareholders.

To remain now at the forefront of such gains, organisations look continually toward enhancing their own view to the marketplace, while remaining cognisant of competition, changing consumer preferences, and inherent dependencies that may manifest as hidden opportunities from within their supply chains.

The principal disruption is happening with the entire premise of moving from being a ‘competitive organisation’ to a ‘cognitive organisation.’

Intelligence, information, workflows and integrated management of functions within and outside the organisation are the key pivots. Technologies may be seen as one key set of inputs to enable such fundamental shifts.

To that extent, the GBS industry is clear in its understanding of the applicability of such technologies.

DNA: The business model has moved from being described as Shared Services to Shared Services and Outsourcing (SSO) to now being called Global Business Services (GBS). Is this the sign of a sector still trying to find its niche and relevancy, or is there sound basis for the changing descriptions?

Varanasi: Twenty years of rigorous adoption of sourcing has seen progressive creation of new service lines and delivery models, alongside rigour and discipline across the entire life-cycle.

However the primary premise – of leveraging human resources as capital and inputs – remained unchanged.

Was value created or eroded? This is a question that is beginning to gain traction, both in terms of defining what value actually meant, and what it doesn’t.

Progressive pursuits, from discrete to integrated services, have opened up a plethora of opportunities for organisations to transform their rigid command-n-control models.

Consequently, many organisations that were at the cutting edge of adopting sourcing began to see the limitations the traditional models (SSO) continued to pose, particularly in the face of an increasingly complex marketplace where consumer needs changed quickly.

Three distinct trends (among many) are pivotal to appreciate the nature of the GBS world:

1) Aggressive commoditisation

Of (hitherto) innovative services allowed organisations to transcend borders and fuel growth in many nations. Of course, a price needed to be paid and that took the form of de-leverage. Control, ownership and predictability gave way to interoperability, open standards and ubiquity that transcended experience or size. The consequential discrete nature of provisioning imposed inherent limitations that providers couldn’t do much about, while customers saw through the limitations.

2) Replacing labour as key input

A resource revolution has been waiting to happen to satisfy the needs of over 2.5 billion new middle-class people worldwide. Meanwhile, smart machines have become increasingly able to perform advanced pattern-recognition tasks (that hitherto required human intelligence).

The evidence of ‘capital deepening’ is undeniable, where robots, computers and software (as capital) are increasingly substituting human labour. The contributing factors for such capital deepening have been increasingly cheap processing power, sophisticated software, cheap and ubiquitous sensors, and a much better understanding of human intelligence (in the form of cognitive sciences).

On the flip side, input factors have equalised to the point that any sophistication among them is nothing more than marginal value. This facet is precisely the reason for the increasing irrelevance of traditional sourcing models.

3) Pursuing cognition and predictability

Fundamental shifts are noticeable across all layers within organisations. The biggest shifts are observed in the operational and tactical layers.

The former is seeing a shift from transactional to intelligent workflows, where technologies and other innovations across data science, artificial intelligence and other trends with governance and collaborative partnering are influencing traditional resource-heavy delivery.

Intelligence is being created continuously instead of keeping the lights up. The fallouts are the irrelevance of job-centric and transactional models.

Meanwhile at the tactical layer, traditional service delivery that guaranteed efficiency-based endeavours within functions began to be replaced by an integrated multi-functional and cross-organisational view.

The endeavour isn’t as much about enhancing efficiencies of operational inputs through structure and rigour. Rather, the emphasis is co-creation and predictive approaches that aim to build resilience within the larger organisation.

DNA: Is there any single technology that you feel is disrupting large businesses? What can or is being done by early adopters to deal with its impact?

Varanasi: No, I firmly believe that there is no silver bullet. I don’t even subscribe to the fact that technologies are disrupting businesses.

Growing networks and globalisation have helped organisations build resilience through collaborative partnering, for a variety of reasons, spread across the entire gamut of activities within.

Today’s technologies continue to surprise many, not just because they are new, but because they are helping us – finally – find answers to vexing questions that have been around for too long.

I would therefore be quite sanguine in pronouncing adverse absolutes for companies which aren’t perceived as early adopters. Relevance and utility value supersede the modernity of any technology.

Hence ‘backcasting’ the business model, starting with outcomes in mind and then tracing back into the organization, would enable the identification of the right combination of input-factors (labour, capital, technologies, tools, systems, infrastructure, policies, operating models, workflows, etc.).

Eventually, the strategic pursuits of an organisation are about revenue growth, resilience and sustainability. To that end, any and all inputs have to pass the test in being able to contribute directly to these goals.

What’s Next

You can hear more from Varanasi and other speakers at What’s Next: The Business Impact of Disruptive Technology on July 28 at the Sime Darby Convention Centre in Kuala Lumpur.

Register directly at http://digitalnewsasia.com/whats-next-2016 or call Suraini Sarip at 6013 295-3498 for details.