Category Archives: Leadership

Are you a leader? Do you want to be. Leaders are not born – they develop. Learn about tips on becoming a leader and staying out in front.

The End of the One Way Street

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For those of you that have been following my Little Life Stories blog over the past week, you know that I have had quite a bit of windshield time as my son and I drove the 2500 miles from Phoenix, Arizona to Brookfield, Connecticut.  Over 40 hours in the car equated to that much time off-line.  You should try it some time.  Disengaging and taking the time to think without the constant demands of meetings, phone, or computer.

One WayNow traveling down highways is the ultimate One Way Street.  If someone decides to travel in the wrong direction – it’s a recipe for disaster. 

But for most other areas of our life and business – traveling down the one way street is a very short sighted solution.   

A very wise friend of mine taught me long ago that by extending yourself, engaging, and helping others there is a karmic affect.  What you give comes back to you.  This video tells the story… 

[youtube=http://www.youtube.com/watch?v=3BVhWIetBH0]

A recent blog post and developing exchange with Gloria Feldt on her blog “Speaking Up” under the category of Courageous Leadership really helped me bring my thoughts into focus in terms of social media interactions and my social media tool kit as a leader.

How does social media fit in my leadership tool kit?

I loved that Gloria started off by recognizing that social media is a tool for leaders and not a strategy. Social Media – interactive websites, blogs, Linked In, Twitter, Facebook, and more are each separate tools that can be used separately and on concert to 1) deliver information and 2) interact with your audience, employees, customers, and community in general.   These actions are the components of our strategy.  The tools simply enable us to act more effectively.

The days of one-way communication are coming to a close.

With the development of new social media platforms, we have entered into a new era of two-way communication that will allow us, as leaders, to develop stronger relationships, enhance communications, share ideas, and collaborate.

I am just learning to use these new tools to facilitate these interactions. The more I learn, the better a communicator and ultimately a leader I can become.

Here is a short story to illustrate what effectively using social media tools can do.

Gloria and I met at an ASU Women in Philanthropy event in 2002. Since then we exchanged holiday cards, read an occasional newsletter or email, and were loosely connected. As we both began to use the newer social media tools, we began to more actively interact, follow each others projects, and introduce each other to friends with shared goals.  Ultimately these conversations can lead to collaborations in the future. Basically, our communication has become a two-way street.

Are you still stuck on the one way street?

Not everyone is taking advantage of this opportunity.  Often I continue to  come across others in the social media and business worlds who are still stuck on that “one-way street” mode of communicating.  They continue to PUSH information out while failing to take advantage of the opportunity to PULL information in by engaging with their social media communities.  Until they do, they will run the risk of missing out on great new ideas, critical information, or opportunities to collaborate, and make a difference in their businesses, their personal interactions, and their communities – where ever they may be.

It’s kind of sad – I hate to see anyone miss opportunities – but in the end, that is their choice.  Their decision just creates more available opportunities for those of us choosing to travel down “two way streets”.

Thanks for stopping by.  Stay tuned.

Joan Koerber-Walker

Looking Inward – What is your CorePurpose

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Looking inside our organization and accurately assessing where and what we are isn’t always easy.

j0438801[1] Because we live where we are every day, we often do not see the little things all around us.

Many changes, for good or bad, are gradual. If we are living them every day, we may not notice the change. It’s like a pearl growing in an oyster or the grass growing in your yard. You do not notice how much the grass grows each day, but go away on vacation for two weeks and you immediately notice the difference on your return.

OK, so we need to take stock inside our organization, but what are we looking for?

The first key area to examine is who you say you are. A good place to start is with your core purpose and value statements.

What’s your core purpose?

Your core purpose is what you are and what you work to be. Unlike mission statements that should be time bound, your core purpose is a continual quest and directing force. It is the first component in who you are as a company.

The second component is the set of values that you adopt as an organization to realize that core purpose. Your values point your people towards HOW they will realize the organization’s core purpose. How they will deal with each other and how they will deal with customers and partners. These values drive your organizational behaviors – what you do day in and day out.

Let’s look at an example.

My own company, CorePurpose, Inc., (www.corepurpose.com) is a distributor of value added services and outsourced solutions. We work with companies ranging from start ups to the Fortune 500® to establish where they are, where the want to be and how to get there. We then build solutions from our portfolio of specialty service providers in the area of human resources, sales & marketing, operations, finance and information technology.

At CorePurpose®, our core purpose is To Provide Services and Solutions that Build Businesses. Everything we do in the company is focused on building businesses – our own – our partners – our customers.

From that core purpose, we then determined our corporate values: People, Acceleration, Promises Excellence, and Results. If you look at the first letter of these words you will note that put together they form PAPER. This was done with specific intent since values are noting but words on paper without sustaining behaviors demonstrated every day.

Looking at our corporate values, we can break them down into specific behaviors:

People – are the most important – no business exists without people – they are our employees, our partners, and our customers.

  • We treat people with respect.
  • We seek out diversity and partner with people who compliment our skill sets.
  • We create services and solutions that are designed to make people successful in what THEY want to achieve

Acceleration – our customers and partners look to us to help get them where they want to be faster.

  • We set aggressive but achievable milestones.
  • We offer resources that allow things to happen faster.
  • We do not wait and wonder. We are decisive and help our customers be decisive also.

Promises – to succeed we must be trusted. That means we must keep our promises.

  • Be clear in the promises you make – gain shared understanding.
  • Don’t EVER make promises you can not keep. Don’t over commit.
  • Ask for help when you need it.

Excellence – people choose to work with us because of the quality of what we deliver.

  • As experts we stay at the top of our field.
  • We know our facts and do not guess.
  • If we don’t know – we say so – we find out – and communicate back.

Results – it’s what we are looking for and what our clients and partners expect.

  • We measure what matters.
  • We do the job right the first time.
  • When we achieve our result, we set the bar higher and start again.
  • We deliver.

If you worked at CorePurpose®, would you know what was expected of you?

If you were the customer or partner, would you know what to expect?

Hopefully so. But as we all know, seeing is believing.

Our employees, partners, investors,  and customers watch what we do, and make their own assessment of the strength of our commitment to our core purpose and corporate values.

What we say is fine… but what we do is what really counts.    

Thanks for stopping by.  Stay Tuned…

Joan Koerber-Walker

 

CorePurpose® is a registered service mark of CorePurpose, Inc.

Looking Both Ways

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One of the earliest lessons we learn as we make our way into the world is to “look both ways before we cross the street.” We heard it as children and have said it to our own. From a business perspective,– looking both ways translates more broadly to knowing that before you head out in a new direction, you must pay attention to the world around you.

j0402780[1]Understanding Environment

“Looking both ways” reminds us of the importance of taking a look at our environment. As we prepare to cross our first street, we are leaving the comfort of what we know with a goal of moving to a new location – the other side of the street.

As business people and businesses – to be successful and achieve our goal safely – we need to know:

Where we are…

Where our customers are…

Where our competition is…

Where our competition is going…

Where WE are going…

What resources we need to get there…

&

Where do we get them?

Why say we need to know where we are? It’s obvious, right?

Not always. Often we are so busy trying to achieve the next objective or goal that we forget to step back and assess where we are today. If we do not take the time to really look at where we are today, we may miss those important “little things” that can have a major impact on to where we want to go.

As we look at where we are, there are some important questions to ask. Some are based on what the organization looks like inside while others are external, how others see you. Both are critically important.

So take the time to look both ways, it can make all the difference in your journey.

Thanks for stopping by.  Stay Tuned…

Joan Koerber-Walker

 

The Difference Between Knowing and Doing

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One of the great secrets to getting better results in your business is the difference between knowing something and doing something.

j0398745[1]Very often when you read a business book, blog or article, you may say to yourself, “I know that already.” And, you probably do.

The question is not if you know it – but rather, are you doing it? Are you using the knowledge?

As we build our strategy for better business results we must USE all we know and apply it to where our business is and where we want to take it to.

Next time you read about a business strategy or process improvement and recognize it as conventional wisdom, take the next step and try to list the ways that you and your company are actually demonstrating it.  You might be surprised what you find.

Ask Yourself…

Are we doing this?

Are we consistent?

How can we do this better?

The key here is the “WE”. Very often we assume that since we know what to do, others in our organization also know – and it is not always true. The key is to share what you know with your team and to act on it – together.

  Thanks for stopping by.  Stay Tuned.

Joan Koerber-Walker

Want more business – Get a Map!

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The Impact of Services Mapping on Employee and Customer Enthusiasm

In today’s challenging business environment, creating and maintaining customer enthusiasm can make the difference between business success and business extinction.

j0402776[1]Customers have more choices than ever before and expect higher and higher service levels relative to

· product and service information 

· choice between service offerings

· tailored or custom services

· quality of delivery

· the quality of the buying experience

Across industries, companies are discovering that of these 5 customer demands, the greatest is that of the buying experience.

While a customer will forgive a service failure that is corrected promptly by a company’s enthusiastic employee ambassador, customers will migrate quickly from companies whose employees feel disenfranchised, even if the service is performed as promised.

But what is an employee ambassador, and where do you find one?

The answer is simple, employee ambassadors are all around you. They are each member of your organization who touches a customer – directly or indirectly. To create enthusiastic employee ambassadors, organizations must provide a support system to foster enthusiasm that includes:

· A consistent culture that reaffirms that each employee is key to the company’s success

· A commitment to process, structure and continuous improvement that allows the employee to make promises to customers and gives the employee faith that their promises will be kept.

As companies aggressively pursue the development and growth of services offerings and services revenue, it has become increasingly important, in fact, imperative for these firms to provide a consistent level of process, support and flexibility to support employees in their quest of keeping promises to customers resulting in the growth of high levels of customer and employee enthusiasm and the resultant customer loyalty and profitability.

All of us want our employees and customers to be enthusiastic about the products and services we provide. Employees can not be enthusiastic if they feel that they can not deliver what is promised, and customers will loose enthusiasm and go elsewhere if promises are not kept. The question is how do we create that enthusiasm and keep it? One tool, created at Arizona State University, is the process of Services Mapping.

Customer Enthusiasm SCC

Cross functional teams across the spectrum of a product or service delivery create a “map” of the product and service delivery systems. The map is broken down into five levels:

Customer View & Evidence:  What does the customer see in the way of marketing materials, articles, and information about the product or service that brings them to your door?

Customer Contact: What does the customer experience when they first make contact with your Organization?

On Stage Employee: What are the tools, attitudes, and systems in place to support a positive employee/customer interaction and the employees confidence in making promises to customers?

Back Stage Employees:  What are the tools, attitudes, and systems in place to support a positive interaction between the front line employee and those they must rely on behind the scenes.

Resources:  What are the physical, financial, and technology resources on stage and back stage employees need to keep promises to each other and ultimately to customers.

The Services Mapping process:

· Provides an Overview so employees know “What to Do” when things go right and when they don’t.

· Identifies weak links in the chain, so promises are kept more often!

· Defines the Lines of Customer Interaction between customers and employees so the employee recognizes where they can have the most impact to the customer experience and the company’s goals.

· Defines Lines of Internal Interaction defined between departments

· Provides a basis for identifying and assessing cost, revenue, and capital invested

· Creates a baseline for use in customer satisfaction and quality improvement efforts

When service delivery processes work, promises are kept, employee enthusiasm increases and it spreads to customers. The result is greater profits as customers stay, and more importantly, through their enthusiasm, bring more customers via the strongest marketing tool in the arsenal, customer referrals!

Thanks for stopping by.  Stay tuned…

Joan Koerber-Walker

Turning Things Around in 2009

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What was your New Year’s resolution?  Mine was to talk to at least two different people every day about what’s happening in our economy and to explore opportunities. 

It had gotten to the point where I was afraid to turn on the radio, TV, or open the paper.  The news was just too depressing.  So I resolved to reach out into my community and observe things first hand.

Since January 1st,  I have met with and spoken to a lot of people in Arizona, across the US, and even abroad.  And what I am hearing is encouraging.  Yes, times are tough, but people are moving forward, innovations are happening, businesses are making changes to speed their recoveries, and investors are looking to invest in solid business plans.  As I meet with friends and business colleagues, they in turn have introduced me to their friends…and I have returned the favor.

Here are just a few of the wonderful things I have uncovered in my search for opportunities…

  • One of my friends was working with a company with a great new product and service concept.  They were getting ready to reach out to investors and showed me their developing plan.  I even got to make some suggestions.  Hopefully, they will help this company raise their next round of funding.  They have a great concept. 
  • I spent time with two executives in Detroit.  One from GM and one from Ford.  Some of the stories they shared were sad, but there were glimmers of hope as they talked about new developments and what those companies were doing to turn things around.
  • A biotech researcher in San Diego was bubbling over with excitement when she shared news about a new development in the lab that could improve an long-standing medical process and ultimately save thousands of lives when it is brought to market.  I told anther friend about it and he introduced me to the person I needed to meet to move the process along.
  • A manufacturer in Arizona has created a new system to help restaurants be more competitive, improve processes, and save energy.  Their business is growing by leaps and bounds.
  • An architectural  glass distributor in Michigan has taken their business global and not only grown substantially but has won high honors and awards along the way.
  • Over the last weeks I have met with people looking to buy businesses and re-capitalize them, not just saving jobs, but with future growth… creating them.  Oh, and they are finding the money for it too!
  • Meetings have brought me in contact with incredibly talented CEO’s and executives who are looking for their next big project.  They were not sitting at home or hitting the links.  They were out there just like me, sharing their expertise, serving on boards of directors, mentoring others, and helping to get things moving forward again.

With all of these encouraging stories bolstering my courage, I was brave enough to open the newspaper again. And what did I find?  Well yes, there was news of layoffs and filings for Chapter 11 BUT there were also NINE full pages dedicated to positive stories just like mine.  Stories of business owners and individuals sharing how they too are staying ahead of the downturn. 

I’ve made it though seven months of keeping my New Year’s resolution.  I think I’ll stick with it.  Wouldn’t you?

Thanks for stopping by.  Stay  Tuned.

Joan Koerber-Walker

Technorati Tags: Joan Koerber-Walker,CorePurpose,Phoenix Business Journal,economy,Phoenix,Arizona,biotech,capital,funding,positive media,networking

Making Cents of Your Health Insurance Dollar

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As President Obama continues to lobby the American people and Congress on Healthcare Reform, talk of change and what it means to average Americans travels from the board rooms of global corporations to the kitchen tables of homes across the country.

In quite a number of discussions, this quote sums up the feelings of many people I have talked to.  “Spare me the details – I just want to know what Healthcare Reform will mean to me.”  If this is how you feel, than this short video from CNN Money might help answer the question.  CNN Money video

One of the major components of the President’s plan is to require almost everyone to have some form of health insurance – tackling the current social and economic  burden of a population of approximately 47 million Americans who are uninsured.  This will add approximately 47 million Americans into the existing insurance pools of either government provided insurance, employer provided insurance or private insurance.  You can find the current breakdown by coverage class in my related post earlier this week.

That being they case, I thought it might be helpful to look at where our insurance dollars go.  To do  that, I referenced the bi- annual report on that information from the same industry report that was referenced by the Senate.  In January of 2008, Price Waterhouse Coopers published research on health insurance costs as commissioned by America’s Health Insurance Plans.  This link takes you to the full report. The Factors Fueling Rising Healthcare Costs 2008

The graphic above shows the break out of the pool of dollars that make up the  employer and private health insurance spend. Looking at the graphic, 13cents of each dollar goes to corporate profits, administration and sales and marketing support.  The other 87 cents goes towards the basics of helping us stay healthy, diagnosing illness or other medical conditions, and treatment.

So if we are going to lower healthcare cost, realistically, the focus will fall predominately in the area shaded in aqua – that 87%.  It is in these areas where we have the greatest opportunity to use American innovation to improve the healthcare process.  Information technology enhancements in the area of medical records management can help us reduce duplicate tests and better manage patient care.  New biotech diagnostics currently in development will allow us to detect and diagnose diseases earlier – thus greatly reducing the total cost of treatment by addressing small problems before they become big ones.   But technology and process improvement alone will never be the answer. 

We, the people, will also need to make some changes in our behaviors if we are ever to really get things under control.  Here are a few things each of us can do to put the health back into healthcare:

  1. Get a check up.  85% of Americans, who have health insurance, do not get an annual check up.  Yet studies by Medicare and Medicaid have shown that if we detect and diagnose chronic disease early we can avoid as much as 90% of the costs of treatment. And, chronic disease represents almost 70 percent of the medical services spend. 
  2. Take a walk.  It is estimated that approximately 31% of Americans are either clinically overweight or obese.  This condition has been directly correlated to a wide range of chronic conditions including Diabetes, Heart Disease, Stroke, Hypertension, some types of Cancer, Sleep Apnea, Osteoarthritis, and Gallbladder Disease.
  3. Ask questions and talk to your doctor.  Whether in your annual exam or during treatment, take an active part in the healthcare discussion.  Ask your doctor what you can do to be proactive about managing your health and your healthcare spend.  Very often a few extra minutes can leave you with good information, ideas, and in the case of treatment sometimes more cost effective alternatives.
  4. Understand what your healthcare plan has to offer.  If you have a bad health habit you want to break, many plans offer free services to help you.  Pull out that booklet they send you once a year and look.  You might be surprised at the resources you are paying for that you have never used.

President Obama may or may not get everything he wants out of Congress this year in the way of health care reform.  And even if he does, the some of the changes will take years.  But we can each start our own healthcare recovery plan today – if we choose to.

Thanks for stopping by. Stay Tuned…

Joan Koerber-Walker

Healthcare: A Perfect Problem with No Perfect Solution

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In the United States, we have two “perfect problems”: our Healthcare system and our Taxation system. What makes these problems perfect is their absolute complexity and an almost universal agreement that a problem exists.

The focus of this article is on healthcare.  I’ll leave taxation for another day – even though eventually our country will not be able to truly address one without the other.

[youtube=http://www.youtube.com/watch?v=HKOfXlB_3Wo]

Up until December of 2006, I did not think a lot about healthcare.  It was something I had, something I paid for, and with the exception of annual check ups for my family, something that I rarely had to use.  I knew it was a problem, but it was not necessarily mine. That changed December 21, 2006 when I became the CEO of the Arizona Small Business Association, and had to answer to and speak on behalf of our 3,000 business members and through them over 200,000 employees. 

The more I researched, surveyed, and listened; the bigger the problem became.  And I was just looking at one state, and within that, only one subset of the population, small business owners and their employees.  Yet both in our state and on a nationwide basis estimates from both the Federal government and independent agencies estimated that of the 45 million people plus who lacked health insurance, approximately 60% of them either owned or worked in a small business.   The constantly rising cost of health care was a burden these businesses were struggling to battle.  Others were starting to give up hope that anything could be done.

LOOKING AT THE NUMBERS:  HEALTH INSURANCE COVERAGE IN THE UNITED STATES

Source: Income, Poverty, and Health Insurance Coverage in the United States: 2007, p.69

hc-numbers-chtThe chart at right shows the estimated U.S. population (as of 2007) and the breakdown of the insured/uninsured and where the insurance comes from.

But as we all know, there have been some pretty significant economic factors since 2007 that probably shift these numbers upward in the areas of both government provided program and the uninsured due to the significant change in the unemployment rate (4.7% in June of 2007 vs. 9.7% in June 2009) and the continuing economic pressures on businesses of every size.

With a problem this large, it’s hard to have any impact.  Especially when it’s also highly complex and politically charged.  At the state level we had various mandates, imposed and proposed, that were continually driving the costs up.  A state provided program for small business had serious limitations and flaws not to to mention a serious deficit that threatened its sustainability.  The whole thing was a mess. 

I had learned a long time ago that it is almost impossible to tackle a really big complex problem – but that if you break it into little ones and tackle them one at a time, you can make headway.  So that is what we did.

First we framed the problem with a set of goals.  Our conditions for success were the following:

  1. It had to be available to any business of any size (even groups of 1) without limitation.
  2. It had to cover the entire state AND provide coverage for employees out of state.
  3. It had to provide the same level of quality care and service that was available to employees in a Fortune 500 company.
  4. Coverage had to be guaranteed issue with no pre-existing conditions limitations as long as there had been prior qualified coverage and pricing and eligibility would NOT be determined by health status of the employees.
  5. It had to be reasonably affordable and competitive.

The next step was to look at what resources we had to work with and to identify potential partners.  We reached out to corporate partners, legislators, the Governor’s office, and national organizations to see what was available, what we could work with or what we could change.  Through a combination of negotiations, partnerships, and collaborations, we were able to design a plan that met all five of our defined goals and launched it 10 months after we started the process.  To see the full details of the program, visit the ASBA website. 

Now, this program did not solve the national problem, but it did provide a solution/option for the community we served across the state of Arizona. AND, it did so without a single taxpayer dollar.  Best of all,  from 2007 to 2009 the gross increase in premium was a total of THREE percent while at the same time the program benefits were enhanced – not reduced.

So my question is this.  Perhaps, while they battle in Washington tackle the perfect problem of Healthcare Reform – and fight over every sacred cow.  Maybe, just maybe, individuals like you and me, in our little corners of the country can build viable solutions by breaking the problem down to smaller more manageable chunks and tackling them one at a time.  That way WE can solve the problem and THEY can keep on talking.

Thanks for stopping by.  Stay Tuned…

Joan Koerber-Walker

P.S. While I no longer serve as the CEO of the Arizona Small Business Association, my time there taught me something very important.  There is very little that can not be accomplished by American small business with a little hard work. collaboration, and ingenuity.  If we focus on the challenge, frame it properly and get down to work the results can be pretty incredible. 

What DO you do?

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Friday I got a tweet very early in the morning, just as I was heading out to a 7 AM meeting across town.  It said simply “What Do you do?” I sent of a quick note explaining with a link to my website and my number so the person could call me later if they wished.  Grabbing my purse, I headed out to the car.  As I was driving to my meeting with The Shea Group that question stayed on my mind.

Silver_Bullet_GripsThe Shea Group is a collection of executives and business owners who understand that learning and career development is a lifelong process.  Each time the group meets, a speaker shares their experience as part of the session.  This time it was Jack W. Milligan of Leathers Milligan & Associates a long time veteran in the area of human resources and executive career management.  Jack told us a story that really resonated with me.  It went like this…

“This is a secret that only human resource professionals know.  Hidden deep in every company, there is a special closet where they keep the silver bullets.  On the day that you start, they will engrave your name on one.  On the day that you leave you will get it back.  They may shoot you with it, or they may hand it to you as they once did an engraved gold watch.  But, that bullet is there and it has your name on it.  It is up to you to be prepared.”  Jack W. Milligan

Jack went on to share tips and techniques that every executive should be employing to manage their career both during employment and during the transition process that is sure to come at one time or another. 

So today I decided to give some real thought to answering the question – What Do you do?  Not just based on what someone might find on my resume or bio – which shows what I have done, but in  terms of what I actively do and engage in and what I hope to bring to the next growing company I have the opportunity to lead.

My “What I do list”

  • Engage employees and partners in our organization’s vision and with them develop a plan that delivers tangible results.
  • Lead throughout the execution process by example.  Never ask another to do something that I personally am not willing to do.
  • Communicate openly and often on what is working, what needs work, and what is yet to be done. Use every appropriate platform – from public speaking,  to writing, to informal chats to deliver the message.
  • Listen to what our customers and our market has to say, learn from them, and put those lessons to work.
  • Take forgotten or underutilized resources and redeploy them for added results
  • Reach out to our community to offer assistance, share ideas, and keep our organization connected, engaged, and respected.
  • Develop and mentor the people around me so that when my silver bullet comes, they can continue on the journey to find even greater success.

What’s on YOUR “What I do list”.  It’s a great exercise – try it and see.

Thanks for stopping by.  Stay Tuned…

Joan Koerber-Walker

Looking back at a Perfect Storm

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During the downturn that shook the foundations of the technology industry after the dot.com implosion, I wrote and article about the Perfect Storm that hit the industry.  In that article I suggested that there are Seven Deadly Sins that can challenge the stability of the supply chain and our overall economy.  This was written in July 2002.

Reading it now, seven years later, it is amazing how we have seen the storm hit once again – this time in the construction and finance industries.  Hopefully someday we will learn our lessons.

bigwave2The Perfect Storm:
What happened to the Supply Chain in 2000/2001
and could it happen again?

July 3,  2002.

In November of 2000, Roy Vallee, Chairman of the Board of Avnet, Inc., the worlds largest electronics distributor, announced, at the Avnet, Inc. Annual Shareholders Meeting, that Avnet was seeing indicators that the Technology Boom of 2000 may not be sustainable.

This unleashed a storm of protest from analysts, investors and supply chain participants. While today we all know that those indications were all too true, with hindsight, we, as an industry, only wish he had been wrong. As the technology sector slowly begins the climb out of the most dramatic downturn in its history, the question asked repeatedly is… “How did this happen? & “Will it happen again?”

Many hypotheses have been put forward in the last year as to what happened and why it was so extreme. Some attribute the cause to:

  • The external environment – globalization, industry consolidation, Y2K, or the dot.com implosion and resulting telecom plunge;
  • Industry cyclicality – sharper and more dramatic cycles as the size of the industry and key sectors within it grow disproportionately;
  • Technology – our sophisticated IT systems let us down. The forecasts were all wrong;
  • An increasingly complex supply chain;
  • Wall Street – pressure for growth driving unrealistic forecasts; or
    All of the above – a Perfect Storm!

Pick any of the above and you can find people to agree with you as to what was responsible.

Interestingly, each of these factors is a “thing” we can point to. We do not have to take personal responsibility because it was an external economic effect, an industry group or corporation at fault, not us.

Organizations and IT systems do not make the decisions that drive the supply chain, people do. Each one of us represents a link in the supply chain and it is the choices we make every day that drive the outcome. Until each of us within the industry chooses to accept this responsibility, we are doomed to face similar extreme business cycles in the future.

So, if human beings are the key factors that control the supply chain, what are the human conditions that drive our supply chain behaviors?

The Seven Deadly Supply Chain Sins

The Path of Least Resistance: In our increasingly busy roles, seeking the path of least resistance comes naturally. Whether as engineers, we design with parts we have always used it the past (designing in parts at the end of their product life cycle or missing out on possible benefits procurement or manufacturing may gain with a more commonly available part) or as procurement and materials professionals we do not make the effort to establish part numbering standards so we truly know what we have and what we need. At one time or another, in good times and bad, we have all fallen into the trap of viewing the old ways as “good enough” rather than making the extra effort to optimize our systems and our processes.

Self Preservation: From birth, self-preservation is the most basic human instinct. Each of has a natural inclination to protect ourselves, our jobs, and our companies. In times of allocation or constraint, a buyer may double order or increase forecast requirements to ensure his company gets what it needs to keep the production lines going. In isolation this may be a small thing, but across an industry, this can create a groundswell of demand that may be unrealized as capacity is increased and product frees up. Within our organizations we use this nature of self-interest by creating incentive programs to drive certain behaviors. Unfortunately, these often conflict from department to department. Thus, our materials team must keep inventory low to earn their incentive and the sales team needs product on hand so they can get the sales level they need to make their sales goals. These conflicting interests lead to distrust and ultimately to breakdowns in communication or even distorted information as each individual protects his or her own interests. If our lines of communication break down within our own companies, how can we provide accurate information to our partners across the supply chain?   

Risk Avoidance: If as human beings we have a natural inclination to protect our selves, the next logical progression is to shy away from risk or find ways to shift the risk from ourselves to another. In the supply chain this manifests itself in many ways. In our contracts and legal forms we add penalty clauses and loop holes to shift the risk of doing business from us to another. Whether it’s the quality of imperfect forecasts, the liability for service or product failures, or artificial or often unnecessary restrictions on date codes, we often spend much more time and effort constructing rules and systems to shift risk to another than we do investing together to improve processes and systems to identify and mitigate the real risks we face. 

Fallibility: “Nothing and no one is perfect. There is always a margin for mistakes. But naturally the other guy will let us down more often then we will err. We must protect our selves from his failures.” This is the thinking that leads us to greater supply chain inefficiencies – bonded inventories, excessive buffers, padded forecasts, and ultimately inventory gluts. It is often easier to assume our supply chain partner will let us down than it is to pick the RIGHT partner and work closely with that them to develop strategy and process so both of us will be successful. 

Distrust: If everyone else is driven by self-interest, risk averse and fallible, no wonder we find it so hard to develop the levels of trust we need to share good information and partner effectively. When we do not trust our suppliers to deliver, we compensate in the supply chain. When we do not trust the product groups to have enough inventories, we pad the sales forecast. When we do not trust the MRP system we tinker with it. When numbers don’t give us the answers we need, we “adjust” them until they do. With everyone doing what comes naturally, it’s a wonder we get any good information across the supply chain at all. 

Greed: Whether you believe that “Greed is Good” or greed is bad, the interesting thing we often forget is that greed is not just about money. Greed is getting your “unfair share” of money, market position, market power, attention, and information. Interestingly if you take the word greed out of the description, it reads like the objectives of many of our companies. 

Increase Revenue & Profits
Increase Brand Position
Increase Market Share
Increase Market Intelligence

It is when greed gets out of control that we get into trouble. At the peak for the last technology wave, that is what happened. As investors we got caught up in escalating stock prices based on company projections that had little basis in financial reality or business basics. This influx of capital created a flurry of investment in telecom systems, IT infrastructure, and other products creating a groundswell of demand. As demand increased and supply became constrained, as buyers, we compensated within our supply chain to ensure we got our “unfair share” of what we needed. As sellers, we raced to capture orders and market share to get our “unfair share” of this inflated demand. And as an industry, we reeled in shock as the whole thing imploded. And then we started looking for someone to blame.   

Denial: When we refuse to acknowledge the truth, we are in denial. Another way to look at denial, one we got caught up in this last time around, is getting caught up in a wave of unrealistic optimism that approaches euphoria. Things were so great in our industry and we were so proud of our strategies, our growth, and our success, that we failed to look closely at the business basics our companies were founded on. Not only do we need to be aware of our own tendencies to get caught up in unrealistic optimism, but we must also be aware of the affect of those around us. When our biggest customer doubles his forecast, we double ours, plus a little extra just to be safe. So does his next supply chain partner and the next one. Soon the forecast has grown beyond anything sustainable, even assuming that the first projection of double growth was correct. At an industry or market level it is even more complicated. Here, when the analysts predict the market will grow by X%, each market participant projects that they will capture their unfair share. If you go back and add each company’s projection up, the aggregate often exceeds the level of projected growth. These are some of the storm clouds on the horizon that signal rough weather ahead.

Are We Doomed?

So with all of our faults, is it hopeless? Are we doomed to ever increasing and sharper cycles? NO! Each of us, at each level of our organizations has the power to drive change in the performance of the supply chain.

Looking at the bigger picture: Whether we call it a supply chain or a supply network, the reality is that the choices, decisions, and actions of each of us, individually, link to others within our companies and across the supply chain. If we are to truly develop the level of quality information needed to drive to success, we need to recognize the linkages to internal customers, partners, and external customers and ensure that we are sharing the highest quality information available at all times if we are to be successful in reaching optimal levels of performance.

Each of us must Dare to Innovate – Design for Supply Chain Information – Providing the design engineers with not only easy access to technical information, but also information on the product life cycle of the components, their availability over time, and parts that are most commonly used within their company and within their industry to reduce the potential for stock outs in time of constraint and liability inventory in times of excess. 

Materials Management and Procurement – Investing in resources, tools and partnerships to create solutions for standardization of part numbers and sharing that information between departments (like engineering) and other manufacturing sites around the world.
Manufacturing – exploring systems, tools and processes that add visibility into inventory activity at the point- of use and relaying it back through the supply chain to support lean manufacturing for lower manufacturing costs and greater inventory trend data to support improved forecasting within the materials management function.
Operations – establishing systems and processes to link global operations and create inventory and supply chain visibility. (This is especially challenging for international companies running on disparate computer systems.)  

Channels To Market – Ensuring that we have the right channels mix to match our products and services to the needs of our customers. Then, ensuring that the right information and support systems to support those channels are put in place to get maximum return on the Sales and Marketing efforts across the direct, representative, distribution, and self -service channels. 

Be generous with your supply chain partners: The opposite of self-preservation and self-interest is generosity. This willing ness to give and share freely is the key to our success as partners in the complex supply chain. Generosity manifests itself in the willingness to share complete and accurate information to partners, not just that portion that supports what you need right now. It also extends to the willingness to pay for the value a supply chain partner provides, and the openness to share what portions of the partners’ value proposition truly adds value. In today’s tight financial times, neither buyers nor sellers can afford services that do not add measurable value to the supply chain process. 

Understand Risks and create process improvements to mitigate them – Accept responsibility: No business relationship is without risk, especially as you move across a complex supply chain. The key is to mapping the process to identify the potential for problems and establishing service recovery systems to address them. In recent years the trend has been not to manage risk, but to try to shift it across the supply chain from the OEM to the CM to the distributor or Manufacturer of the component. For the supply chain to work effectively and for the participants to openly share information, each supply chain partner must accept responsibility for that part of the supply chain information and risk that belongs to them. Otherwise, innovation and trust between partners becomes impossible. 

Dare to Trust/Share REAL information: The key to being able to trust your supply chain partners is to pick the RIGHT partner, then give them complete and accurate information, set reasonable allocations of risk based on accountability for the supply chain information each generates, and then let them do their job. Choose the right partner based on their ability to get the job done, their track record within the supply chain and the innovations they can bring to your processes that add value and help you realize your goals. 

Greed is not all bad, but blind greed is dangerous: Wanting to get your “unfair share” is what business is all about. However, when we blindly pursue market-share, revenue, or other business metrics beyond what the marketplace can support, we all ultimately suffer. New innovations and businesses are developing to help us look at excess inventories across the supply chain. Identifying these excesses and redirecting them inside our businesses, channels, industry groups or the marketplace allows us to circumvent the build-ups of inventory that ultimately lead to gluts and market declines. As an industry we must enter into new types of relationships with our supply chain partners to add greater transparency to not only the product we need for the future, but also the residual inventory that is left sitting across the supply chain. By increasing this visibility, we get a better picture of what is needed, what is left over. We then have the opportunity to shift the resources back through the chain and put those assets to work for us rather than pushing them off to a partner as a liability. 

Temper Optimism with Realism: At the height of the boom, optimism was at its highest point. The cyclicality of the technology industry was “a thing of the past” and business was continually headed up and to the right. As the market drastically corrected, reality set in and we all scurried for cover, drastically cutting back on our product requirements, canceling orders and pushing as much liability away from our selves and back towards our supply chain partners. In the darkest days of the downturn, we lost our optimism and trust in each other, cut our costs wherever we could and battened down the hatches to ride out the storm. Looking around us, we hoped that we would make it through and knew that some others may not.

Today the storm clouds are beginning to dissipate and many analysts predict that we are starting a slow recovery from the Perfect Storm that started in 2000/2001. As we move towards recovery, there are lessons we have learned that point us towards smoother sailing in the future if we choose to heed them and learn from the painful times we have been through. We must hold on to the optimism that better times are ahead, and invest accordingly, but we must also temper that optimism with a never ending awareness of the market forces swirling around us and not be afraid to raise the storm flags when optimism conflicts with market reality. 

So, to answer the questions we started with: How did this happen?
Because we let it.

Will it happen again? By the nature of technology, there will always be a measure of cyclicality in our industry, but the shape of those cycles is up to all of us based on our supply chain behaviors. Eventually, there will be other storms in the high tech industry. It is our choice if we sail right into them, as we did this time, or if we plot a new course, one marked by the sharing of accurate and complete supply chain information between partners, a willingness to be held accountable for our supply chain information and decisions, and a willingness to take the time to find the RIGHT partners and then give them what they need to support us across the supply chain.

How will you chart your course?

(This article was originally published in the CorePurpose Executive Brief,  July 2002)

Thanks for stopping by.  Stay  Tuned…

Joan Koerber-Walker