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Innovate or Die,
Partner or Perish
May 25, 2012
Istanbul, Turkey
2
“Ok, you invented the wheel, but what have you done for me lately?”“OK, you invented the wheel, but what have you
done for me lately?”
time
innovation
8,000 BC 3,500 BC C 2008
1903
1957
1969
Innovation Curve:
Innovation: What Made Long Distance Flying Possible?
3
Jet Engines GPS Equipment Wide Body Aircraft
The Toilet
4
COLLABORATION“Partner or Perish”
INNOVATION“Innovate or Die”
EXECUTION
STRATEGY
5
AGENDA
• Strategy
• Strategy and Innovation
• Strategy and Collaboration
• Collaboration Execution
• 5 Areas Where Innovation Will Occur
6
Strategy Positions
Client Intimacy
Ops ExcellenceLow Cost
Product Innovation
Growth
Op Margin ROIC
ShareholderValue
AverageGrowth
& MarginRate
ClientTarget
ValueProposition
ServiceDelivery
Operations
7
0
10
Dell Fo
cus
0
10
IBM Fo
cus
0
10
Apple Fo
cus
SvcSalesDistQAMfgSCLProcPDEngR&DAdmin
SvcSalesDistQAMfgSCLProcPDEngR&DAdmin
SvcSalesDistQAMfgSCLProcPDEngR&DAdmin
Spend Varies by Market Position
Source: Break Through Bill Davidson
ClientIntimacy
ProductInnovation
ProductInnovation
8
AGENDA
• Strategy
• Strategy and Innovation
• Strategy and Collaboration
• Collaboration Execution
• 5 Areas Where Innovation Will Occur
9
Strategy Positions & Innovation: Low Cost—BMW Story
This approach to Specialization & Customization delivers for BMW a 20% Operating Ratio
Seven Automobiles
325i Sedan
M3
325i Sports Wagon
Mini Cooper
X3
325Ci Convertible
325Ci Coupe
SpecializationAll on 1 Platform
Multiple Options
Leather Vinyl Cloth
Hub capsAluminum
WheelsChromeWheels
Red Green Blue
CustomizationWith “Plug & Play”
Seven Markets
Business People
Racing Enthusiasts
Families with Kids
Urban Cowboys
Outdoor Enthusiasts
Sunshine Lovers
Dating Couples
UTi Innovation Strategy: Innovation & Cost Management
R&D &Innovation
Client Requirements
80-90%Configuration
ExpandConfiguration
Drive Lower Operating Cost
11
Strategy Positions: Product InnovationMicrosoft Integration
Word Processing LeaderWordPerfect
Spreadsheet LeaderLotus 1-2-3
Graphics LeaderHarvard Graphics
Database LeaderAshton Tate dBase
Best of BreedProducts
How manyof these products
are left ?
Best of BreedSolutions
History shows the integrated solution wins (beats the competition), even if the individual products of the integrated
suite are weaker than the “best of breed”
MicrosoftOffice
12
Product Innovation:APPLE Adjacent Industry Integration
MoviesStoreComputing Browsing Player
Apps
13
Busy Exec
On-The-Go
CulturalToilet
DesignerThrone
Out House
The FirstToilet
Client Intimacy Innovation: Innovation of a Commodity into a Solution
14
Other3PLs
Do ItYourself
Client Intimacy
Operations ExcellenceLow Cost
Product Innovation
Strategy Positions: Client Intimacy—Spaghetti Dinner
15
AGENDA
• Strategy
• Strategy and Innovation
• Strategy and Collaboration
• Collaboration Execution
• 5 Areas Where Innovation Will Occur
Partnership: Why Partner?
16
Why Partner? • Reduce risk• Fill a Gap• Speed to market• Gain expertise• Solve a problem• Operate at a lower cost• Do it better• Easier to get funding
Supplier Buyer
Why Not?• Compete in collaborative networks already• Rival each other in an industry • Promote competing technologies or infrastructures;• Create relationship exclusivity that prevents partners from working effectively with other partners.
• Share it• Borrow It• Rent it• Lease it• Own It
Control
Control and Flexibility are Often at Odds: Can You ReachPrime with Collaboration
17
Control
Flexibility
AmountOf
Flexibility& Control Prime Time
l u i s h u e t e
10
100%
0%
18
AGENDA
• Strategy
• Strategy and Innovation
• Strategy and Collaboration
• Collaboration Execution
• 5 Areas Where Innovation Will Occur
19
Strategy & Collaboration: (Cost / Quality (including risk) / Speed Tradeoff)
Systems
Expertise
ClientFixed Asset
OperatorCarrier
ManagementPostponement &
Distribution Network
Optimization
• Network Design• Network Optimization• TM• Inventory Optimization• Postponement• Order Management
• Service levels• Risk reduction• Experts• Continuity / Staffing
Pooling• Shared Infrastructure• Shared Systems• Shared Expertise / Verticals
• Economic Advantage• Visibility & Control
Relationship
Other3PLs
Do ItYourself
Government& Regulatory
Compliance
ProcessesSystems
Expertise
An Open Business Model (OBM) for Open Innovation (OI)
20
EstablishTrust
BuildGoodwill
CreateValue
IndispensableDialogue
Steps
• Ensure all internal departments are on board & not competing with the partnership• Determine what can be shared• Identify legal and anti-trust issues• Assess whether the relationship can work
• Create & hold a similar vision• Build & share IP together• Determine the process for IP sharing in advance
• Supplier owns ingredients & technology (solution)
• Partner owns the application of the IP (smart application)
• Who gets what of the new monetized solution
• Communication, commitment, & transparency• Explicit knowledge is easy to share but the value comes from tacit knowledge (real time Info sharing)
• Use a methodology• View, Aim ,
Execute• Idea Store
• Who will do what so each party knows their role• By sharing and brainstorming build goodwill (win / win)• The enemy is each partners competitors, not each other
• Has to create commercial value for participants• Use project management to implement• Need to develop a mindset of “sharing is winning”• Need to focus on OI (Open Innovation by
• Leadership• Strategy• Partnership• Champions• Internal experts• Customers
21
Execution & Innovation:5 Things To Focus on in the Future
SystemsProcesses
SystemsExpertise
ClientFixed Asset
Operator
Customs
Expertise
• Network Design• Network Optimization• TM• Inventory• Postponement• Order Management
• Service levels• Risk reduction• Experts• Continuity / Staffing
Pooling
1
Relationship
Optimization
Compliance
CarrierManagement
Postponement & Distribution Network
• Economic Advantage• Visibility & Control
1) Network Design: 80-90% of Supply Chain Cost is Driven by Supply Chain Design
22
23
Execution & Innovation:5 Things To Focus on in the Future
SystemsProcesses
SystemsExpertise
ClientFixed Asset
Operator
Customs
Expertise
Optimization
Compliance
• Network Design• Network Optimization• TM• Inventory• Postponement• Order Management
• Service levels• Risk reduction• Experts• Continuity / Staffing
Pooling
1
2
CarrierManagement
Postponement & Distribution Network
Relationship
2) Static to Dynamic Execution—How We Do This?
24
StaticHistorical• RFQ• RFI
DynamicExecution
Real TimeData
Optimization
Total Cost
Key Metric:Purchase Price
Variance
Key Metric:Cost/Kg
How do you get consistency in the cost / kg so youavoid answering the PPV Question?
AgilityForecasting
VUCA
25
Execution & Innovation:5 Things To Focus on in the Future
SystemsProcesses
SystemsExpertise
ClientFixed Asset
Operator
Customs
Expertise
• Network Design• Network Optimization• TM• Inventory• Postponement• Order Management
• Service levels• Risk reduction• Experts• Continuity / Staffing
Pooling
1
3
Optimization
Compliance
CarrierManagement
Postponement & Distribution Network
• Economic Advantage• Visibility & Control
Relationship
2
26
Compliance
Why Compliance is Important
• Foreign Corrupt Practice Act (FCPA)• Anti-Bribery Laws• Entry into new markets• Emerging Markets (1st world solutions)• Increased & Changing Regulatory
Requirements• Increased compliance focus and penalties
What are the RISKS ofNon-Compliance?
• Damage to company image• Fines and penalties• Sanctions• Interruptions or loss of privileges• Supply Chain Disruptions
What can a Supply ChainPartner do?
• Minimize Risk• Act as buffer• Knowledge and training• Communication• (Global) Processes • Controls
27
Execution & Innovation:5 Things To Focus on in the Future
SystemsProcesses
SystemsExpertise
ClientFixed Asset
Operator
Customs
Expertise
• Network Design• Network Optimization• TM• Inventory• Postponement• Order Management
• Service levels• Risk reduction• Experts• Continuity / Staffing
Pooling
1
3
Optimization
Compliance
CarrierManagement
Postponement & Distribution Network
• Economic Advantage• Visibility & Control
Relationship
2
4
Data to Knowledge
28
• Control• Optimization• Real time execution• SC Design• Predictability = Reduce PPV• SC disruptions Convergence
& Combination
29
Execution & Innovation:5 Things To Focus on in the Future
SystemsProcesses
SystemsExpertise
ClientFixed Asset
Operator
Customs
Expertise
• Network Design• Network Optimization• TM• Inventory• Postponement• Order Management
• Service levels• Risk reduction• Experts• Continuity / Staffing
Pooling
1
5
3
Optimization
Compliance
CarrierManagement
Postponement & Distribution Network
• Economic Advantage• Visibility & Control
Relationship
2
4
Best Practice For ONE Industry Might Not be Innovative in Another Industry
30
"If Ford had kept up with technology like the computer industry has, we would all be driving $25 cars that got 1,000 miles to the gallon."
Bill GatesComdex
31
If Ford had developed technology like Microsoft, we would all be driving cars with the following characteristics:
#10:
For no reason whatsoever, your car would crash.........
Twice a day.
32
If Ford had developed technology like Microsoft, we would all be driving cars with the following characteristics:
#9:
Every time they repainted & updated the lines in the road, you would have to buy a new car.
33
If Ford had developed technology like Microsoft, we would all be driving cars with the following characteristics:
#8:Occasionally your car would die on the freeway for no reason. You would have to pull to the side of the road, close all of the windows, shut off the car, restart it, and reopen the windows before you could continue. For some reason you would simply accept this.
34
If Ford had developed technology like Microsoft, we would all be driving cars with the following characteristics:
#7:Occasionally, executing a maneuver such as a left turn
would cause your car to shut down and refuse to restart, in which case you would have to reinstall the
engine.!!!!
35
If Ford had developed technology like Microsoft, we would all be driving cars with the following characteristics:
#6:
Macintosh would make a car that was powered by
the sun, was reliable, five
times as fast and twice as easy to drive - but would run on only five percent of the
roads.
36
If Ford had developed technology like Microsoft, we would all be driving cars with the following characteristics:
#5:
The oil, water temperature, and alternator warning lights would all be replaced by a single warning light . . .
“This Car Has Performed An Illegal Operation”
37
If Ford had developed technology like Microsoft, we would all be driving cars with the following characteristics:
#4:
The airbag system would ask 'Are you sure?' before deploying.
38
If Ford had developed technology like Microsoft, we would all be driving cars with the following characteristics:
#3:
Occasionally, for no reason whatsoever, your car would lock you out and refuse to let you in until you simultaneously lifted the door handle, turned the key and grabbed hold of the radio antenna.
39
If Ford had developed technology like Microsoft, we would all be driving cars with the following characteristics:
#2:
Every time a new car was
introduced car buyers would have to learn how to drive all over again because none of the controls would operate
in the same manner as the
old car.
40
If Ford had developed technology like Microsoft, we would all be driving cars with the following characteristics:
#1:
You'd have to press the 'Start' button to turn the engine off.
41
Ford’s Final Comment
… when all else fails, you could call 'customer service' in some foreign
country and be instructed in some
foreign language how to fix your car yourself!!!!
42
COLLABORATION“Partner or Perish”
INNOVATION“Innovate or Die”
EXECUTION
STRATEGY