With convergence, all of these companies are vying for their share of consumer wallets increasingly at that market that y surpasses Microsoft’s. How did it manage to get over the enched competitive advantage of companies such as Sony, Motorola, r Nokia?
Does structure matter in an Efficient global leadership model
In our work with corporations, we have frequently found that the supply chain structure in Global Leadership Model frequently results in limiting the effectiveness of the organization. The traditional pyramid structure of the organization frequently stifles customer responsiveness and innovation. In the modern outsourced globalized world, a traditional pyramid structure with very strict hierarchies and internal walls between departments does more to be a hindrance than to be an aid for achieving success in business.Our work in global supply chain strategies and supply chain design has convinced us that a modern distributed organization needs to look at redesigning its structure to keep up with the modern world. The business world has changed tremendously in the last 20 years. A typical supply chain now runs across multiple continents seamlessly, through boundaries of several organizations, to finally serve a customer with a unique product. To do so, organizations have created de facto structures, which are far different from the pyramid structures that they have put in their organization charts. We would argue that organizations should formalize their de facto structures and use them to gain further competitive advantage. For this purpose we have created the following model:
What are the supply chain leadership model and its structure?
The supply chain leadership model shown in Fig:1 starts with customer at the apex of the organization. Clearly, it is the customer’s need which the organization is trying to serve and aligned to this customer is the sales team, which is in direct contact with the customer all the time. The function of the sales team is to have intimate understanding of the customer needs, customers’ usage of its products and their demographics, psychographics and profile. Only then can an organization create successful products, which will gain wider acceptance in its customer base.
An organization can outsource pretty much everything but it can never outsource its sales. Sales is so fundamentally an integral part of an organization’s structure, that virtually everything else but sales, could be done outside the organization. However, two other key functions which are equally important and support the sales teams and also customer phasing are marketing and research & development. Between them, these three – sales, marketing and research & development-form the top tier of the modern Global Leadership Model organization’s structure. However, both research & development and marketing can be outsourced so long as the company and its core team control the outsourced entities.
Forming the second tier is the foundation of the organization – the supply chain, which incorporates procurement, production and logistics. They are the support base of the organization, which are frequently outsourced either to single provider or to a multitude of best of breed providers around the world in such a way that the customers’ needs are met seamlessly without any visibility of where any of these activities are actually carried out. It is interesting to note that this efficient leadership model merely illustrates the actual structure that most modern organizations have evolved into. What is surprising is that most business schools and management theories are still persisting with outdated organizational models of 80s and 90s, which bear no resemblance to the actual way businesses are choosing to structure their organizations.
However, the above supply chain leadership model is still a model of last decade. In addition, due to persistence of traditional supplier-buyer relationships, when this model is applied across multiple organizations it morphs into an unworkable hierarchical structure shown in Figure.
2) Imagine if 5 of more organizations are linked in a multi-layer structure shown above. Unfortunately, that happens to be the case with many large organizations that compete with Apple in the market-place today. While such a structure minimizes cost and responds predictably to all external stimuli, it is not suitable for the world of rapid change we live in today.
Success of Apple has shown that in the next decade this model needs to be supplemented by an even more evolved model which we have called Efficient Global Leadership model (EGL model for short). In this model we recognize that no single organization by itself is in a position to service all the needs of a customer relating to even a single product. The fact is that two or more, in general three organizations come together as a supply chain, work together collaboratively, to fulfill the customer’s need.
As shown in Fig:3, each one of these organizations work in close harmony with each other, where the research & development teams of each organization work together as do marketing teams and even sales teams of these organizations. To create product, and then to manufacture those products, the production teams and the procurement teams work together to put those products in customer’s hands. In such a model, a close collaboration is required among the supply chain partners to create market and sell the products. Similarly, close cooperation is also required to produce the products, move the products and store the products in such a way that highly innovative products are produced in shortest period of time at a fraction of the cost of traditional products and put in customers’ hands extremely quickly. Needless to say, when Apple manages to put out one innovative product after another in the market place, it is not only its own innovation but also an innovation of all its partners, which is at play here. Only when companies work together in such an efficient leadership model, do they achieve the level of success which Apple has achieved over the last 5 to 10 years. Modern corporations will do well to copy and emulate this success.