Why Business Networks are Important?
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Business networks are a critical element of modern business operations. In today’s fast-paced, digital age, businesses can benefit from connecting with other businesses to grow and stay competitive. Networks allow companies to collaborate, share resources and learn from each other’s successes and failures. By joining forces with other businesses, organizations can gain access to new markets while also boosting their efficiency through shared information and expertise.
“Call it a clan, call it a network, call it a tribe, call it a family. Whatever you call it, whoever you are, you need one”
Business networks provide an expansive platform for companies to interact with potential customers, suppliers, or partners in real time. Through engaging conversations on social media platforms or virtual events hosted online, organizations can build relationships that last longer than just a single transaction. Networking also helps companies become aware of global trends and stay ahead of potential threats within their industry by staying up-to-date with relevant news or insights shared by members of the network.
“Business Networks are more important than your business infrastructure”
Business networks are a vital part of the success of today’s businesses. To stay competitive, companies must be able to access data quickly and efficiently. This means that businesses need a solid network infrastructure in place to keep up with their competition. Business networks allow companies to connect with customers, vendors, and partners quickly and easily, enabling them to take advantage of new opportunities while protecting their data from outside threats.
A business network is more important than any other business infrastructure because it helps organizations gain intelligence on market trends and customer preferences while providing enhanced security measures against cyber-attacks. By leveraging the power of business networks, companies can gain insights into their competitors’ strategies as well as uncover potential partnerships or collaborations. Additionally, by using a network system for communication purposes, businesses can significantly reduce operational costs by limiting physical meetings and associated expenses.
Business networks are an integral part of running a successful business. They offer numerous benefits for companies, such as increased efficiency, better customer service, improved collaboration, and greater resilience. Business networks enable companies to quickly respond to changing market conditions and customer demands to stay competitive in the marketplace.
With the right business network solution, businesses can increase their agility and responsiveness by leveraging secure connections across multiple sites or locations. By connecting remote sites with secure access from any device, businesses can easily share information among employees regardless of their physical location or time zone. Additionally, business networks provide a platform for secure interactions between customers and vendors by enabling real-time data exchange. This helps businesses build stronger relationships with stakeholders while providing them with more accurate data in less time.
“Business Networks Achieve Success with Cash Flow”
When cash is king, business networks triumph. In today’s world, success depends on having strong relationships and strategic alliances. But to succeed in the competitive business environment, companies need to make sure that their network is built on a solid foundation of financial stability and efficient cash flow management.
Businesses need to ensure that they have sufficient cash reserves for unexpected events, such as natural disasters or economic downturns. Cash also plays an important role in providing flexibility for businesses when it comes to making quick decisions and purchasing assets or services needed for growth. Companies can leverage their existing relationships with banks, suppliers, and customers to access funds quickly if necessary. Furthermore, having adequate cash reserves will enable businesses to take advantage of new opportunities or negotiate better deals with existing partners to capitalize on future growth potential.
This is not a one-of-a-kind illustration of a more hearty Business Network destroying a generally normal one at a pivotal time. The story is rehashed in a large number of enterprises while testing times show up, as at last, they do. The information from a methodical report completed by the Aberdeen Gathering uncover two basic bits of knowledge. Right off the bat, the companies with more hearty business networks have infinitely better cash-to-cash cycles (we will examine the money conversion cycle in Section 9) – almost a six times better money transformation cycle.
Furthermore, and all the more critically, their cash cycle improved during the two years of testing times paving the way to the worldwide financial emergency, while the remainder of the business returned wards. 92% of business network aces had further developed their Money Cycle over the two years paving the way to the Worldwide Financial Emergency (GFC) while just 18% of business network slow pokes had further developed it, while for 29% of them it became worse. Is the outcome displayed in Figure 1.2 amazing?
Barely, assuming you reevaluate the tale of Nokia versus Ericsson. A similar disastrous fire almost destroyed one company while leaving the other one significantly more grounded to confront the surge of another gallant business network – that of iPhones.
About the Authors
Vivek Sood: Sydney based managing director of Global Supply Chain Group, a strategy consultancy specializing in supply chains. More information on Vivek is available on www.linkedin.com/in/vivek and more information on Global Supply Chain Group is available on www.globalscgroup.com
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Dr. Partsch Wolfgang
Partsch was born in Vienna but spent most of his time in Munich. He came from a natural sciences background with a PhD in Physics and also studied Industrial Dynamics from Jay Forrester. Most of the original thinking, methodologies and terminology of Supply Chain Management (SCM) were developed by Dr. Partsch and his team in the 1980s. There is a saying in the European supply chain circles – “if Wolfgang does not know it – then it is not worth knowing.’
A maven in the world of Malcolm Gladwell’s The Tipping Point, Wolfgang is constantly thinking about the technologies, the economics and the emerging trends in Global Supply Chains. He is now the only active member in the original team of SCM pioneers.
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In the ever-changing business landscape, it is essential to keep up with the times to take advantage of new opportunities. Business networks offer a fast and effective solution for companies looking to build strong relationships with other businesses.
Business networks provide an excellent platform for connecting with partners, suppliers, customers, and investors. They give you access to a vast pool of resources that can help you grow your business in boom times. With these networks, you can quickly find potential opportunities in various markets and industries. You can also get valuable feedback from peers or industry experts on your products or services or even receive advice on how best to manage operations during economic downturns. Furthermore, by joining a network, you also have access to exclusive events such as conferences and seminars where you can learn from successful entrepreneurs who have already paved the way for others in their field.
Let’s take a look at another example in a sector that is quite volatile. One of the most volatile businesses is global bulk transportation, with rates that can change by up to 94% in just four weeks or by up to 400% in only a few months. All businesses may find it stressful to budget and prepare in such a fluctuating business environment, except those who rely on their business networks to get long-term contracts to smooth out the tough times and find capacity during the good times.
To say the least here that the Business Organizations quoted in the above models, likewise called the production network in many examples, are novel to each company and industry, figured out over various decades by and large, and merit a few trillions of dollars in esteem. In a solitary industry, retailing, the whole business network is worth more than $1.5 trillion for every gauge. Presently balance that with the much-proclaimed valuation of Facebook, as of now fixed at more than $80 billion, to place things into point of view. Informal communities are not equivalent to Business Organizations.
“The valuation of Business Networks is astronomical, though difficult to quantify”
Business networks have become an integral part of the modern business landscape. As companies rely more on digital platforms, relying heavily on data-driven decisions and technological advancements, they require sophisticated tools to streamline their operations and reach their goals. Valuation of these networks is becoming increasingly important as businesses look to quantify the value of these networks in their strategic planning – but it can be a tricky task.
The main challenge lies in quantifying how much each network is worth monetarily; this requires a thorough analysis that takes into account several factors such as size, user base, daily usage statistics, engagement levels, transaction volume, and so on. This makes it difficult for companies to accurately value their underlying business networks – something that could be crucial when looking at potential investments or mergers and acquisitions.
The all-out valuation of the Business Organizations in only six industries – retail, car, gadgets, FMCG, air space, and mining – is assessed to be more than $4 trillion in valuation. These secret Business Organizations are reformulated and reconfigured on a nonstop premise – here and there prompting monstrous changes on a worldwide scale, while at different times prompting steady transformations that main manifest completely north of 10 years or more. Mark Zuckerberg is clearly the legend of the long-range informal communication world. Lots of ink has been spilled expounding on his adventures in the person-to-person communication scene. Anyway, who is a portion of the legends in the Business Organization ing scene?
What about any semblance of Michael Dell, Steve Jobs, or Dietrich Mateschitz (pioneer behind Red Bull) for a few clear models? Michael Dell reconfigured the whole business network in the hardware and PC industry to decrease the money change pattern of his company from 56 days which was the business standard to – 4 days over a time of just four years. Let us currently take a gander at Steve Occupations’ job in Business Networking. His, and Apple’s, takes advantage of in new item development are notable and profoundly respected. However, what is less notable is the job of the Business.
Allow us now to take a gander at Steve Occupations’ job in Business Networking. His, and Apple’s, takes advantage of in new item development are notable and profoundly respected. However, what is less notable is the job of the Business Organization of providers, colleagues, accomplices, and other such substances who have adjusted their own advantages to that of Apple to diminish the new item development pattern of Apple to almost eight months, from an industry standard of almost 26 months. Once more, the mag-ic of Business Organizations has made it conceivable to configure, assemble, send off and sell progressive items in under 33% season of the business.
Supply Chain 3.0
The fact that many businesses are stumbling their way toward profitability is that they are stuck at the lower stage of supply chain evolution. We are at Supply Chain 3.0 now, says Sood. Knowing the first reaction of people on hearing that term would be a skeptical squint or raised eyebrows, the two SCM experts leave a little gap to utter What is that? and delve right into the explanation.
The first generation of supply chain in the 80s saw everything within the walls of a company, from purchasing through shipment of products to the customer.
The first contribution that SCM made, in Sood’s words, was: Instead of doing your job in isolation and giving the result to somebody else, why don’t you actually work with that somebody else in a collaborative manner so that both of you can jointly come to a much better solution for the company?
SCM took off in the mid-80s with the invention of personal computers and Apple. These technological breakthroughs made it possible to collect information along the supply chain and send them to a central supply chain information pool. Before this advancement, only rich companies could really afford SCM projects with some IT support.
“This is an era of what I call 5-star business networks, where everything you do, whether it is product development, research and development or even marketing everything is done with the final customer in mind”
In the 90s came the second generation of the supply chain. This second wave was about getting out of the four walls and going international. Immediately, people were talking about production in Korea, Taiwan, China, and Europe and customers in North America. People started talking about collaboration with customers and suppliers. Sood notes: In that sense, the same concept was applied sporadically and somewhat successfully.
This period also saw the progress of IT. Companies such as SAP started to make big moves, as well as supply chain management software companies such as Manugistics.
The third wave happened with the Internet boom, where the new medium started to have a revolutionary impact on trade and businesses. We moved from international supply chains to global networks.
This is an era of what I call 5-star business networks, where everything you do, whether it is product development, research, and development, or even marketing everything is done with the final customer in mind and you work very closely with your final customers to create the products that are in demand in the market place, says Sood.
The idea of supply chain 3.0 is closely linked to a super networked business model, which breaks from the linear manner that businesses used to relate to each other. In the old model, for instance, company A produces goods that are then procured by company B, which then produces services that are procured by company C and so on. We would end up having stacks, or multi-layers of companies that are related in a very hierarchical manner.
Why is this bad? Because it is inflexible, formulaic, and innovation-stifling and puts the end consumer almost out of context. With supply chain 3.0, R&D teams of two or more organizations work together, just as their marketing teams; while other departments cooperate to produce, store and move the products before finally selling them to the customer.
In his book The 5-Star Business Network, Sood also details the benefits of getting to the third generation of the supply chain.
The end customers see products released very quickly, fine-tuned over some time. Then multiple generations of products are created in a very systematic manner to optimize the profitability and get the cash to cash cycle to an extent where companies can predict very accurately how much cash they will generate out of each generation of product.
Just try and imagine that, during the financial crisis of 2008, consumers who sometimes did not have money to pay the rent, would somehow scrounge together enough to purchase Apple’s iPhones.
Why were they doing it? Because they had fallen in love with the product, and with the company which had designed a product so much around their particular needs, they would find creative ways of putting together money to go and buy that product.
At the same time, on the back end, Apple had worked out a very tightly knit supply chain that not only minimized the cost of producing iPhones but also helped the company invent new products in half the time of others.
Sood appears to ease people’s mental denial (but we’re not Apple) by adding: I’m not saying everyone should have fanatical consumers like Apple to be successful. All I’m pointing out is that the more intimately you meet your consumers’ wants, the more rewards you will reap for longer periods. You need your own 5-STAR Business Network to work with you to do this.”
Adds Sood, when I wrote the book “The 5-STAR Business Network”, our team did a 6-year longitudinal study of the top 1200 corporations around the world. It is interesting to note that 62 companies out of the entire starting sample of the top 1200 companies in the world scored 20 points out of 25, which is our cut-off for Supply Chain 3.0. Also, interesting to note is that Apple – the darling of the supply chain crowd – is only ranked #60 in the rankings. And, due to its low margins, Amazon – just missed the cut. Figure 3, which is reproduced from the above book with permission, gives the top 35 of these 62 companies and shows the diversity of where excellence resides.
When asked about the rest of the 1200 companies, Sood refers to his blog, or book both of which have full detail of the study and data.
In a similar vein, Dr. Partsch stresses the fact that no matter how you measure, and how to analyze, and determine the cut-offs, only less than 20% of companies have manifested advanced supply chain in any form; the rest range from we tried ,we are a little bit good” and we missed the boat.
Moving up the chains
With the increasing complexity of these new supply chain networks, we need education and expertise, and we need technology to improve the processes. The founding father of SCM says the trio “people-process-technology” helps move companies forward, but cautions against putting “technology” at the forefront.
Back in the 90s, the SCM terminology was misused by many IT companies, who said software tools by themselves could solve common supply chain problems. That is nowhere near the truth and Dr. Partsch quotes a common refrain which is a bit of cliché, but yet it is true “If you have only a hammer, every problem looks like a nail.”
People, I would say, account for 40%, processes normally about 40%, and 20% is the technology of the investments, he adds.
Every company is unique, hence, they move, transform or evolve towards a higher level of the supply chain in different manners too. Devising a complete and detailed road map could easily be done by someone such as Dr. Partsch or Vivek Sood.
“I think it is not enough to just give people a map and tell them to climb to the peak by themselves. We want to and we always climb the mountain with them,” says Dr. Partsch
Sood gazes towards the picture of a Sherpa alongside a climber on the Himalayan range and says: We tend to work with executives with very strong capability sets, generally those who will be CEOs very soon. They do not need very large teams for very long periods.
People generally self-select the consultants that suit them. Large brand name consultants deploy larger teams for a much longer time and tend to work with a different group of managers who need a lot of hand-holding.
“I think it is not enough to just give people a map and tell them to climb to the peak by themselves. We want to and we always climb the mountain with them”
Supply Chain as a litmus Test
Management buy-in is a critical factor in successful supply chain transformation projects. As Peter Drucker said: Only three things happen naturally in organizations: Friction, confusion, and underperformance. Everything else requires leadership. It links to the human element out of the trio mentioned by Dr. Partsch earlier. He says: If you don’t have support from the CEO or CFO nothing will happen. Sood agrees: The leadership of a CEO doubles the success probability of any business transformation.
Therefore, the first role of a company leader is to break down silos, to get different departments to talk to each other. Just as how a music conductor makes sure a concerto is played harmoniously by all the musicians involved, a CEO leads a company towards growth by ensuring everyone in the organization is not trampling on each other’s feet.
Sood cites a common issue in organizational structures, which is a disconnection between finance, sales, and operations. A typical finance department has an annual planning cycle, which involves budgeting. An operation department, on the other hand, usually has a monthly planning cycle, which involves sales and operations planning. As two departments often plan on two different time horizons, 90% of companies do not have the same monthly budgetary updates.
“Sales and operations planning forms a key component of SCM but unfortunately, a lot of companies have made sales and operations planning very formulaic and extremely rigid. It’s all form without substance,” Sood Comments
How does this affect the end customer? Internal bickering and resentment are never good signs. Customers are not too naïve to figure out if a company has failed to launch new products as scheduled, or delayed shipping on more than one occasion.
More than ever, the job of the CEO is to weave the team of all internal C-level people who are extremely competent into a cohesive team that works as one. That is why SCM is a leadership function and cannot be delegated down, emphasizes Dr. Partsch.
An example of how a company can leverage the power of supply chain 3.0 with proper leadership is Zara. They have 18 fashion cycles a year whereas a typical fashion retailer only has two seasons.
“Zara is beating hands down any retailer in the world by a factor of 900% productivity difference in their planning cycle. The owner of Zara is known to be the third richest man on earth and he is a man who grew up in a one-room flat next to the railway lines. How did he create this? By understanding what a good supply chain can do for his business and even in a country that is not known for its innovation or for even being very productive,” Says Sood
The burning question at this point could be: How do people know if they need to move up the supply chain ladder at all? This should not be an exercise to find a needle in a haystack or dig out whatever fault one can find in a company. Sood speaks in a half-humorous, half-serious voice: If you take that approach, perhaps every college student would want to be a consultant when they graduate to pay off their debts. A more useful thing to do is to look for patterns of unhappy customers or patterns of undesirable numbers on the earnings report.
“We are more and more in the battle of supply chain versus supply chain, and not companies versus companies. You need the best external advisers to win in this game. There may not be more than 10 people like us on the planet who can achieve rapid, beneficial, large-scale business transformations like we do.”
dr. wolfgang partsch
The 5 star business network
Many executives may lie in their bed at night, hand on forehead, not knowing their company’s headache is due to a brain tumour. “While I admire these people for their dedication to the organisation they are working for, sometimes the deep underlying causes of these minor headaches slip past their mind,” says Sood. He believes SCM should not be foreign concept in the corporate world, 30 years on from the day it first appeared in print.
“We are more and more in the battle of supply chain versus supply chain, and not companies versus companies,” says Dr. Partsch. “You need the best external advisers to win in this game.
There may not be more than 10 people like us on the planet who can achieve rapid, beneficial, large-scale business transformations like we do.” On being questioned on this he points to fact that while he plays golf as much as millions of others on earth – only a handful of people regularly make more than $10 m per year from the game. “Anyone can talk a good game – look at the results to know the impact.”
The youngest in the original SCM pioneers sounds naturally like a Grimm Brothers’ tales narrator: “I may or may not live to see the next movement of SCM, or supply chain 4.0, but I trust that there are always people like my partner Sood who can help companies get there.”