Home' MHD Supply Chain Solutions : MHD July-Aug 2017 Contents In the modern outsourced-globalised world, a
traditional structure with very strict hierarchies
and internal walls between departments is a
hindrance rather than an aid for achieving
success in business transformations.
In today’s hypercompetitive world of consumer
electronics, Apple is a standout among peers as
great as Sony, Samsung, Panasonic, Motorola,
Nokia and Dell. With convergence, all of these
companies are vying for their share of consumer
wallets with increasingly similar looking products
that do similar things.
What did Apple do, so that its market value now
nearly surpasses Microsoft’s? How did it manage
to get over entrenched competitive advantage of
companies such as Sony, Motorola or Nokia?
Our work in global supply network strategies
and supply network design has convinced us
that a modern distributed organisation needs to
look at redesigning its explicit structure to keep
up with the realities of 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 organisations, to
finally serve a customer with a unique product.
To do so, organisations have created de facto
structures, which are far different from the
traditional structures that they have put in their
The purists might argue that this does not
really matter if the organisations are already
acting in accordance with a de facto structure
an argument that holds some merit. However,
people who make up an organisation respond
to the explicitly shown structure with much
more enthusiasm and clarity than to a de facto
or mutually understood structure. I believe
that organisations should formalise their de
facto structures and use them to gain further
competitive advantage. For this purpose, we
have created the model shown in Figure 2.
The customer centric model shown in
Figure 2. starts with customers at the apex
of the organisation.
Clearly, it is the customer’s need that the
organisation 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 organisation create
successful products that will gain wider
acceptance in its customer base.
An organisation can outsource almost
everything it does, but it can never outsource its
sales. Sales are a fundamentally, integral part of
an organisation’s structure. Virtually everything
else but sales, could be done outside the
organisation. However, two other key functions
that 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 organisation’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
organisation, the supply chain, which incorporates
procurement, production and logistics. They
are the support base or the backbone of the
organisation, 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 customer-centric model merely
illustrates the actual structure that most modern
organisations have evolved into.
What is surprising is that most business
schools and management theories are still
persisting with outdated organisational models
of 80s and 90s, which bear no resemblance
to the actual way businesses are choosing to
structure their organisations.
This customer-centric model is still a model
of the last decade, and later in this piece we
will see the reasons for this assertion. First,
let us examine the impact of this model in
practice of commerce as conducted by many
Due to the persistence of traditional
supplier-buyer relationships, when this model
is applied across multiple organisations it
morphs into an unworkable hierarchical
structure shown in Figure 3.
Imagine if five of more organisations were
linked in a multi-layer structure shown.
Unfortunately, that happens to be the case
with many large organisations that compete
with Apple in the marketplace today. While
such a structure minimises cost and responds
predictably to all external stimuli, it is not suitable
for the world of rapid change we live in today.
The success of Apple has shown that in
the next decade, this model needs to be
supplemented by an even more evolved model
that we have called Efficient Global Leadership
model (EGL model for short). In this model, we
recognise that no single organisation 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 organisations
come together as a supply chain, work together
collaboratively, to fulfil the customer’s need.
“Most business schools and management theories
are still persisting with outdated organisational
models of 80s and 90s.”
Figure 2. Customer-centric
MHD SUPPLY CHAIN SOLUTIONS — JULY / AUGUST 2017
SUPPLY CHAIN 43
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