Last week I listened to an excellent conversation on SAP Purpose Network Live, organised by Ann Rosenberg. Michel Roger from Accenture and our colleague Martin Barkman discussed Supply Chain Resilience. They described some patterns to deal with the current situation: CEOs have set up war rooms, so that they can look at the situation on a daily basis. People safety and throughput are primary concerns. Because of the evolving nature of the pandemic, organisations need to react quickly, and make tactical decisions. The crisis also boosts creativity for simplification and optimisation of processes within organisations. A big risk for almost every company is that suppliers can’t deliver and let them down. In this case they need to work with alternative suppliers, or check for supplies at the spot market. As counterpart to monkey testing digital twins are used to analyse and predict effects of different suppliers, increasing inventory, and changing demand. Resilient organisations should be able to simulate interruptions of their supply chains before they happen.
During the discussion an interesting hypothesis was brought up: it appears that healthier companies are more resilient, and there might be a correlation between the resilience of a supply chain and sustainably of a company. Healthier companies apparently have better relationships to their suppliers, and their employees feature a problem solving mindset. This makes sense to me. When I put myself in the shoes of a company owner I would assume that my suppliers and my employees won’t let me down if I always treated them fair. I can’t judge our own supplier relationships, but one thing which is already obvious to me is that investments into psychological safety of our people pay out. Our leaders provide us with security, and a high degree of freedom and flexibility. The current resilience of our company is a direct result of top-level leadership style. Put your people in front, else you won’t produce anything.
The question was raised if any trends can be seen as a result of the crisis. One possible implication of shortened supply chains may be that trade becomes more local. On the other hand, countries still trade, so localisation might not be a long-term trend. Customers are nowadays used to getting what they want when they want it. When the economical crises hits them hard they might reprioritise their demand. People might challenge if they really need a second car or if a thing can repaired instead of throwing it away. Producers might reconsider relationships with their suppliers. Working in a circular economy implies sustainable sourcing. The value of sourcing, that is where a product comes from and how it was produced, might be purchase criteria for customers. In summary, our future supply chains will be better connected to customers, less linear, more visible, reactive, responsive, and hopefully sustainable. Make it transparent, and let them decide what they pay for.
As a software business we don’t produce physical goods. Nevertheless our internal value chains are very similar to supply chains. And the people designing and delivering internal processes can be considered suppliers. Indeed our company was quite resilient when most of us all of a sudden had to work from home. SAP IT managed to keep the lights on. It can be considered a reliable supplier of IT services to our organisation. In view of the above hypothesis that sustainable companies are more resilient a consequential question would be what makes us more sustainable.
A vicious circle of production and consumption driven by quarterly profit reviews is not sustainable. As long as you have tons of money you may believe that you are so individual and special that standard products are just not good enough, and every solution must be tailored to your needs. With profit margins shrinking and sustainability being an issue we will need to simplify internal products and business processes. No more bells or whistles please! We will listen to our customers, learn from their feedback, and act accordingly. We will dispose some of the debt we inherited from pre-digital times. We will closely monitor the usage of our systems, and if it turns out that their cost exceeds the benefits the give to our users, we will switch them off. By doing this we will save power and protect the planet. Before deleting our digital waste, we will recycle whatever we can to learn for the future. Fortunately, a lot of this waste exists only in digital or logical space, so the deadweight loss of their disposal will be small. By the way, in times of knowledge graphs and collaborative editing dumping internal process guidelines into huge Powerpoint decks feels a bit unreal.
The big advantage we have over computers is that humans are self-learning. I consider it the high art of management to develop exactly what the customer needs and deliver it when it’s needed. The intelligent enterprise will partly replace rules based systems and processes by self-learning systems and self-organising processes. The paradigm shift towards more intelligent systems will not be limited to computers. Digital Transformation also implies changes in human governance. I feel that this paradigm shift is happening right now, and I hope that the disruption of old normality accelerates the shift. By closing feedback loops we will find out which organisational models still work for us, and which should be updated. In our company I can already see some islands of Agility and self-sufficiency within a rules based ocean.
Giorgio Armani recently said in a Sueddeutsche Zeitung interview that the fashion world should slow down, and all this travelling around the world is not only a waste of resources but also a damage for style. “The world of luxury is characterised by timeless style. Luxury needs time to be fabricated and appreciated, and therefore it cannot and must not be fast.” The same thinking could be applied to the fabric of our products: quality needs time, and even if software release cycles are accelerating, our customers will appreciate the elegance of a user interface and the performance of a well written piece of code more than yet-another feature hidden somewhere in a sub-menu. To compare our business with luxury fashion may be a lopsided, but in times of recession investment decisions may be influenced by considerations about what is really essential, and how durable and repair friendly something is. In other words: it’s time to think about the sustainability of our products.