Building Value Networks. Stopping the Backward Slide.

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In the 1980s, I had a flip phone. (On the left, I share a picture for those that never experienced the evolution of the cellular phone.) The device was limited to voice/calls–no music, no text, and no apps. This device was a portable phone. The device increased my work mobility, but with limitations. The telephone could not interconnect with other networks. Then, I felt I was on an island talking to others that were on my network. Phone calls to Europe or Asia were costly and of poor quality.

Today, with seemingly a click of the finger, the phone as a communication device is SO MUCH more than a phone. Similarly, with the break-up of “The Bells” in the United States in 1982, personal networks grew more open. By the early 2000s, phone calls to Europe from my cell were expensive but manageable. Slowly, the systems became more interoperable, increasing the value for the consumer, the participants, and the companies involved.

I struggle to understand why innovation in supply chain networks stalled. In my opinion, the evaluation of business networks never evolved past the portal. The portal–with all of its limitations–is analogous to the flip phone: functionally inadequate. A portal is an information dead-end street.

I was a Gartner analyst in the period of 2000-2002 when trading exchanges were cool. Like a rocket ship traveling to Mars, a new press release popped into my email each day. As a new analyst, I was part of a team studying the evolution of value networks. At one time, there were more than 200, then consolidation happened, and the number became 112. Today, there are seven–Ariba (now a part of SAP), Blume Global(renamed from Rez-1), Covisint (acquired by OpenText), E2Open (purchased by Insight Venture Partners), Elemica (purchased by Thoma Bravo and then acquired by Eurazeo Capital), Exostar (recently purchased by Thoma Bravo), GT Nexus (acquired by Infor), GXS (purchased by Thoma Bravo) and SupplyOn. Also, Value-Added Networks (VANS) morphed. IBM purchased Sterling Commerce. GXS purchased Inovis, OpenText purchased GXS, Descartes Systems Group purchased numerous assets to form the GLN (Global Logistics Network), and TrueCommerce purchased Datalliance. (If this looks like a messy world, you are right, it is.) The only progress, in my opinion, is the lining the pockets of venture capitalists. Innovation for supply chain leaders in building value networks stalled.

In parallel, solutions like Elementum, OneNetwork, TraceGains, and Tracelink evolved along with the Internet of Things architectures for logistics execution led by FourKites, Macropoint, Resiliance360, Shippeo, and Supplystack. I lovingly call this group the network wannabes. Each has a different level of promise, but no one is championing interoperability.

In short, the market is confusing, but more importantly, there are no leaders driving the industry forward. Each business model is self-serving. The capabilities operate in islands. The Venture Capitalists skimmed profit but have not driven innovation. It is like my flip phone in capability, but moving backward.

Start With Definitions

To begin any discussion in this market, the buyer should start with definitions. All solutions, irrespective of capabilities, call themselves a network. A network is not a network. Each form is different. Generalities sink a project. When a buyer is not clear, problems arise.

Figure 1. Definitions

 

So, What Should You Do?

As a business leader, ask the right questions. Don’t assume that an enterprise application has network capabilities, and ask each player for proof points around interoperability with others. The most insular and the least likely to play well with others is Ariba. In second place is OneNetwork.

In this pandemic, building value networks is more important. Supplier reliability and the bi-directional flow of data at the speed of business improve agility and decreases the issues with having the wrong inventory or aligning transportation inbound logistics with manufacturing scheduling. Here are some rules of thumb:

1. It is a messy market. There is no network capable of connecting sourcing, logistics, manufacturing, and distribution together in the market today. Make interoperability a priority and push the network providers to drive information across networks.
2. Don’t assume that onboarding will be easy. While each provider has a logo slide, and most have the same logos, don’t assume that just because your trading partner is on a network that the information shared will be meaningful. Get into the details.
3. Get Involved. If you have invested in network capabilities, hold the venture capitalists accountable for driving value. Get active at the board level and drive accountability and innovation.
4. The devil is in the details. Gain insights into how quickly data moves through the network and the inherent latency of data conversion. A Value-Added Network operates on batch jobs, and as a result, the data is not as current as a Supply Chain Operating Network.
5. Invest in multi-tier process capabilities. Buy on the basis of multi-tier process capabilities from the outside-in, not from the inside-out. What you have as an ERP architecture is largely irrelevant. A network that just shares data, but lacks process capabilities is a weak investment. The goal is to connect trading partners in meaningful ways to unleash higher levels of value.
6. Build talent. Organizational talent to build networks is scattered in the organization. The baby boomers that built EDI networks are retiring and the digital transformational teams lack an understanding of what it takes. Form cross-functional teams and focus on building value.
7. Avoid slick presentations. If the presentation sounds too slick, it probably is. This is hard work that too few companies understand.
8. Use standards. Understand the standards available and maximize the use of GS1 and ISO8000 standards. With the increase in contactless shopping, an increase in security and piracy, and the shift to last-mile delivery, standards matter more than ever, but they are not a panacea.
9. Leverage your clout. Form a guiding coalition with other trading companies. Stop the slide. Social responsibility and supplier reliability in uncertain times require it. The industry will only move forward if business leaders take action.

Summary

The only two successful and transformational public networks were driven by Walmart and Taiwan Semiconductor (TSMC). While the industry talks about value networks, the traditional investment focus is on enterprise technology, which ironically lacks the capabilities to drive value network interoperability. Now is your time to make history. …get past the flip phone stage in your value network.

If you are interested in joining our share group on the network of networks, drop me a mail at [email protected] The group meets monthly to discuss and share insights. There is no charge to join.

 

Link to Original Source
Lora Cecere
2020-08-24 12:18:55

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