Chapter
8

Going beyond the Core Levers to Transform to a More Real-Time Organization

To continue transforming to a more real-time organization that values customer time better than competitors do, experienced real-time leaders will find that they must go beyond the core levers of products, services, processes, data, and people. Additional levers are particularly important when a company’s efforts to become increasingly real time have engaged more and more of the organization or require the cooperation of partners, suppliers, and other affiliated organizations. Such transformational levers include:

  Technology, which refers to platforms or more specific tools, machinery, and equipment; more generally, it refers to the means that enable completion of one or more steps at various stages in the life of a product or service. For example, a handsaw is a tool for cutting wood to build a house. Alternative technologies for that same step include a more powerful piece of equipment (viz., an electric handsaw), a more versatile platform (viz., a table saw), and a more automated platform (viz., a numerically controlled milling machine). Technologies do not directly make the company a real-time company but instead can be employed to transform its ability to meet customer needs associated with its products and services. Such was the case with FedEx’s use of innovative technologies. Enabling technologies can be deployed within the company or by a partner, such as a supply chain customer.

  Culture, which refers to the principles that guide and shape a company’s operations. At the core of culture is the set of values shared by the members of the company and, more broadly, the members of its ecosystem of trading partners. Value statements that are posted on the wall or the website reflect management’s desired culture, but the company’s real culture is often more nuanced and complicated—it may even be the antithesis of management’s desired result.

  Strategy, which refers to the company’s effort to position itself in a changing marketplace. Strategies are often (but not always) documented in a strategic plan that outlines the role the company wants to play in the marketplace. Strategies can be internal to the company or they can include efforts to position the company jointly with other affiliated members of the ecosystem. Strategies should identify long-term goals and distinctive activities that serve to differentiate the company from competitors.

  Relationships, which refer to a company’s efforts to secure and nurture interactions with its suppliers, customers, and other external parties. In recognizing that their organization, products, and services are part of a larger ecosystem, leaders will increasingly find it beneficial to work with expanding ecosystem partners where each company works to help each other become more real time.

When companies are working within or as part of a complex ecosystem of partners, this working arrangement creates the need for some transformation projects to drive change to entities outside the organization. There are times when a company’s efforts to become more real time can be hampered or completely undercut unless a partnered company undertakes a complementary transformational action.

Technology

Technology innovation enables process improvement. As a prerequisite step, it is essential that the enabling technology is deployed and certified for operation before the organization begins to change the selected process. Deployment of the enabling technology in and of itself does not provide any real-time improvement for the company. These improvements only begin to come about after the technology is deployed and the process changes begin. If the process changes fail to bring about the desired result because of an enabling technology fault, the reputation of a desirable transformation program will be harmed. When programs are viewed under a harsh light by customers, employees, and suppliers, it becomes difficult to maintain the support these programs need to thrive.

In the current digital age, information, computing, communication, and connectivity technologies become part of a wide collection of potential enabling technology levers for transformation. Interfaces and ICT (information and communication technology) were previously identified as tools that support process improvement, such as increasing the network speed so critical information can flow quickly through the enterprise. Innovations in these tools may also be considered when focusing on technology innovations. Some of the more specific digital technologies driving changes are social networking, mobile devices, and cloud computing. Other technologies include artificial intelligence (AI), virtual and augmented reality (VR and AR), robotics, big data, and blockchain. Enabling technologies also include Internet of Things (IoT) technologies that take advantage of low-cost network and sensor/actuator systems to permit a myriad of “things” to digitize sensed conditions and respond to remote commands. For example, a smart thermostat and smartphone can be used to control your home temperature from anywhere. These and all other kinds of digital technologies will continue to evolve.

Introducing a new enabling technology has the potential to reduce a company’s internal operational time and costs. Some of these enabling technologies can lock a company into new operational processes that are difficult to move away from. The deployment of an enabling technology must be considered from two perspectives: the real-time benefit that the enabling technology supports and risks to future transformational programs associated with the potential for lock-in. Leaders know that the only constant in today’s business world is change. No matter how real time a company is today, a competitor is working to find a way to steal the company’s real-time crown. As that day approaches, the company must plan to make itself even more responsive if it wants to maintain its leadership position. If an enabling technology precludes that next evolutionary step (a step forward that might not be understood today), the current real-time benefit must be weighed against the cost of that future inhibitor.

Another concern for corporate management is rooted in the negative consequences that enabling technologies, such as automation, can have for employees. Any technology that replaces human workers can have negative consequences for the workforce. Employees are very aware of the potential for technology displacement; they are fearful of these consequences and, therefore, often passively or actively resist such programs. Companies are well advised to consider the negative consequences from adopting an enabling technology. Creating a proactive position on these issues would be wise. The reason that most transformation programs fail is that the corporate culture fails to fully embrace changes required to maximize program success. For example, if management considered the adoption of an automation technology, the leaders must consider how displaced workers will be managed after the program completes. Can they be redeployed or retrained to cover other functions, or should they be given an outplacement package that the employees (both outplaced and those that remain on staff) consider fair? Additionally, in this situation, the leaders must also consider whether the automation technology will lead to a dehumanization of work that could negatively impact employee morale and productivity. If leaders do not co-develop the plan with employees, they should at least share the plan with them to validate or revise it and encourage their needed support.

An example of a pervasive technology-driven change is the adoption, enhancement, and continued expansion of enterprise resource planning (ERP) systems. For companies that make use of ERP systems, changes in these systems are considered advances in an enabling technology, but for companies that sell ERP systems these same changes are considered an advance in their product/services.⁶⁴ The advances in a range of global supply chain technologies represent increasingly important enabling technologies for most companies. However, for the logistics companies themselves, they would consider these advances as product and service enhancements. The nature of the transformational lever is often a matter of perspective.

The Future Outlook of Global Supply Chains—A USC Marshall Research Project⁶⁵

An important focus of supply chains is delivering a product from point A to point B in the most efficient manner possible. Managing the physical logistics of goods in transit includes a significant amount of uncertainty. For example, successful delivery of the package may be impacted by issues associated with global strife, transport costs, labor issues, and much more. Companies’ ability to remain competitive in an uncertain and changing landscape depends on how well their supply chains are managed. To minimize the risks associated with supply chain issues, most companies seek to establish partnerships with more than one supply chain partner. The existence of multiple supply chain partners also allows the company the freedom to select the delivery service that provides the ideal mix of cost, quality, and time that its customers require. When logistics companies compete against one another as real-time companies, their time-related improvement programs often include efforts to improve supply chain efficiency and agility. For these companies, agility refers to their efforts to adjust schedules to maintain efficiency while reducing delivery times and also improving their ability to react and recover from unexpected situations.

The critical nature of supply chain management has continued to balloon with globalization, and these same globalization processes are continuing to spread. By 2025 the world’s consuming class is expected to grow to 4.2 billion people, and all of these people will be able to order products online and have them delivered by a sophisticated and networked supply chain. By 2030 the world’s 750 biggest cities will contribute over 60 percent of the total world GDP, and these cities will act as natural hubs required to support the supply chain ecosystem.⁶⁶

Supply chains are not static networks but grow, expand, and evolve over time; their ability to do so is dramatically impacted by advancements in enabling technologies employed by this industry. Some of these new technologies allow goods to move faster through the supply chain, others allow goods to be better tracked, and others allow the business processes that support these endeavors to operate more efficiently. The disruptive impact of these enabling technologies is continuing to change how companies manage their supply chains, and often the early adopters are able to leverage these technologies for a competitive advantage.

The USC Marshall research found that the majority of companies do not have a team in charge of their supply chain. Of the companies that do have such a team, the majority have a global presence. The research also found that the fastest-growing companies in today’s market are global companies. As logistics companies continue to improve their international services, the expectation is that even these successful global companies will move away from centralized supply chain structures.

A majority of successful companies indicate they are increasing their focus on e-commerce preparedness projects, allowing them to directly fulfill and ship orders placed on the internet (hands-free). Cloud technologies have already had a significant impact on supply chain and other business practices. For some companies, though, these and other enabling supply chain technologies represent a new step forward, complete with risks and costs. However, there are also situations where companies have experience with an enabling technology and are considering its use in a new way to support supply chain processes. In a transformation program involving the adoption of a new supply chain technology or the extension of already adopted technology, the information technology (IT) group is often a key contributor. Thus, it is important that IT specialists, supply chain specialists, and other transformation team members collaborate with each other throughout adoption and implementation of the technology. Companies that have had previous success working collaboratively on innovation projects will find it easier to bring the team together early in the project’s life so the collaborative benefits begin right away. Other companies may need to make special efforts to nurture collaboration.

Though logistics companies continually compete to become more real time, there are limits associated with the movement of a physical shipment. Efforts to improve the information flow between these service companies and their customers represent attempts to improve customers’ experiences as they anticipate receiving or sending a shipment. Thus, the real-time battleground in the supply chain is not only in providing more effective real-time physical shipment of the product but also in the way these logistics companies work with customers to adopt and use e-commerce, cloud, and other emerging technologies to exchange information. Ultimately, these supply chain technologies bring the data lever into play to make better real-time customer experiences possible.

The importance of data should, nevertheless, not obscure other aspects of logistics that improve real-time customer experiences. The importance of packaging is an example:

Culture

At the core of a company’s culture are the values shared by its members. Members of an organization who have previously undertaken a real-time transformation project have learned to place a high value on customer time. Presumably, through this project the team members have also developed an appreciation for the competitive nature of a real-time market environment and how this drives a need for continual innovation. These team members can serve as the company’s internal real-time ambassadors. In an ideal world, at the conclusion of one transformational project, the members from that team would be distributed to different transformational programs within the company. These experienced program leaders would help successfully complete other programs while instilling in the other project members a belief in the need for real-time cultural change. Over time, these shared values would become more widely shared, and a real-time culture would naturally emerge. Beyond the organization, if the company forms a transformational team that includes employees from partner companies as members, those same values could be transmitted to allied companies (as long the management of the allied companies are willing to embrace the same philosophies).

As stated by the respected organizational psychologist Edgar Schein,

For any given group or organization that has had a substantial history, culture is the pattern of basic assumptions that the group has invented, discovered or developed in learning to cope with its problems of external adaptation and internal integration, and that has worked well enough to be considered valid, and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to these problems.⁶⁸

Changing an organization’s culture is a slow process at first, but it can have a compounding effect if the successes that arise from such efforts are celebrated within the company. Success, in this sense, is defined as the visible demonstration that the organization is able to facilitate a customer’s real-time experience in a way that is better than similar experiences facilitated by competitors. These successes will not become apparent until after the transformational program is complete and presumably the transformational team has been disbanded. This makes it critical that these operational successes are linked to the transformational team that enabled such successes.

A complex transformational change requires considerable attention both during the implementation and afterward, once the changes become operational. Research has demonstrated that the major reasons for the failure of such efforts are often associated with insufficient commitment on the part of management in terms of time and/or resources. Often these programs are under-scoped; they take time to mature, and the time required to realize results is often underestimated. Finally, companies often neglect to provide an adequate socialization program or create a sufficient training and development program for the personnel involved. These programs can include memos/directives from top management, formal training programs, discussion groups among impacted employees, circulation of success stories, and incentive programs that encourage the evolving cultural values. Leaders will be particularly watched for their determination to follow through on new goals. They must be ready with progress metrics that allow for assessment of the success of their efforts.⁶⁹

Strategy

Strategy is reflected in the distinctive activities a company employs to differentiate it from competitors and achieve its goals. Within a real-time company’s strategy, there are distinctive activities that can be associated with the company’s desire to become a real-time organization. Creating a high-quality customer experience is a differentiation strategy; the focus on the customer’s time as a critical component of the customer experience is a defining characteristic of the real-time company.⁷⁰ Thus, the real-time organization’s activities to demonstrate a respect and a sense of value for the customer’s time often differentiate it from the competition.

Companies should establish a transformational roll-out plan. The success (or lack of success) of the initial projects sets the tone for future real-time-inspired transformations. Often an organization’s first real-time transformational program is limited; the organization’s ability to evolve is constrained by its ability to appreciate the need for a company to change. As a result, these earliest efforts are often separated from the rest of the organization. A segmented structure may force the transformational team to struggle once the program begins to be integrated into the company, but it avoids complications early in the program’s life that are associated with mixing two distinct corporate cultures. After a number of successful real-time transformations have been completed, the focus on the customer will be accepted as a paramount concern. Over time, the successful organization will find itself involved in running several concurrent transformational programs. Ideally, the elements involved in the changes will no longer need to be segmented from the rest of the organization because the process will seem second nature to the company.

For some companies, demonstrating the value of customer time more effectively than the competition becomes integral to the organization’s strategy. In other words, organizations that base their strategy on valuing customer time are following a real-time organizational strategy that, while rooted in the original corporate strategy, ultimately redefines the company’s core product or service value proposition.

Relationships with Suppliers, Customers, and Other Partners

Suppliers, customers, and other partners that interact with an organization all have a relationship with the organization. Using the core levers to transform the organization to value customer time more effectively than the competition may lead to changing relationships with these stakeholders. These relationships are important levers to consider as potential drivers to improve the company’s real-time position in the market.

Digital technologies make it possible for organizations to reimagine their relationships with customers to be more than a transactional interaction. Loyalty programs with retailers are examples of one type of relationship that digital technology makes possible. These programs involve unobtrusively collecting data on items purchased by customers. Analysis of these purchases allows retailers to understand customers’ purchasing behaviors and preferences. That understanding permits retailers to more effectively tailor information, products, and services to satisfy these customers and their preferences, ideally providing more effective real-time experiences. Customers are often more than happy to share data with a company they trust as long as that information is utilized to provide them with a better customer experience. However, customers become concerned when that data is not protected or is shared with outside parties, which the customer might not trust.

Sensor technology is increasingly being employed to collect data on a product’s use over its life. This data can be generated by monitoring a product’s performance or reporting that data to a service organization so the company can provide timely preventive maintenance. Such preemptive service saves the customer time, particularly if the customer believes the product fills an essential need. This is an example of how technology is utilized to change the relationship between the company and the customer.

Some relationships may involve a different kind of problem known as a chicken-and-egg problem. In these relationships, a company’s partners are independent organizations that have no direct reporting relationship to the company but are needed to satisfy the customer’s product or service requirements. Incentivizing a partner to act in support of a company’s efforts to make itself a real-time company is a matter of negotiation. However, despite the existence of a negotiated agreement, the company cannot ensure the partner will successfully serve the company’s interests. Many times a company will take action to improve the probability of success for its partners. Without such an intervention, the partner could fail, which precludes the company from achieving its objectives. This class of problems is sometimes characterized as chicken-and-egg problems, i.e., problems where the company must act to ensure another company’s success before it can be successful.

A Chicken-and-Egg Situation for Fuel Cell Electric Vehicles and Filling Stations

Many innovative transformational programs face one or more chicken-and-egg issues. For example, consider the situation where electric car manufacturers need charging stations before they can sell their vehicles, and the providers of the charging stations require a sufficient number of electric cars before they can be successful. Without a sufficient quantity of electric cars, few, if any, charging stations will be established; without sufficient charging stations, few, if any, electric cars will be demanded. Trying to secure cooperation between independent companies (e.g., to have enough charging stations and electric cars for each to succeed) renders these chicken-and-egg problems difficult to solve.⁷²

Some potential negative consequences of the chicken-and-egg problem include:

  Failure of promising innovations, which includes discontinuation of projects due to insufficient cash flow or other difficulties

  Disincentive to bring out promising innovations, which include situations where a promising innovative idea might disrupt established and solid cash flows associated with legacy businesses

  Failure to reach critical mass, which includes situations where there are delays getting to the crossover point that allows the businesses to become self-sustaining

With these types of chicken-and-egg problems, one company could execute its strategy flawlessly, but if the other company fails to successfully execute its strategy, the market will work to ensure that both companies suffer negative consequences.

Over time, as ecosystems continue to become more complex, some companies that are working together on a chicken-and-egg issue may evolve their relationship. Such an evolving relationship anticipates merger and acquisition, a licensing arrangement, or the formation of a more formal strategic alliance. Other companies may not evolve their relationship but instead may allow it to linger or languish. Although the potential for success in such situations is often clouded, as long as there is the possibility of success, these relations will persist. Despite their complexity, a network of ecosystem partners has the potential to outperform a single vertically integrated company. As a company’s partnerships proliferate and as market problems/solutions become more complex, the number of chicken-and-egg issues and proposed solutions will increase. Just as relationships with suppliers, customers, and others are important levers to consider as potential drivers to improve a company’s real-time position in the market, so are relationships with partners in a chicken-and-egg situation.

Addressing Chicken-and-Egg Problems with Ecosystem Partners—A USC Marshall Research Project

Although chicken-and-egg issues are relatively common, work on the chicken-and-egg issue in managing innovations has been relatively scarce. USC Marshall research⁷³ demonstrates there is substantial agreement with the following statements:

  When evaluating the potential of new products and services that a company may offer, chicken-and-egg problems are often a significant issue.

  Chicken-and-egg problems often make new innovations more difficult to pursue.

  Unanticipated chicken-and-egg problems can emerge as an unexpected source of friction once a development project begins to make progress.

This research also found that business leaders felt that their companies’ ability to address chicken-and-egg problems gave them a significant competitive advantage.

Two broad classes of problems arise when forming an alliance as a strategic response to addressing the chicken-and-egg problem. One class of problems arises from responding to unanticipated events, such as external events or unexpected actions from the partner. Sources of external events include technological changes and competitor actions; sources of unexpected partner actions include different cultures, conflicting goals, and different decision-making styles. The danger is that these unanticipated events lead to divergent incentives or debilitating conflicts.

The second class of problems is based on concerns of being taken advantage of by the partner. In this situation, one or both companies assume the cooperative arrangement creates a relationship of unequal partners (i.e., an unbalanced relationship) where one company begins taking actions to inoculate itself from the actions of the other. An example of this class of problem would include making specific investments that benefit one partner but fail to lead to appropriate benefits for the other partner. Another example occurs when a company is losing its technology edge or other proprietary information, thereby nullifying the cooperative spirit that allows both entities to flourish. Withholding key information from a trusted partner negatively impacts the partner’s performance, and in chicken-and-egg situations, this reduction in performance actually harms both companies. Thus, it is essential that a company share its intellectual property when appropriate, but in a way that still provides adequate protection.

Ultimately, trust becomes an important determinant of the positive resolution of these chicken-and-egg issues. Among firms that rely on third parties to source or implement new technologies, there is a strong preference to work with vendors with whom they have developed a trusted working relationship. For companies where this is not possible, the companies find they must evolve and develop a trusted relationship before progress accelerates.

Companies must consider three major types of alliances—contractual alliance, joint venture, and merger or acquisition—when they decide to become formally involved in a chicken-and-egg relationship. These three options fall on a continuum from the least integrated to completely integrated. The assumption is that companies in a chicken-and-egg relationship recognize that they must develop something more than an arm’s-length relationship, i.e., something more than a customer-supplier relationship.

A key ingredient in any form of alliance is based on the expectations associated with the alliance. Firms need to understand the importance of setting and managing expectations from both sides. Many problems in contractual alliances, joint ventures, and acquisitions are related to misaligned expectations. If firms do not take the time to carefully manage expectations, then different groups often draw from their different backgrounds to create differing expectations. When expectations are not met, that triggers frustration, anger, and distrust. Therefore, it is imperative to clearly align expectations.

The contract for a contractual alliance or joint venture is different from a contract for a merger or acquisition; however, the negotiation process provides a similar context for the setting of expectations. Clear communication is essential for all forms of alliance.

Trust is also essential for a successful partnership, and there must be a fully disclosed win-win game plan. If both companies are on an equitable win-win game plan, then when one company is experiencing difficulty, the other company should step in to aid in their mutual success. Mutual trust implies that one company will freely admit to the other if there is a problem. If either company attempts to obfuscate a problem, that reflects a misalignment in values. Moreover, beyond sharing what each side expects of the other, a successful alliance results in each company disclosing to the other any incidents of program failure. If one company’s actions are inconsequential to the other, the other company is unlikely to do anything to support the former when there is trouble.

For a real-time organization to work successfully with partners in a chicken-and-egg alliance, all partners must put a high priority on valuing customer time. That priority clearly needs to be a common expectation. The partners should discuss in detail what that priority means for the alliance.

Key Takeaways

  To transform their organizations to value customer time more effectively than competitors, leaders may find that they must go beyond the core levers of:

  Product or service innovations

  Process innovations

  Innovations with data

  Innovations through people

  Changes involving these broader levers include innovations in:

  Technology

  Culture

  Strategy

  Relationships with suppliers, customers, and others in the organization’s ecosystem

  Organizational leaders should ask themselves, “What levers are we ready to use?”

  Organizations that have joined the real-time revolution with aspirations to be real-time leaders will find themselves employing these broader levers.

  Organizations that have tried a limited set of transformation projects to become more real time using the core levers may find that they are ready to try a transformation project with a broader lever.

  Organizations that are not ready to consider these broader levers should at least try using one or more of the core levers to become a more real-time organization.

  Organizations failing to use any of these levers are missing the real-time revolution and threatening their survival.