Damian Pike, vice president, innovation and transformation, DHL Supply Chain, presents his thoughts on the emergence of a new business model where companies unite to capitalize on their collective strengths
A transformative business model is emerging that will redefine how your business will operate in the modern world. Most organizations still conduct their business in a piecemeal fashion: separate entities interacting transaction by transaction, project by project. Relationships pit one company or partner against the other, with winners and losers. That worked in the past but not anymore.
In the postal and logistics sector, we are more accustomed to this short-term, transactional model than most. Getting materials from A to B has a clear beginning and an end – the start and conclusion of a transaction. But globalization, and the fact that competition now comes from any geography and any sector, disrupting entire markets as it does, is making this approach obsolete. In response, whatever the sector, multiple organizations must join together to face the market as a single, cohesive commercial entity. We call this approach Business Collective 1.0.
It’s a simple idea about eliminating the barriers that traditionally separate not just internal departments, but different external partner businesses up and down the supply chain. In this new ecosystem, the collective of organizations in the same supply chain would align on a shared mission and competitive strategy. They then work together to harness and capitalize on their collective strengths and overcome individual weaknesses – the sum being greater than the parts. This idea radically shifts how you view the market place in which your business operates – as one that’s filled with external opportunities instead of fears.
At first glance, the Business Collective concept may appear to be just another way of saying collaboration. But that would be selling it short. Business Collective is something different. It’s about creating an end-to-end, mutually executed process that extracts waste from your business and creates sustained value for the end customer and other parties in the supply chain. It blurs the formerly rigid boundaries that separated your business from others within your own sector and beyond.
At DHL, we are currently working with a leading airline catering company to combine our respective strengths – food service and logistics – to tackle problems they could not address on their own. With our combined capability and expertise, we can start to uncover and capitalize on tremendous opportunities that neither of us would have seen by operating in silos. In addition to identifying operational efficiencies, we can better serve the ultimate focal point for the Business Collective approach: the customer.
This is a far cry from the procurement focus that pervades so much of business. In most companies, the focus is about driving down costs. This commoditizes the goods and services provided by suppliers, and forces them to compete solely on price reductions. This saves money in the short term; however its returns diminish rapidly over time. You can only cut prices so far and companies should be looking to a longer term and more collective way of doing business.
For companies who are new to the Business Collective approach, we might use our expertise in lean and six sigma to review a process and extract waste at a customer facility. This is a relatively basic level of the Business Collective in action but the customer reaps enormous benefit from having an outside expert review their operations and drive value by streamlining it. At the advanced end of the spectrum, two or more organizations come together recognizing that their joint capabilities allow them to solve problems better collectively than independently.
At DHL we have been investigating the extent to which businesses have adapted to the Business Collective approach, and the barriers preventing them from doing so. We found that there is a significant opportunity for forward-thinking companies to foster growth by adopting the new model. More than 70% of businesses are only just beginning to explore the collective form of partnership, or are only partnering at a transactional level.
The results for customer collaboration are similar, with 74% of respondents either just starting to explore partnering, or partnering on a transactional basis only. Businesses that are willing to bring their best to the table for such partnerships must seize the opportunity.
It’s well known in the logistics sector that your supply chain is only as strong as the weakest link. The same holds for the Business Collective. The model is an exacting master – it demands the best of every business involved. Because we are working together toward a common goal, no business holds back. Working collectively, each business does what it does best, but better through partnership.
Damian Pike has 15 years of supply chain experience, having previously worked in a range of strategy and marketing roles where he gained first-hand experience in the technology, transport infrastructure and public sectors. He works in DHL’s Specialist Services Division and is responsible for the innovation and transformation agenda. Within his current role, he has led the development of the digital strategy, overseen the entry into two new markets (with significant new contracts) and managed the sales agenda, delivering significant growth across the diverse markets.
May 19, 2016