The World is Flat
The world is flat - the playing field is being flattened by technology
GLOBALISATION 3.0:
Globalisation 1.0 - When Columbus set sail, opening trade between the Old World and the New World-until around 1800.
- It shrank the world from a size large to a size medium.
- was about countries and muscles -
Key agent of change/dynamic force of global integration was:
-Countries Globalising - how much brawn -how much muscle, how much horsepower, wind power, later, steam power -your country had
- and how creatively you could deploy it.
Primary questions:
- Where does my country fit into global competition and opportunities?
- How can I go global and collaborate with others through my country?
Globalization 2.0 ( lasted roughly from 1800 to 2000, interrupted)
- This era shrank the world from a size medium to a size small.
Key agent of change, the dynamic force driving global integration:
- Companies Globalising -was multinational companies - spearheaded first by the expansion of the Dutch and English joint-stock companies and the Industrial Revolution.
- 1st first half of this era, global integration was powered by falling transportation costs, thanks to the steam engine and the railroad,
- 2nd half by falling telecommunication costs-thanks to the diffusion of the telegraph, telephones, the PC, satellites, fiber-optic cable, and the early version of the World Wide Web.
- walls started falling all around the world, and integration, and the backlash to it, went to a whole new level.
- But even as the walls fell, there were still a lot of barriers to seamless global integration. (No email or web till post 1992)
Primary Questions:
- How can I go global and collaborate with others through my company?
Globalization 3.0 -around 2000
- shrinking from size small to a size tiny and flattening the playing field at the same time.
Key agents of change:
- software- all sorts of new applications-in conjunction with
- a global fiber-optic network that has made us all next-door neighbors.
- People Globalizing - Individuals must, and can, now ask, Where do I fit into the global competition and opportunities of the day
Primary Questions:
-How can I, on my own, collaborate with others globally?
Globalization 1.0 and 2.0 were driven primarily by European and American individuals and businesses. Even though China actually had the
biggest economy in the world in the eighteenth century, it was Western countries, companies, and explorers who were doing most of the globalizing and shaping of the
system. But going forward, this will be less and less true. Because it is flattening and shrinking the world, Globalization 3.0 is going to be more and more driven not
only by individuals but also by a much more diverse - non-Western, non-white-group of individuals. Individuals from every corner of the flat world are being empowered.
Globalization 3.0 makes it possible for so many more people to plug and play, and you are going to see every color of the human rainbow take part.
Outsourcing:
- Those who get caught in the past and resist change will be forced deeper into commoditization. Those who can create value through leadership, relationships and creativity will transform the industry, as well as strengthen relationships with their existing clients."
- no matter what your profession-doctor, lawyer, architect, accountant-if you are an American, you better be good at the touchy-feely service stuff, because anything that can be digitized can be outsourced to either the smartest or the cheapest producer, or both.-"Everyone has to focus on what exactly is their value-add."
- Services will always be protected - unlike goods they are not traded but produced & consumed in the same spot. You can't export a haircut!
- Even with the outsourcing of some jobs for western world to India, India's growing economy is creating demand for many more western products that they could never before afford. It goes full circle.
- homesourcing (employees working from home) and outsourcing aren't so much competing strategies as they are different manifestations of the same
thing: a relentless push by corporate America to lower costs and increase efficiency
Blogs:
They have given people a chance to stop yelling at their TV and now have a say in the process and speak out - share their perspectives and 'unfiltered' insights.
The 10 Forces that flattened the world
1. Winows up & walls down.
- Fall of Berlin wall heralded a a tippling towards democracy. More economies would be governed from the ground up, by interests & demands of the people.
- Communism was a great system for making people equal - equally poor! - Capitalism makes people unequally rich.
- Windows enabled any indiv to amass, author & diffuse as much info as they wanted & share it with others. Before we thought what one could do with pen & paper now this capability was with all.
- IAYF info at your fingertips empoyered masses.Info asymmetry was quickly becoming a thing of the past. Consider, no need for insurance brokers as info was available..
- The wall was brought down not by the USA crippling the USSR in the cold war arms race alone but throgh windowsallowing indiv download the future.
2. The new age of connectivity - the web.
- Internet was a low cost tool of global connectivity.
- Net vs. Web: net is a network of computers connected by cables. Web sits on top as a network of documents, sounds, vids, info..connected by hyperlinks.
- Dot-com bubble: investors looked at web & concluded that if if everything was to be digitized - data, commerce, books,music, photos - then the demand for info based products would be infinite.
This Lead to an inflated over investment in fiber-optic cables to wire the world. - However adoption was not as expedited as expected.This abundance of fiber drove down the prices of international calls and transporting data.
- The browser: helped make net truly interoperable. It ignored underlying topologies to allow seamless integration on a single protocol. Before this there were propietary corporate networks that were disconnected as they spoke different languages - essentally silos of info locked away.
10 years ago Joe in accounts would get on his PC in the office and try get hold of Sales yearly figures but couldn't as they were on a system his comp couldn't access that system He would try get the shipment info from goodyear but they had a diff system that their system couldn't connect with.Open protocols & XML was created to address this.
- point-&-click functionality meant trhat mere mortals could utilse the technology - you no longer had to communicate in 1s & 0s.
- Overinvestment is not necessarily a bad thing - Gates compared the Internet to the gold rush, the idea being that more money was made selling Levi's, picks, shovels, and hotel rooms to the gold diggers than from digging up gold from the earth.
3. Workflow Software
Work flow platforms are enabling us to do for the service industry what Henry Ford did for manufacturing
- "We are taking apart each task and sending it around to whomever can do it best, and because we are doing it in a virtual environment, people need
not be physically adjacent to each other, and then we are reassembling all the pieces back together at headquarters
- 24/7/365 we are all working around the clock around the planet.
3.b. Standards: - Common protocols - Instead of everyone trying to control the fire hydrant nozzle, they made all the nozzles and hoses the same, creating a
much bigger market that stretched across every neighborhood of the world. Then companies started to compete instead over the quality of the hose, the pump, and the
fire truck.
- Salesforce.com -(increased broadband, Ajax,..) software becomes something you rent rather than something you own. No need to worry about maintenance, upgrades, IT team. It is all managed externally by the service provider. Business solutions & best practices within & between companies can be shared. Newly developed modules can be sold back to salesforce.com - their customers in effect become their R&D and development team.
4. Opensourcing
Why? - IT people tend to be very bright and what everybody to know how bright they are - OS is peer-reviewed science
- Most software development involves a source code repository - it is managed by tools called a CVS ( Concurrent Versioning System) - allows me to connect to the server and pull down the latest version - i can make changes (a patch) when satisfied I can upload this to CVS server and it becomes the latest version
Apache: (The Apache tribe was the last tribe to surrender to the oncoming U.S. government - OS is about defiance, independence - pun: A PAtCHy server,)
IBM was trying to sell its own proprietary Web server, called GO, but it gained only a tiny sliver of the market. Apache proved to be both a better technology and free.
So IBM eventually decided that if it could not beat Apache, it should join Apache
- The world's biggest computer company decided that its engineers could not best the work of an ad hoc open-source collection of geeks, so they threw out their own technology and decided to go with the geeks! - let's invest in it and get rid of the one that we are trying to make on our own, which isn't as good."
- IBM wanted to build differentiated applications on top of Apache and charge money for them.
- Apache people were not interested in payment of cash - they wanted IBM's best engineers to help further develop Apache
There is no future in vanilla for most companies in a flat world. - the commercial future belongs to those who know how to make the richest chocolate sauce, the sweetest, lightest whipped cream, and the juiciest cherries to sit on top, or how to put them all together into a sundae.
Vanilla will be provided free by the OS community.
Also e.g.: RedHat can't sell you Linux per se (thats against OS regulationsCommercial Software:) but they have developed a business offering services around it and customising it for businesses.
Commercial Software: You spend a ton of money up front to develop a software product, and then the marginal cost of producing each one is very small, but if you sell a lot of them, you make back your investment and then plow profits back into developing the next generation.
- 'When you have a security crisis in your [software] system, you don't want to say, 'Where are the guys that work part-time developing this, is there even a number to call?'
- Microsoft has been able to count on the fact that the only thing more expensive than commercial software is free software.
- Few big companies can simply download Linux off the Web and expect it to work for all their tasks. A lot of design and systems engineering needs to go around
it and on top of it to tailor it to a company's specific needs, especially for sophisticated, large-scale, mission-critical operations. - costs as much if not more.
Community Answer: Goldcorp - miningdata competition = "where is the gold?" - 1400 scientists - mathamaticians, physicits, geologists, computer scientist - 1000% increase for a $100,000 prize.
5. Outsourcing Y2K bug fixes:
- Which country hard the greatest abundance of low-paid high skilled IT workers to perform such a tedious job? India
- Arguably, it is harder to get into an IIT than into Harvard or the Massachusetts Institute of Technology
- "India had no resources and no infrastructure," - "It produced people with quality and by quantity. But many of them rotted on the docks of India
like vegetables. Only a relative few could get on ships and get out...."For decades you had to leave India to be a professional. . . Now you can plug into the world from
India."
- India is a developing country with a developed intellectual capability
6. Offshoring
- when a company takes one of its factories that it is operating in Canton, Ohio, and moves the whole factory offshore to Canton, China. There, it
produces the very same product in the very same way, only with cheaper labor, lower taxes.
Every morning in Africa, a gazelle wakes up.
It knows it must run faster than the fastest lion or it will be killed.
Every morning a lion wakes up.
It knows it must outrun the slowest gazelle or it will starve to death.
It doesn't matter whether you are a lion or a gazelle.
When the sun comes up, you better start running.
- in thirty years we will have gone from "sold in China" to "made in China" to "designed in China" to "dreamt up in China"
- Low Chinese Prices are beneficial:
_Morgan Stanley estimating that since the mid-1990s alone, cheap imports from China have saved U.S. consumers roughly $600 billion and have saved U.S.
manufacturers untold billions in cheaper parts for their products. This savings, in turn, Fortune noted, has helped the Federal Reserve to hold down interest rates longer,
giving more Americans a chance to buy homes or refinance the ones they have, and giving businesses more capital to invest in new innovations
_If General Motors builds a factory offshore in Shanghai, it also ends up creating jobs in America by exporting a lot of goods and services to its own factory
in China and benefiting from lower parts costs in China for its factories in America.
- China will never be truly flat until it gets over that huge speed bump called "political reform."
7. Supply Chaining
Global supply chains that ddraw parts from all over the world is essential - complex
There are 2 challenges:
a. Global Optimization:
It doesn't matter if you can get one part cheaper in one place. The key is that the overall cost including delivery and setup is cheaper - e.g. buying groceries locally for an extra 1.50 or taking the bus for 2.00 to save that 1.50
- Need to mange all these factors - as transporatation manager I want to get those parts delivered at lowest cost , however if I am production manager I want to get those parts via the fastest and most reliable truck company
b. Coordinating (disruption prone) supply with (difficult-to-predict) demand:
- Don't want to purchase too many of one type of part or sweater - Too many: Need to discount - Too few: Missed opportunities not only day but for life
- Postponement is the strategy of reacting when stock is low and demand is high. However, need sophisticated IT processes to manage this e.g. Zara
- Dell.com has a customer for each and every product it develops - never stuck with products it can't sell
- Competition is more intense than ever - A smart and fast global supply chain becomes a competitive differentiator
- Walmart - RFID tags - quicker than barcodes (collective scan) - supply chain accounts for 5 - 10% of savings - gives info on products within size, amount, source - can splice & dice: what sells best on thurs evenings, what sells best during during hurricanes
8. Insourcing:
-Bringing an other companies core competencies that you don't yourself possess in-house to form part of the value-chain
e.g. UPS - synchronizing global supply chains for companies large and small
When our grandfathers owned shops, inventory was what was in the back room. Now it is a box two hours away on a package car, or it might be hundreds
more crossing the country by rail or jet
Toshiba had negative name as slow handling repairs: -If you own a Toshiba laptop and it breaks and you call Toshiba to have it repaired, Toshiba will tell you to drop it
off at a UPS store and have it shipped it to Toshiba, and it will get repaired and then be shipped back to you. But here's what they don't tell you: UPS doesn't just
pick up and deliver your Toshiba laptop. UPS actually repairs the computer in its own UPS-run workshop.
Toshiba came to UPS and asked it to design a better system. UPS said, "Look, instead of us picking up the machine from your
customers, bringing it to our hub, then flying it from our hub to your repair facility and then flying it back to our hub and then from our hub to your customer's house,
let's cut out all the middle steps. We, UPS, will pick it up, repair it ourselves, and send it right back to your customer.
- complaints went down dramatically.
9. Informing:
Search Engines for the masses - Never before in the history of the planet have so many people-on their own-had the ability to find so much information about so many things and about so many other people.
- It is a total equalizer. - If someone has broadband, dial-up, or access to an Internet cafe, whether a kid in Cambodia, the university professor,
or me who runs this search engine, all have the same basic access to overall research information that anyone has.
- It is the antithesis of being told or taught or kept in the dark (Info. Asymmetry). It is about self-empowerment; it is empowering individuals to do what they think best with the information they want.
- "Though Google is like God - God is wireless, God is everywhere, and God sees everything. If you have any questions in the world, you ask Google."
10. The Steroids:
Digital, Mobile, Virtual, ..everything
Complementary Godds: there are goods that are complementary-whereby good A is a lot more valuable if you also have good B.
Its only good to have pencils because we have paper, its only good to have an eraser because we have pencils - individually they are not too valuable. We got a better quality of one and better quality of the other, your productivity improved. - This is known as the simultaneous improvement of complementary goods
Stepping onto the playing field LEGACY FREE
- meaning that many of them were so far behind they can leap right into the new technologies without having to worry about all the sunken costs of old systems. It
means that they can move very fast to adopt new, state-of-the-art technologies, which is why there are already more cell phones in use in China today than there are people
in the United States. Many Chinese just skipped over the landline phase..-went from NO phones to cell phones
Reverse Auctions companies bid down against each other rather than bid up against each other. They bid for contracts on everything from toilet paper for the Boeing factories to nuts and bolts-the off-the-shelf commodity parts-for Boeing's supply chain.
IT revolution the business press has been touting for the last twenty years? Sorry, but that was only the prologue. The last twenty years were just
about forging, sharpening, and distributing all the new tools with which to collaborate and connect. Now the real IT revolution is about to begin, as all the
complementarities between these tools start to really work together to level the playing field. The last twenty-five years in technology, said Fiorina, then the CEO of HP, have been justthe warm-up act Now we are going into the main event, she said, "and by the main event, I mean an era in which technology will literally transform every aspect
of business, every aspect of life and every aspect of society."
Vertical versus Hrizontal - moving from a vertical (command and control) world to a much more horizontal (connect and collaborate) flat world.
GLOBALISATION 3.0:
Globalisation 1.0 - When Columbus set sail, opening trade between the Old World and the New World-until around 1800.
- It shrank the world from a size large to a size medium.
- was about countries and muscles -
Key agent of change/dynamic force of global integration was:
-Countries Globalising - how much brawn -how much muscle, how much horsepower, wind power, later, steam power -your country had
- and how creatively you could deploy it.
Primary questions:
- Where does my country fit into global competition and opportunities?
- How can I go global and collaborate with others through my country?
Globalization 2.0 ( lasted roughly from 1800 to 2000, interrupted)
- This era shrank the world from a size medium to a size small.
Key agent of change, the dynamic force driving global integration:
- Companies Globalising -was multinational companies - spearheaded first by the expansion of the Dutch and English joint-stock companies and the Industrial Revolution.
- 1st first half of this era, global integration was powered by falling transportation costs, thanks to the steam engine and the railroad,
- 2nd half by falling telecommunication costs-thanks to the diffusion of the telegraph, telephones, the PC, satellites, fiber-optic cable, and the early version of the World Wide Web.
- walls started falling all around the world, and integration, and the backlash to it, went to a whole new level.
- But even as the walls fell, there were still a lot of barriers to seamless global integration. (No email or web till post 1992)
Primary Questions:
- How can I go global and collaborate with others through my company?
Globalization 3.0 -around 2000
- shrinking from size small to a size tiny and flattening the playing field at the same time.
Key agents of change:
- software- all sorts of new applications-in conjunction with
- a global fiber-optic network that has made us all next-door neighbors.
- People Globalizing - Individuals must, and can, now ask, Where do I fit into the global competition and opportunities of the day
Primary Questions:
-How can I, on my own, collaborate with others globally?
Globalization 1.0 and 2.0 were driven primarily by European and American individuals and businesses. Even though China actually had the
biggest economy in the world in the eighteenth century, it was Western countries, companies, and explorers who were doing most of the globalizing and shaping of the
system. But going forward, this will be less and less true. Because it is flattening and shrinking the world, Globalization 3.0 is going to be more and more driven not
only by individuals but also by a much more diverse - non-Western, non-white-group of individuals. Individuals from every corner of the flat world are being empowered.
Globalization 3.0 makes it possible for so many more people to plug and play, and you are going to see every color of the human rainbow take part.
Outsourcing:
- Those who get caught in the past and resist change will be forced deeper into commoditization. Those who can create value through leadership, relationships and creativity will transform the industry, as well as strengthen relationships with their existing clients."
- no matter what your profession-doctor, lawyer, architect, accountant-if you are an American, you better be good at the touchy-feely service stuff, because anything that can be digitized can be outsourced to either the smartest or the cheapest producer, or both.-"Everyone has to focus on what exactly is their value-add."
- Services will always be protected - unlike goods they are not traded but produced & consumed in the same spot. You can't export a haircut!
- Even with the outsourcing of some jobs for western world to India, India's growing economy is creating demand for many more western products that they could never before afford. It goes full circle.
- homesourcing (employees working from home) and outsourcing aren't so much competing strategies as they are different manifestations of the same
thing: a relentless push by corporate America to lower costs and increase efficiency
Blogs:
They have given people a chance to stop yelling at their TV and now have a say in the process and speak out - share their perspectives and 'unfiltered' insights.
The 10 Forces that flattened the world
1. Winows up & walls down.
- Fall of Berlin wall heralded a a tippling towards democracy. More economies would be governed from the ground up, by interests & demands of the people.
- Communism was a great system for making people equal - equally poor! - Capitalism makes people unequally rich.
- Windows enabled any indiv to amass, author & diffuse as much info as they wanted & share it with others. Before we thought what one could do with pen & paper now this capability was with all.
- IAYF info at your fingertips empoyered masses.Info asymmetry was quickly becoming a thing of the past. Consider, no need for insurance brokers as info was available..
- The wall was brought down not by the USA crippling the USSR in the cold war arms race alone but throgh windowsallowing indiv download the future.
2. The new age of connectivity - the web.
- Internet was a low cost tool of global connectivity.
- Net vs. Web: net is a network of computers connected by cables. Web sits on top as a network of documents, sounds, vids, info..connected by hyperlinks.
- Dot-com bubble: investors looked at web & concluded that if if everything was to be digitized - data, commerce, books,music, photos - then the demand for info based products would be infinite.
This Lead to an inflated over investment in fiber-optic cables to wire the world. - However adoption was not as expedited as expected.This abundance of fiber drove down the prices of international calls and transporting data.
- The browser: helped make net truly interoperable. It ignored underlying topologies to allow seamless integration on a single protocol. Before this there were propietary corporate networks that were disconnected as they spoke different languages - essentally silos of info locked away.
10 years ago Joe in accounts would get on his PC in the office and try get hold of Sales yearly figures but couldn't as they were on a system his comp couldn't access that system He would try get the shipment info from goodyear but they had a diff system that their system couldn't connect with.Open protocols & XML was created to address this.
- point-&-click functionality meant trhat mere mortals could utilse the technology - you no longer had to communicate in 1s & 0s.
- Overinvestment is not necessarily a bad thing - Gates compared the Internet to the gold rush, the idea being that more money was made selling Levi's, picks, shovels, and hotel rooms to the gold diggers than from digging up gold from the earth.
3. Workflow Software
Work flow platforms are enabling us to do for the service industry what Henry Ford did for manufacturing
- "We are taking apart each task and sending it around to whomever can do it best, and because we are doing it in a virtual environment, people need
not be physically adjacent to each other, and then we are reassembling all the pieces back together at headquarters
- 24/7/365 we are all working around the clock around the planet.
3.b. Standards: - Common protocols - Instead of everyone trying to control the fire hydrant nozzle, they made all the nozzles and hoses the same, creating a
much bigger market that stretched across every neighborhood of the world. Then companies started to compete instead over the quality of the hose, the pump, and the
fire truck.
- Salesforce.com -(increased broadband, Ajax,..) software becomes something you rent rather than something you own. No need to worry about maintenance, upgrades, IT team. It is all managed externally by the service provider. Business solutions & best practices within & between companies can be shared. Newly developed modules can be sold back to salesforce.com - their customers in effect become their R&D and development team.
4. Opensourcing
Why? - IT people tend to be very bright and what everybody to know how bright they are - OS is peer-reviewed science
- Most software development involves a source code repository - it is managed by tools called a CVS ( Concurrent Versioning System) - allows me to connect to the server and pull down the latest version - i can make changes (a patch) when satisfied I can upload this to CVS server and it becomes the latest version
Apache: (The Apache tribe was the last tribe to surrender to the oncoming U.S. government - OS is about defiance, independence - pun: A PAtCHy server,)
IBM was trying to sell its own proprietary Web server, called GO, but it gained only a tiny sliver of the market. Apache proved to be both a better technology and free.
So IBM eventually decided that if it could not beat Apache, it should join Apache
- The world's biggest computer company decided that its engineers could not best the work of an ad hoc open-source collection of geeks, so they threw out their own technology and decided to go with the geeks! - let's invest in it and get rid of the one that we are trying to make on our own, which isn't as good."
- IBM wanted to build differentiated applications on top of Apache and charge money for them.
- Apache people were not interested in payment of cash - they wanted IBM's best engineers to help further develop Apache
There is no future in vanilla for most companies in a flat world. - the commercial future belongs to those who know how to make the richest chocolate sauce, the sweetest, lightest whipped cream, and the juiciest cherries to sit on top, or how to put them all together into a sundae.
Vanilla will be provided free by the OS community.
Also e.g.: RedHat can't sell you Linux per se (thats against OS regulationsCommercial Software:) but they have developed a business offering services around it and customising it for businesses.
Commercial Software: You spend a ton of money up front to develop a software product, and then the marginal cost of producing each one is very small, but if you sell a lot of them, you make back your investment and then plow profits back into developing the next generation.
- 'When you have a security crisis in your [software] system, you don't want to say, 'Where are the guys that work part-time developing this, is there even a number to call?'
- Microsoft has been able to count on the fact that the only thing more expensive than commercial software is free software.
- Few big companies can simply download Linux off the Web and expect it to work for all their tasks. A lot of design and systems engineering needs to go around
it and on top of it to tailor it to a company's specific needs, especially for sophisticated, large-scale, mission-critical operations. - costs as much if not more.
Community Answer: Goldcorp - miningdata competition = "where is the gold?" - 1400 scientists - mathamaticians, physicits, geologists, computer scientist - 1000% increase for a $100,000 prize.
5. Outsourcing Y2K bug fixes:
- Which country hard the greatest abundance of low-paid high skilled IT workers to perform such a tedious job? India
- Arguably, it is harder to get into an IIT than into Harvard or the Massachusetts Institute of Technology
- "India had no resources and no infrastructure," - "It produced people with quality and by quantity. But many of them rotted on the docks of India
like vegetables. Only a relative few could get on ships and get out...."For decades you had to leave India to be a professional. . . Now you can plug into the world from
India."
- India is a developing country with a developed intellectual capability
6. Offshoring
- when a company takes one of its factories that it is operating in Canton, Ohio, and moves the whole factory offshore to Canton, China. There, it
produces the very same product in the very same way, only with cheaper labor, lower taxes.
Every morning in Africa, a gazelle wakes up.
It knows it must run faster than the fastest lion or it will be killed.
Every morning a lion wakes up.
It knows it must outrun the slowest gazelle or it will starve to death.
It doesn't matter whether you are a lion or a gazelle.
When the sun comes up, you better start running.
- in thirty years we will have gone from "sold in China" to "made in China" to "designed in China" to "dreamt up in China"
- Low Chinese Prices are beneficial:
_Morgan Stanley estimating that since the mid-1990s alone, cheap imports from China have saved U.S. consumers roughly $600 billion and have saved U.S.
manufacturers untold billions in cheaper parts for their products. This savings, in turn, Fortune noted, has helped the Federal Reserve to hold down interest rates longer,
giving more Americans a chance to buy homes or refinance the ones they have, and giving businesses more capital to invest in new innovations
_If General Motors builds a factory offshore in Shanghai, it also ends up creating jobs in America by exporting a lot of goods and services to its own factory
in China and benefiting from lower parts costs in China for its factories in America.
- China will never be truly flat until it gets over that huge speed bump called "political reform."
7. Supply Chaining
Global supply chains that ddraw parts from all over the world is essential - complex
There are 2 challenges:
a. Global Optimization:
It doesn't matter if you can get one part cheaper in one place. The key is that the overall cost including delivery and setup is cheaper - e.g. buying groceries locally for an extra 1.50 or taking the bus for 2.00 to save that 1.50
- Need to mange all these factors - as transporatation manager I want to get those parts delivered at lowest cost , however if I am production manager I want to get those parts via the fastest and most reliable truck company
b. Coordinating (disruption prone) supply with (difficult-to-predict) demand:
- Don't want to purchase too many of one type of part or sweater - Too many: Need to discount - Too few: Missed opportunities not only day but for life
- Postponement is the strategy of reacting when stock is low and demand is high. However, need sophisticated IT processes to manage this e.g. Zara
- Dell.com has a customer for each and every product it develops - never stuck with products it can't sell
- Competition is more intense than ever - A smart and fast global supply chain becomes a competitive differentiator
- Walmart - RFID tags - quicker than barcodes (collective scan) - supply chain accounts for 5 - 10% of savings - gives info on products within size, amount, source - can splice & dice: what sells best on thurs evenings, what sells best during during hurricanes
8. Insourcing:
-Bringing an other companies core competencies that you don't yourself possess in-house to form part of the value-chain
e.g. UPS - synchronizing global supply chains for companies large and small
When our grandfathers owned shops, inventory was what was in the back room. Now it is a box two hours away on a package car, or it might be hundreds
more crossing the country by rail or jet
Toshiba had negative name as slow handling repairs: -If you own a Toshiba laptop and it breaks and you call Toshiba to have it repaired, Toshiba will tell you to drop it
off at a UPS store and have it shipped it to Toshiba, and it will get repaired and then be shipped back to you. But here's what they don't tell you: UPS doesn't just
pick up and deliver your Toshiba laptop. UPS actually repairs the computer in its own UPS-run workshop.
Toshiba came to UPS and asked it to design a better system. UPS said, "Look, instead of us picking up the machine from your
customers, bringing it to our hub, then flying it from our hub to your repair facility and then flying it back to our hub and then from our hub to your customer's house,
let's cut out all the middle steps. We, UPS, will pick it up, repair it ourselves, and send it right back to your customer.
- complaints went down dramatically.
9. Informing:
Search Engines for the masses - Never before in the history of the planet have so many people-on their own-had the ability to find so much information about so many things and about so many other people.
- It is a total equalizer. - If someone has broadband, dial-up, or access to an Internet cafe, whether a kid in Cambodia, the university professor,
or me who runs this search engine, all have the same basic access to overall research information that anyone has.
- It is the antithesis of being told or taught or kept in the dark (Info. Asymmetry). It is about self-empowerment; it is empowering individuals to do what they think best with the information they want.
- "Though Google is like God - God is wireless, God is everywhere, and God sees everything. If you have any questions in the world, you ask Google."
10. The Steroids:
Digital, Mobile, Virtual, ..everything
Complementary Godds: there are goods that are complementary-whereby good A is a lot more valuable if you also have good B.
Its only good to have pencils because we have paper, its only good to have an eraser because we have pencils - individually they are not too valuable. We got a better quality of one and better quality of the other, your productivity improved. - This is known as the simultaneous improvement of complementary goods
Stepping onto the playing field LEGACY FREE
- meaning that many of them were so far behind they can leap right into the new technologies without having to worry about all the sunken costs of old systems. It
means that they can move very fast to adopt new, state-of-the-art technologies, which is why there are already more cell phones in use in China today than there are people
in the United States. Many Chinese just skipped over the landline phase..-went from NO phones to cell phones
Reverse Auctions companies bid down against each other rather than bid up against each other. They bid for contracts on everything from toilet paper for the Boeing factories to nuts and bolts-the off-the-shelf commodity parts-for Boeing's supply chain.
IT revolution the business press has been touting for the last twenty years? Sorry, but that was only the prologue. The last twenty years were just
about forging, sharpening, and distributing all the new tools with which to collaborate and connect. Now the real IT revolution is about to begin, as all the
complementarities between these tools start to really work together to level the playing field. The last twenty-five years in technology, said Fiorina, then the CEO of HP, have been justthe warm-up act Now we are going into the main event, she said, "and by the main event, I mean an era in which technology will literally transform every aspect
of business, every aspect of life and every aspect of society."
Vertical versus Hrizontal - moving from a vertical (command and control) world to a much more horizontal (connect and collaborate) flat world.
posted by the author at 4:27 AM
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