Inside-Out Cannot Get You to Outside-In

Yesterday, I facilitated a group of business leaders attempting to drive innovation in supply chain practices. The last five years were tough for the group. With five serial years of Draconian cost-cutting efforts and downsizing, the team has been heads-down trying to survive. For many years, the focus was overcoming day-to-day hurdles. In addition, the company, for the first time in a decade, is struggling to grow. As a result, there has been little time for conferences, external training, or educational forums.

Five years is a long time in the technology space. The team is waking up to realize the technologies they are currently using for supply chain planning is being sunsetted by their technology provider. They need to find a replacement. The recommended alternative from the existing vendor is not seen as a possibility. But, as the group tries to find a better answer, they find that they are out of touch with the market. Sadly, the consultants hired to help the group are as well. The supply chain market is in flux to a much greater degree than in the past decade. What consultants have sold in the past is not the answer today.

Reflection

I have been an industry analyst for two decades now. I have never seen a time where there is as much innovation and confusion in the supply chain market. While the group wanted to drive innovation, the consulting practice recommended mature technologies on the plateau of productivity. I questioned the disconnect and found that the consulting partner was not aware of many of the emerging technologies.

The software market is moving through the final rounds of consolidation of client-server technologies. Decision-support technologies and business processes are being redefined based on a confluence of technologies--the Internet of Things, Cloud, Cognitive Computing, Blockchain, Additive Manufacturing, Robotics, and open source/big data analytics. As a result, the givens are no longer givens, and the possibilities are exponential.However, the rate of adoption is driven by the cultural DNA of the company.

Figure 1. Hype Cycle

To better understand the market, my categorization of technology providers on this hype cycle is in Table 1. The solutions evolving for innovators are emerging, but the architectures are still in flux. For the innovator, the rewards are greater, but the solutions require greater co-development and partnering. Many of the innovators do not understand the requirements of enterprise-class architectures. Not all organizations are equal to this task. The early adopters are testing solutions, and the late majority are finalizing the approaches. Late Majority and Laggard buyers want proven solutions with well-defined Return on Investment (ROI). They are less willing to accept risk. I recommended that the group consider using innovators' "engines" to improve the outcomes of more mature decision support technologies. My recommendation is to break down the problem into requirements for inputs, engines, outputs, user interface, scenario planning, and data model fit.

Table 1. State of Supply Chain Planning Solutions

The Mirage of Outside-In Processes.

The group wants to drive a digital transformation. They want to be outside-in. However, the discussion in the room was very inside-out. Unfortunately, inside-out thinking is what they know. It is hard to learn from the past, to unlearn, to relearn. The "unlearning" is the toughest part.

The consultants believe that an inside-out process can be transformed to be outside-in. This where we had a disconnect. I do not believe that this is true. Instead, I believe that outside-in processes must be defined with the goal in mind, and that an inside-out process focused on the organization and transactional flows is not suitable for an outside-in digital transformation. The reason? Simply put, an inside-out process is about the company. It is insular. An outside-in process starts with the channel and provides synchronization of data across flows from market-to-market. The inputs, outputs, and flows are different. It is about synchronization of data versus integration. The architectures are also very different. As a result, I believe the consultants in the room were painting a mirage for the group. What is a mirage? It is an optical illusion. A frequent analogy is the appearance of a sheet of water in a desert or on a hot road caused by the refraction of light from the sky by heated air when there is no water present.

I know of no group that has been able to take an inside-out process and make it outside-in. I also cannot find a successful use of an ERP architecture to build an outside-in process. However, many of the decision-support tools listed in Table 1 can be outside-in. The key is in the definition of the implementation. The data models, flows, and inputs are different. 

Table 2. Driving The Digital Outside-in Transformation

I encourage groups to do more than just talking about outside-in. Take action.
 
How so? Start by drawing the outside-in flows on a whiteboard on the wall. Think of the data and signals in the channel that can inform systems and drive a better response. Then list the data and flows in the supplier base that are needed to be successful against the business goals. (For example, redefining Estimated Time of Arrival through GPS and Telematics. Or quality data and availability to ship from contract packaging companies. Track-and-trace information is also a requirement for many businesses.) As a next step, list the goals and the new requirements by the customer. Build the flows by listing all of the forms of data--structured, unstructured, streaming, and federated data sources--that can inform the decisions. Then define the potential outside-in processes. I think that you will find them quite different than the inside-out approach.
 
This is literally thinking out of the box. The box, most supply chain leaders find themselves in, is saying that they want to be innovative and then limiting their thinking to traditional enterprise-based processes. The four walls of the enterprise are the box. The future of digital innovation is not enterprise thinking.  We must learn from the past, to unlearn, to relearn. The "unlearning is the hard part," and unfortunately, most consultants are not able to help. Like many of my clients, they are also on their journey to "unlearn" as well. Good luck in your journey. I welcome your comments.
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