The Changing 21st Century Business Environment
Volatile … Uncertain … Complex … Ambiguous (VUCA)
We fail to appreciate the tectonic shift from stable and predictable to volatile and disruptive. Consider all the processes in manufacturing and supply chain that are based on those Old Game assumptions. Forecasting. Scheduling. Planning. Sourcing. ROI. In consumer products, the best companies are only able to forecast demand at 40% accuracy and even then, you don’t know whether a given customer-product forecast is in the 40%. The impact is extra capital investment, higher inventory, stockouts.
In the New Game world, we now assume volatility and uncertainty. We invest in production for flexibility and responsiveness. We look for demand signals in advance of orders. We systematically mine the environment for unstructured information.
Manufacturers are getting to the “why” customers buy and shifting what they offer to better match. For example: customers typically don’t want the product so much as the outcomes they can achieve with that product. Therefore beyond the physical offering, producing companies often deliver value-added services, outcomes, and data that help the customer run their business more effectively. This fundamentally changes the business model and the business objectives.
In the Old Game, efficiency, uptime, and profitability were the only metrics by which manufacturing performance was judged. The rules have changed Now, manufacturers account for sustainability alongside those traditional measures finding that innovations can simultaneously improve costs and efficiency. Companies recognize that as the economics of sustainability improve, sustainability is a competitive differentiator.
Incorporating sustainability looks different at different companies.
Reducing energy and water use in production
Striving for zero-waste-to-landfill across their enterprise
Embedded in their ethos and issuing annual sustainability reports against frameworks, such as the UN Sustainable Development Goals.
In the New Game, consumers and the investors are voting with their wallets for the firms who produce the best products, judged on quality, performance, and sustainability.
In the VUCA world you make trade-offs. Companies responding to the COVID crisis faced a market of volatile and unpredictable demand, critical components in short supply, a supply chain in chaos. The matching demand required speed and ease of deployment. Design for rapid assembly and manufacturing. Standard, off the shelf components vs. custom.
The dramatic change from physical focus to value is shown in these examples:
Planned obsolescence on industrial machines to drive future purchases in the Old Game vs. highest reliability with technology to monitor it in the New Game.
Selling chemicals only on orders in old game vs. offering a service to ensure adequate levels of that chemical for the customer’s needs in the New Game.
Producing cement is one of the world's largest generators of CO2 emissions. A national scale producer discovered in the course of using IoT and analytics to improve the quality that the realtime adjustments for process quality also generated significantly less CO2.