Serendipity and the Supply Chain

Published November 28th, 2012 by Trevor Miles @milesahead 10 Comments

It is some weeks since I wrote a blog, but I have been mulling over some ideas, which was triggered by a colleague challenging me on my title of Thought Leader. While this is a personal tale, bear with me because it is about planning, or, more correctly, it is about one’s approach to planning. But, in keeping with the Kinaxis light hearted approach to supply chain, let me share a Dilbert comic about management and leadership that relates to my colleagues challenge.

Serendipity and the Supply Chain

On a more serious note, the roles in this comic could be swapped out for any number of combinations. I want to focus on the schism in supply chain between those that think all we need to do is plan better and all will be better, and those that think that all we need is greater agility and all will be better. I have always thought that the truth lies somewhere between and that, depending on your industry and corporate strategy, it is a matter of choice to emphasize planning or agility. For example, a ‘lowest cost provider’ had best focus on planning to reduce costs, whereas a ‘highest value provider’ had best focus on agility and customer responsiveness in order to maintain the price and (hopefully) margin advantage.

But, above all, the choice is not binary.  And for far too long, over 30 years, we have been treating the practice of supply chain management as if its sole purpose was to produce the most efficient plan.

So where does ‘serendipity’ come into this?

The various definitions of ‘serendipity’ illustrate my approach or attitude to planning perfectly.  According to Wikipedia, and this is the generally accepted definition:

Serendipity means a “happy accident” or “pleasant surprise”; specifically, the accident of finding something good or useful while not specifically searching for it.

Most of the other definitions I looked at emphasize the aspect of luck, of happenstance. The one on Bing even includes ‘lucky’ as a synonym. But the definition in Bing also includes ‘gift for discovery’ in the definition.  What the heck is a ‘gift for discovery’?

Reading a bit further down in the Wikipedia page I came across the answer in the following paragraph:

One aspect of Walpole’s original definition of serendipity, often missed in modern discussions of the word, is the need for an individual to be “sagacious” enough to link together apparently innocuous facts in order to come to a valuable conclusion. Indeed, the scientific method, and the scientists themselves, can be prepared in many other ways to harness luck and make discoveries.

Bing defines ‘sagacious’ as

Wise or Shrewd: having or based on a profound knowledge and understanding of the world combined with intelligence and good judgment

Synonyms: wise, sage, learned, perceptive, erudite, knowledgeable, intelligent, astute, clever, shrewd, discerning

So ‘serendipity’ is not about luck after all, but rather, in the original definition anyway, it is the faculty of being able “to link together apparently innocuous facts in order to come to a valuable conclusion”. And this is the really important part of the second sentence in the Wikipedia definition. It is about the manner in which the ‘scientific method’ can prepare us to ‘to harness luck and make discoveries’. There are so many important discoveries that have been labeled lucky when in fact they showed enormous faculty to “harness luck and make discoveries”, including Marie Curie and radio-activity, Linus Pauling and penicillin, etc. Even Newton and gravity. Supposedly Louis Pasteur, the father of immunization, said that “chance favors the prepared mind”.  All these discoveries were made by people researching something different but being agile enough in mind to be able to interpret and comprehend the importance of what they saw in front of them.

All too often we treat serendipity as something bad. The terms that come to mind are ‘seat of the pants’ or ‘fire-fighting’. I am not in favor of ‘seat of the pants’ or ‘fire-fighting’.  I am arguing that serendipity is not the same.  And I am using serendipity deliberately, rather than agility, because agility itself carries so much baggage in supply chain.  I am using serendipity in the sense of being “sagacious enough to link together apparently innocuous facts in order to come to a valuable conclusion”. I also think that this is a perfect way to describe supply chain agility. It is the capabilities by which we understand true demand and translate that into a profitable supply response.

So what’s needed?

Talent Capable of Innovative Insight

Many people have written about the issues of supply chain talent, including Lora Cecere (Supply Chain Talent: The Missing Link), Bob Ferrari (Is There Really A Shortage of Qualified People?), the Massachusetts Institute of Technology’s Center for Transportation and Logistics, and Supply Chain Management Review, which quotes Michel Janssen of The Hackett Group as saying that

What is certain is that the world will look distinctly different five years from now. In response, companies need to improve the quality and timeliness of business information, their decision-making processes and operational agility.

As Lora points out, it is the people that have to make decisions, middle management, where there is the real talent shortage.  This is where we need the people schooled in ‘the scientific method’ so that they can “link together apparently innocuous facts in order to come to a valuable conclusion”.

Tools that Enable Innovative Processes

Talent without enabling tools is a blunt instrument.  We need sharp tool in our sheds, both figuratively and literally. Only then will we have the skills, analytics, and process capabilities to take full advantage of serendipity.

Looked at slightly differently, Clayton Christensen, commenting on investment strategy in an article titled “A Capitalist’s Dilemma, Whoever Wins on Tuesday” in the New York Times just before the US elections states that there are 3 basics types of innovation:

  • Empowering innovations – which transform complicated and costly products available to a few into simpler, cheaper products available to the many.
  • Sustaining innovations – which replace old products with new models, and create few jobs.
  • Efficiency innovations – which reduce the cost of making and distributing existing products and services, and almost always reduce the net number of jobs, because they streamline processes.

I think anyone who has been around supply chain for the past 20-30 years will recognize Efficiency as the primary driver of all the innovation, with little thought given to Empowering innovation. While Christensen sees this from a product perspective, I also see this from a process perspective.  We have trained our people and supported them with systems that automate the mundane, the normal, the usual, the rote.  When I go to conferences I hear people talking ‘innovation through standardization’.  While I understand where they are coming from, and do not dismiss their point of view outright, this is the path to commoditization. After all, Christensen says that:

 Efficiency innovations also emancipate capital. Without them, much of an economy’s capital is held captive on balance sheets, with no way to redeploy it as fuel for new, empowering innovations.

 But I should send a copy of Clayton Christensen’s book titled The Innovator’s Dilemma to these people, because, in my opinion, there is no place for serendipity in their mental model. Only more cogs in the ‘efficiency’ machine. Not where I want to be.  And not what I believe will lead to process innovation and more effective supply chains.  I’m going for Empowering innovation. The part of the Christensen article that resonates with me, given the heavy emphasis that has been placed on efficiency and outsourcing in supply chains over the past 30 years, is

efficiency innovations are liberating capital, and in the United States this capital is being reinvested into still more efficiency innovations.  George F. Gilder taught us that we should husband resources that are scarce and costly, but can waste resources that are abundant and cheap. … we taught our students how to get the most revenue and profit per dollar of capital deployed. To measure the efficiency of doing this, we redefined profit as ratios like RONA (return on net assets), ROCE (return on capital employed) and I.R.R. (internal rate of return) executives can innovate to add to the numerator of the RONA ratio, but they can also drive down the denominator by driving assets off the balance sheet — through outsourcing. Both routes drive up RONA and ROCE. Similarly, I.R.R. gives investors more options. It goes up when the time horizon is short. So instead of investing in empowering innovations that pay off in five to eight years, investors can find higher internal rates of return by investing exclusively in quick wins in sustaining and efficiency innovations. Continuing to measure the efficiency of capital prevents investment in empowering innovations that would create the new growth we need because it would drive down their RONA, ROCE and I.R.R.

I see this everywhere I go. At conferences. At customers. At prospects. I understand that ‘bottom line’ measures – the denominator in most financial ratios – are more in the direct control of the company in general and supply chain in particular, but we are not going to innovate ourselves out of this recession by focusing on efficiency innovations alone. This is as true at the process level as it is at the product level.  And this is where serendipity comes in.  We have got to get off of the functional efficiency drug in supply chain and focus more on horizontal process effectiveness.  Greater supply chain efficiency will be a result, but it cannot be our only goal.

So how can we harness serendipity? How can we know sooner that something happened the consequence of which is something to which we need to pay attention? (Please note that I am not referring to the original event, but rather to consequence or impact of the event.) Isn’t this the very definition of serendipity: “link together apparently innocuous facts in order to come to a valuable conclusion”? I discussed quite a bit of this in a recent blog titled “Integrated Planning and Control”. I honestly do not believe that automating decisions through business process management (BPM) tools is going to get us very far in supply chain management, because we can only automate the most mundane decisions.  In this context, the Gartner article I refer to in my previous blog – ‘The Trend Toward Intelligent Business Operations’ (subscription required) – captures this need in the following statements, with my emphasis:

The impact of integrating real-time analytics with business operations is immediately apparent to business people because it changes the way they do their jobs.

The most dramatic change is the increase in visibility into how the company is running and what is happening in its external environment.

Individual contributors and managers have improved situation awareness, so they are able to make faster and better decisions.

Integrated analytics serve a different purpose than the familiar “information at your fingertips” goal of making data universally available

The Personal Tail, or the End to a Personal Tale

Dwight D. Eisenhower, the 34th President of the US and also a general in the US Army once said:

 Plans are worthless, but planning is everything. There is a very great distinction because when you are planning for an emergency you must start with this one thing: the very definition of “emergency” is that it is unexpected, therefore it is not going to happen the way you are planning.

I hold this to be true in my life as much as I hold it to be true in all Operations, including Supply Chain Management. I have had few “emergencies” in my life, but to be honest I saw most of these as “opportunities” rather than “emergencies”.  It is true that few things have turned out exactly as I planned them. At a personal level I fall back to Clayton Christensen via David Brooks, who wrote about the “Summoned Life” in the New York Times in August 2010 that

This is a column about two ways of thinking about your life.
The first is what you might call the Well-Planned Life. It was nicely described by Clayton Christensen …
invest a lot of time when they are young in finding a clear purpose for their lives. Once you have come up with an overall purpose, he continues, you have to make decisions about allocating your time, energy and talent. …
The second way of thinking about your life might be called the Summoned Life. This mode of thinking starts from an entirely different perspective. Life isn’t a project to be completed; it is an unknowable landscape to be explored. …the individual is small and the context is large. Life comes to a point not when the individual project is complete but when the self dissolves into a larger purpose and cause.

I suspect my colleague, whom I referred to in the beginning of this blog, would favor the Well-Planned Life. If I had to choose one or the other, I’d choose the Summoned Life, but I need a ‘direction’ sufficiently to respect the Well-Planned Life. But fundamentally I believe that developing the skills and competencies to recalibrate quickly is infinitely more valuable than a rigid adherence to a plan that was never anything more than, well, a plan. Know sooner. Act faster.

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10 Responses to “Serendipity and the Supply Chain”

  1. Nancy Beckman

    “the very definition of “emergency” is that it is unexpected, therefore it is not going to happen the way you are planning. ”

    I think that’s something any one who deals with supply chain risk management should remember. If you plan for it, it can no longer be an emergency. The real test is how does your supply chain handle something that no one saw coming, because one day that is exactly what it will have to do.

  2. Adam

    One thing I’d add to your list is a focus on information sharing/management. You can’t really have serendipity if you’re not stumbling across new facts! You touched a little bit on it with the analytics, but it goes further than that: talking to the guys on the ground or in the factory, talking to people in totally different departments, learning about concepts seemingly totally unrelated to supply chain management – getting novel information is how those serendipitous connections between facts and concepts are made.

  3. Trevor Miles

    Hi Nancy

    I thought about commenting on Eisenhower’s use of the term “emergency”, and now I know I should have. I agree with you, but I would word it differently. Every day we face “emergencies” in the supply chain. These are distinguished more by severity than by us having anticipated them. And most times it is the cumulative effect of many small emergencies that make our supply chain both ineffective and inefficient.

    I wrote a blog about this in 2009 – http://blog.kinaxis.com/2009/01/nearly-all-supply-chain-risks-are-unanticipated/

    Regards
    Trevor

  4. Trevor Miles

    Hi Adam

    I agree, information sharing is more than the analytics. You characterize the ‘scientific method’ very well when you write about “talking to the guys on the ground or in the factory, talking to people in totally different departments, learning about concepts seemingly totally unrelated to supply chain management”.

    But now you need to act. Serendipity should guide what you explore as alternative courses of action, but you shoudl always use analytics to check the likely outcome before putting the chnages into action.

    Regards
    Trevor

  5. Kevin L.

    I totally agree with Nancy and believe that is the reason that the positions listed above are so difficult to fill, they require a next level of thought. I believe most people, given some training, can keep the gears moving in a supply chain. Ordering on time, not running out of stock, getting things to the right place in a timely manner.

    However, the supplier evaluation process and deciding how to structure a supply chain so that it is still cost effective and efficient while still being nimble enough to cope with “emergencies” is something else entirely. Understanding the industry and your organizations’ position within it is crucial to understanding the best way to structure your supply chain.

  6. Trevor Miles

    Hey Kevin

    We agree on a lot.

    Dealing with the ‘unusual’ is where creativity and human judgment is best applied. And I believe that the roles that are difficult to fill should be dealing with the ‘unusual’ rather than with the ‘normal’. At the same time, as you write, much of their time should be focused on designing a supply chain and establishing processes that can deal with the ‘daily churn’ in a supply chain efficiently and effectively.

    In my reply to Nancy, what I was really getting at is that the term “emergency” is to loaded for me becuase so much of what we deal with in supply chains is unanticipated. This does not make these events emergencies, and only through a process of analysis of the impact or consequence of the event can we determine its severity. Of equal importance in my view is that the manner in which we deal with emergencies – you refer to it as being nimble – should become the manner in which we operate our supply chains on a daily basis.

    Our instinct is to suppress volatility. I say we should embrace volatility and complexity, because they aren’t going away. In fact every indication is that they are going to increase.

    http://blog.kinaxis.com/2011/10/embrace-complexity/

    Regards
    Trevor

  7. Rick Manning

    I’ve been involved with distribution for 40 years, 25 years in a JIT (Just in Time) environment as a Warehouse Manager. From the very first day, I got my lesson in the difference between efficiency and effectiveness.

    The two are not synonymous, so much so that at least one person has suggested that we abandon JIT in favor of JIC (Just in case). As insourcing and onshoring make a comeback, JIC might be the way to go.

    The conceptual framework of this article is incredibly important; the application of principles from other fields can bring about the quantuum leap in supply chain mangement that everyone wants, but no one can get because of mindlock in the field in which they are operating.

    Thank you for articulating some ideas that I’ve been mulling around for a few decades. It’s refreshing and encouraging to discover that I’m not the only one in the field with these thoughts.

    Rick Manning, Minister of Esoteric Parameters, Analog Consulting

  8. Trevor Miles

    Thanks Rick. Much appreciated. There are times when I feel I speak into an echo chamber, so it is great to have your endorsement.

  9. Anne Embrey

    Insightful article. We have worked for about two years to align our company to take full advantage of efficiency innovations – and have reaped benefits that are so seductive we want to keep cutting, keep slicing, keep combining – with little thought to the next big idea. At the same time, our president and our CIO saw a gap in improvement and thus I landed in a new role over continous improvement.

    The word serendipity and all the defintion variations give me great fodder for the year ahead. Finding the balance between praising people for tightening their processes (which they do well) and encouraging them to see that is not enough for the future – well, that will be my journey. Thanks so much for the article.

  10. Trevor Miles

    Thank you very much Anne. Efficiency is a race to the bottom, so I am pleased to hear that you are on an exciting journey. Good luck, and please let me know the outcome.

    Regards
    Trevor

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