I think I have to set something straight. Some of the comments on my blog suggest that the right brain chasm issue is about clearly ‘owning’ the S&OP process at the most senior level and therefore put it in the simple ‘leadership’ bucket.  Yes, I think we all agree that leadership is key in implementing S&OP or any change for that matter. My S&OP pulse check survey’s in 2010, 2011 and 2012 all indicate that senior leadership is the biggest roadblock in implementing S&OP. But that’s not what I’m talking about. ‘Owning’ the process by the most senior business leaders is just the start.

I’m talking about the biggest issue and opportunity business and thought leaders have to start addressing to make S&OP or business as a whole more effective.

The biggest opportunity is to find  ways to build a business culture with critical mass of people who show cooperative behaviours, want to understand the other silo and are open to be influenced by the other silo’s, be it function or business unit, customer or supplier. Actively create groups that cross the silo’s and think holistic in ‘we’ and ‘us’, rather than in ‘I’ and ‘me’. Thinking holistic is a right brain activity. If we want to cross a silo effectively, we have to understand the other silo’s motivations, goals and feelings. We need to have empathy for the other silo. Feelings and empathy are right brain activities as well.

Crossing the right brain chasm is not an easy task for business leaders, as crossing the silos is hard for us humans. Historically we are wired to stay in our silo. That’s just our survival instincts. Staying in our own clan or herd, means risk reduction, certainty, safety and a higher change to survive. On top of this there is research that indicates that only 50% of people cooperate naturally and 30% behaves selfish.  Fuelled by social networking we see evidence of more narcissism and ‘I’ and ‘me’ thinking. So the challenge to understand the other silo and think holistic only seems to get bigger.

Business leaders have to first understand the right brain chasm before addressing it. Business leaders then need to educate their people in understanding and using their right brain; if we want to start crossing the borders of our silo’s to start communicating and collaborating more efficiently. Building critical mass of people who have a developed right brain and are willing to use it is where the real value for businesses is. It will pay back through transparent, timely information sharing and speed and agility in decision making or correcting mistakes. And if done right, it will pay back more than any other investment in training, process or technology.

Business and supply chain leaders are mostly left brainers and don’t think (yet) like this. They think logic, KPI’s and analytics. They think left brain. This is how supply chain and S&OP have evolved the last 30 years and achieved great things. My point is; it’s time to change if we want to bring things to a whole new level. I can’t say that what I’m saying is totally new as Daniel Pink already described in ‘a whole new mind’ the importance of the right brain in today’s world. My angle is just slightly different from Pink’s.

For me crossing the right brain chasm is the only solution for real efficient horizontal business processes and the key for a collaborative environment.

The biggest change required for proper S&OP or in general for agile decision making is horizontal thinking. Information never sits in one function, therefore we have to start understanding other functions and think more holistic. Thinking holistic and understanding feelings are right brain activities. The change to start crossing silo’s is hard because we’re wired to stay in our own tribes, where we feel save and secure.

We know change is hard in general. Kotter’s research in over 100 companies showed in 1996 that only 30% of change efforts is successful. McKinsey’s research amongst 3200 CEO’s confirmed this 30% again in 2009. In ‘good to great’, Collins researched 1400 companies over 40 years and found that nearly 1% was great.  Great companies beat the market by 6.9 times. A feature of these companies is that they have ‘level 5 leadership’  and that ‘change comes automatically to them’. So great leadership makes change possible. Still, leadership has been indicated by practitioners as the #1 roadblock to implement S&OP.

As change is so hard, you first have to understand your change environment before you can think about sustaining S&OP. The only way to sustain S&OP is to create an S&OP culture. Culture is created by purpose, values & behaviours. Therefore we have to lead in effective S&OP behaviours and make them part of our DNA. Amongst effective S&OP behaviours are trust, communication, discipline and collaboration. The right brain is essential to be effective in these S&OP behaviours.

The S&OP leadership quadrant can help you to map S&OP support in process and behaviour and can give you insight in your change environment and your roadblocks to create a sustainable S&OP culture. There are many ways to improve your S&OP environment to make it sustainable. It will take years, but it can be done.

hope you like it

cheers,

Niels

My presentation was about how to create and sustain a culture of S&OP and how we need to start using our right brain to do that. I tell you why we need our right brain more. The biggest change we have to go through when implementing S&OP is to start thinking horizontally rather than vertically. We have to start crossing the borders of our silo’s to start communicating and collaborating with other functions. Thinking horizontally means thinking holistic. Thinking holistic is a right brain activity.

Crossing the silos is hard for us, as historically we are wired to stay in our silo. That’s just our survival instincts. Staying in our own clan or herd, means risk reduction, certainty, safety and a higher change to survive.  Only when our survival is threatened we will go outside our herds, take risks to try and survive. Our survival in business is now threatened if we don’t cross the borders and exchange better and more complete information for agile, fast decision making. If we want to cross a silo effectively, we have to understand the other silo’s motivations, goals and feelings. We need to have empathy for the other silo. Feelings and empathy are right brain activities.

The last thirty years we have made great progress in developing supply chain management and S&OP form a left brain perspective. As I described three years ago, it is now time for the  behavioural supply chain , or the ‘right brain’ supply chain. We’re three years on and unfortunately I don’t see many signs that we’re getting closer in crossing the chasm from left brain to right brain supply chain thinking.

A recently released white paper from the Association for Finance Professionals (AFP) shows that amongst other things, it is extremely important for finance professionals to have advanced excel skills and the ability to validate data. I couldn’t agree more. Advanced Excel knowledge is a must for every finance professional. Even in businesses with advanced IT environments and with seamlessly integrated systems, the spread sheet is still the most flexible piece of calculating software.

There is no better way to quickly gather some information from different people around the business and calculate some numbers. There is no easier way to simulate opportunity and risk scenario’s in a P&L and discuss and communicate the results across functional areas.  And the basics are really easy to learn. This ease of use and flexibility must be the reason that more than 30 years after the introduction of Lotus 1-2-3 from IBM and Excel from Microsoft, the spread sheet is still king. Some of my own research on planning suggests that 85% of users still use the good old spread sheet. Other surveys show similar results between 60% and 90%. In my role as integrated business planning manager, I monthly present an 18 months rolling EBIT number to our managing director. A lot of cross functional information needs to be gathered for this, but all the P&L lines come together in a spread sheet and that’s where the EBIT number is calculated.

Having said all this, we have to understand the risks of using spread sheets and more important, the finance professional has to understand the world beyond the spread sheets and the numbers.  The risk of spread sheets are many and not limited to non-centralized data, multiple numbers and plans rather than one integrated plan, formulas that are only understood by the creator and can’t be re-engineered or non-compatible Excel versions.  Still, with good version management and documentation on how the spread sheets and processes works, many of these risks can be limited, and the spread sheets can thrive as an add-on reporting tool on top of the enterprise or business intelligence systems.

What is more important  to understand for the finance professional, is that at a certain point in time, it is not only about the numbers anymore. Sometimes the information or the numbers are simply not there, as there is uncertainty in the world around us and assumptions and rough estimates have to be made. These estimates and assumptions often have to be agreed with a functional owner to come to an integrated consensus.  Assumptions on sales volumes and price points, production yields, material consumptions, market growth or truck utilization cannot be made by finance professionals only.

This is where finance business partnering, relationship management and influencing of the functional owner or business unit comes in.  This is also where the usually logical, analytical left brain finance professional has to tap in to right brain and understand the emotions and behaviours in decision-making and how they can be impacted by different people and cultures. It is important to realize that under pressure of time and politics decisions are often not rational.  Furthermore perceptions on quality, prices and performance differ from person to person within a company and even more in different geographical locations where different cultures, values and motivations play a role.

Before you make a report or go in to a presentation, of course you have to triple check the outcome of your spread sheet and make sure the numbers add up.  It is as important to have aligned your assumptions with functional business owners, understand time pressures, politics and your cultural environment. If you didn’t take the time to business partner, influence and understand perceptions of your stakeholders, you might find yourself in the situation where your spread sheet was right, but your advice was disregarded and the decision went in the exact opposite decision.

That’s when you realize you had to think beyond the spread sheet!

as promised in my December blog find my presentation on leading sustainable S&OP here!

Sustainable S&OP can only be established when an S&OP culture is created. To create an S&OP culture, effective S&OP behaviours like discipline, common goals, trust, communication and collaboration need to become part of a company DNA. This presentation links some literature on this behaviour with results from my S&OP pulse check 2012. It furthermore provides some tips on how to create an effective S&OP culture.

The presentation is closely linked with my article on Global S&OP and leadership and I will use it as basis for when I speak in March at the Australian S&OP conference 2013. I hope you enjoy it. Let me know what you think. Is the right culture important to sustain S&OP and survive strategy changes, merges and acquisitions and management changes?

cheers,

Niels

find here my article that was published in the 2012 fall edition of the Journal of Business forecasting. Choose a rainy day to read it as it is pretty long! Enjoy and I’m interested in your thoughts and feedback

Global S&OP Leadership, Change, Behavior and cross-cultural differences

cheers,
Niels

I first wrote about the  behavioural supply chain almost 3 years ago and still believe this is an undervalued aspect in the supply chain and not touched by many thought leaders. I like to point out Sean Culey from who I know passionately believes in this and whom I’ve been bouncing ideas of. Check out his work! You can start here

Culture and behaviour are not often things one reads about in supply chain or S&OP articles. It has my special interest for the last 5 years as I’ve come to the conclusion that this is where the real value lies in S&OP or supply chain transformations. For the last 20 years it has shown that in businesses only 30% of change efforts succeed. I think a big part of this low success rate is due to culture and behaviour. As I said supply chain literature hardly covers this aspect and I’m pleased that I have been given the opportunity to contribute to this topic.

With the writing of this article, which has been with the editor for over a year, I also made a presentation on how to create a sustainable S&OP culture. I will publish that probably in the early new year. This presentation will discuss what effective behaviours drive the right S&OP culture. I believe those to be Trust, Communication, Discipline and Collaboration.

For now enjoy the summer break (yes it is summer here in Melbourne) – or Xmas break – with your friends and family

cheers,
Niels

My last blog was a reaction to a question from Lora Cecere on how to change company DNA. Or company culture. It just strikes me over and over again that supply chain left brain bloggers, writers etctec don’t touch the topic of leadership and company culture. A little exception left and right maybe, but in general you can’t find it. The fact that an article of me on this topic has been for over a year under editors review, makes me think people don’t get it either! Maybe it is my writing style.

For me the equation is so simple:

The right consistent leadership drives trust and the right behaviour by employees. The right behaviour over time drives company culture. Company culture will enable you to communicate faster and more effective, to really collaborate, to make more effective and faster decisions and execute according to what was agreed as there is a high sense of accountability.

Therefore company culture can be a competitive advantage.

I’m a left brainer and analyst too and had to make a journey. I started of thinking the world can be optimized with algorithms when I finished my studies in operations research. Then I worked across 10 countries as consultant I soon learned about different cultures and how people are different.  In my first year as supply chain manager my customer service department had a turnover of 100%. I realised then it was about people. The last 5 years I learned that, although you can’t change a country culture, you do can change a company culture for the better

You ever experienced this? You sit in a meeting, you and the team have prepared well, and all the information and decision documents are available. All the attendees had the chance to read through the information before the meeting. But you sit there and you don’t get value out of the meeting, there are no quality decisions. And all the fancy reporting by the sexiest systems in the world won’t help.

There is no open transparent discussion, no trust; politics are on the agenda more than the real agenda. No accountability is taken and there is no follow through on actions and agreements. No constructive feedback is given on suggestions. People are not listening with the intention of being influenced. After the meeting the real decisions are made.

All signs of a non-effective company culture. My estimate is that this stuff happens in over 80% of companies. This is where we can unlock real value. The supply chain left brainers just decide not to touch on the subject and keep talking about data, systems and other left brain stuff.

I just don’t get it!

The answer I believe is refreshingly simple; make it part of the company DNA! Or in other words, make it part of the company culture. But there is more required then only listening. To really unlock the power of social a company also needs to be clear about things like:

1. develop social as a strategic capability
2. define and control focus on where to excel in social
3. have the right IT infrastructure to enable social integration
4. have the right supply chain to execute social insight

But all of that will not be effective if a company can’t listen properly to start with, both inside and outside the company walls.  So let’s first start with being able to listen!

First of all, I think that listening will become vital for any company in the social age. For companies that show arrogance in not listening to partners in the value chain, to employees or consumers, it will be a matter of time before they will be punished by the power of social. Even if you have the power in the value chain, the time to change is limited. The monopolist screwing consumers or bullying suppliers or the company with an unethical culture, churning through their employees. One vital mistake and they will be called to justice by the power of social. Their brands will be damaged beyond repair in the process. But how to make listening part of the company DNA?

According to Collins and Porras a company vision exists from its core values, core purpuse, a BHAG (big, hairy, audacious goal) and a vivid description.  The core purpose is the reason for being; it captures the soul of the organization. Where you can fulfil a strategy, you can’t fulfil a purpose. Core values define what the company stands for. A company will stick to them, even if it became a competitive disadvantage in certain situations.

Well defined, integrated and truly lived, purpose and values will drive companywide behaviour. Imbedded company behaviours will drive a sustainable company culture, which will last over time. Making listening part of your core values or purpose will over time create a sustainable company culture that listens. Employees will say; ‘listening is one of things we just do around here’.  In other words; listening is in their DNA!

In Stephen Coveys book ‘the seven habits of highly effective people’ he addresses the behavioural effectiveness of ‘seek to understand to be understood’. He identifies 5 ways of listening: 1. Ignoring, 2. Pretending, 3. Passive listening, 4. Active listening and 5. Listen with empathy. I like to add to that; ‘Listen with the intention of being influenced’, as Rick Maurer describes in his book ‘Beyond the walls of resistance’. Only when you have the intention to listen AND being influenced you respect the knowledge, perspective and autonomy of the other party. Only with listening common goals can be agreed. And without common goals, collaboration is by definition not possible.

A June 2011 article in the Harvard Business Review suggests that only 50% of people naturally corporate. People that don’t corporate most probably are not great listeners and do only partially respect the others opinion. If you don’t act on that, probably only 50% of your employees are good listeners  And you have to make sure that you have critical mass in the organization that actually does listen. You and your company need to create critical mass in employees who believe that listening is vitally important and help building that culture. Some suggestions on how to do that:

1. Make listening part of the core company values or even mission statement
2. Write your HR policies so that listening and collaborative behaviour is tested in your recruitment process.
3. Reward listening and collaborative behaviours continuously. Hold people accountable and provide behavioural feedback to those who don’t listen.
4. Lead by example: if you don’t honour the autonomy of your peers or subordinates, you can’t expect it from anybody else!

Yes, social listening can be very powerful to get market and consumer insight, but it can only flourish once we master to listen within the walls of our own company. Fix the internal listening by creating a culture that listens and you can start to unlock the door to the power of social.

The power of social made me connect to her and provided me a free lunch as well (thanks Lora). The power of social media got me a job once. Lora also just wrote a blog on social media and supply chain which is worthwhile reading and where she concludes we have to start listening first. I fully agree.

My view is clear; social is here to stay. It will be as normal as the water coming out of your tap and the window that make you look outside your house. Like that window it can make you look outside in to the world at any time in the convenience of any place you like. I believe it has enormous potential, as it has shifted power to people, voters, the end user, consumer or employee. If you’re willing and able to listen to those individuals you can unlock a lot of value and power. If you’re not willing to listen…social power has overthrown dictators in the Arab spring, it has punished monopolistic behaviour of banks, made politicians swallow their words and apologise and created serious brand damage to Goldman Sachs when the money obsessed culture went publically viral when an employee was sacked.

On the other hand, I’m also a critic of social. This week Facebook announced their 1 billion active users and 140 billion friends. Friends? Really? Let’s just call them what they are; mostly shallow connections that indeed create a fantastic distribution network. Some say, most of the accounts are fake. Furthermore, the social world doesn’t represent the real world. How many bad pictures did you update on FB? How many times did you share with your social friends that you actually felt like shit? I hardly spend time anymore in LinkedIn groups as in most of them the value of the conversation has gone down dramatically. It’s full of spam. There is also a dark side to social as individuals can easily be targeted in bully campaigns. But then, social is still young and I suppose we’re all still learning, as well personal, within companies and in the end to end value chain.

McKinsey recently valued the social economy up to 1.3$ trillion, due to increased social collaboration within and between companies, which will translate to a 20% to 25% improvement in the productivity of knowledge workers. I believe there is value, but I’m also sceptical. Can you implement a social platform in a company and expect people to start communicating and sharing information more effectively? What about checking if the employees are engaged in the first place? What about checking if there is any cross functional communication or collaboration happening now? If not, you can bet it won’t happen with a cute little social tool in place either. Otherwise a money obsessed company culture becomes a money obsessed social company culture. Where is the value in that? Would Enron have been saved with social?

In the external value chain the possibilities of social are endless if we’re willing and able to listen to suppliers, customers and consumers. In my 2012 S&OP pulse check, participants indicate that only 21% have collaborative planning with customers or supplier integrated in their S&OP process. That means we’re not really listening yet to our closest partners in the value chain. Let alone listening further up or down the value chain. About 1.5 year ago I wrote a top of mind blog
on some social possibilities in the supply chain.

I’m still excited about the prospect of having real time insights in consumers’ needs at the point of purchase. What is their real need? What are they thinking and feeling when they buy your product?

Social makes that possible and more. Still we first have to fix internal company communication to create a value proposition out of that insight and execute any of that social insight effectively. I’m not convinced we’re ready for that, but my hopes are up that social will eventually be the common denominator that crosses the language barriers we have between people, cultures, different functions and businesses. Only then we will unlock the real power of social.

Ps. Lora asked me what it would take for companies to start listening. I’ll answer that in my next blog