четверг, 2 августа 2018 г.

DIGITAL CHAMPIONS


The interlinked platforms that make up Industry 4.0 represent a new kind of challenge for manufacturers and other technology-intensive companies. With four key business ecosystems, they can make this new world their own.

by Reinhard Geissbauer, Stefan Schrauf, and Steve Pillsbury


Most manufacturers, energy companies, and raw materials providers know they face a strategic challenge. Industry 4.0 is coming. Dubbed the “fourth industrial revolution” by World Economic Forum founder Klaus Schwab, this orchestrated system of digital advancement has also been referred to as an industrial renaissance (see “A Strategist’s Guide to Industry 4.0,” by Reinhard Geissbauer, Jesper Vedsø, and Stefan Schrauf, s+b, May 9, 2016). It is emerging from a number of different companies and government initiatives, most notably in Germany, the United States, and China.
In all cases, the promise is the same. The last industrial revolution (known as Industry 3.0) involved the automation of single machines and processes. This new wave of operations integrates every aspect of the value chain in one end-to-end digital platform, using sensors and analytics throughout, incorporating the Internet of Things (IoT), with cloud-based software driving the entire process. Companies can use this new shared smart infrastructure to make their manufacturing and logistics more efficient, to offer innovative products and services, and to keep improving their production on the fly, responding in unprecedented ways to customer and consumer demand.
The benefits are immense, and impressive examples of Industry 4.0 have begun to emerge. The connected industry platform at Bosch Rexroth, a global electronics and engineering company, has set a goal of realizing €1 billion (US$1.2 billion) in savings by 2020 and offering similar sensor- and software-based solutions to its customers. GE Digital, the enterprise that oversees GE’s industrial Internet platform, set a similar target in 2015, aiming to realize US$1 billion in productivity goals by 2020 — a target it reached in 2017. Daimler credits its “smart production” Industry 4.0 initiative with helping it set seven consecutive annual production records for its Mercedes-Benz cars, with all its vehicle models and drive types rolling off the same fully flexible production lines. Li & Fung, which provides logistics and supply chain services to the consumer products and apparel industries, has dramatically reduced time-to-market. For example, its apparel manufacturing clients use the company’s virtual reality environments to see how garments would look on purchasers and rapidly adjust designs. French aerospace and defense components manufacturer Safran, with its “factory of the future” initiative, is approaching growth rates for its four-year-old LEAP turbofan jet engine that the engine’s predecessor, the CFM56, never reached in 20 years of volume production.
Cases like these are noteworthy for two reasons. First, they demonstrate the advantages that manufacturers can enjoy from Industry 4.0: improved pathways for revenue and profit growth, greater customer satisfaction and loyalty, increased operational efficiency, reduced product development cycles, faster scalability, and more gainful supplier relationships (see “Expected Benefits of Being a Digital Champion”). Second, they illustrate the challenges involved in realizing those gains. Industry 4.0 is not a group of technological platforms that can easily be adopted as a purely operational upgrade. It requires a clear strategy and top management commitment; the transformation of key operational activities; and a deep understanding of collaboration, across internal company boundaries and likely with other companies that share the same platforms and technologies.

Many business-to-business enterprises claim to have already adopted this concept. Indeed, in the industrialized world, Industry 4.0 is becoming as essential as lean strategy: If you can’t claim to have mastered it, you may be out of the game. But of companies in the most relevant sectors — makers of automobiles, consumer goods, electronics, and industrial equipment, along with engineering and process industries — only about 10 percent have mastered the strategic, operational, and cultural changes necessary to make Industry 4.0 succeed. We call these companies Digital Champions. By their account, they have used the technologies of Industry 4.0 in a comprehensive way, to consistently and significantly improve their results.
We saw the power of these champions of the industrial renaissance in the last quarter of 2017, when we surveyed more than 1,100 executives at global manufacturing companies, asking them about their digital operations. By awarding points for specific digital capabilities and strategies — a maximum of 40 points for digital ecosystems, 40 points for implementation of new technologies, and 20 points for fostering a digital culture — we were able to place each company on a digital maturity scale, representing the degree to which they had implemented Industry 4.0 and related technologies.
About 22 percent of the respondents’ companies were Digital Novices, employing isolated solutions and applications at the functional or department level only. The lion’s share — 42 percent — ranked as Digital Followers. They practiced vertical integration, a hallmark of Industry 3.0, linking internal functions such as sales, manufacturing, sourcing, and engineering. About 27 percent of the companies were Digital Innovators. They connected their operations to those of external partners and customers, using integrated platforms for collaboration and information exchange. The remaining 10 percent made up the Digital Champions category (see “Digital Maturity by Region and Industry”). One measure of their success is the future orientation in their product mix; Digital Champions already generate, on average, 56 percent of their revenues from digital or digitally enhanced products and services, compared with 35 percent for Innovators, 15 percent for Followers, and only 8 percent for Novices.

Some Digital Champions are household names, among the largest and most accomplished industrial manufacturers in the world. Others are innovative middle-market companies, or startups at the edge of manufacturing practice. They use advanced technologies to raise their levels of product development, production, supply chain management, logistics, and distribution. This gives them more interactive and intimate relationships with customers. Organizationally, they seek to master four business ecosystems: customer solutions, operations, technology, and people (see “Four Ecosystems for a Digital Champion to Master”).


An ecosystem, in this context, is a cluster of vital industrial activities, some inside the organization and some outside, tied together through common digital connections and practices. Each ecosystem is connected to the others through digital pathways that foster sophisticated multifunctional capabilities. Manufacturers that hope to climb the digital maturity ladder can achieve their competitive advantage by orchestrating and integrating these four ecosystems.
Each of the ecosystems is pivotal. None can be ignored. For example, a well-designed customer solutions ecosystem, oriented to understand and respond to market conditions, represents a good first step toward a digitally mature business model. But if that company’s operations ecosystem does not have the requisite capabilities, partnerships, and technology, and does not plan to propel efficiency and effectiveness, it won’t be able to produce its goods as profitably as its Digital Champion competitors do, and its business model will fall flat. If its technology ecosystem is outmoded, or its people ecosystem is unfocused, it will similarly be unable to deliver and compete.
Each Digital Champion has its own form of Industry 4.0 prowess. Some have highly effective go-to-market strategies. Others excel at implementing a transparent and integrated supply chain, or at attracting talented people. But on the whole, Digital Champions distinguish themselves by a continuous effort to improve their capabilities in all four ecosystems and by integrating and orchestrating them.

Customer Solutions: Meeting the Market

This is the ecosystem with the greatest visibility to the outside world. Its activities include defining digitally enabled product and service offerings, attracting customers, and maintaining relationships with customers, directly or through third parties (such as retailers or online channels). In the customer solutions ecosystem, insights about retail shopping behavior and preferences are linked (with software and data analytics) to the development of products tailored directly to customers. Digital Champions tend to have broad, sprawling customer solutions ecosystems, with links to a range of external companies as well as their own internal groups, which might have been connected in only limited ways before. Now they capture and share relevant customer data, gleaning insights that allow them to develop individualized products and services and offer them through a variety of routes to market, such as third-party vendor platforms, e-commerce, retail outlets, and apps.
These joint ventures and informal partnerships with external companies distinguish a customer solutions ecosystem from a vertical, customer-centric product development function. By adding external expertise — often from other companies with deep experience in particular niche or technology arenas — Digital Champions can fill important gaps in their go-to-market strategies. Li & Fung, based in Hong Kong, maintains an Industry 4.0–oriented platform for apparel makers around the world, drawing regularly on its participating companies for data and expertise. On its customer portal, clothing makers and retailers enter designs of new fashions. Its vendor portal hosts suppliers and contract manufacturers, which can immediately produce new collections or replenish existing lines, depending on customer demand, for their customer-facing counterparts. Li & Fung’s customer solutions ecosystem provides dense digital connections among all the companies that use these two portals, generating real-time consumer purchasing and preferences data from stores and other apparel outlets and feeding it back into the supply chain. This enables designers to change product volume and features instantly, numerous times a season. In turn, manufacturers use this data to anticipate new production runs even before they are ordered.
Another customer solutions ecosystem play is the partnership between GE’s Predix — its industrial Internet platform — and Apple. Predix apps are available for iPhones and other iOS devices, allowing industrial customers to write asset tracking and maintenance programs for their handhelds and gain operational mobility. At DuPont, the customer solutions ecosystem enabled a joint venture with Chinese equipment company Hebei Nonghaha Agricultural Machinery Group, created to develop a device that plants one corn seed per mound. General Motors developed a customer solutions ecosystem play around autonomous vehicles and self-driving cars, prototyping a number of experiments with business offerings in this domain, including alliances with ride-sharing companies such as Lyft and fostering a new set of designs oriented toward shared or autonomous vehicles.
Some Digital Champions place themselves at the hub of a customer solutions–oriented platform; all participant organizations communicate directly with the Digital Champion rather than with one another. Apple fits this category, with its huge coterie of app developers creating products and components directly for iPhones and iPads. So does John Deere, which integrates technology and designs from third-party companies into its precision agriculture equipment to help farmers measure the use and performance of water systems, seeds, pesticides, and soil enhancement products. Other companies’ platforms, such as Siemens MindSphere and GE Predix, permit their participants to collaborate more easily.
To facilitate collaborative partnerships, drawing on the widest number of companies and individuals at low cost, Digital Champions deploy open platforms with low-friction networks that make it easy for participating companies to link in their own customer solutions ecosystems. For example, they might tailor products directly to one another’s customers, cross-branding as if they were one enterprise. These applications can generate huge revenue streams and capture customer loyalty. The survey found that 50 percent of Digital Champions have already implemented open, collaborative platforms, and 68 percent offer individualized products and services through portals with enhanced customer experience. It also found that 63 percent go even further with more intricate, data-enhanced integrated partner networks (see “Platform Business Models Used by Digital Champions”).

Operations: Rapid, Relevant Response

The operations ecosystem is the workhorse for Industry 4.0 activity. It includes the day-to-day inputs and outputs that support a Digital Champion in delivering value to customers. Among its functions are the supply chain, product development, innovation, production, logistics, distribution, and post-sales customer interaction. A highly functioning operations ecosystem can create benefits that have previously eluded manufacturers. For supply chain planning and execution, it can greatly improve efficiency and product customization by adjusting the pace of production to match real-time customer demand. For research and development, it coordinates a network of internal functions, suppliers, academia, researchers, and sourcing and logistics specialists. For manufacturing, this ecosystem vertically links and automates factories (owned by the Digital Champion or contracted out) and connects the shop floor directly to supply chain and customer demand activities.
Companies with a high level of digital maturity can design their operations ecosystem to respond more rapidly and interactively to the customer solutions ecosystem. As demand changes for products or services, the operations ecosystem continually adjusts. Suppliers or factories may be needed in new regions; warehouses and parts management may require more flexibility to deliver on accelerated just-in-time schedules; and innovative logistics partners may be added. Even if much of this happens automatically, it is critical to regularly reevaluate the operations ecosystem against performance metrics and capability requirements, drawn from the customer solutions part of the business model.
The Digital Champion Bosch Rexroth has mastered the operations ecosystem for, among other product lines, its hydraulic valves used in agricultural equipment. In one of the company’s most advanced plants, in Homburg, Germany, customized orders are assigned to a manufacturing line with a special feature: Products guide themselves through the assembly stations with the help of RFID chips. The nine intelligent stations on the line recognize how the finished product has to be assembled and thus which operational steps are necessary. Displays show workers the corresponding instructions for any of the more than 200 versions of the component that is to be processed. The assembly line integrates the human, the product, and the machine in a system of flexible mass production.
An interactive cockpit oversees the Bosch Rexroth effort, tracking key performance indicators related to the manufacturing process, along with the quality of the assembly. The cockpit collects all relevant data from the connected production facilities, updates them dynamically, and makes them available in real time.
This approach allows the company to match products to customer specifications so that the products are tailored for use in particular agricultural environments, while maintaining the speed, scale, and cost efficiency of mass manufacturing.
With the launch of its Nexeed software and service portfolio for industrial Internet applications, Bosch has pooled all its Industry 4.0 activities to support customers in connecting the value chain from end to end and integrating it into an operations ecosystem. Nexeed represents an entry point into the connected factory, tailored to customers’ needs. It allows individual lines to be combined, and interconnects factories and plant networks, including their internal and external logistics. A variety of apps and software solutions support workers in their daily tasks. Relevant manufacturing data is more quickly accessible to employees through their mobile devices; this ultimately leads to greater machine availability in production. Internal transport processes and flows of goods outside the company can be seamlessly monitored and traced back. Workers are kept informed of the location, condition, and delivery time of goods. The result is increased productivity and agility, which boosts competitiveness.
With an operations ecosystem of this sort, a company can gain at least five significant benefits.
• Transparency: It has a complete end-to-end view of the value chain.
• Real-time data sharing: All the participating departments and companies can see the same information simultaneously.
• Extended collaboration: Operational links develop organically with trusted partners (such as suppliers), becoming deeper and more synergistic over time.
• Responsiveness and flexibility: Companies can respond instantly to changes in end-user demand; they can shift plans easily and execute those changes promptly.
• Connectivity: Product life-cycle management, supply chain management, and customer information are all integrated seamlessly.
We analyze how advanced a company’s operations ecosystem is in two ways. First, we assess the manufacturing process, emphasizing the degree to which production is automated and transparently connected across the company’s own plants, along with partnering manufacturers, suppliers, and logistics channels. Ideally, all of the ecosystem’s elements are exchanging data continually and acting on it in real time. This approach is so advanced that only 5 percent of the companies we interviewed, including only 33 percent of Digital Champions, had adopted it. Digital Champions score better when it comes to linking their factories with some form of integrated digital connection; almost half of them have done this, whereas most of the companies we interviewed — about two-thirds — have just selectively automated single factories.
The second way to assess operations ecosystem capabilities is by measuring supply chain integration. Digital Champions are well ahead of other companies in this respect. More than 80 percent of Digital Champions have at least near-real-time, end-to-end integrated networks with supply chain partners that offer full collaboration and visibility among the companies involved. This customer-driven supply chain lets participating companies quickly assess the impact of potential changes in demand and resolve any constraints that would hinder a rapid shift in production and distribution schedules. Among the companies surveyed, only 27 percent have reached this high level of digital supply chain mastery.

Technology: Incessant Innovation

Because the customer solutions ecosystem determines the company’s business model, and the operations ecosystem organizes its most complex capabilities, many business strategists seem to feel they have their hands full with just those two clusters. They tend to regard the technology ecosystem as being made up of more routine functions, to be delegated to service bureau–style departments. But that is a mistake. The technology ecosystem consists of activities embedded throughout the organization in every business entity, all linked together. They include established enterprise applications such as resource planning, customer relationship management, financial analytics, and cybersecurity, along with applications tailored to new platforms and revenue streams. Digital Champions gain a back-office performance edge from this ecosystem because they incorporate latest-generation technology: advances in cloud storage and collaboration, data analytics, human–machine interfaces, customer and employee experience, and hardware and software integration.
In designing and implementing this ecosystem, Digital Champions are risk takers with discipline. They insist that their business strategy should determine which technology they adopt, while continually keeping up with digital advances that have the potential to enhance strategy, particularly involving speed, flexibility, customization, and efficiency.
Rather than having a “not-invented-here” bias toward homegrown and stand-alone systems, Digital Champions readily form partnerships with outside companies, including vendors and other users of platforms, hardware, and software, to more quickly implement new digital applications without redesigning the wheel. These attributes undoubtedly play a role in their impressive track record as innovators: More than 90 percent of the Digital Champions among our survey respondents said they were planning, prototyping, or already implementing advanced technologies such as robotics, digital twins (real-time simulations of on-the-ground operations), and the industrial IoT. The comparative figures among Digital Novices were below 40 percent.
Intriguingly, Digital Innovators, the group just below Digital Champions on the digital maturity scale, foresee revenue gains of nearly 20 percent, outpacing Digital Champions. We suspect that this figure reflects the fact that Digital Champions have already enjoyed initial revenue bumps from technology investments, whereas Digital Innovators are a step behind and will probably reap these benefits over the next few years if they adopt Digital Champion strategies soon.
One company that has made its technology ecosystem a centerpiece of its business model is Austria’s Magna Steyr, which manufactures vehicles for other automakers, often when sales fluctuate and flexible manufacturing is needed. Its portfolio has included Mercedes G-Class, BMW 5 series, and the Jaguar E-PACE and I-PACE. With this product mix, Magna Steyr is the only vehicle contract manufacturer to produce the whole band of powertrain technologies — from the internal combustion engine to plug-in hybrids to pure electric vehicles. Because Magna essentially operates a dozen or so assembly schemes for different vehicles on a single line — an approach that many automakers are still struggling to perfect — the company has had to develop factories that are completely agile. Otherwise, profitability would be impossible, as some original OEMs have discovered with their low-volume models.
Magna has overcome this agility hurdle by introducing a steady stream of Industry 4.0 digital innovations, combining them to continuously upgrade the performance of its plants. Among the technologies is a digital cockpit that produces a digital twin simulation and monitors assembly-line performance for each vehicle. Adaptable robots with AI that can recognize each vehicle and determine assembly steps instantaneously guide the cars through the manufacturing lines. An in-line quality control function checks the assembly operations against real-world expectations in each step of the process so that quality isn’t weighed only at completion, when a great deal of time tends to be wasted in the auto manufacturing process. And manufacturing data analytics are adjudged by learning machines that can alter the assembly process on the basis of new conclusions culled from prior vehicle builds.

People: Culture of Competence

As the latest industrial renaissance unfolds, there will be an increasing need for skilled workers. Some will need to configure and operate complex equipment and others to program it. All will need to make quick decisions in response to shifts in product lines, designs, and input from a range of partners. Digital Champions thus invest heavily in training and on-the-job skill development. They have also succeeded in (or at least are moving toward) building a digital culture in which people throughout the hierarchy have a high level of competence. They have mastered not just the tools of Industry 4.0, but the judgment needed to deploy those tools effectively in the service of strategic business goals. They understand the ways in which their own efforts fit into the overarching goals of the customer solutions and operations ecosystems, and thus into the organization’s rapidly evolving strategy.
These facets of the business, involving recruitment, training, workplace design, incentives, and a context for collaborative effort, represent the core of the people ecosystem, which is essential to making sure that the other three ecosystems operate at peak levels. Organizations that employ their people ecosystem to the greatest benefit have traits in common in four key categories.
• Skills: Workers can handle diverse challenges. They can turn rapidly to new tasks, learning on the job. The organization has strong capabilities in data analytics, human–machine interaction, and technology-supported decision making. There are formal pathways for increasing the workforce’s digital IQ.
• Mind-set and behavior: The organization has a digital mind-set and vision; it welcomes entrepreneurship and new leadership styles; it is open to new technology; it learns from failure; it is creative, innovative, and generally curious; it embraces a nonhierarchical, “best idea counts” mentality; and it puts a premium on rapid decision making.
• Talent sources: The company relies on cross-functional teams to drive digitization and eliminate silos. These teams are highly integrated, made up of people who work for the company mixed with employees at partnering companies; with freelancers from hackathons and accelerators; and with people from digital agencies, research institutes, and universities.
• Career development: The organization supports its people ecosystem with a variety of unorthodox appraisal, incentive, and compensation schemes that reward innovative and smart digital ideas; flexible work arrangements and telecommuting when appropriate; free time to support continuous improvement of company operations; career models that reflect the value of digital expertise; and real-time employee feedback.
As the need for skilled labor increases, it will be crucial to develop new ways of acquiring talent — often individuals educated in science, technology, engineering, and math — as well as tailored training programs in digital concepts and capabilities. To some degree, this will result in higher salaries for people with the right skills; high pay provides an incentive for employees to continually refine and improve their skills throughout their career, taking advantage of Digital Champions’ strong support for lifelong learning.
Companies with effective people ecosystems embed the IT workforce into the customer solutions and operations ecosystems. This is a sharp departure from the traditional approach, in which IT is made up of a group of isolated specialists, separately owning all technology assets and delivering services, often inefficiently, to line businesses. The people ecosystem model enables the technology ecosystem to deliver IT solutions that address precisely what the business needs when it needs it. It also fosters data-driven decision making on all levels, because people understand how to incorporate sophisticated tools into their work practices.
In our survey, Digital Champions excelled at developing digital culture. Of the Champion respondents, 59 percent have invested heavily in training to upgrade staff for digital transformation; 52 percent regard failures as an accepted part of the development process (an attitude that encourages experimentation with new ideas); and 52 percent have flat hierarchies and quick decision-making processes.

Becoming a Digital Champion

The relatively small number of Digital Champions suggests how difficult it can be to master the four ecosystems, especially for an incumbent company without a digitally oriented culture. Start by moving in several directions at once: developing ecosystem-specific capabilities while driving integration across all four ecosystems. Here are six proven steps to accelerate your efforts.
1. Conduct an ecosystem assessment. This should look closely at the state of the company’s products and services, its customer satisfaction levels, its operational capabilities, the relative value of its technology, and the skills of its people. Assess each as if you were studying a competitor, which can help shine a light on your organization’s shortcomings. Consider your external challenges. How equipped are you to meet new market developments, competitors’ moves, shifting customer expectations, regulatory changes, and technological advances? Think about the art of the possible: digital strategies based not on past constraints but on new capabilities. What can you offer now that you couldn’t before, thanks to changes in technology, better understanding of consumer behavior, and opportunities for collaboration with external partners?
2. Define a vision of what the organization can become in this new world of Industry 4.0. Using the results of the first step, decide where to position your business, which value propositions to present to customers, and how to deliver your individualized products and services. What can you offer that can be tailored to individuals, or that competitors can’t match?
3. Develop an integrated operations model. It should span all four ecosystems and enable you to work effectively with external strategic partners. Focus first on the customer solutions ecosystem, identifying the best potential partners and the capabilities you will need (for example, in marketing analytics or product research and development). Determine which are already available internally, which to develop through partnerships, and whether to make or buy the rest. With these choices made, design the operations ecosystem. Then, build out your technology and people ecosystems to enable the first two ecosystems. In your design, specify the interfaces, interdependencies, connections, technology, and data links that will ensure seamless interaction among all the ecosystems.
4. Establish an ecosystem governance, investment, and decision board. This board should set priorities and key milestones, review and approve design and implementation outcomes, make investment decisions, and oversee results.
5. Continue to build out the ecosystems, starting with the strengths you already have. Design and implement ecosystem capabilities through rapid, fluid, project-based team efforts — similar to those used in agile software development. This step should include creating collaboration models for connecting and sharing operations among partners; vendors; organizations such as factories, logistics providers, or contract manufacturers; advisors; ad hoc workforces; permanent employees; and short-term and long-term relationships. These models can be implemented as prototypes and pilots, then adjusted before subsequent ecosystem elements are rolled out. After each successful rollout, link the element to relevant aspects of the other ecosystems.
6. Take full advantage of the new value chain. After the four ecosystems are in place, implement practices to make the most of the changes. These include close monitoring of the new approaches, focusing on the levels of growth, performance, productivity, and continuous improvement. As the ecosystems evolve, reinvest in the continued growth of the four ecosystems model.
These steps can represent a few years’ worth of activity in some companies. Even a Digital Champion typically has a lot of distance left to travel before the company can claim to be an Industry 4.0 leader. Indeed, only about half of the Digital Champions we surveyed said they had effective strategies for the full range of fundamental Industry 4.0–related activity. The depth of commitment required to become a Digital Champion can be daunting. But the consequent improvements in efficiency, speed, product development, creativity, customer response, and revenue show that achieving higher levels of digital maturity is worth it.

Author Profiles:

  • Reinhard Geissbauer is a partner with PwC Strategy& Germany, based in Munich. He is global head of the Digital Operations Impact Center and head of the digital operations EMEA leadership team.
  • Stefan Schrauf is a partner with PwC Strategy& Germany, based in Düsseldorf. He is the EMEA co-lead for digital operations and lead for global digital supply chain solutions.
  • Steve Pillsbury is a principal with PwC US, where he heads the PwC North America digital operations team and serves as the U.S. lead for the PwC Digital Operations Impact Center. He is based in Chicago.
  • Also contributing to this article from PwC Strategy& Germany were Evelyn Lübben, principal and project lead of the study; Phillipp Bertram, principal; Judith Schneider and Farboud Cheraghi, managers; and s+bcontributing editor Jeffrey Rothfeder.





среда, 1 августа 2018 г.

The Rise of the Last-Mile Exchange


Keeping up with the growing volume of e-commerce will require delivery companies to disrupt their long-standing business model.



Park yourself at a typical residential intersection in the U.S., and you’ll watch a parade of delivery vehicles pass by over the course of the day. Trucks from FedEx, UPS, and the U.S. Postal Service (USPS) crisscross neighborhoods, retrieving and delivering packages, sometimes more than once. Increasingly, they are joined by trucks from regional shippers such as OnTrac or LaserShip, as well as by unmarked vehicles with non-uniformed drivers, who drop off packages for companies including Walmart and online startups such as Roadie, Doorman, and Sidecar. Soon, fleets of vans bearing Amazon’s logo, operated by independent companies, will be joining the mix.
The rising pace of activity along what’s called the last mile of the retail sales chain reflects the boom in e-commerce. According to the U.S. Census Bureau, e-commerce accounts for about 9 percent of total retail sales, and is growing at a double-digit clip. The number of packages delivered annually in the U.S. is expected to rise from 11 billion in 2018 to 16 billion by 2020, according to estimates from Strategy&, PwC’s strategy consulting business. B2C deliveries, generated mainly by e-commerce, account for more than half of today’s volume, and will make up two-thirds of volume by 2020. In many ways, this seems like a sunny story all around. Consumers have more shopping choices than they have ever had, and their online purchases are delivered faster than seemed possible just a few years ago. Retailers can reach many new customers, and are better able to serve existing customers with faster and more flexible distribution chains. Transportation companies are riding a powerful wave of new demand for their services.
But all this growth brings some peril. Retailers and transportation companies alike are facing challenges in this fast-changing marketplace. Both sectors are at risk from Amazon. The company is the behemoth of the e-commerce boom, with 100 million Amazon Prime members, and accounts for 25 percent of all U.S. packages today, on track to reach 50 percent by 2020. With a vertically integrated network that provides inherent advantages, Amazon is positioning itself to dominate both the retail and the transportation sides of the business.
A second threat to retailers and transportation providers is more systemic. The traditional ways of managing the delivery of packages — with hub-and-spoke ground networks, massive regional distribution facilities, and fleets of vehicles — were designed to optimize long-distance, intercity shipping. As a result, they are not well suited to the emerging realities of expanded e-commerce, in which the trend is increasingly local (trips of less than 50 miles are growing at a 25 percent annual rate). Furthermore, transportation companies struggle to accommodate fluctuations in last-mile demand. Peak shipping volume in December, for example, is more than 25 percent higher than in September, which causes shippers to scramble to hire tens of thousands of temporary employees and add capacity every year. Daily swings can be far higher; volume on some days in holiday seasons is an order of magnitude higher than the daily average.
Meanwhile, new delivery approaches — such as stores hiring their own delivery personnel and startups crowdsourcing delivery vehicles and drivers — can operate effectively only on a very local basis, and they gain few advantages by building scale geographically.
For all these reasons, devising a better solution to last-mile delivery will be the next major battle in e-commerce supremacy. To compete effectively against Amazon’s advantage, retailers and transportation providers will need to develop a way to better coordinate and more accurately match demand for the delivery services they can profitably supply on a given day.
The solution is to build a “last-mile exchange” platform that drives delivery decisions, and, crucially, allows retailers and transportation providers to collectively shape delivery demand and adjust continually to the inherent variability of the last mile. Such an exchange could deliver a win for consumers, retailers, and transportation providers. FedEx and UPS are the companies best positioned to disrupt their own business and create this new paradigm. Each could bring a significant share of the overall transactions to the platform. And each has a great deal to gain by evolving from a commodity provider with large fixed costs into a nimbler player that can compete against Amazon, aggressive regional players, or upstarts working out of the proverbial garage.

The Last-Mile Dilemma

The difficulty of delivering merchandise in a cost-effective way on the last mile of the retail sales chain has bedeviled e-commerce from its beginnings. Hazards in the last mile killed off many of the Internet startups in the late 1990s and early 2000s, such as Webvan (see “The Last Mile to Nowhere: Flaws & Fallacies in Internet Home-Delivery Schemes,” s+b, July 1, 2000). But despite the growth and evolution of e-commerce since then — along with the advent of smartphones, apps, and improved connectivity — the fundamental economics of the last mile haven’t changed. Profitability remains highly dependent on two key factors: (1) the transportation provider’s route density — how many packages can be delivered on a given delivery run, and (2) the drop size — how many packages or items are delivered at each stop.
Consider your own experience as an e-commerce consumer today. If you receive one package with a new thumb drive from the USPS on Tuesday morning, a package of beauty supplies from FedEx a few hours later, a book delivered by UPS on Wednesday, and a box of groceries from Walmart on Friday, it’s easy to appreciate the inherent inefficiencies in these four delivery trips. Imagine, instead, that a transportation provider could deliver all four of those packages from one truck, in one trip, at one time. Efficiency would soar, and per-package shipping costs would be roughly 50 percent lower, which could result in lower costs for consumers and higher margins for retailers, transportation providers, or both.
It’s clear that traditional legacy couriers such as FedEx, UPS, and the USPS (which is both a public-sector competitor and a partner, because FedEx and UPS, along with Amazon, offload a significant percentage of their last-mile deliveries to the postal service) are being pressured to keep up with demand. Historically, as in manufacturing, building scale was the primary lever for lowering last-mile costs. But today, the rising tide of e-commerce threatens to swamp the biggest commercial ships. The more that big retailers such as Amazon, Walmart, and Target ship, the deeper the per-parcel shipping discount they expect. Legacy couriers have also been slow to utilize peak pricing; their revenue is typically tied to annual contracts with fixed prices. And declining margins make it hard to justify the last-mile investments needed to keep pace with growth.
Most responses to date have been reactive. OnTrac and LaserShip have grown rapidly by targeting smaller retailers (historically the more profitable customers) with offerings in high-volume service areas that are mispriced in a national network. Other players in the e-commerce marketplace are attempting to make the delivery–supply component of the cost equation more flexible. Crowdsourcing personal vehicles and delivery personnel is one way to offset the “fixed” nature of traditional transportation providers by matching delivery demand with more variable supply. Walmart has tested a variety of solutions, including curbside pickup (“click and collect”) as well as an “associate delivery” service, in which employees can opt in to deliver consumers’ purchases, using their personal vehicles, on their way home from work.
Target was so concerned about the last mile that in late 2017, it paid US$550 million for Shipt, a crowdsourced provider that was less than five years old. Amazon is leveraging its acquisition of Whole Foods to combine grocery with other e-commerce package offerings in order to increase route density. Not to be outdone, Walmart is adding “pickup towers” to 500 of its U.S. stores in 2018 to concentrate demand into a single delivery point. These automated delivery hubs hark back to a concept we profiled more than 15 years ago (see “Oasis in the Dot-Com Delivery Desert,” s+b, July 1, 2001), in which players developed solutions to aggregate online purchases in secure neighborhood drop boxes instead of individual homes. Most of the startup ideas failed in the United States. But DHL has 3,000 “Packstations” throughout Germany, and about 90 percent of the German population can get to one within 10 minutes. Similar third-party delivery point concepts can be found in countries including Costa Rica and Latvia.
The difficulties of managing demand on a given day — which is especially evident at peak times such as Black Friday and holiday seasons — are built into the current e-commerce ecosystem. Transportation providers typically don’t know about a purchase until well after the online shopping cart transaction is complete. (How often have you tried to track a package on the FedEx or UPS website only to be informed that the shipper is awaiting information about the purchase?) Information is often siloed in the retail companies themselves, within order management, inventory management, and shipper transaction management systems — forcing delivery information later in the process.
When retailers have sales campaigns that create shipping surges, they don’t necessarily communicate the surging demand to their transportation providers. And even though shipping peaks can be massive for both retailers and transportation providers, the two players are independently guessing what the volume will be. As a result, retailers often place tremendous pressure on fulfillment and shipping resources.

Building a Last-Mile Exchange

The solution to this problem is a last-mile delivery exchange that connects consumers, retailers, and transportation companies via a digital platform. It could solve many of the difficulties challenging the e-commerce ecosystem today and produce benefits for consumers, retailers, and the package delivery providers, yielding improved convenience, transparency, efficiency, and cost savings. Such an exchange would create a path forward through the disruption caused by increasing consumer expectations, advances in technology, the emergence of new entrants, and the rise of the sharing economy [see the 2016 PwC report “Shifting Patterns: The Future of the Logistics Industry” (pdf)].
The exchange would effectively flip the script. Rather than react to demand and respond to others’ decisions, transportation companies and retailers could engineer demand earlier in the sales process and dynamically balance supply and demand, much as Uber uses surge pricing to encourage more drivers to work during times of peak needs in peak locations. Such a platform designed for e-commerce package delivery would need to be multisided, involving both retailers and last-mile transportation providers. Instead of passing on information from point to point in a linear fashion, it would need to dynamically share data among all the players. The exchange participants would need to have sophisticated algorithms that help them decide how much to bid to deliver a given package to a particular location on a particular day at a particular time. For example, assume a carrier already has a planned delivery of a dress from Nordstrom to a home in Dunwoody, outside Atlanta. That carrier could offer a great price to deliver an additional package to the house next door (from Nordstrom or another retailer) and an even better price for another delivery to the same customer. Accordingly, Best Buy might be willing to offer a discount on a television with excess inventory in Atlanta.
The last-mile platform would need to connect the retailers’ order management and inventory data with package and delivery resource data in real time. Because sending data from mainframe to mainframe will no longer be feasible, a cloud-based ecosystem would be optimal, pooling package data, resource availability data, and analytics with insights, and featuring dynamic optimization of pickup and delivery routes. Drawing another parallel, such a platform would need analytic sophistication comparable to that of the ecosystem that supports Google’s AdWords, which auctions key search terms billions of times each month to ensure the maximum value for both advertisers and consumers on Google’s search platform. Data security — including consumer privacy, protection of proprietary company data, and transaction security — would be critical. This strategy would pay multiple dividends.
Consumers would benefit from seeing direct shopping incentives and options at the initial point of sale. And they would receive indirect shopping incentives because retailers would pass through shipper offers of lower-cost shipping on days when delivery demand is low. Consumers would generally also have more visibility into, and more interaction with, the entire delivery process.
Retailers would benefit from the power of aggregation, keeping their own online storefronts and identities but offering more and better shipping options through the last-mile exchange that would rival the experience that Amazon provides. Their shipping costs would fall.
Legacy couriers would build more flexible and efficient networks. Supply chains at FedEx and UPS are already highly optimized to deal with the fixed constraints designed into their existing networks. But the last-mile exchange would empower them to meet the challenge of managing supply chain costs despite the inherent variability in e-commerce volume growth. They would be able to see demand fluctuations earlier in the e-commerce sales process and shape demand with incentives, dynamic pricing, and real-time matching of resources. They could, in effect, reframe the problem to better design and utilize their fixed delivery fleets — minimizing the need for multiple trucks delivering packages on the same streets in a given time frame. (They might even create a secondary market swapping packages between networks to eliminate such redundant coverage.)

Disrupt Yourself

Although the proposed exchange may seem theoretical and futuristic, there is every reason for companies to act now to make it a reality.  E-commerce volume will continue to boom, and the challenges facing transportation companies will become more serious. Consumer expectations have been reset since 2005, when Amazon introduced free two-day delivery for Amazon Prime customers. And expectations continue to escalate. Consumers now see two-day delivery as the default, and increasingly expect their purchases to arrive the day after they place their orders, or even on the same day. Just a few years ago, transportation companies were delivering packages only five days per week. UPS moved to six-day delivery in 2017. Amazon began arranging Sunday deliveries through a deal with the USPS in 2014 — and it’s inevitable that the entire package delivery business will move to a routine seven-day delivery cycle before long. The last mile of the retail sales chain will likely become even more crowded with more competitors.
The current e-commerce trajectory is pointing toward a future in which FedEx, UPS, and other transportation companies become commoditized players in a game whose odds favor other players. But acting now would enable companies to alter this trajectory. Creating a last-mile exchange would fundamentally disrupt the last-mile delivery business by addressing demand in a more sophisticated way. FedEx and UPS, as noted earlier, are best positioned to be the disruptors. Their significant shares of overall transactions, as well as their huge resource bases and highly evolved delivery capabilities, give them the stakes they would need to place such a large bet. It’s also possible that a consortium of retailers and transportation providers could band together to create an exchange. The specific details are also likely to evolve as blockchain technology becomes accepted more widely.
Finally, although consumers and retailers will see significant benefits if e-commerce delivery becomes more efficient, solving the last-mile dilemma may well be an existential challenge for transportation companies. Creating a new last-mile exchange would enable them to shape a future that would be more favorable to them.

Author Profiles:

  • Tim Laseter is a managing director at PwC US, and an advisor to executives for Strategy&, PwC’s strategy consulting business. Based in Arlington, Va., he is also a contributing editor of s+b, and a professor of practice at the University of Virginia’s Darden School. He is the author or coauthor of four books, includingInternet Retail Operations.
  • Andrew Tipping leads the U.S. transportation team for Strategy&. Based in Chicago, he is a principal with PwC US.
  • Frederick Duiven specializes in advising transportation clients on growth strategies for Strategy&. Based in Arlington, Va., he is a director with PwC US.

пятница, 27 июля 2018 г.

10 мифов про нетворкинг


Рассмотрим 10 мифов про нетворкинг. Именно из-за существования предубежденности, многие люди опасаются новых знакомств, разочаровываются в нетворкинге и отказывают себе в удовольствии общения. Какие же причины являются барьерами на пути установления полезных контактов?

1.    Обмен визитками расширяет сеть контактов

Визитная карточка это лишь инструмент нетворкинга. Она служит для упрощения обмена контактами и помогает в дальнейшем напомнить о состоявшемся знакомстве. Простой обмен карточек ещё не гарантирует, что вы можете назвать нового знакомого бизнес-партнером или другом. Если не сделать следующий шаг для развития вашего знакомства, то в дальнейшем даже не сможете сказать, что знакомы. Вас просто не вспомнят. Придется знакомиться заново...

2.    Завести полезные контакты можно только на нетворкинг-встречах

Никогда не знаешь, где встретишь интересного человека, который окажется полезным. На специальных нетворкинг-встречах люди более расположены к знакомству, но и на любых деловых мероприятиях есть прекрасная возможность встретить нужных людей. Кроме того, случайное знакомство на выставке, в театре, в самолете, или в компании общих приятелей может открыть возможности, которые вы искали долгое время.

3.    Достаточно лишь познакомиться

Первое знакомство это лишь начальный шаг в развитии отношений. Серьёзные проекты не делаются со случайными людьми. Нетворкинг характеризуется частой встреч и глубиной общения. Чем чаще вы попадаете в поле зрения своего контрагента и чем неформальнее  коммуникация, тем ваши отношения крепче. Так вы можете рассчитывать на помощь с большей вероятностью.

4.    Знакомиться нужно только с вышестоящими людьми

Безусловно, руководители и топ-менеджеры компаний - это ценные контакты. Но зачастую установление и поддержание знакомства с ними требует больших ресурсов. Вместе с тем, принятие конечных решений в компаниях может быть делегировано подчиненным, руководителям отделов и направлений. С ними вы можете решить свои задачи гораздо проще. Не пренебрегайте общением с менеджерами среднего звена. Даже знакомство с секретарем или помощником сослужит вам хорошую службу: записаться на прием или узнать какое мероприятие планирует посетить начальник - откроет для вас отличные возможности для дальнейшего личного контакта и презентации.

5.    Нетворкинг нужен для того, чтобы что-нибудь продать

Приемы нетворкинга часто используются для расширении сети клиентов. Специалисты млм успешно применяют навыки коммуникации для повышения продаж. Но это далеко не единственная возможность нетворкинга, и уж точно не его основная цель. Развитая сеть контактов помогает решать как вопросы бизнеса, так и бытовые: устроить ребёнка в детский сад, обойти бюрократические барьеры, найти качественного специалиста, например, фотографа или парикмахера. Кроме того, новый знакомый может стать вашим единомышленником, партнером, ценным консультантом и даже другом.

6.    В нетворкинге люди используют друг друга

Опасное заблуждение рассматривать новые контакты только в своих меркантильных интересах. Нетворкинг - это процесс установления и поддержания новых знакомств. Но если вы начнете строить этот процесс только в одностороннем порядке, то результата просто не будет. Ведь для знакомства и общения двух людей необходимо согласие и желание обеих сторон. В нетворкинге часто встречаются модели взаимопомощи по принципу «win-win», а нередки и случаи альтруистической, односторонней помощи в виде менторской поддержки, консультации, предоставления ресурсов, имеющихся в избытке.
Если человек пытается использовать тебя в своих целях, вычеркни его из списка своих знакомых. Дейл Карнеги

7.    Если я буду кому-то нужен, меня найдут сами

Надеяться, что вы станете незаменимым человеком в реализации чьих-то планов - самоуверенно. В окружении вашего контрагента кроме вас может быть несколько профессионалов с похожими компетенциями и опытом. Если к тому же вы не знакомы лично, то рассчитывать на выгодное предложение с его стороны сложно.

8.    Старый друг лучше новых двух

Новые цели, проекты и идеи требуют свежих ресурсов. Может оказаться так, что среди ваших знакомых нет таких людей, которые обладают необходимыми возможностями, чтобы помочь вам. Либо их профессионализм ниже, чем вы могли бы получить от другого человека. Кроме того, у прежних знакомых могут измениться интересы и мотивация. Если вы постоянно задействуете одних и тех же людей, их ресурс истощается, а ваши просьбы начинают казаться навязчивыми. Расширение круга связей даёт вам источники новых знаний и возможностей.
Ученые считают, что знакомства формируют новые нейронные связи. Таким образом, с каждый новым контактом вы дополнительно «прокачиваете» свой головной мозг.

9.    Чтобы заниматься нетворкингом нужно много времени и сил

Нетворкинг - это работа в долгую. Нужно уделять время и прилагать определенные усилия для  выстраивания отношений. Но это не так много, как может показаться на первый взгляд. С кем-то полезно встретиться раз в месяц, кому-то изредка позвонить или написать сообщение, а кого-то достаточно поздравить раз в год с днём рождения. Уделяя ежедневно несколько минут своим связям, вы инвестируете в укрепление сети контактов. Эти усилия в нужный момент окупятся сторицей.

10.    Нетворкинг не работает

Некоторые люди, не получая мгновенного результата, разочаровываются в нетворкинге. Рассчитывать, что абсолютно каждый новый контакт решит какую-то вашу проблему - наивно. Самое частое разочарование испытывают люди, рассчитывающие на одностороннюю помощь от других людей. Нетворкинг в дословном переводе (net - сеть, work - работа). Поэтому, если вы не прилагаете никаких усилий, то невозможно надеяться на положительный результат.
Мы рассмотрели лишь 10 мифов нетворкинга, хотя предубеждений в вопросах построения сети полезных контактов гораздо больше. Но пусть вас это не пугает и не останавливает. Знакомьтесь, общайтесь и будьте сильны своими контактами!
Дружите по-деловому!
Алексей Бабушкин, эксперт по нетворкингу 
Источник — блог networking24