I interviewed Ulises Pabon, a seasoned business concept innovation expert. He shared his thoughts on creativity in the supply chain. He explained the difference between optimization and innovation and expounded upon how companies are implementing new designs to complement strategic and changing business models. He says that supply chain innovation is like reinventing the business model, and finding creative ways to do it is the nature of the game. Eliminating Waste v. Creating Value.
“You won’t necessarily get what you want by fixing what’s wrong. That’s optimization. But innovation is knowing what you want and designing for that future state.”
Innovation vs. Optimization
Ulises Pabon elaborated on the differences between supply chain optimization and supply chain innovation. Even though they may complement one another, integrate well together and serve similar goals, there are some conceptual differences between optimization and innovation. Pabon explained that optimization has more to do with eliminating waste through redesigning or reconfiguring the players or components in the supply chain. It can mean negotiating and coming to an agreement with the players to, for example, reduce transactions or eliminate x amount of the packaging from the raw material, so that less resources are used.
Innovation is primarily concerned with creating new values, said Pabon. Rather than determining where the waste is and how to eliminate it, innovation focuses on adding value to the supply chain. The people who are involved in innovative strategies and deployment look at the entire business model with the intent of inventing new configurations. Pabon provided an example: an airplane tire manufacturer, rather than focusing on how to best sell its tires to airlines by searching for an appropriate distributer, might contact the airlines directly, offer the tires for free and charge for usage per landing. This is an innovative business model that will increase the manufacturer’s profits.
Reinventing Business Models
There are many examples of innovative business practices. Some might go unnoticed by all but a couple of the most proximate players, others make headlines in business news. One example of the latter is Starbucks. Rather than looking at the traditional way of typing players along a channel, they devised an entirely new business model. “We could argue that what Dell did to the PC business would be another example of a company that has reinvented the supply chain,” says Pabon, “as is Apple.” He points out that nobody would have expected Apple to become the number one music retailer in the world, since they were thought only to be a computer company. But with the combination of iTunes and iPod they pretty much reinvented the whole business, and they didn’t do it by optimization or cutting corners.
According to Pabon, there is a design principle that comes into play when performing business innovations: you won’t necessarily get what you want by fixing what’s wrong. Fixing what is wrong is akin to optimization strategies, whereas the strategy of innovation aligns itself with new states, techniques and inventions.
There is nothing at all wrong with fixing what isn’t working, says Pabon. It is most likely well worth the effort. But it’s very important to look at the supply chain as a whole, especially the value chain, and to attempt to identify ways to reconfigure those players in a profitable way.
Other Ways to Be Innovative
“There is no universal template on how to approach innovation,” said Pabon. However, one promising plan of action might be to get away from the desk and go explore the components of the supply chain; meet the players face to face and listen to their concerns. In a global economy, it’s difficult to understand the players by looking at spreadsheets or PowerPoint presentations. Things become much clearer when you visit in person; you can see for yourself how raw material is being transported and transformed along the value chain.
Pabon offered another tip for engaging in strategic innovation, one that is more subtle: he suggested observing beyond what the customer is saying and assessing the more passive needs. This might not be easy, but often times new configurations can arise based on what is difficult to verbalize. He draws a parallel to a book “Drawing on the Right Side of the Brain”, which teaches students a new methodology - how to see the space between objects. By focusing on and identifying with the space between form, you can see the form more clearly and in a different light.
It’s important, of course, to sustain the standard methodologies as well, such as tracking how value is moving throughout the supply chain, but creativity or design thinking can be invaluable.There’s no single recipe on how to innovate; many companies are experimenting in a variety of ways, which is essentially the nature of the game.
About Ulises Pabon
Ulises Pabon is an expert in total quality management and organizational change. He began his career in electronics engineering and manufacturing and has served as the chief operations officer for QBS, Inc. since 1992. QBS, Inc. is a broad-based management consulting firm that integrates professionals from a variety of disciplines, from engineering to economics to psychology, to assist organizations in an overall revamping of their value proposition or business model. Ulises’ specialties include business concept innovation and management systems, creativity and disruptive innovation tools, process and organizational design, economic development initiatives, balanced scorecard implementation and personal development tools.