By Michael Martin, Vice President, Strategic Development, Global Automotive, DHL Supply Chain.
Even in today’s globalised world, most automotive companies still conduct business as separate entities that interact transaction by transaction. Relationships are “us versus them” – with winners and losers. That worked in the past. Not anymore. Globalisation, and the fact that competition now comes from anywhere, can pop up at any time and can disrupt entire markets overnight, is making this approach obsolete.
This realisation has paved the way for a new business model in which businesses no longer act alone but, instead, operate as a collective. Through this business model, OEMs work closely with not just tier 1 suppliers, but tiers 2 and 3 to build a go-to-market strategy and operating organisation. Essentially, the Business Collective is about creating an end-to-end, mutually executed process that extracts waste and creates sustained value for the end customer and for all parties in the ‘ecosystem’. This new strategy will be enabled by technology and talent, driven by the speed of business, and necessitated by competition.
Why the new approach?
This approach dovetails into and draws on the evolution of organisations from reactive to predictive enterprises. Automotive companies are no longer relegated to running their business by looking in the rear-view mirror and managing their operations based on weeks- or months-old information. Thanks to new technologies and new management science, organisations are starting to anticipate and even predict the future. They then direct their global operations accordingly.
The new paradigm reverses the old ‘inside-out’ approach to focus to ‘outside-in’. It considers external players, looking on them as opportunities, rather than necessarily threats. It means operating your business in a way that is in tune with the trends impacting the automotive industry and collaborating with players to drive value across your own business and your customer’s.
Capitalising on the opportunity
Leading automotive companies with a future-gazing mind-set have started to look at adopting these collective capabilities to drive innovation. More companies than ever before are beginning to realise that markets and technology move fast, and no company can go it alone. This approach reduces waste; that much is clear. But it goes far beyond simply improving efficiency and cutting costs.
Attacking issues, challenges and opportunities as a Business Collective opens the door to business transformation, making a real difference to a company’s performance and position in the market. Business Collective is based on the proposition that organisms are more powerful acting collectively than alone – the 1+1=3 paradigm.
For many reasons, businesses have reached the limits of what transactional relationships can do. By altering their business model and shifting to an approach which is truly integrated, everyone becomes part of a unified business strategy, to face the competition and thrive.
The road ahead
A survey by DHL confirms that some companies are just beginning to embrace the Business Collective approach but most have a long way to go. More than 70% of respondents are either only starting to explore new partnering models with suppliers or are still partnering at a transactional level. Only 5% claim to have reached a fully integrated partnering model with customers; however this figure is set to grow. For automotive companies that are considering, or are already exploring this new business model, the opportunities are significant in a number of areas including talent, resources and capabilities.
To successfully explore these opportunities, businesses must open their books and doors in ways they never have done before. For the Business Collective to be fully effective, trust is fundamental. Once trust is established, all parties must step up their level of investments – in systems, people, process and infrastructure to support the strategy. We are talking about transformational, not incremental change.
It’s well known in the automotive sector that the supply chain is only as strong as the weakest link. The same holds for the Business Collective. The model is an exacting master – it demands the best of every business involved. Because we are working together towards a common goal, no business holds back. Working collectively, each business does what it does best, but better through partnership.