When Kansas won the NCAA men’s basketball championship in April, it confirmed the tournament predictions of many basketball experts: Memphis wouldn’t and couldn’t win the championship because of their poor free throw shooting.  It just took Memphis to the last minute of regulation in the championship game to prove those prognosticators right.  Yes, up by 3 points with handful of seconds left, Memphis could have called time out and set up a defensive play designed to stop Kansas’ last second drive in regulation.  Yes, Memphis could have fouled Kansas and forced them to take the ball out – thus wasting precious seconds.  And, yes, Memphis could have fouled again, forcing 2 free throws that would have stopped Kansas from attempting a 3-point shot.  All of those things could have helped them win the game.  But in the end, missing 3 of their last 4 free throws in regulation really did Memphis in.  Free throws: the most basic and fundamental skill in basketball.

Memphis was a flashy team with a penchant for “Sports Center highlights”.  And they were very, very good.  They won an NCAA record 38 games this year, and came down to the final seconds of regulation with a chance to win their 39^th game and a national championship.  But in the end, Kansas will be remembered as champions and Memphis will be relegated to the sports trivia books as the team that has won more games in a season than any other, yet it didn’t win the championship.

So what does this basketball story mean to us? No, I’m not going to rename B2B as “ball-to-basket”.  But it is Memphis’ failure to get the ball in the basket on their free throws that should catch our eyes.  Information Technology historically has a reputation – often well deserved – for focusing on flashy technologies – the cool moves, the next-big-thing, the fun stuff, the technology equivalent of the “Sports Center highlight” while ignoring the mundane fundamentals of aligning with and supporting the business.  However, these fundamentals, these “free throws” of business, are what wins our championships – improving stakeholder equity and increasing customer satisfaction.

Recently Tony Friscia of AMR Research wrote a nice piece (You’re Not Tiger Woods!) in his executive newsletter “Above the Noise” suggesting that implementing fancy technology solutions without having sound business practices is like the average golfer purchasing a new driver and expecting to radically improve his or her game.  Only if you have sound business practices already will you find value in your investment and only if you are already very skilled and disciplined in your game – like Tiger Woods – will you really benefit from the new driver technology.  In fact, the executives Tony speaks with routinely indicate that they receive no or negative ROI on back-office software “investments”. 

Similarly, this article, penned by yours truly in 2005, draws parallels between golf and B2B mistakes we’ve made over time.  The short of it is that even with all the new technologies, golfers scores haven’t improved in 30 years as they ignore the fundamentals of the game to instead go for the flashy big drives.  As I work with companies, I find that many continue to ignore their fundamentals.  Whether this is ignorance, willing actions on IT’s part, fear of IT in the CEO/CFO/COO seat, or something else, business basics are neglected as IT departments go for the flashy new technology.  Tony’s findings and mine are echoed in an article in CFO-IT a few years back that found that close to 70% of purchased software becomes “shelfware” – applications purchased but whose functionality isn’t utilized.

I have never been a big Colin Cowherd fan, but on April 21, 2008, he made a great point on his radio program.  Success, in sports or in business, is more about having the right culture than it is about anything else.  He pointed to sports and to the University of Wisconsin as an example and how its football fortunes turned around with the arrival of Barry Alvarez because of the culture he instilled.  Likewise he mentioned successful leading companies that have struggled after their CEO was changed and the new CEO didn’t understand and work within the culture of the business (or perhaps the business didn’t change to the CEO’s culture).  Overall he made a compelling argument.

Likewise, John Dvorak made a compelling argument in his 2004 column entitled “The Myth of the Disruptive Technology” which questioned Clayton Christensen’s ideas of disruptive technology.  I support John’s view and, though I am not partial to guns, suggest an analogy to the gun advocates’ saying that “guns don’t kill people, people kill people.”  I’d say that “technology can’t fix business, people can fix business”.  The corollary is that technology can cripple a business if it is lacking the right culture and processes to take advantage of it.

I believe that getting your supply chain automation right – whether you are on the buying or selling side – is about getting your culture right.  And that culture has to support appropriate best practices, not just hot technologies.  And true cultural change depends on having your people buy into what you are trying to do.  It isn’t easy, but it will bring the biggest benefits to your company.  Finding an experienced partner to help in developing and executing those best practices can certainly help, as well.  It may be that the outsourcing trends for IT services – and more recently for B2B services – are a reflection of companies realizing that they can control costs and reduce risk better through a partner motivated to provide success through business “free throws”, not technological “Sports Center highlights”.

It is amazing that thousands of companies have tried to implement global data synchronization yet studies show that the data is still as bad after the project as it was before – perhaps even worse.  One retailer employed a consulting firm to audit the products and data they receive for inaccuracies and they kept multiple consultants busy (perhaps they still are busy) doing this work.  Why would companies continue to pursue stakeholder and customer limiting technologies and practices?

Perhaps retailers and their suppliers feel “in for a penny, in for a pound” is the appropriate approach when it comes to global data synchronization.  My colleague, Melanie Ligons, even puts it as “in for a pound, in for a ton”.  After all, the standards groups will continue to work to make things better, right?  Well, yes.  But how long will it take?  There are things companies can do today to address their real problem – bad data – and not wait for the standards groups.  Another colleague, Steve Keifer, recently wrote (Consumers - Not Retailers - will drive adoption of Data Synchronization) that SAP, Oracle and others have built significant master data management functionality into their solutions.  Of course, it takes a significant investment – both in terms of money and in human resources – to effect the cultural, process and technical change necessary to implement such functionality.  Yet it takes more effort still to modify corporate behavior to want to fix this problem.  The solution may be more costly than the ongoing problems caused by bad data.

It might be, however, that it only looks more costly.  Ongoing analysis at some companies reveal that fixing the bad data problems they face (and almost all companies are facing them) will have substantial positive impact on their businesses.  One electronics company makes between 300 and 400 million parts per day. These are created and shipped to customers to be put into products.  Imagine if you have wrong information – about the components themselves or about the orders for those components.  The mistakes could be costly to both the electronics company and it customers.  Thus, they have embarked on a strategic data management plan that includes technical, process and cultural change.

Still, this company and many others might benefit as much from an externally resident data firewall that protects the company from both bad parts data and inaccurate supply chain data – and does so for both inbound and outbound information.  The electronics company mentioned above has analyzed its internal information and found that, depending on systems and product lines, between 35% and 50% of its data has errors, missing attributes or mismatches.  In addition, they estimate that 50% of their data comes from outside their business.  When this much data originates outside the enterprise, a business is depending on its partners to get the data right, so that the enterprise’s business decisions are based on both complete and accurate information.  Yet I’ve not heard of many companies that perform data audits on their suppliers.  If you audit them for the quality of components and resources, wouldn’t you want to make sure the information about the components – and the information used in developing/producing the components – was accurate, too?

Companies that utilize GXS solutions that provide product and transaction data quality do just that.  They make sure that product information is accurate BEFORE they let it into their businesses.  And they make sure their business transactions adhere to their strict business rules.  This helps make sure that not only the data is accurate, but shipments are more likely to be accurate as well.  And to be on the safe side, companies use these tools for outbound data to make sure their customers and, in the case of retail, their consumers are getting the right information and products.

I usually don’t talk about GXS products in my blog, but felt it was important to do so after participating in the Electronics Industry Data Exchange Association’s (www.eidx.org) spring conference last week.  During the conference it became clear that at least the high tech companies understand the magnitude of the challenge of bad data – and that changing formats from EDI to XML as the retail industry did – is not the answer.  Catalog data format is irrelevant if the data is bad.  They are looking for solutions and companies like Oracle, SAP, GXS and others presented how their solutions work to solve the real business problem of bad data.  In the retail industry, companies like Best Buy in the US and 3663 in the UK have embraced data quality solutions as a principle aspect of business transformation that will ensure their customers have the right information and the right products.  These are the pioneers, though.  Most retailers are relying on global data synchronization to share information and magically fix their data, too.

Yet how can it?  When most users of global data synchronization are inputting data manually, using spreadsheets or web forms that provide little to no data quality validation, retailers are receiving information rife with keystroke entry errors.  And those suppliers that do automate global data synchronization (so that their data is truly synchronized with their customers – a novel idea!) are rarely embarking on data governance and stewardship programs to make sure the data they synchronize is accurate.

If companies think that data sync alone will fix data problems, then neither they nor the consumers will win.  Quite frankly, consumers are demanding more and accurate data, not synchronized data.  In fact, consumers could care less about the technology associated with meeting their needs.  What they do care about is whether the dimensional information about that flat panel TV can be relied on.  They don’t want to have to take it back.  Consumers want to make sure the food they purchase won’t cause an allergic reaction.  If the data they receive is synchronized, but inaccurate, it is worse than not getting information at all.  To quote Barry Bernstein of SonyEriccson with regards to data: “Missing is easy, wrong is difficult.” If consumers are provided with bad data now, then they will be trained to disregard future information – even information that might be right. 

While some might argue that the global data synchronization standards allow for more information to be shared – including information that was difficult to share with older standards – they will also agree that most companies that are doing global data synchronization today are doing so for only a limited number of mandatory attributes – dimensions, weights, GTIN and such.  Their arguments that GDSN was necessary to allow for all the other information are spurious, at best, and hurtful to global retail business at worst.  GDSN took everyone’s eye off the ball.

In order to get the industry behind GDSN, a variety of organizations, like A.T. Kearney, did research that showed the potential value of GDSN to participant companies.  Yet many of the benefits mentioned ASSUMED accurate data as part of the result of global data synchronization.  In fact, accuracy was the primary result that was expected.  Knowing that synchronized data is still bad, then, there is little to support the business benefits found in all those studies.  Even a new product introduction process that takes less time isn’t valuable if the data is inaccurate.

Data Sync is a nice to have.  Data Quality is a need to have.  Once retailers and their suppliers realize that the two are not the same thing, the need will have to be addressed.  The high tech industry already gets it and is starting with data quality initiatives first. Perhaps retail can learn from them.

This is my third entry regarding the Olympics.  But will it be my last?If you haven’t worked out what you need to regarding the Olympics with your Chinese suppliers by now, it appears it is too late.  Smart carriers have been working with their contacts to secure their capabilities during the Olympics. But factories across several provinces in China will be shut down for some time in order to help clear the air for the athletes and guests at the Olympics (seems normal business travelers, tourists and residents don’t measure up to deserving similar consideration!).    So, you might have shipping capacity, but nothing to ship.

One would think that we’d come far enough in our business lives to outgrow old fashioned means of sharing critical business information  While we don’t necessarily need to utilize the latest and greatest technologies, you’d think we’d at least get out of the dark ages.  Unfortunately we keep slipping back into the past.

What am I talking about?  I found that the lunacy that has taken hold in the high-tech space has oozed into retail.  Yes, my pet peeve, replacing B2B transactions with manual portals, has invaded retail.  Suppliers to the retailer in question know it well.  The retailer has eschewed common sense and asked their suppliers to manually enter ALL product data via a portal.  No option is given for uploading data.  This from a company once a leader in usage of electronic file transfers for product data.

Now, this may not be so bad if it weren’t for the fact that the data being entered includes data for apparel products.  Think about it.  All the different sizes, colors, styles, etc.  And these products are usually seasonal, so all this information is entered once for just a few orders. 

Suppliers have had to hire extensive teams just to provide the product data to this company, or that data gets provided slowly and late.  The competition must be smiling over this one.  A once proud and strong company jettisons industry leading processes and tries to compete, using a manual portal, with retailers small and large who have automated these processes in order to speed new product introduction, ensure accurate ordering, enhance the chance that orders will be fulfilled in a timely fashion, and to reduce costs.  This retailer is increasing their costs, introducing errors, minimizing their chance for accurate and timely delivery and more.  I also understand that from some suppliers they receive product up to 7 weeks after the competition – not good for products with a seasonal sales cycle.

But how and why is this happening?  Perhaps a loss of institutional knowledge is the key.  An IT team with little experience in the apparel B2B space is probably part of this company’s problem.  Loss of institutional knowledge is a problem that many companies will face – to their own detriment – as we move forward.  Mergers and acquisitions may create some of these situations, but the sense I’m getting from a few smart resources is that B2B staff members are becoming increasingly grey in their hair.  This means as people are promoted, let go, or retire, companies will be left with young, inexperienced people with no understanding of technicalities of transaction management or mapping, little knowledge of the subtleties of trading partner management, and no sense of history when it comes to the long row we’ve hoed in the EDI fields over the last 30+ years.  Taking the quick and dirty way out to put up a portal may reduce IT costs, but it increases overall business costs substantially.

An AMR analyst noted to me earlier this year that there is a lack of university and other formal educational programs focused on B2B here in the US.  There is also a dearth of reasonably available industry B2B training.  This means that folks with little experience are being handed the keys to the corporate B2B infrastructures and finding the easiest way out – building portals and then telling the suppliers to stop the antiquated electronic messaging so they can use the cool, manual web forms with a dancing mouse on them.  Ok, I made up the dancing mouse part. 

As I’ve mentioned previously in this blog, I think portals are great for trading relationships where one company is unable or unwilling to automate, but for heaven’s sake, if you can execute automated transactions, do so.  The tough thing for most inexperienced people to understand when tossed into an EDI role is that the goal of B2B is to support the best execution of the business.  Unfortunately if they fail to understand legal and operational requirements, if they get caught up in technical rather than functional needs, they can end up “executing” the operation of the business (pun intended).  Unfortunately, I know from experience that this lesson is lost on many executives as well, so the real danger comes when the bad decisions from the inexperienced in the B2B role are supported by, rather than questioned by, the members of the C-suite.

I was recently reminded of the story from the 1980s or 1990s where a software company started paying its programmers to find and fix bugs.  If I recall the story properly, the incentive program was halted rather quickly (within a week or two) after at least one programmer received a hefty bonus through purposefully creating and finding extra bugs. 

In an incident closer to home for me, I worked with a dotcom retailer that incented its merchandisers by the number of new suppliers that were brought on – not by the profitability of those relationships.  This led to infamous deals like one with a man that sold small numbers of Beanie Babies from his garage.  The dotcom merchandiser proceeded to purchase full page ads in USA Today and several newspapers in the largest US cities to sell the Beanie Babies at fantastic prices.  Unfortunately the “supplier” had about 300 Beanie Babies “in stock” and those were sold out in about an hour’s time, however the products weren’t put in an out-of-stock state on the web site for some time after that, thus disappointing many, many customers and forcing the company to find much more expensive suppliers to fulfill as many orders as possible – at a loss to the dotcom.

A more strategic impact of that merchandiser incentive program was the fact that legitimate supplier relationships were negatively impacted as well.  It would take weeks to get fully automated relationships set up with suppliers (such as the biggest brand name computer manufacturers), and just as we got our supply chain ready for significant volumes of transactions, the merchandisers would strike a deal with a competing supplier – thus earning a bonus for the merchandisers, weeks of manual transaction management for the supplier management team, and significant efforts for the supplier.  Meanwhile, the fully automated supplier was left with no promotions and limited orders, since there was no further compensation coming to the merchandiser.   And the EDI team was left to implement a new trading partner with the company seeing little value come from their efforts to implement the previous supplier.  This was an ongoing issue.

But what, you may ask, prompted me to think of these things?  Well, I’m familiar with suppliers that have compliance departments whose leaders wish to grow little fiefdoms.  They don’t want to eliminate compliance errors altogether because their team might shrink.  But I recently heard an amazing tale of incentives that stunned me.  One supplier compliance manager requires everyone in the compliance department to negotiate away each year the equivalent of their own salary.  These people are now incented to make sure as many supply chain errors as possible occur in order that they can cover their salary each year.  This means never fixing the problems identified via root-cause analysis – if such analysis is even engaged in.  Thus the problems recur so they can negotiate away some of the penalty again and again. 

So much for helping the company meet the corporate goals of stakeholder equity, customer satisfaction and operational efficiency.

This is unique in my experience.  Is it in yours? 

In my EDI career, I reported to at least four departments.  These include IS, Technology/Development, Finance and Operations.  Some of my direct managers included a CFO, a CTO, VP of Operations and IS Director.  In fact, I reported into three different departments within one company in the span of just two years.  My wife sometimes says to me “You’re weird.”  Perhaps the schizophrenic EDI life has something to do with it. 

This schizophrenia abounds in the EDI world.  Because of it, many EDI teams become the proverbial “red-headed stepchild” of their organizations.  Occasionally departments fight to have the team under their auspices.  Often they fight NOT to have it.  Sometimes the EDI team reports into one organization and has dotted line into one or more other organizations.  Having a confusing role makes it hard for the EDI team to get appropriate attention – or funding.  It also makes it hard to do their job – or even figure out what their job is.

In the early days EDI reported into senior level staff.  These days you are more often likely to find them 4 or 5 steps away.  After they stabilizes base transactions, the distance from leadership and the marginalization within the enterprise keep EDI teams from being involved in the next step.  Some might argue that maintaining the “B2B pipe” is the extent of the EDI team’s role.  However, having done all the root cause analysis and process definition, and because they so often straddle technology and functional roles, EDI teams are exactly the folks that should be leveraged for implementing refinement to EDI functionality to allow better compliance and smoother supply chain operations.  They should also be called upon to implement corporate compliance programs (which, by the way, look very similar to the types of metrics and controls EDI teams have used for years).  Instead, we’re finding companies in the high-tech space dropping EDI and other automated transactions and moving their suppliers to manual portals.  Scorecards are being implemented in retail but EDI staff is not involved when their companies undertake these initiatives.

EDI teams just don’t get any respect!  Do you?

Bell Rings.  Dog Salivates.  Food is served.

Bell Rings.  Dog Salivates.  Food is served.

Bell Rings.  Dog Salivates. 

Retailer implements “compliance requirement”.  Suppliers squirm.  Minimal necessary steps are taken for supplier to meet the new requirements.

Retailer implements “compliance requirement”.  Suppliers squirm.  Minimal necessary steps are taken for supplier to meet the new requirements.

Retailer implements “compliance requirement”.  Suppliers squirm. 

The retail supply chain is broken.  Suppliers into retail pay almost 2% of their gross sales in compliance-related deductions.  And we’ve reached the point – long ago, actually – where suppliers will not do anything for their retail customers unless there is a stick involved.  Carrots need not apply. 

The problem is that this model has encouraged most suppliers to ignore initiatives that could increase their bottom and top line – changes that would be beneficial to the supplier.  These initiatives are sometimes presented at a low level without strategic level discussions – and presented in an adversarial way via compliance requirements.  And suppliers get so many different ones from across their customer base that it is hard for them to rationalize all of these into a comprehensive program that will make sense – and profits for them.  The end result is “letter of the law” rather than “spirit of the law” adherence to retailer requests from all but the largest and/or most ingenious of suppliers.  Data synchronization becomes manual data entry into web forms or spreadsheets.  So much for machine-to-machine communications.  ASNs are sent but are built from Invoices rather than warehouse and shipping information. 

What should be a mutually beneficial relationship is often not.  Even if there is a high-level strategic agreement, that message can get lost as it trickles down to those responsible for execution on both the supply and buy sides.

Retailers want their suppliers to succeed.  Suppliers want their customers to be successful.   Can we simplify in order to make it easier to succeed?  Can we leverage more B2B transaction types and reduce the complexity in each?  Perhaps actually using standardized documents rather than documents that break standards?  Can we all focus on a subset of data for synchronization – perhaps physical specifications and price – and leave the rest for later?  Can we agree on at least a common lexicon for all terms so we aren’t all talking about the same thing in different terms?

What do you think?