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.

We are entering an age when B2B industry organizations are moving their focus from traditional transaction-oriented programs to higher-order, line-of-business challenges.  It is not that EDI and other B2B standards are not important.  They certainly are.  However, the work done over the last 20+ years has yielded many mature B2B programs.  These mature B2B programs enable B2B teams and interested functional staff to explore new, more value-added functionality for their organizations.  It also has helped shift the financial resources from the order-to-settlement and other mature processes to those value-added functions like logistics visibility, score cards, dashboards and more.

Organizations with mature B2B programs now need the same type of industry group focused on their line-of-business problems as emerged in the early days of B2B and addressed the granular details of the order-to-settlement process.  At the same time, companies with less mature programs still need to leverage the work that came before them in order to catch up and benefit from the traditional B2B functionality as well as the new line-of-business value adds.  Where do high-tech companies turn for help whether they are mature programs or new to B2B?

EIDX, the Electronics Industry Data Exchange Association is celebrating its 20^th anniversary this year.  EIDX is part of CompTIA, the Computing Technology Industry Association, and has long been the go-to organization for B2B leadership in the North American high-tech space.   EIDX has lead the high-tech industry through numerous challenges and changes over the years.  And EIDX understood several years ago that a significant shift was beginning to take place in the high-tech B2B space and it has positioned itself to continue its leadership role in the new, line-of-business oriented B2B world. 

EIDX has embraced the Open Applications Group (OAGI) and is a contributor of business best practices.  OAGI will, in turn, leverage these best practices in developing technical solutions for process-based B2B solutions.  In support of this initiative, EIDX has formed work groups to address important and current industry challenges.  EIDX is also working with EDIFICE, its European counterpart, to help the members of both organizations achieve better automation with Asian suppliers.

Linked here is the EIDX homepage where you can find their annual update detailing the EIDX organizations’ success in meeting their 2007 goals.  If your organization is in the high-tech space in North America, you should be working with EIDX.  If you are in Europe, work with EDIFICE.   If you are in Asia, contact either organization as they are both reaching out to Asian companies today to help provide guidance and best practices in integrating into the global high-tech supply chain.

 EDIFICE’s next plenary is hosted by Microsoft in Prague on March 5^th and 6^th.  The focus of the conference is “Distribution Channel Management”.  You can reach their sign-up page here.

EIDX’s upcoming conference will be hosted by TI on April 16^th and 17^th in Dallas.  It will focus, amongst other things, on high-tech’s number one issue right now - Data Quality. You can sign up here. 

If you have questions, feel free to contact me using the information below.

Bryan Scott Larkin, member of the Board of Governors, EIDX

518-882-7176

Bryan.Larkin@gxs.com

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.

What isn’t going on in your business, but you think is?  Where are you re-inventing the wheel – even though you probably have years of knowledge tucked away in another department?  What departments are not talking to one another that should? What is all this costing you, your supply chain, and your customers? 

One area is bad data.  If you are like most companies, you live with it and assign an entire team – perhaps multiple departments have entire teams – to address the results of it.  You could fix it up front, but, hey, why bother?  Just wait and address everything once the damage is done so you can truly assess the value of correcting the problem.  If you are like most companies, you experience the same problem over and over again and just resolve the resulting issues, but not the underlying problem.  Hey, good move.  That’s job security for a few people.

Another area is compliance penalties.  I know the cultured term is “expense offset” or “deduction”.  But quite frankly, let’s call it what it is.  Suppliers are PENALIZED by their retailers for poorly executing business transactions.  Shoot, suppliers are penalizing themselves as well!  Sometimes this occurs because of bad processes.  Sometimes this occurs because two people or departments refuse to talk to one another.  I consulted with a retail supplier that had revenues around $800M/year.  $300M of business was done with one customer.  They paid $10M in penalties per year to that retailer.  I asked the compliance department the cause of those penalties.  The answer?  They said that EDI was an expensive way to do business.  When asked to elaborate, they told me that every time they invoiced the customer, they were billed $500 by the customer.  Why was this?  It turns out that the retailer penalized the company if an invoice arrived before a shipment.  All the invoices arrived before the shipment because the company’s ERP created an invoice at time of shipment and the EDI system was immediately given the invoice which was then sent, with little delay, to the retailer.

The EDI team was sitting with me during this discussion and it was a revelation to them.  The compliance folks had never spoken to the EDI team.  They had assumed that the $500/invoice was just the cost of doing business and had never questioned it.  The EDI team minimized future penalties by immediately putting a 3 day hold on all invoices.  A better choice would have been to send invoices based on the receipt of a delivery notice from the carrier, but hey, the 3 day wait probably cut 80% of the early invoicing penalties and it was a quick fix.  If they have net profits of 10%, this fix probably added 10% to the bottom line. ..and a hefty bonus to one or more executive’s compensation!

This type of situation occurs in every company.  The question is how do you combat it?  How do you keep the impact to a minimum?  Or do you just live with it?