Supply Chain design – An underrated activity in Business Development ! (Professor Staffan Gullander)

Posted in BUSINESS ADMINISTRATION on 15. Feb, 2009

About a month ago I have written a short article about the launch of the VentureLab program in the article: “VentureLab Twente for high-ambition techno starters !“

This article will cover the first VentureClass in which Professor Staffan Gullander discusses the importance of supply chain design in new business development, as well as a few other topics which are interesting to consider for starters.

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Supply Chains -- Why these matter for starters !?

A well though-out understanding of the supply chain and designing your own supply chain is often an underated activity in new business development. Let’s discuss the following statement below a little.

“In start-up firms supply chains are under development but seldom with strategic insight / foresight” [ref01]

For example “Porter’s Five Forces analysis is a framework for the industry analysis and business strategy development developed by Michael E. Porter of Harvard Business School in 1979.”

In addition very usefull, is analysing the supplier-portfolio with help of the Kraljics Matrix. On the Business Advice America Central website the purchasing-supplying-relationship is clearly visualized, and it is highly recommended to read the article ”Purchasing strategies in the Kraljic matrix — A power and dependence perspective” (Caniels & Gelderman, 2005, p. 141-155), which provides insights in the dynamics of the outlined relationship.

The strategic quadrant of the Kraljics Matrix is more long term focused and you should think of close collaboration and cooperation principles. Despite the importants of the strategic quadrant this is a quadrant where start-ups and often companies in general don’t like to be. So start-ups should clearly think about this quadrant and the resulting implications.

The essence for a start-up is not only to thoroughly understand the supply chain, but design the supply chain in the start-up’s advantage. Furthermore a start-up needs to analyse the value distribution over the complete supply chain, and try to figure out what part of value can be captured.

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Double Helix model -- Modular and integral structures relation

A related topic is the management of technology with the focus on a product’s architecture and the implications for the supply chain design. There are two main concepts of a product architecture, namely modular- and integral product structures.

“A modular architecture is characterized by components -or modules- that can be mixed and matched due to standardization of interfaces to an extreme degree and standardization of function to some degree. A typical example is the Personal Computer. An integral architecture comprises a set of components and subsystems designed to fit (just) each other. [ref01]“

The impact on the supply chain of a product’s architecture and the underlying dynamics can be read in the article: “Are You Modular or Integral? Be Sure Your Supply Chain Knows” (Fine, 2005). In addition a presentation of professor Charles Fine (MIT) is highly interesting to read “Value Chain Dynamics” (Fine, 2004). The presentation clearly shows the evolvement between integral and modular structures, summarized in the Double Helix model which is shown in the picture above.

 

Procurement, internationalisation & Corporate Social Resposibility

It is not hard to understand that a start-up company doesn’t have all the neccessary compentences in-house for all the phases from development start to end-user delivery. This simply means a start-up needs to think about outsourcing certain competences (and remark the strategic quadrant of the Kraljics Matrix). Outsourcing has certainly advantages like spreading risks, speed up the development cycle, or getting access to the best competence ability in the world. With a true global market and the impact of the world wide web, and modern media the impact of internationalisation (both inward and outward) can impact business model(s) of a start-up business.

Finally the topic of corporate social responsibility is discussed with the help of the business case: “Fair Trade Certification” The YouTube-video below provides some additional information about the the Fair Trade concepts.

Furthermore you should think about ecolabels as well, while the whole mix of environmental responsibility and social responsibility “promote a more sustainable consumerism with the goal of creating a sustainable society”. This is not only important for large companies like HP, Dell or Microsoft to create more enviromental and social friendly products, but it can also be a great advantage for a start-up firm to have for example an ecolable or market a social responsible product or service.

 

About Prof. Staffan Gullander 

staffan_gullander_200px“Staffan Gullander has held different positions in large firms, among which V.P. at Atlas Copco Airpower (Belgium). He is currently a Professor of Innovation and Entrepreneurship at Stockholm University and has extensive experience in teaching and consultancy for several industry and government bodies such as Whirlpool, SKF, Electrolux and Volvo. His research areas include: Business development in SME’s (particularly start-ups), business angel networks, venture capital, incubators and internationalization, customer-supplier relationships, strategic supply change management with a focus on networks, supplier development, power/dependency, product development and transfer of technology with a focus on group dynamics (teams).” [ref01]

 

Referene list

  1. VENTURELAB TWENTE:  11 February 2009: “Service and Product Innovation” by Staffan Gullander

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