Consultancy
Geheim Van Ketenkwaliteit 2What are the secret ingredients of value chain quality? The participants in the network are the most decisive factor for success. If they prioritise the interests of the value chain over their own self-interest, the quality and value of the chain will increase. However, more is required to achieve high quality within the value chain.
“The most beautiful thing we can experience is the mysterious.” (Albert Einstein)
There are few things in life more captivating than something that is secret. In any given bestseller, for instance by Dan Brown, everything revolves around a well-guarded secret that is unravelled after a long search. Fortunately, not all secrets are discovered; for do you know what the druid Panoramix used for his magical potion that made Asterix and Obelix invincible? What we do know is that the potion consisted of a mixture of different ingredients.
The same applies to the secret of value chain quality. The recipe for this mixture consists of a number of indispensable and defining ingredients needed to work on chain quality. To uncover the secret of chain quality, it is important to let go of a number of ‘principles taken as truth’. Thinking in vertical lines, where the emphasis lies on a person’s position within the organisational chart, should no longer be seen as the only truth; to work on chain quality, a horizontal mindset is essential. It is more important to understand who collaborates with whom within an organisation than who reports to whom.
Another key ingredient is the trust among the participants in the chain, which is necessary to build chain loyalty and to recognise the importance of all participants within it. Leadership is a further ingredient that must motivate employees to think in terms of both the organisation’s interests and those of the chain. The manager must be a builder and maintainer of networks.
The final fundamental ingredient is determining the starting point. The participants must align on this starting point so that each of them can support the chosen route. The dialogue between organisations is therefore crucial. Unfortunately, there are always employees within organisations who are not keen on such dialogue; these individuals can be categorised as ‘egoists’, ‘little bosses’, ‘saboteurs’ and ‘loners’. Be careful, as these individuals can disrupt the ingredients in this carefully constructed mixture.
The decisive success factor in working on value chain quality is always the individual employee, regardless of their position within the organisation.
In less than 50 words
- Organisations that aim to continuously improve and enhance the quality of the value chain must meet four conditions.
- These are: a horizontal mindset (thinking and collaborating across boundaries), mutual trust, value chain-oriented leadership (acting as a bridge-builder), and a shared objective.
- The key success factor is the employee, wherever they are within the organisation.
Four conditions
A well-known saying is that a chain is only as strong as its weakest link. If an organisation wants to work on continuously improving and enhancing value chain quality, a number of conditions must be met. Only then can true chain collaboration, and the improvement of its quality, be achieved.
1. A Horizontal mindset
“There is a meta shift taking place, from ‘a world of things’ to a ‘world of relationships’; a way of thinking in network structures” (Ganzevoort, 1999). As a first condition, it is important that vertical organisation is not seen as the only truth. It goes without saying that everyone knows who is ‘in charge’ and who is accountable to whom. Even better is to map out, through process management, which processes flow through the organisation. These flows make it possible to determine which people work together. The relevant participants, possibly from different departments and hierarchical levels, can then align on how and in what way this collaboration takes place. A key aspect of a horizontal mindset is thinking in relationships and network structures. It is about thinking horizontally, collaborating, constructing and governing (Bakker and Hardjono, 2009).
2. Value chain loyalty and trust
According to Homan (2006), organisations are not truly objective systems, but rather collections of social constructs and of individual and collective actions shaped by those constructs. Trust is vital in order to work together on these constructs. Unfortunately, this is also the least tangible aspect. To what extent do customers and suppliers recognise the benefits of working together to improve and strengthen a product, service or the value chain?
At all times, the organisation remains dependent on the willingness of individuals, as trust can be built but also quickly broken. To collaborate within a value chain and continuously improve, there must be mutual respect and trust, and there should be no illusion that a single player seeks to dominate the market as a monopolist. The concept of ‘inclusive thinking’ (Boerwinkel, 1966) is central here: the idea that my well-being, happiness and prosperity cannot be achieved at the expense of or without others, but only by also pursuing and promoting the well-being of others. This means that improving value chain quality can only be achieved by working on it together across the entire chain.
3. Value chain-oriented leadership
According to Schins (2005), in recent decades leaders have primarily focused on working within the organisation, while relatively little attention has been given to working on the organisation itself. It is important for managers to shift their focus from listening upwards within the hierarchy to thinking horizontally, from left to right across the organisation. The same applies to accountability: rather than addressing only individuals, a process team, a collective group of people from different departments or organisations, should be held responsible for improvement points.
This means that a manager must be someone who can connect, build and maintain bridges. They should be able to delegate responsibility to employees while understanding and balancing both internal organisational interests and those of the value chain. A manager should act as a network builder, encouraging both themselves and their employees to establish contacts and gain knowledge beyond the boundaries of their own organisation.
4. Shared objective
The starting point for the different parties must be the same. Graves (1974) states: “The same motivations can lead to different behaviour.” It is important that, when working together within a supply chain on improvement, it is clear how this objective can be achieved collectively without losing sight of the interests of the overall chain. The shared objective can always shift, as thinking is guided by the principle of continuous improvement. However, it is essential that all participants are aware of this and are committed to the chosen strategy. There may be a role for the various trade associations in guiding collaboration within the chain, and they could ensure that members treat one another appropriately. Thinking in terms of processes, chains and networks is central to this. Organisations must guard against the risk of individualism within the chain; when one partner starts to consider itself too important and loses sight of the shared objective, this will undermine the balance of the chain.
The musical theatre industry
A compelling example of an industry in which strong collaboration within the supply chain is practised and continuously improved is the musical theatre industry, one of the fastest-growing sectors in the Netherlands. Despite the economic climate, this industry has managed over the past year to sustain theatre attendance. This is because all players in the chain understand that it is in the interest of every partner that audiences keep coming to the theatre. As a result, they set aside their immediate competitive interests and focus on the viability of the entire chain. They recognise that if they were to compete solely on ticket price, the profit per ticket would fall sharply and theatres would eventually stand empty, as there would be insufficient funds to launch costly new productions.
Across several areas, participants are seeking synergies to navigate the current period successfully. Loyalty, and maintaining it, is essential. The latter in particular may become a pitfall if too many agreements are made at a purely personal level within organisations.
Synergy benefits
In 2008, a situation arose in this industry that demonstrates how leveraging synergy benefits contributes to improving the overall quality of the supply chain. Two major players in the market are Stage Entertainment (Joop van den Ende) and V&V Productions (including Albert Verlinde). They decided to enter into a collaboration to distribute productions by V&V through Stage Entertainment’s international network, including in Germany.
To further expand the Dutch musical theatre industry at a European level, both companies agreed to launch a production from one party through the other’s network abroad. Guided by the idea that “the musical market extends beyond the Netherlands, so we will enter Europe together,” they aimed to jointly compete with foreign competitors.
Through this case, the musical theatre industry demonstrates that it meets all of the aforementioned criteria and shows how the quality of the supply chain can be enhanced in this way.
Types that can dig pits
“Those who think little make many mistakes” (Da Vinci). When creating the right mix, there is always a risk that certain individuals may try to disrupt the process. It is important for an organisation to recognise types of people who can cause imbalance and dig pitfalls for the organisation, thereby hindering progress.
1. Egoists. There is always a risk that an organisation will seize the opportunity to make quick profits and focus on short-term solutions that may jeopardise the long-term viability of the supply chain. It is important for each participant in the chain to remain clear about the desired outcome the chain is pursuing. It is no longer just about individual interests but about the interest of the entire chain. When a participant places its own interest above that of the chain, a problem arises. The chain partners themselves must take action to restore the balance.
2. Bossy types. When one of the participants holds a dominant position, this can pose a potential threat to the chain, as it must be prevented that the chain is ‘ruled’ by a powerful party. There are markets where the power of a single player is so great that only crumbs remain for other organisations. There must always be a mechanism to ensure that balance within the chain is maintained, as no mechanism can function properly when it is unbalanced. Therefore, ensure that ‘dominant players’ are stopped in time in their ambition to bend the chain to their will.
3. Saboteurs. At which levels within organisations can individuals commit acts of sabotage that affect the entire chain? How easily can ill-intentioned individuals prevent a productive collaboration from flourishing? It is important here that a signalling function can be issued to chain partners. A saboteur must be recognised by others, and timely communication is required to indicate that this person is displaying undesirable behaviour.
4. Lone operators. “There are no facts, only interpretations” (Nietzsche). Ensure that agreements between organisations are not made solely on a personal basis. ‘Gentlemen’s agreements’ are not a reliable way to establish long-term commitments. Agreements made in the past may be discarded by new management or leadership if they are not supported by the organisation, with all the consequences this may have for the chain. Make agreements as organisations, not merely at a personal level. Lone operators can also be individuals who distance themselves from developments and lose their connection with the organisation; these individuals can become potential saboteurs. Ensure there is support throughout the organisation. Agreements made at a personal level are insufficient to guarantee the continuity and quality of collaboration within a supply chain.
What is the secret of value chain quality?
“He who wishes to increase his wealth must reduce his greed” (Socrates). To improve supply chain quality, trust and transparency are required from all participants, as it is the participants themselves who determine success. It is about the horizontal mindset of employees within the organisation and the mindset of the organisations within the chain, focusing on the interests of social constructs and networks. It concerns organisations in the chain that are oriented towards collaboration, with leadership taking the interests of the entire chain into account, in order to enhance the quality and value of the chain by jointly setting its direction. It is important to recognise individuals who seek to disrupt progress towards improving supply chain quality. Just as the druid Panoramix knew the right combination of ingredients for his magic potion, we know a number of ingredients that enhance supply chain quality, but like the Romans, we are still searching for the right combination.
