The Impact of Intense Disruption On Business Models: Strategic Alternatives (Part 2)

Nitin Singh

Part 2 of a three-part series

Once you understand the key parameters that impact your business model, it is time to dive deep into how to leverage existing capabilities to navigate through the new economic scenario. Additionally, if the capability does not exist or exists only partially, what should you do to resolve those gaps? Let’s analyze the typical business capabilities required to run a consumer products company like XYZ, using the capability model in the following figure.

It is important to identify the key capabilities that should be augmented to handle this situation. It is also imperative to understand the business capabilities that are negatively impacted. Based on the typical challenges highlighted in the previous article, the following capability heatmap was drawn that highlights the key capabilities that were impacted.

This provides a high-level view of which capabilities XYZ should augment. Different approaches could be leveraged, such as partnerships, build capacity, outsourcing, etc. For example, to run a business remotely, there might be a need to license or rent remote application tools for effective working.

Now, let’s look at which capabilities should be augmented to resolve issues of supply-chain disruption, as discussed in the previous blog. We realized that identifying alternate sources of supply and developing those suppliers quickly could be one such solution for XYZ. Now with the help of the capability model, let’s look at the related capabilities that XYZ needs to build to make the best use of alternate sources of supplies. Please refer to the previous figure, where you can see three key capabilities highlighted with red arrows.

  1. Sourcing: Identifying alternate sources of supply requires a robust strategic sourcing process that helps in reaching out to alternate suppliers quickly and qualifying them according to product-quality standards. One of the sources for potential suppliers could be the B2B business networks that already have registered and qualified suppliers. In addition, the ability to integrate XYZ’s systems with those networks would help XYZ place requests for quotes electronically and make this process real-time.
  1. Commodity management: Commodity or category management is also an essential capability to make sure XYZ can quickly reimagine its procurement strategy to leverage the discounts and/or tap into the best sources of supply. This includes analyzing the strategy for the short, mid, and long term. Some categories would show exponential growth, while other categories might see a dip in demand, and this is true for many of the large fast-moving consumer goods (FMCG) companies whose portfolio includes many different SKUs. A structured commodity strategy also includes price-negotiation guidelines and identifying subsequent procurement processes. So, this capability certainly is an important one to make sure XYZ can tap into alternate sources of supply for critical products.
  1. Available to promise and allocations: Once XYZ has developed or augmented capabilities for sourcing and commodity management, it is essential to update its available-to-promise (ATP) logic by taking the supplier capacity into consideration to ensure an accurate order-delivery timeline. ATP logic should also be able to consider incoming shipments for the new supplier so that XYZ can promise its customers accordingly. If XYZ can connect to the business network of the newly onboarded supplier, it would make it much easier to get timely advanced ship notices, which can help make accurate predictions on promise dates to XYZ’s customers. In addition, XYZ can connect with retailers to identify key commodities that have rapidly shifting demand patterns (e.g., cleaning supplies, toilet paper, sanitizers, etc.).

In this post, we examined analyzing the impact of uncertain events by leveraging a capability heat map. In the next and final part, we will explore how to restructure your portfolio strategy to mitigate risks to your business from unforeseen events.

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Nitin Singh

About Nitin Singh

Nitin Singh works with SAP’s strategic customers as Principal Enterprise Architect to orchestrate the complex transformation programs. He also leads the Practice for Intelligent Enterprise Innovations at Business Transformation Services, SAP America. He is an expert in planning & executing complex digital transformations and has delivered more than 80 engagements with SAP strategic customers over the last 15 years. He speaks frequently at internal & external forums and is an author of a SAP press book.