I recently had the chance to visit Dubai UAE. It was my first time to the Middle East and I was anxious to learn more about this mysterious region where SCALE and BIG appear to be mutually exclusive terms.
I work for a really big company – we operate globally and leverage our scale to deliver consistent value through a best in class Supply Chain. As a Procurement leader, I am part of that efficient Supply Chain machine; and naturally, I think about leveraging scale most often when developing sourcing strategies.
In traditional procurement environments, value comes from deriving economies of scale. Volume consolidation, supplier reduction, operating on a regional/global basis are strategies which address most business needs to drive costs for materials to the lowest levels. Goods are manufactured by machines that typically can produce more for less if run efficiently. Leveraging fixed costs over larger quantities typically results in an optimal production quantity of goods at the lowest possible cost.
For Services, the math doesn’t always work the same way.
And perhaps for this reason, I chose to visit the region we call MEA – Middle East/Africa last. I had to establish some amount of scale I could leverage in order to address the incredible diversity across the emerging Arab world. I didn’t have global suppliers I could take with me into this market so I would need to find a way to bring value to a limited number of resources.
When you are buying Services, you are obtaining value from people rather than from machines.
Scalability in Services is about capability and capacity.
People are inherently variable. Without standard work processes and training systems, the output of one service worker will likely be quite different from that of another. Scale in Services works when you have the know how to perform a given service with excellence and apply the appropriate investment in technology for better processes, training and digital tools.
In order for a call center to provide value to more callers, it either needs to hire more operators or develop better methods to respond to more callers with increased efficiency. Programming BOTS to quickly find information that will help answer caller queries, for example, is a strategy to increase call through put and lower operating costs to increase revenue.
When you can take advantage of scale, you allow for reapplication and eliminate reinventing the wheel.
You leverage your learning and free up capacity for creativity. That creativity can be aimed at developing solutions that are more appealing to a larger and more diverse customer base. When properly leveraged, scale provides a virtuous cycle were scale delivers value and value allows for more scale.
Services require an optimal relationship between client and provider.
What works for a specific type of customer might not work for all because customer needs are always slightly different. When a provider can only respond with a canned solution that works for the masses, how can you be sure your unique needs will be properly addressed?
Without a proper answer, you will likely choose the local provider or niche solution because you think that will better meet your business need. And, in some cases it will.
The Niche approach will help you deeply understanding and develop a solution with the right features and user experience which best respond to the precise needs of the business. But there is some value from scale that cannot be refuted: knowledge and know-how and risk mitigation.
So, my trip to MEA was all about bringing the knowledge of what worked best in other regions to bear on the special and unique requirements of this emerging market. My team was dealing with many manual processes and challenges that had been resolved elsewhere, bringing these solutions helped them put out the local fires so that rather than desperately trying to keep their head above water, they could respond to customer needs and move on to higher value work.
There are so many experienced resources that my team could leverage, there is no need to rather than recreate the wheel, my team can use their creativity to identify even greater value.
Here is some Niche value to leverage:
- Suppliers who really know the market and can deal with laws or regulations which make it hard for a global supplier to enter.
- Focused attention on truly unique requirements.
- Needs or wants not being attended elsewhere/otherwise
And here are the knowledge and know how Scale that my team is now reapplying:
- Supplier Governance processes.
- Tools and templates for Labor Service Forecasting.
- Compliance and Risk mitigation techniques.
- Standard Scope templates.
And, my first visit to MEA is not my last! This incredible region is filled with new things to learn and new ideas to leverage.
How about you? Do you have a Niche/Scale example to share?