Flat World Business Principles and the Workforce System

In the past 15 years, companies have developed a number of business practices designed to make them successful in a global economy. These practices are no longer nice to have. They are required for businesses that wish to survive in a flat world. In this workshop, we will explore four of those key principles and how they can be applied in the workforce system. We will introduce you to several companies that are harnessing the power of these principles for growth and success. And we will show you how you can learn from what they are accomplishing to improve the quality of your local workforce system.

Presented by The Widing Group 936 N. 5th Street Philadelphia, PA 19123 (215) 923-4059 info@widinggroup.com

2007All Rights Reserved. The Widing Group

Four Flat World Principles

In the global economy, there are four foundational business principles to which companies must adhere if they wish to survive and thrive. Functional View of Work Processes Businesses do not think in terms of product or service lines as much as business functions. For example, a company that makes shoes will have manufacturing, packing, shipping, human resources, marketing, etc. as basic functions that must occur across all types of shoes they manufacture. To have quality products or services, each of these functions must work with the other functions. If theres a problem with how one function is accomplished, this will impact the other functions. As a result, businesses must pay attention to the quality of each function and how the different functions interact with one another in their overall impact on the business. This functional thinking is what has allowed for the growth of outsourcingcompanies identify the
2007All Rights Reserved. The Widing Group

functions that are core to the quality of their business and then outsource the other ones. Many companies have also begun to sell their expertise in their core functions, recognizing that another service they can provide is to either show other companies how to do what they do best, or to actually take over the function for the other company. Standard Setting Another key business principle in a flat world is standard-setting. For each business function and subfunction, businesses set two kinds of standards. Process standards identify how a function must be performed. Outcome standards identify the key results of the performance of a particular function. Setting standards allows companies to standardize products and services so that no matter who is performing the function, they know exactly what is expected of them in that performance. Standards also allow companies to gain greater control over how their work will be performed and

how they will serve their customers. If they decide to outsource certain functions, this gives them a way of measuring the quality of the relationship they have with the company to which they are outsourcing. Supply Chaining A supply chain is the flow of resources into and out of an organization. In the global economy, companies that have mastered the most efficient ways of managing the inputs into their company and the flow of goods and services back out will be the most successful. To have an effective supply chain, a company must have identified all business functions that must occur to accomplish the companys business. They must also have set the appropriate standards for each of these functions. The real value in a supply chain, though, lies in a companys ability to work with its suppliers, distributors, storage facilities, etc. to ensure that they are adhering to the companys standards as well. If I make shoes and I cant get the suppliers of my raw materials to meet my standards for on-time delivery of materials at the quality level I need, then my supply chain will fall apart. Effective supply chain management is a critical business function in a global economy. Creating Value Add Services through Partnerships

Many business in the global economy have grown because of their ability to form partnerships with other organizations and companies that add value for the customer. Companies recognize that they have core functions and services that they provide to their customer base. But they also understand that customers are often interested in complementary products and services that add value to the core options. Rather than trying to provide those complementary pieces themselves, the best companies seek out other companies that provide those complementary services and form partnerships with them to jointly deliver to their customers. Partnerships that add value for customers are based on what customers have said they want, not on what companies think they should have. Theres no point in forming a collaborative partnership to provide additional products or services if the customer has no interest in what is being provided. Companies must also seek out THE best providers of the complementary quality or service that customers are demanding and be able to work with the other company to develop the most effective strategies for jointly delivering products or services.

2007All Rights Reserved. The Widing Group

The Companies
United Parcel Service (UPS)
The worlds largest package delivery company, United Parcel Service (UPS) employs 360,000 people at 2,850 facilities world-wide. Through its vast global network, it transports more than 13 million packages and documents per business day throughout the U.S. and to more than 200 countries and territories. But UPS does more than just shipping. They have taken over business functions ranging from order picking to repairs to accounts receivable for their customers so that their customers can focus on their core business.

WalmartThis $245 billion dollar mass market retailer has a budget

larger than many small countries. It operates over 3,400 stores in the U.S. alone. Walmart has achieved this unprecedented dominance as a result of savvy business practices, including operating the leanest supply chains in business today and making visionary use of technology. Walmart products move off the shelves faster than anywhere else and the time it takes to replenish inventory can be measured in hours, not days.

StarbucksThis $21 billion Seattle-based company sells has over 9,000 outlets
world-wide. Selling everything from coffee to CDs, Starbucks is in the business of the coffee experience, and theyre always looking to partner with those companies that will best complement their customers desires for a high quality coffee drinking experience.

Case Study 1UPS and Plow & Hearth

A few years ago, Plow and Hearth, a large, national catalogue and Internet retailer, had a problem. Too many of its furniture deliveries were arriving at customers homes with broken pieces. So Plow and Hearth called in UPS package engineers to take a look at their processes. Why UPS? Because UPS is in the packing business. Theyve identified the specific activities and functions that must take place for quality packing to occur. And they know how to help other companies improve their own ability to do quality packing and shipping. So, recognizing that broken pieces meant that parts of the packaging function werent working well, the UPS engineers created process maps for each of the major P&H packaging functions. They examined how the work was done, the hand-off from one department to the next, etc. This gave them key information about what was and wasnt working in the process. UPS then helped Plow and Hearth identify problems and refine the work functions. They also conducted packaging seminars to train P&H staff in the new procedures. This resulted in a significant reduction in the number of broken pieces in Plow and Hearth deliveries. Key Questions Why would Plow and Hearth consult UPS on a packaging problem? Why wouldnt they address the problem themselves? Why did UPS map the processes that P&H was using to pack their products? Why didnt they just come in and tell P&H how to do things the UPS way? How could the concept of business functions be translated to the workforce system? How would a functional approach help Boards better identify and address workforce system issues?

Case Study 2UPS and Toshiba

According to Toshiba customers, Toshiba took too long to repair and return broken laptop computers. Recognizing that they needed to take action, Toshiba started working with UPS to determine what could be done. At the time, UPS would pick up Toshiba laptops from the customers home, ship the laptops to Toshiba for repair and then pick them up and deliver them back to customers once Toshiba had completed the work. As the two companies worked together, UPS suggested that it might be more efficient to remove the Toshiba middleman. Rather than sending the laptops to Toshiba to be repaired, UPS would make the repairs themselves using UPS employees at their local hub. UPS staff would be certified by Toshiba to make the repairs so that they met Toshiba standards and the time between pick-up of the damaged laptops and return of the repaired computers to customers would be drastically reduced. After adopting this strategy, customer complaints dropped dramatically. And most Toshiba customers have no idea that a UPS employee repaired their computer. Key Questions Why would Toshiba want UPS employees to do their work? What would Toshiba have to gain from giving work away? What role did standards play in this process? Why did UPS decide to abide by Toshibas standards for repair? Why didnt they develop their own standards since they were providing the service? How would standard-setting apply to the workforce system? What standards currently exist? What standards need to be developed?

Case Study 3Walmart and Levis

In 2002, Levis wanted to start selling jeans through Walmart stores. They had shrunk close to 40% in sales over the past few years and knew that what they needed was to get their jeans moving through the massive Walmart distribution network. But to do this, took some major overhauling of Levis business practices. Walmart is the leader in lean supply chains. They have identified thousands of key business functions that occur along the route that products must travel from the supplier to Walmart and the routes that orders must travel back to suppliers. In addition, Walmart has set standards for everything they do. To play with Walmart, suppliers must be willing to change how they do business to meet Walmarts requirements. In Levis case, they needed to know how jeans were doing in the stores in order to place orders with their suppliers. At the same time, they also needed to be able to track the progress of the production of their jeans from when the order was placed to when they arrived on Walmarts shelves. This meant major overhauls to Levis computer systems and a change to the Walmart regional distribution model. In fact, most Levis work functions had to be refined or re-done in order to meet Walmart standards and to create the most efficient supply chain possible. Key Questions Why would Levis have to change their business practices in order to sell their jeans in Walmarts stores? What had Walmart done that made it possible for Levis to change their practices? What is the benefit for Walmart of Levis changing their practices? How does it benefit Levis? How does the principle of supply chain management apply to the workforce system? What could we do to differently to better manage our own supply chain?

Case Study 4Starbucks

In the late 1980s, under the leadership of Howard Schultz, Starbucks began to open coffee bars that sold high-quality gourmet coffee in the Seattle area. Initially, the goal

was to bring fine coffee to consumers. But as Starbucks has grown, its mission has morphed into a plan to provide a coffee-drinking experience to its customers, an experience that is based on what Starbucks customers have said that they most value. What does that experience include? Specially created CDs that play the blend of tunes customers hear in their favorite Starbucks stores. Newspapers for customers to read, while they sip their soy lattes. Games for them to play in between bites of lemon pound cake. Comfortable couches with art and a relaxed atmosphere for personal or professional interactions. Recently, Starbucks has even begun to sell fair-trade coffee coffee that is grown by companies that abide by principles of fair tradebecause thats something that customers have requested. The Starbucks approach is to gain a deep understanding of their customers and what their customers value. They then use this information to find partners who can provide the products and services Starbucks customers are looking for. Further, their focus is on making the coffee-drinking experience uncommonly good. Not just OK or better, but something that stands out from how every other company sells their coffee. It is a combination of understanding true value-add and then partnering to bring it to customers. Key Questions Why would Starbucks want to go beyond just selling coffee? How does Starbucks decide who it will partner with? What other business practices must be in place for a value-add partnership to work? How could this model of partnering apply in the workforce system?

Pulling it all Together

Each of these case studies has illustrated a fundamental principle of effective global business practices. However, all of these case studies share a common characteristic. They demonstrate that flat world companies are partnering with each other in new and innovative ways that not only bring greater value to customers, but that actually further improve each individual companys capacity to perform. Each of these companies, and thousands of businesses like them, are applying new standards and strategies for partnering

that are having a profound impact not only on their companies, but on the larger workforce development system. Think about some of these questions: Would UPS, Walmart or Starbucks achieved the successes they have if they had not worked with their partners to develop common standards of quality and to deliver products and services according to those standards? Would Levis have improved its internal work processes if it hadnt had Walmarts requirements driving them to change? What about Plow and Hearth? Would they have been able to improve without outside help from their partner? Is the workforce system currently positioned to provide the kinds of high quality, value-add services to business and job seeker customers that are demonstrated in these case studies? o Have we sufficiently identified the service delivery functions that occur in the workforce system? o Have we effectively defined standards of consistency and quality for those services? o How well is our supply chain operating? Are we delivering to businesses and job seekers what they want and need? o Have we defined standards of partnership and are we working with all workforce partners to provide the kinds of value add services businesses and job seekers demand?

Are we ready to support a globally competitive workforce?