The Supply Chain Transformation Report 2022 by Future Insights Network

The Supply Chain Transformation Report 2022 Where are supply chains and their companies on their transformation journey into the Age of SMART Technology

FOREWORD If you are attempting to transform your enterprise supply chains, you are in effect transforming the whole business- such is the omnipresence of supply chains in most contemporary corporations. Given that supply chains are composed of structural, technological, and human components, they are by default the ideal platform for change. But, it takes leadership to acknowledge this reality, and a touch of daring to follow through with implementation at ground level. This is especially the case for those companies that are on the wrong side of the ‘great divide’ – the separation between Stages 3 and 4 on the maturity curve identified in this report. They have to get going now, with purpose, or be left behind in the highly competitive world of the future. The findings in this report make an important contribution to our accumulated knowledge on change efforts to date, and provide useful pointers for future action.

Dr John Gattorna

Supply Chain Thought Leader & Author

LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN

EXECUTIVE SUMMARY This report, based on input from supply chain leaders across the industry spectrum, examines where supply chains are on their evolutionary journey in a time when both the technical and human dimensions of business are undergoing massive transformation. It also provides supply chain leaders with a framework to guide the change process, not only in their supply chains but also for the business as a whole. This is important because technology and greater overall people and process maturity are making it possible to replace deep hierarchical and siloed structures in the business as a whole with those that more closely follow the horizontal flow of work from and to the customer. Because this horizonal flow is primarily the domain of demand-driven supply chain leaders, they now find themselves in the front lines of both supply chain and business transformation. Future Insights Network collaborated with McLagan International, Inc. to conduct this research in order to help supply chain leaders better understand the transformational dynamics operating in their businesses, as well as to provide a possible framework for taking leadership actions in these times of business, technological and societal disruption. 257 mid/executive level respondents from 161 companies from around the world completed an in-depth survey launched as a prequel to the Future Insights Network’s annual TransformFest Conference. Questions focused on important supply chain business results and internal organizational conditions “TECHNOLOGY AND GREATER OVERALL and practices related to both people PEOPLE AND PROCESS MATURITY ARE and technology management. MAKING IT POSSIBLE TO REPLACE DEEP Responses were filtered through HIERARCHICAL AND SILOED STRUCTURES a six-stage maturity model where IN THE BUSINESS AS A WHOLE WITH we examined the relationships THOSE THAT MORE CLOSELY FOLLOW between maturity stage and THE HORIZONTAL FLOW OF WORK external and internal variables. FROM AND TO THE CUSTOMER.” The survey confirmed seven internal and external variable groups – factors -- that supply chain leaders can use to examine the evolutionary status of their enterprises: three internal factors: organization design, information flow efficiency, and unleashed human energy; and four external factors: dynamism, customer centricity, socio-environmental responsiveness, and strategic potency. All seven are

significantly stronger for organizations in later maturity stages (stages 4,5, and 6) that have crossed what we call “the Great Divide” where the orientation of the business turns horizontal to and from the customer. We also correlated digitalization status with maturity. We found that later maturity stages are seeking and getting higher value from that technology. In addition, the data and their interrelationships show that transformation is held back more by people management processes, legacy systems, skill levels, and structures than cultural barriers like lack of trust or engagement. This data indicates that there may be more latent cultural goodwill in organizations than is traditionally thought, even though even these areas are not yet strengths. The biggest barriers exist in areas where leaders must act – what we call Leadership Impact Areas. There are few clear strengths in any area covered by this research process. But a comparison of relative strengths and weaker areas paints a picture of supply chains and their businesses huddled around a significant transformational cross-over point (“the Great Divide”) where the traditional business paradigm gives way to structures and operating models that more closely follow how work actually flows. Organizations are spread across the six maturity stage spectrum, although the last two stages are only emerging and will likely require more technological and human maturity as well as innovations and business infrastructures that are yet to materialize. But supply chains are on the move. It’s the goal of this research to provide the insights and frameworks to guide assessments and actions that will help accelerate and shape that continued movement in both the technical and human dimensions of the business. We thank all the people who participated in this research.

Patricia A McLagan, CEO McLagan International, Inc.

Benchmarking report for your Supply Chain.

Pat McLagan

patmclagan@mclaganint.com

Rory Pilbrow

roryp@futureinsights.org

LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN

CONTENTS Introduction: Organizations Undergoing Deep, Supply Chain-Driven Change

The Leadership and Transformation in the Supply Chain Diagnostic Survey and Framework

Survey Findings: What the Data Says

Where are Supply Chains on their Maturity Journey? Supply Chain Related Business Results

10 13

Internal Organization Conditions and Practices Internal Business Conditions Related to Transformation Leadership Impact Areas Breadth of Strategy Participation Digitalization Moving into the Supply Chain and Business

15 18 20 22

The Bigger Picture: Summary and Perspective on Leadership and Transformation in the Supply Chain Back to the Survey Framework: A Statistical Analysis of Survey Data Summary Observations and Discussion Action Implications for Supply Chain and Business Leaders Leadership and Transformation in the Supply Chain and Beyond

26 26 28 29 31

The Authors

Appendix: Statistical Charts

A-1 Factor Analysis of External Variables A-2 Factor Analysis of Internal Organization Variables A-3 Causal Model Based on Regression Analysis A-4 Canonical Regression Appendix: Figures

33 34 35 35 35

THE LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN DIAGNOSTIC SURVEY How is the coevolution of the human and technological dimensions progressing related to one of the biggest drivers of transformation today: the supply chain? This is the question that the Leadership and Transformation in the Supply Chain Diagnostic Survey 2 explores by seeking to answer three questions: 1. How well are supply chains and their organizations doing in performance areas they value? 2. What are the internal practices and conditions related to both people and technology that make the most difference in performance? 3. Do mature supply chains and businesses, with more inbuilt capabilities, perform better than those in earlier stages? In other words, we explore the relationship between a variety of dependent variables (#1) and their connections to a variety of independent variables (#2), while noting whether a moderating variable (#3) influences these relationships.

Figure 1: Survey Framework

INTERNAL CONDITIONS AND PRACTICES

MATURITY LEVEL

Our goal for the survey and throughout this report is to provide supply chain and business leaders with information that will guide how they think about and shape the truly transformational changes they face as major players in the game-changing shift into the Fourth Industrial Era. Background Early in 2021, Future Insights Network (FIN) and McLagan International, Inc. (MI), after discussing the change challenges facing supply chain leaders, decided to investigate how well supply chains and their organizations are positioned in both the human and technical dimensions of their current transformation journeys. We decided to ask participants

SUPPLY CHAIN PERFORMANCE/RESULTS

in the annual Future Insights’ TransformFest conference to respond to an abbreviated version of a more comprehensive supply chain focused survey created by McLagan International, Inc. in collaboration with the late Roddy Martin. We ran the abbreviated survey from early October through the November TransformFest 2021 Conference, presenting preliminary findings at the conference. The survey ran through and closed at the end of the conference. What follows is a presentation of the results, our conclusions using both statistical and expert analysis, a description of the supply chain industry arising from the data, and recommendations related to transformation challenges supply chain and business leaders face.

The Leadership and Transformation in the Supply Chain Diagnostic Survey is an abbreviated version of a larger GuideStar™ diagnostic and educational questionnaire whose goal is to help supply chains and their businesses examine how they are evolving and where their weak and strong points are for moving into the future. Future Insights added several questions related to digitalization in the supply chain. 2

LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN

Survey Respondants 257 people representing 162 companies completed the entire Leadership and Transformation in the Supply Chain diagnostic survey. Here is the respondent profile:

Figure 2: Respondent Headquarter Locations and Industries

46%

36%

EUROPE

NORTH AMERICA

APAC

5% MEA

5% LATIN AMERICA

Consumer Packaged Goods Industrial Food and Beverage Pharmaceutical/Bio-Tech Chemicals Automotive Consumer Electronics Consulting/SC Education/Academia Logistics Retail Medical Devices and Diagnostics IT Cosmetics Apparel Semi conductor Conglomerate Aerospace 0%

10%

12%

14%

16%

18%

20%

Business Revenues Respondents are mostly from large companies: 40% report business revenues over $10 Billion, 26% between $1 and 10 billion, and 35% under $1 Billion.

Level of top Supply Chain Leader Most top supply chain leaders are in or reporting to the C-suite. 43% are C-level, and 36% are at the C-1 level, reporting to the C-Suite. This means that the supply chain is well represented in the strategic decision bodies of the enterprises featured.

Figure 3: Business Revenues

Figure 4: Level of Top Supply Chain Leader

40%

50%

30%

40% 30%

20%

10% 0%

10% 1 - 500 Million USD

1-5 Billion USD

501 Million 1 Billion USD

5 - 10 Billion USD

10+ Billion USD

C level

C-1 (reports C-2 (reports 2 levels to Executive under the Executive Team) Team)

Other

Size of Supply Chain Organization All supply chain organization sizes are represented in this data, as shown in the chart below. 50% report under 1000 supply chain members, 27% 1,000-20,000, and 22% over 20,000.

Figure 5: Supply Chain Organization Size 25% 20% 15% 10% 5% 0% 1 - 100 people

101 - 500 people

501 - 1,000 people

1,001 - 5,000 people

5,001 20,000 people

20,001 50,000 people

50,000+ people

Survey Respondent Level Survey respondents included 7% C-level and 10% SVP/VP level executives, 49% directors or senior managers, and 17% middle level managers. This means that the perspectives represented in the questionnaire are mostly from the upper but not the top of the organization.

Figure 6: Survey Respondant Level C Level Executive SVP or Vice President Senior Level Director/Manager Mid-level Manager First Level Manager Technical professional Other 0%

10%

15%

20%

25%

30%

35%

40%

45%

50%

LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN

In order to further understand respondents’ organizations, we also asked them to identify the primary ways they relate to their customers. We used the research-based customer segmentation categories developed by Dr. John Gattorna as the framework for our questions here3. What follows is the respondent profile relative to the five major customer alignment categories:

“WHILE COLLABORATIVE RELATIONSHIPS ARE INCREASING, LEAN WITH ITS PROCUREMENT-DRIVEN COST FOCUS, IS PROBABLY LESS DOMINANT TODAY DUE TO REQUIREMENTS FOR MORE BUFFERS AND GREATER FLEXIBILITY.”

•

Collaborative. 28% of respondents report that their dominant relationship category is collaborative; that is, customers expect them to be an integral part of their business and are not overly price-sensitive. Project. 22% report that most relationships are in the project category where schedules and precision to specs on one-time big programs matter most. Lean/Continuous Improvement. 20% put most of their customer relationships in the lean and continuous improvement category where customers buy on price more than relationships, expect consistent and timely

•

products, and are easily attracted to competitors. Dynamic. 16% said that most of their customer relationships are in the dynamic category, with unpredictable needs and a willingness to pay for extra capacity from their supplier. Fully Flexible. 13% of respondents reported that their dominant customer relationships are fully flexible, requiring an extreme degree of adaptability and agility from their supplier. Customers are willing to pay a premium for adaptability.

We asked John Gattorna to comment on these results. He observed that they are likely influenced by COVID disruptions and other concerns about globalization today. He noted that while collaborative relationships are increasing, lean with its procurement-driven cost focus, is probably less dominant today due to requirements for more buffers and greater flexibility. However, fully flexible relationships, enabling responses to extreme disruption, don’t seem to have spiked as much as he expected in this current environment, and are more transitory in nature.

IN SUMMARY The data we will review in the next sections reflect the following. •

•

A search to discover how well supply chains are performing in areas the business and customers value; what the internal conditions are that define the supply chain; and whether maturity level makes a difference in either of these external or internal areas. A respondent population with these qualities: 1. A diverse industry base mostly headquartered in Europe and America, consisting mainly of large businesses with revenues over $1 billion, and supported by a supply chain organization of more than 1000 staff, with 35% over 5,000. 2. Top supply chain leaders in respondent businesses who are primarily executives at the C and C-1 levels. Thus, they are direct participants in business strategy and decision-making. 3. A survey respondent level slightly lower than the level of the top supply chain leader, but mainly upper level/senior managers. 4. Dominant customer relationship patterns that are collaborative and project-focused while fully flexible relationships are least common. 5. A lower percentage of lean relationships that may be due to effects of the very unstable business environment of the past few years. 6. A less than expected presence, in today’s COVID-influenced environment, of fully flexible relationships.

Reflection Questions Where does your top Supply Chain officer sit? What difference does it make for your supply chain’s ability to evolve and transform? To influence and help shape the business agenda? What customer relationship pattern is dominant in your company? Is it changing? How? Why? With what impact on your customers? On your planning and operations? "HOW WELL ARE SUPPLY CHAINS AND THEIR ORGANIZATIONS POSITIONED IN BOTH THE HUMAN AND TECHNICAL DIMENSIONS OF THEIR CURRENT TRANSFORMATION JOURNEYS?"

John Gattorna is Founder and Co-Partner of Gattorna Alignment and author of thought-leading books and articles about supply chains, including Dynamic Supply Chains: Delivering Value Through People. 2010. 3

SURVEY FINDINGS: WHAT THE DATA SAYS In this section, we review the data from the survey. Specifically, what it tells us about: • Where respondent companies are on their evolutionary – maturity -- journey • Performance in result areas where supply chains have significant influence • Status of Internal conditions and practices related to both the human and the technological aspects of the business • The relationships between what is happening inside the supply chain/business (internal conditions) and performance results

WHERE ARE SUPPLY CHAINS ON THEIR MATURITY JOURNEY? Figure 7: Focus on Maturity as a Moderating Variable

INTERNAL CONDITIONS AND PRACTICES

MATURITY LEVEL

Organizations, like people, are living systems, developing and evolving over time. This means that unless they are blocked or refuse to adapt, their natural course is to become better able to deal with complexity, develop and build on evolving capabilities, and discover new ways of interacting with the world and solving problems. Some organizations try to accelerate this evolution by using various change management methods or buying advanced capabilities via mergers or acquisitions. But these can only supplement the natural tendency in both people and companies – as living systems -- to continue to develop capabilities “EACH DEVELOPMENTAL STAGE REQUIRES and evolve. Efforts to accelerate GIVING UP SOME OLD ASSUMPTIONS development often fail if they are not AND ADOPTING NEW ONES THAT built on capabilities built in earlier REQUIRE MAJOR SHIFTS IN THE maturity stages. PARADIGMS THAT GOVERN DECISIONS, A maturity model is not a “good-bad” RELATIONSHIPS AND IDENTITIES.” continuum and is a simplification of what is a very complex supply chain reality. However, maturity models are useful and used in many fields to help people and organizations better understand where they are on their evolutionary path. Each developmental stage requires

SUPPLY CHAIN PERFORMANCE/RESULTS

giving up some old assumptions and adopting new ones that require major shifts in the paradigms that govern decisions, relationships and identities. With this in mind, the survey asked several questions related to where responding organizations are positioned in a business and supply chain maturity model. The model was created by the late Roddy Martin, a well-known supply chain thought leader, and adapted and extended in partnership with McLagan International who draws on 50 years of work with transforming businesses. The hypothesis is that businesses that are further along in their evolution will show better transformation and performance results. There are six progressive stages in this Supply Chain Maturity Model: •

•

Reactive. The enterprise is forming, reacting to opportunities and problems, and firefighting. There are limited inbuilt routines and proactive capabilities. Project. The enterprise is a build-up of projects generally run by experts and beginning to use project management disciplines. Function. Decisions are driven by functional groups (marketing, finance, etc.) or prioritize cross-organization

LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN

themes that build overall organizational capability in a specific area (e.g., “lean,” “agile,” “quality.”) • End-to-End Value Stream. Decisions focus on customers and prioritize the efficiency and effectiveness of the end-to-end, demand-driven value chain, including S&OP, external suppliers and logistics partners as well as traditional core supply chain functions and manufacturing. • Win-Win Value Network. Direct and indirect participants in the customer-focused value stream, within and outside the enterprise, are viewed as a network. All roles in the enterprise – functional and support areas, etc. -- optimize to support the customer“MANY ORGANIZATIONS GET STUCK IN STAGE THREE, UNABLE TO CROSS THE focused value flow. “GREAT DIVIDE” BETWEEN EARLY AND This is currently taking the form of LATER MATURITY WAYS OF OPERATING.“ platform enterprises, inverted firms, and other collaboratives where significant value is added by parties outside the firm itself (Uber, Amazon) or by entrepreneurial microbusinesses operating on a platform where all are part of the firm (e.g., Haier) and where customers and external stakeholders are intimately involved in decision making. • Ecosystem. This is an emergent stage where the entire production/delivery system behaves like an ecosystem, including the concept of no waste and being a circular economy. In this stage all parts involved contribute to the well-being and balance of the entire ecosystem. They are self-aligning and “smart,” continually adjusting to changes and co-creating environments as they move into and out of them. The Great Divide A major shift occurs between maturity stages three and four, centering on how information is able to flow. Stages 1,2, and 3 require hierarchy, silos, and external controls like rigid job boundaries to move information and align roles. However, with advanced information technology these become less

valuable as alignment and information movement vehicles. These features can actually slow information flow because they necessarily rely on bureaucratic processes that add value in early maturity stages but often interfere with value in later stages. From Stage 4 onward, the primary orientation of the business turns horizontal and outward and begins to treat customers, external partners and players as members of the extended firm. In large enterprises, this is only possible because information technology is able to provide a single source of truth throughout the value stream. It also brings information for decisions closer to action in real time, while imposing new kinds of controls in the form of visibility and transparency. This enables the enterprise to match its structure with its value flow. Digitalized value streams then take on some of the people/technology alignment functions of hierarchy, silos, and external controls that have been necessary, but add costly bureaucracy and friction to point to point interactions. The shift from stage 3 to 4 is a profound one, requiring new power relationships, identities, and norms in addition to advanced technologies. For this reason, many organizations get stuck in stage three, unable to cross the “Great Divide” between early and later maturity ways of operating. In addition, organizations that do begin to cross the Great Divide struggle with transformational pressures as the entire business realigns itself to support the end-to-end value flow. To identify where respondents are in the maturity framework, we asked two maturity4 benchmark questions, one focused on metrics (Beyond the survival metrics of revenues, margins, and profits, what is the main focus of the metrics and rewards that drive change in your business?), the other on how the organization approaches change (Which of the statements below BEST describes the MAIN WAY that change happens in your business/enterprise?) . We then put our survey population into two groups according to their responses. We call them EARLY MATURITY (stages 1,2, and

Figure 8: The 6-Stage Maturity Model for Supply Chains and their Businesses

FUNCTIONAL REACTIVE

PROJECT

Firefighting; limited inbuilt proactive capability

Company as build up of projects run by experts

Improvements are driven by functions or crossorganization themes (e.g “lean, quality.”)

END-TO-END VALUE STREAM Decisions prioritize the end-to-end, demand-driven value chain

WIN-WIN VALUE NETWORK Enterprise viewed as a network, with all internal and external roles optimized

ECOSYSTEM All parts are self-aligned and ‘smart’, continually adjusting to changes

THE GREAT DIVIDE Technology assisted information flows parallel, integrate and enable work flows to customers, empowering and aligning local decisions and freeing hierarchy and discipline leaders from many control and communication functions

3), and LATER MATURITY (stages 4,5, and 6) in the rest of this report. Do LATER MATURITY organizations operate differently, transform more efficiently, and get better results? If they do, there may be lessons for the entire supply chain and business as a whole.

To find out, we compared EARLY MATURITY with LATER MATURITY enterprises. Based on their answers to the two maturity stage questions, about 2/3 of respondent’s placed their organizations in the EARLY MATURITY group and 1/3 in the LATER MATURITY group.

Figure 9: Where Respondents are in their Maturity Journey THE GREAT DIVIDE

40%

Metrics Change Approach

30% 20% 10% 0% Reactive Limited inbuilt routines and proactive capabilities

Project A build-up of projects generally run by experts

Function Improvements driven by functional or cross-organization themes

End-to-End Decisions prioritize efficiency and effectiveness of the chain from and to the customer

Win-Win Value Emergent Ecosystems Network All players involved The direct value in the network are stream, support self-aligned, smart functions, and and operate both external stakeholders independently and optimized seamlessly aligned

EARLY MATURITY

LATER MATURITY

In the rest of the report, we examine response similarities and differences between EARLY MATURITY and LATER MATURITY groups, as well as the implications of responses for the entire group. For now, know that supply chain organizations as a whole hover at the “Great Divide,” between stages three and four, with most in stages 1, 2, and 3.

IN SUMMARY Supply chains operate in all levels of maturity. This survey presents a view where: •

•

About 2/3 of organizations are in the first three of six stages of evolution and capacity (EARLY MATURITY): 1/3 in the last three (LATER MATURITY). Most respondents’ organizations hover at the point of a “Great Divide,” between the functiondriven and end-to-end identities (Stages 3 and 4). This is the point where organizations must become more horizontal, externally aligned with customers and other stakeholders, and fluid in operations. The maturity result patterns here are similar to other surveys we have done, although they are skewed slightly to the right, possibly because we only used two of the seven maturity indicators in this abbreviated investigation

Reflection Questions Where is your supply chain and the business it supports on its evolutionary journey? The LATER MATURITY stages operate, communicate, and control horizontally – more in line with the flow of work from and to the customer. What are some of the processes and practices in your business that support this flow? Interfere with it? What capabilities and relationships does your business need to develop in order to make a more horizontal flow of communication and work possible? How will the role of hierarchy and silos change as your business matures and perhaps introduces more digital technologies? What role do you see technology playing in facilitating a more horizontally-oriented business?

These two questions were drawn from a larger pool of maturity questions contained our more comprehensive Supply Chain Transformation GuideStar survey. The responses to these two maturity questions show a similar response pattern to all maturity questions asked in the larger survey, but there is a 7% skew toward higher maturity levels in this abbreviated diagnostic. 4

LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN

SUPPLY CHAIN RELATED BUSINESS RESULTS Figure 10: Focus on Results the Organization is Achieving

INTERNAL CONDITIONS AND PRACTICES

MATURITY LEVEL

Respondents rated their business’ strengths relative to competitors in thirteen business result areas that supply chains are expected to directly influence. Responses generally averaged slightly above 3 on a 5-point scale5, placing mean perceptions of performance as slightly better than competitors6 . But indicating an overall opportunity for development. As a group, respondents felt most positive7 about their social and environmental performance, their ability to serve and retain customers, and to act in a crisis. These are areas of

SUPPLY CHAIN PERFORMANCE/RESULTS

potential capability to draw on during periods of change and disruption. However, in all cases except the “social license to operate,” the LATER MATURITY group is significantly stronger. EARLY MATURITY organizations show significantly weaker performance than LATER MATURITY enterprises in seven result areas, with ratings below the 3.5 threshold (responses in the weaker to neutral zone) for all results. The LATER MATURITY group scores in the stronger zone in all these areas, although not yet firmly in the strength category of 4 or 5.

Figure 11: Stronger Result Areas for Both Groups

Early Maturity

Later Maturity

Social license to operate reputation as a responsible, high integrity enterprise Key customer service levels

Customer retention and loyalty

Crisis-response time

Emissions reduction/ Climate impact 2.0 5 6 7

2.25

2.5

2.75

3.0

3.25

3.5

3.75

4.0

4.25

4.5

Response options were: Major weakness, Weakness, About the same as the competition, Competitive strength Major competitive strength. These were assigned numerical codes of 1-5, with 5 being a major strength. We have no way of knowing at this point whether the skew to “better than competitors” is due to “better” performing organizations participating in TransformFest, or whether it is self-assessment inflation. In this report we will consider >3.5 as moving into the strength zone, and <3.5 as in the weak zone. © Copyright 2022. McLagan International, Inc Research and Report in collaboration with Future Insights Network. A company purchasing this Report may share it within the company only.

Figure 12: Areas of major difference between LATER MATURITY and EARLY MATURITY organizations

Early Maturity

Later Maturity

Percent of strategies achieved Business is positioned and equipped for sustainable competitive advantage Perfect order performance Speed of response to competitive challenges Attraction of the best talent Percent revenues from new products/services Introduction of disruptive, industry shaping products/services Attracting new customers 2.0

2.25

2.5

2.75

3.0

3.25

3.5

3.75

4.0

The LATER MATURITY group reports greater strengths in ALL external result areas with more than a half point advantage in two very important business result areas: Business positioned and equipped for sustainable competitive advantage (+.54) and % strategies achieved (+.53)

IN SUMMARY Observations drawn from Business Result Responses. •

•

• •

•

Reflection Questions

None of these business result areas is an absolute strength for either the EARLY MATURITY or LATER MATURITY groups, except “social license to operate,” at 4.05 for the LATER MATURITY group. Both groups see one other external focus area, emissions and climate, moving into the strength area (above 3.5) These relatively higher ratings on social and environmental results could be considered good news given the increased accountability pressures facing businesses in these areas. Two additional external-facing areas, customer retention and customer service levels, are also in the top rated categories for both groups, although not yet fully in the strength areas of 4 and 5. (After decades of “customer focus” interventions, should these customer scores be higher, rating fully into the strength areas 4 and 5?). The good news is that customer relationships, service, and loyalty are stronger areas to draw and build on during times of disruption and transformation. The LATER MATURITY group performs better in all business result areas, and significantly better in six. The weakest areas for both groups relate to introducing and profiting from disruptive and new products and services and attracting new employees and customers. These may be related. The biggest differences between EARLY and LATER MATURITY groups (over one-half point ) are in the most dependent of business variables: competitive positioning and strategy achievement, indicating that operating across the “Great Divide” has significant strategic value.

How do you explain the big differences between maturity groups shown on Figures 11 and 12? What dangers lurk when customer service levels are high, but you are not attracting new customers or innovating products and services? Does this apply to your company? The societal and environmental items, although representing relatively recent strategic concerns, are rated among the top items. Do you think this is an accurate picture? Does it reflect progress in addition to focus? These results show a major strategic and competitive advantage for LATER MATURITY stage organizations. How clear and motivating to leadership action is this survey-based conclusion? How can you use this information to support and accelerate change and transformation that will move your enterprise into higher maturity stages?

LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN

INTERNAL BUSINESS CONDITIONS AND PRACTICES Figure 13: Focus on what the organization is doing

INTERNAL CONDITIONS AND PRACTICES

MATURITY LEVEL

Most if not all organizations are working to support the human dimension of the business in ways that will lead to business success and ensure that people coevolve with the technological and other forces driving radical change. This survey examined several types of conditions and practices that today’s businesses are pursuing as part of their transformation agenda in the people/culture side of the business. Questions here focus on transformational conditions, leadership impact, strategy involvement, and technology priorities.

SUPPLY CHAIN PERFORMANCE/RESULTS

frequently used to describe the human dimension of a transforming business today. One of these had mean scores for both maturity groups (3.5+) that tipped them into the strength range on our 5-point scale. It’s also worth noting that the second highest rating for both groups is for the item Level of trust and transparency across all boundaries – up, down, sideways, with EARLY MATURITY organizations at 3.46 and LATER MATURITY at 3.91. This and employee engagement have been ongoing focus areas in most organizations. Although not absolute strengths, these are in the strength zone and may indicate a potential growing reserve of human energy to draw on across all maturity stages.

Internal Organization Conditions Related to Transformation The survey focused on ten internal conditions that are

Figure 14: A shared stronger area for both maturity groups

Early Maturity

Later Maturity

Extent to which people are engaged and aligned for common purpose at work 2.0

2.25

2.5

2.75

3.0

3.25

3.5

3.75

4.0

“TRADITIONAL HIERARCHICAL AND SILO OPERATIONS CAN MAKE IT DIFFICULT FOR IMPROVEMENTS IN THESE AREAS. HOW DOES THE ROLE OF HIERARCHY AND FUNCTIONAL SILOS NEED TO CHANGE IN YOUR BUSINESS IN ORDER TO SUPPORT BETTER HORIZONTAL SUPPLY CHAIN FLOWS THAT CHARACTERIZE LATER MATURITY ENTERPRISES?”

Figure 15: Internal Conditions Differences between Groups

Early Maturity

Later Maturity

Level of trust and transparency across all boundaries (up, down, sideways) Ease and speed of decision making and problem solving - Up and down the organisation) Ability to access the expertise you need wherever it is and whenever you need it On time, at cost, at quality implementation of technology and other transformation initiatives Speed of detecting and acting on game changing trends and threats How fast innovations transfer from one part of the supply chain/enterprise to another Ease and speed of decision making and problem solving - across horizontal levels and functions Retention of best talent 2.0

2.25

2.5

All organizations may be doing better in the trust and engagement area, but the products of that trust and engagement (better information flow, decision-making, and innovation) are lagging. Even the LATER MATURITY organizations struggle with horizontal communication: “ease and speed of decision making and problem solving across horizontal levels and functions” is among the weakest areas for both groups.

2.75

3.0

3.25

3.5

3.75

4.0

We pick up this story in later sections. “Retention of best talent” is among the lowest rated items for both groups – something we will refer to later. Note that although both groups’ rating profiles are similar, The LATER MATURITY group ratings are significantly higher in all nine internal condition areas and more than .5 higher in three areas:

Figure 16: Biggest Internal Conditions (>.5) Differences between Maturity Groups

Early Maturity

Later Maturity

Ease and speed of decision making and problem solving - Up and down the organisation) How fast innovations transfer from one part of the supply chain/enterprise to another Ease and speed of decision making and problem solving - across horizontal levels and functions 2.0

2.25

2.5

2.75

3.0

3.25

3.5

3.75

4.0

These differences make sense given that once an organization enters Maturity Stage 4, its activities and design become more aligned with the core flow of work to the customer: silos and traditional hierarchy become less dominant in directing and containing information flows.

LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN

IN SUMMARY What the data say about internal organizational conditions related to change and transformation. •

•

Responses here depict a slightly more trusting, engaged, and aligned enterprise across groups than we have seen in previous research. However, items related to the products of trust, engagement, and alignment (speed of innovation transfer, decision making and problem solving up and down and horizontally, acting quickly on game changing threats, as well as the ability to access expertise wherever it is) don’t match the trust and engagement levels for either group. The lack of clear strengths for either group in these expected “products” of trust and engagement may indicate internal structural barriers, something that will be evident in later sections. LATER MATURITY enterprises rate significantly higher in areas related to agility and responsiveness. Relative to the EARLY MATURITY group, they claim faster decision-making in all directions, better cross-enterprise information and innovation flows, and are more successful in transformation activities. The scores here for the LATER MATURITY group are in the strength zone, above 3.5 on our 5-point scale, but there are no clear strengths, indicating there is more work to do to prepare the organization for more unobstructed information movement. The inability to retain talent at desired levels is a key concern for both groups – something that takes on more urgency given the concern about digital skill deficiencies noted later in this report.

Reflection Questions Employee engagement, trust and alignment are problems that organizations have focused on for several years. Even though the ratings are not yet absolute strengths in this research, they are relatively stronger than other areas, This data indicates that efforts here may be bearing some fruit. Are employees more engaged and trusting now than two years ago? If yes, does this have a positive impact on decision and information flow efficiency in your enterprise? If not, what is getting in the way? This survey occurred almost two years into the pandemic. Do you think this was a positive or negative factor here? The easy movement of information, innovation, and ideas across the enterprise is not a clear strength for either maturity group, although LATER MATURITY companies show a clear and significant advantage. Traditional hierarchical and silo operations can make it difficult for improvements in these areas. How does the role of hierarchy and functional silos need to change in your business in order to support better horizontal supply chain flows that characterize LATER MATURITY enterprises?

LEADERSHIP IMPACT AREAS

People in formal leadership roles are responsible for the overall direction, design and development of the enterprise. These responsibilities produce conditions that amplify performance and results in both the technical and human dimensions of the business. The way leaders approach these formal responsibilities change significantly when organizations move into later maturity stages. This survey asked questions about four leadership impact/ responsibilities that have a multiplier effect on performance: organization structure, management and people processes, purpose and strategy, and culture and norms. Here are the results for respondents as a whole, and for EARLY MATURITY and LATER MATURITY groups independently.

Figure 17: Leadership Responsibility and Impact Areas Are your business/enterprise’s purpose and strategy strengths or weaknesses for moving into the future? To what extent is your organization’s culture (norms, values-in-action, power relationships etc.) a strength or weakness for co-evolving with technology and successfully moving into the future? Is your business/enterprise structure a strength or weakness for success as your business moves into the future? Is how people are managed, aligned and supported (management and people processes) in your business/ enterprise a strength or weakness as it moves into the future?

Early Maturity

2.0

2.25

2.5

2.75

As in the previous section, the LATER MATURITY groups exceeded EARLY MATURITY ratings in statistically significant ways. Business Purpose and Strategy These set direction and are the basis for decision, technology, process and people alignment. +.35 stronger in LATER MATURITY organizations Culture and Norms These create the performance atmosphere and shared behavior boundaries. +.42 stronger in LATER MATURITY organizations Structure This is the organization’s design for purposes of resource allocation, decision authorities, role accountability and identity, professional and skill synergies, and administrative relationships. +.59 stronger in LATER MATURITY organizations

3.0

3.25

3.5

3.75

4.0

Later Maturity

4.25

4.5

Management and People Processes These are the administrative, planning, accountability, supervisory, and human resource processes that support people alignment, development, performance, and accountability. +.24 stronger in LATER MATURITY organizations Curiously culture and norms are more positively rated by both groups than management and people processes. This raises a question similar to the last section where respondents rated people engagement and alignment stronger than the expected products of that alignment (for example, speed of interaction and decisions.) Both suggest that there are administrative and structural barriers to unleashing what may be untapped reserves of human potential and goodwill that are implied by engagement and culture ratings. Leaders need to rethink whether it is “culture” – the usual boogeyman – or systems, processes and structure that are most responsible for strategy or change disappointments and failures.

LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN

IN SUMMARY Observations from Ratings of Leadership Impact Areas. • •

•

Again, LATER MATURITY respondents report significantly stronger scores in all four areas of leadership impact. Both groups see purpose and strategy as the strongest of the four areas. Culture and norms is the second strongest area for both groups, although 33% in the EARLY MATURITY group rate culture as a weakness or major weakness. The relatively higher ratings of culture and norms overall, however, is consistent with the relatively higher engagement and trust scores reported in the previous section. The higher ratings for purpose and culture and norms suggest that the psychological dimension of the business may be a more neutral or even a somewhat more positive force than previously thought: progress to acknowledge and build on. However, Structure and Management and People Processes are weaker. This puts the ball directly in leaders’ courts: focus on removing impediments in these areas to unleash better results and to perhaps unlock additional benefits of slightly stronger purpose and culture. Structure is the area where the LATER MATURITY group has the biggest advantage over the EARLY MATURITY group although it is barely a strength. This suggests that later stage structures are better aligned with the actual flow of work, but that they still have work to do to improve this alignment. It is an area to explore for some “best practices.”

Reflection Questions Business purpose and strategy, culture and norms, structure, and management and people processes are critical areas of leadership responsibility. . Are leaders in your organization assessed directly on the strength of these areas? Should they be? Culture and Norms have traditionally been blamed for technological and other failures. Yet they are rated as slightly stronger than the structure/management process-focused leadership responsibility areas. Have there been culture and norms improvements in your business? If yes, what is working? This data suggests that structures and management processes are the major barriers to change. Is this true in your enterprise? Is your organization ready to deal with the structure and management process impediments to moving into later maturity stages which operate more horizontally and as networks, and where traditional leader-follower relationships change?

BREADTH OF STRATEGY PARTICIPATION Supply chains are redefining themselves to include more players, in addition to customers , who directly participate in, influence or are affected by the end-to-end value stream. This expanded view of the value stream is what defines LATER MATURITY, or maturity stages 4,5, and 6. So, we might expect to see a broader group of supply chain and business participants involved in overall planning activities as supply chains evolve. In order to investigate this assumption, the survey listed

14 potential strategy and planning participant groups, not including customers, and asked which groups actively participate in developing and shaping the supply chain strategy today. Over 50% of both EARLY MATURITY and LATER MATURITY groups involve functions that are traditionally associated with the supply chain: Supply Chain Planning, Warehousing and Logistics, Sourcing and Procurement, and Manufacturing as the most influential participants. (Figure 18).

Figure 18: Both Maturity Groups; Most Involved Strategy Participants

Supply Chain Planning Warehousing/ Logistics Sourcing/ Procurement

Later Maturity Early Maturity

Manufacturing 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

A majority of the LATER MATURITY group also involves Finance, Continuous Improvement, and Data Analytics. And they are more likely to actively involve more stakeholder groups, in total. (Figure 19)

Figure 19: Additional Strategy Participation Groups

Finance Continuous Improvement Data Analytics Sales/Marketing IT Quality Engineering External/Contract Manufacturing

Later Maturity Early Maturity

Product R&D Suppliers HR and Training 0%

10%

20%

30%

40%

50%

60%

LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN

IN SUMMARY What does this picture of strategy participation indicate? •

•

Three additional items are worth exploring. First, suppliers are only involved in planning with 30% of LATER MATURITY and 18% of EARLY MATURITY organizations. Clearly they are critical players in the end-to-end operations. What is lost if they are not involved in planning activities? Secondly, Sales and Marketing is involved in 48% of LATER MATURITY and 39% of EARLY MATURITY organizations. S&OP integration is currently a key priority for supply chains. Yet less than half of both groups include it as part of strategic supply chain planning. Also, even though talent, skill, and capabilities concerns are cited consistently in this research, Human Resources/ Training is the lowest rated strategy “SUPPLIERS ARE ONLY INVOLVED participant for both groups – IN PLANNING WITH 30% OF LATER reinforcing a pattern in survey MATURITY AND 18% OF EARLY MATURITY responses related to developing ORGANIZATIONS. CLEARLY THEY ARE CRITICAL PLAYERS IN THE END-TO-END people: it may be a concern, but it OPERATIONS. WHAT IS LOST IF THEY ARE seems to be a low priority! NOT INVOLVED IN PLANNING ACTIVITIES? ” In conclusion, the LATER MATURITY group involves more stakeholder groups in supply chain planning, indicating that it has a more expansive view of what the supply chain or value stream is and who is part of it.

Stakeholders who are traditionally considered part of the supply chain are most likely to actively participate in and shape supply chain strategy. LATER MATURITY organizations are significantly more likely to involve internal groups who are concerned about overall business performance (continuous improvement, finance, and data analytics), as well as external partners (suppliers, external/contract manufacturing). Sales and Marketing, in spite of S&OP’s industry emphasis, is only involved in 48% of LATER MATURITY and 39% of EARLY MATURITY organizations. Are technology or embedded systems and processes restricting participation, or is it people and silos? Suppliers are among the least involved participants in both LATER and EARLY MATURITY enterprises. This indicates that supply chains –even across the Great Divide – still have opportunities to better integrate these important players in their endto-end operations. Will digitalization create more opportunities here? HR/Training is the least involved stakeholder group. This is surprising, given the rate of skills changes occurring in supply chains, concerns about talent and skill deficiencies, and the potential timing advantage of simultaneously creating development strategies as supply chain plans firm up.

Reflection Questions What stakeholder groups are actively and influentially involved in your planning processes? What parts of the end-to-end value stream and the value network do they represent? Participation breadth influences the scope of plans, can lead to creative solutions that accelerate change and transformation, and helps affected groups get out of the starting gate faster. What stakeholder groups do you think should have more influence in or contribute to your supply chain planning processes in your organization. If you involve more groups, how would your planning activities and communication patterns need to change?

DIGITALIZATION MOVING INTO THE SUPPLY CHAIN AND BUSINESS Accelerating advancements in technology are profoundly disrupting old paradigms of the business, so it’s common to equate the word “transformation” with “technology.” As the World Economic Forum states, “smart” technology advancements today are bringing organizations into a fourth industrial era that will redefine many aspects of business and the business environment. Digitalization is a key transformation driver today. Supply chains are major beneficiaries and shapers of this force that will finally make the dream of end-to-end businesses, value networks, or even more responsive and creative business forms possible. This is increasingly possible as technology delivers universal, bi-directional, real-time information processing, analytics and exchange with fewer or no intermediaries. Because of its power as a transformational force, digitalization is a surrogate for the technical/structural

(hard) side of the business in this survey. What does the survey data say about the status of digitalization and how it relates to the maturity of today’s organizations? To answer this question, we asked questions focused on key drivers to digital, factors that are limiting technological progress, and the realized and expected benefits from digitalization. We also asked respondents to rate the maturity of their data analytics. Respondents reported as follows. What is driving digitalization as a priority? Respondents could select up to four responses from a list of nine potential drivers of digitalization investments. A majority of both groups identifies the same top two drivers. However, the LATER MATURITY group is most concerned about rapid advancements in technology and keeping up with these, while the EARLY MATURITY group’s top priority is cost reduction:

Figure 20: Shared Digitalization Drivers Later Maturity Early Maturity Cost reduction Rapid advancements in technology and access to these 0%

10%

20%

30%

The two groups differ in other ways in their views of why they want to adopt digital technologies. Their slightly different priorities provide interesting insights into their current business challenges (Figure 22). LATER MATURITY groups have more externally oriented concerns (customer responsiveness, new business models, and a few other minor preferences. EARLY MATURITY groups

40%

50%

60%

70%

80%

are more likely to be driven by cost concerns, keeping up technologically, and managing costs. The latter concerns indicate that earlier stage organizations are still building the capabilities that will enable them to focus more energy on new business models, and more. In the meantime, competitors who have more advanced capabilities may be starting to outpace earlier stage businesses, leading to a fear of being left behind.

LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN

Figure 21: Additional Digital Drivers for each Maturity Group Buyer or customer behaviour and preferences New commercial or business models Fear of being left behind by competitors Regulatory changes in the industry Requirements from suppliers or trading partners

Later Maturity Early Maturity

Quality The need to retain and develop talent 0%

10%

20%

30%

Again, the talent implications of digitalization (The need to retain and develop talent) don’t rank with other drivers: . Although this was a forced choice question, concerns for the human dimension again are among the least selected drivers In sum, while both groups see digitalization as a way to reduce costs and keep up with technology, the EARLY MATURITY group is more focused on these as primary goals and is also more concerned about being left behind – survival issues. In the meantime, LATER MATURITY group are more

40%

50%

60%

likely to focus on commercial/customer and operational competitive advantage – industry leadership issues. What are the most likely benefits of digital technologies and capabilities for the supply chain? Respondents could choose four potential benefits from a list of twelve. Response patterns here are similar for both groups, but there are interesting differences that reinforce data that appears earlier in this report.

Figure 22: Likely Benefits of Digitalization Enhanced customer focus and customer service Enhanced visibility and transparency Agile and dynamic operating models Performance improvements Cost reduction Accelerated pace of innovation and time to market Enhanced risk management capabilities People and capability development Top line growth through new customer propositions

Later Maturity Early Maturity

Compliance and control Enhanced safety 0%

10%

20%

30%

40%

50%

60%

70%

Both groups identify the following as the benefits they most expect from digitalization. These are the normally promoted key benefits of an integrating digitalization strategy. • • •

Enhanced customer focus and service Enhanced visibility and transparency Agile, dynamic operating models

But again, and reinforcing conclusions from the question about drivers, there are important differences between the groups. LATER MATURITY respondents are significantly more likely to identify accelerated pace of innovation and time to market, while the EARLY MATURITY group is more concerned about achieving performance improvements and cost

reduction. Again, the latter shows a greater concern for current operations while the former are reaching for transformational benefits (e.g., innovation). What is limiting achievement of the digital agenda? Digitalization is a transformative force that likely triggers many types of resistance from the existing system. Understanding this is important for shaping a change support agenda. Here is what respondents told us about what is making this move to digitalization difficult in their enterprises. Respondents could select any or all items on a list of twelve. EARLY MATURITY respondents identified more limiting factors overall than LATER MATURITY respondents.

Figure 23: Factors Limiting Digitalization Legacy systems are too complicated and numerous to... Our internal skills and capabilities are limiting progress Other pressing issues concerning the day to day operations take Culturally our organisation has always been slow to adopt new... Cost The value from digital supply chain is unclear Ambiguity around business strategy and firm performance Lack of top level sponsorship for digital supply chain initiatives Lack of clear ownership

Later Maturity Early Maturity

Percieved cyber security risks/threats Our partners limit our ability to make system wide changes and... Inability to agree on business case 0%

10%

20%

Both groups see “legacy systems are too complicated and numerous to unravel,” and “Internal skills and capabilities” as the major barriers. These limiting factors show up in other parts of the survey as systemic weaknesses in people management processes, as skill deficiencies, and in the overall relative difficulty of moving information and decisions up, down and across the enterprise. Over 30% of EARLY MATURITY respondents selected eight of the twelve limiting factors, while only three limiters rated over 30% for the LATER MATURITY group. Another way to look at the above seven items is that their positive expression (e.g., agreement on the business case) differentiates EARLY and LATER MATURITY STAGE enterprises. A closer look at “limitations” also exposes deeper differences between the groups. The EARLY MATURITY

30%

40%

50%

group is less clear about the digitalization’s business value and is more likely than the LATER MATURITY group to report barriers that indicate unclear strategic direction and support: inability to agree on a business case, lack of clear ownership, lack of top level sponsorship, lack of clarity about digital’s value. They are also more likely to see culture as a barrier to speedy adaptation (recall that 33% of the EARLY MATURITY GROUP rated culture/ norms as a weakness or major weakness.) Meanwhile, LATER MATURITY organizations have more sophisticated concerns: creating new commercial/business models, rapid advances in technology and access to these, and understanding buyer and customer behavior and preferences. Note that most differentiators relate to clear leadership, strategic focus, and willingness to invest in digital (skills and analytics). Maybe these

LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN

indicate that EARLY MATURITY organizations are trying to create system-wide digitalization technologies without having the inbuilt capabilities to support large cross-enterprise projects. They may not yet have built the functional strength, and process efficiency, that develops in Maturity Stages 2 and 3, and thus creates the foundation for digitalization. As many know, if your processes are poor, they will still be

problematic when they are automated. How sophisticated are the two groups in their use of data analytics? The ability to turn data into information that is useful for strategic and tactical purposes is vital for any organization today, and it is a critical by-product of digitalization.

Figure 24: Maturity of Data Analytics 50%

Later Maturity Early Maturity

40% 30% 20% 10% 0%

Limited data only available locally

Basic data is inconsistent, some integration but limited value

Developing data is somewhat robust

As with other areas examined in this study, The LATER MATURITY group is better positioned to realize tactical and strategic benefits from data analytics, rating 3.3 vs. 2.7 on a 5-point scale of analytics sophistication. A plurality of both groups rates their analytics sophistication at the midpoint on our scale. However, 40% of the EARLY MATURITY group while only 12% of LATER MATURITY scores

Intermediate data is robust and well integrated

Advanced data is fully robust, widely accessible and drives analytics

below the midpoint, with 16% of EARLY MATURITY 41% of LATER MATURITY rating their digital sophistication in the top two categories. The LATER MATURITY group is well into the zone of more robust and integrated data. Both groups are on a trajectory to greater sophistication in this important area, with the LATER MATURITY group significantly more advanced, but still reporting a long way to go.

IN SUMMARY Conclusions about the status of digitalization. •

•

The two groups show a similar pattern of expectations from digitalization. A majority of both EARLY MATURITY and LATER MATURITY respondents see digitalization as a way to reduce costs and keep up with technology. And most also expect better customer focus, visibility, transparency, and agile operating models as benefits. Legacy systems and lack of skills are key impediments for both groups – reinforcing data from other parts of the survey that implicate these areas. EARLY MATURITY groups are more driven to digitalization by transactional vs. transformational forces (reduce costs, fear of being left behind). EARLY MATURITY groups are unclear about the business value of digitalization and report a lack of clear business direction and strategy. They also report a broader array of limiting factors than the LATER MATURITY group. LATER MATURITY groups are more concerned about transforming and upgrading the business and finding ways to get closer to customers.

Reflection Questions How clear, focused, and supported within your overall business is your digitalization program? Does your approach and experience resemble the EARLY or LATER MATURITY group? Where are you on your digitalization journey? Digitalization is a big theme in business today. It is tempting to move into it without having the foundations of well-designed processes, strategic clout at the C-level, a clear business case, relevant skills, and ability to incorporate stakeholders within the scope of the digitalization project (the traditional supply chain? Functional activities? Forecasting synergies with sales and marketing? Customers and suppliers for end-to-end integration?) How strong are your foundations? What legacy systems are in the way of digital breakthroughs in your organization? How can you accelerate their replacement or remove the biggest barriers they may present?

THE BIGGER PICTURE: SUMMARY AND PERSPECTIVE ON LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN This diagnostic survey is like a prism, allowing us to look at supply chains and their organizations through a variety of lenses. The survey sections tell us what is happening in areas of business results, maturity evolution, and organization conditions and practices -- including digitalization sophistication -- related to transformation. In this section we examine what it all means, including asking the important “so what” question. We turn first to a statistical picture of what the data says, and then to a professional analysis and comments to further clarify the story that the data tells and its implications.

BACK TO THE SURVEY FRAMEWORK: A STATISTICAL ANALYSIS OF SURVEY DATA Earlier, this report presented a framework that shows the relationship among the variables that were the survey’s focus. Based on statistical analyses that clustered items and examined relationships between them, we can now fill out the framework. Figure 25: Factor Clusters

INTERNAL CONDITIONS AND PRACTICES

MATURITY LEVEL

SUPPLY CHAIN PERFORMANCE/RESULTS

Organization Design Purpose and strategy Structure How people are managed and aligned People engagement

Early Maturity Reactive Project Function

Dynamism Attraction of best talent Introduction of industry-shaping, disruptive products and services % revenue from new products Retention of best talent

Information Flow Efficiency Ease/speed of horizontal decision-making/problem solving Speed of innovation transfer in the organization and supply chain Speed of response to competitive challenges Speed of detecting/acting on game changing threats Human Energy Optimization People engaged/aligned for common purpose Ability to access needed expertise Trust/transparency across all boundaries

Later Maturity End-to-End Value Network Ecosystem

Customer Centricity Key customers service levels Customer retention/loyalty Perfect order performance Socio-Environmental Responsiveness Emissions reduction/climate impact Crisis response time Social license to operate

Strategic Potency Speed of detecting and acting on game changing threats Percent of strategies achieved

LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN

Based on statistical analyses (Appendices A-1 and A-2), we identified the seven factor clusters in Figure 25. Four describe desired performance results, and three describe internal organization conditions. External (Performance) Factors • Dynamism (DYN): Responsiveness to and ability to creatively evolve in a changing environment. • Customer Centricity (CC): Creating and keeping advantage with customers. • Socio-Environmental Responsiveness (SER): Being a positive and responsive part of the larger socio-environmental system. • Strategic Potency (SP): The influence of intentional actions and plans on business success. Internal Factors • Organization Design (OD): Conditions that define and support enterprise direction, boundaries and relationships. • Information Flow Efficiency (IFE): How quickly and effectively decisions, ideas and information move throughout the enterprise. • Human Energy Optimization (HEO): Conditions supporting people to use their full capacity and creativity at work.

The data show a strong statistical relationship between internal and external factors, moderated by the maturity variable. Importantly, the internal factors account for 25% of the differences in maturity ratings, while maturity accounts for 13% of the strength of the external performance factors. Based on statistical regression analysis9, the factor with the most impact on maturity is Organization Design, with the other two internal factors (Information Flow Efficiency and Unleashed Human Energy) also exerting strong influence. Thus, to accelerate a supply chain into later stages of maturity, leaders must ensure that organizational structure, direction, management and engagement processes make it easy for information to flow in all directions, and for people to be both aligned and free to use their energy for problem solving and innovation. This, in addition to completing the growth work related to their current maturity stage (e.g., building project management capability and early management strength in Stage 2, and functional and process strength as well as internal brand identity (e.g., agile, customer-focused, quality-oriented) in Stage 3.) Maturity also has a strong statistical relationship with three of the four external performance factors (Dynamism, Customer Centricity, Strategic Potency). Socio-Environmental Responsiveness, a more recent goal of supply chains in the form of ESG focus and measures, exhibits a relatively weaker

relationship. This is understandable because results in this area are more likely in Stages 5 (Win-Win Value Network) and 6 (Ecosystem), stages that fewer organizations (<12%) have entered. There are also direct relationships between the internal and external factors10. The internal variables account for 76 percent of the strength of the reported external results, while the external results account for 22% of the strength of internal results. This means that internal results drive the external results more than external results influence internal variables. This helps answer the frequent question: do better results cause better internal conditions or vice-versa. We have evidence here that the internal conditions enable external performance. This research also indicates that today, specific supply chain/organization conditions related to digitalization correlate with Maturity level, creating an additional set of internal organizational factors to consider when trying to influence valued business results (“external factors”). As mentioned in the Digitalization section summary, EARLY MATURITY stage organizations may be having more trouble introducing digitalization because they have not yet built the capacities of maturity stages 2 and 3. A case of “walk before you run?”

See Appendix A-3 for details related to the statistics. We used canonical correlation analysis to identify and measure these relationships. See Appendix A-4 for more details about this method. Canonical correlation is appropriate in the same situations where multiple regression would be but is used in cases where are there are multiple variables on both sides of an independent variable/dependent variable relationship. 9

SUMMARY OBSERVATIONS AND DISCUSSION the infrastructure for easy transition into a digitalized world that requires a more horizontal way of operating. Both groups experience limitations and identify cost concerns and lack of relevant skills as their main limitations, but EARLY MATURITY enterprises feel significantly more pressure in these areas.

Responses to this survey provide a picture of what is happening related to transformation in supply chains today. Respondents were primarily upper and upper middle leaders representing a cross-section of industries in all geographic areas. They represent 162 organizations in various stages of organization evolution – or maturity. 59% fall into what we have called EARLY MATURITY (maturity stages 1-Reactive, 2-Project, and 3-Functional). 41% are LATER MATURITY organizations (maturity stages 4-End-to-End Value Stream, 5-Win-Win Value Network, and 6-Ecosystem). LATER MATURITY organizations are positioned across what we have called the Great Divide, where organizations become more horizontal and inclusive of external stakeholders. Most organizations straddle the line between stages 3 and 4. Stages 5 and 6 are emergent stages with only 8% and 3% of the population putting themselves into those categories based on responses to questions designed for the purpose of categorization. We hypothesized that organization conditions and results would be related to their maturity level – a hypothesis that this study supports. The LATER MATURITY group is statistically stronger in virtually all areas we examined. They are stronger than EARLY MATURITY organizations in all three internal organization factor clusters (organization design, information flow efficiency, and human energy optimization). They are “BOTH GROUPS EXPERIENCE LIMITATIONS also more sophisticated in their AND IDENTIFY COST CONCERNS AND approach to digitalization and data LACK OF RELEVANT SKILLS AS THEIR analytics, focusing on the business MAIN LIMITATIONS, BUT EARLY MATURITY enhancements that technology can ENTERPRISES FEEL SIGNIFICANTLY provide. Alternately, EARLY MATURITY MORE PRESSURE IN THESE AREAS.” organizations may not have developed

LATER MATURITY organizations also report better performance results. Their ratings are higher in all four external results factor clusters: Dynamism, Customer Centricity, Socio Environmental Responsiveness, and Strategic Potency. In future studies we hope to add the missing piece of overall business financial performance. At this point, though, LATER MATURITY organizations do report stronger strategic positioning relative to competitors than do EARLY MATURITY firms. There is an interesting deeper theme in this data that provides an important insight for transformation leaders. For decades, culture has been the boogeyman blamed for derailing big changes. It is still not a strong area across businesses, but this survey’s questions related to culture and norms, people alignment and engagement, and trust – all important for human motivation and focus – receive relatively stronger ratings by both early and later maturity groups. Respondents in both groups also give purpose and strategy relatively higher strength ratings. These are all social system conditions that we would expect to lead to higher ratings of information flow efficiencies, including better innovation transfer and faster problem solving and decision making up, down and across the enterprise. But these areas of internal process agility, although stronger for later maturity stage groups, are still among the weakest overall. Why is this? The answer may be in the relatively weaker ratings of structure and people management processes, as well as the persistence of legacy systems. Structures, people management processes, skill deficiencies, and legacy systems are tangible barriers to unleashing the assets of the enterprise. But they are also structures in people’s minds about how roles and relationships should work. And, they are, as noted in the “Leadership Impact” section, conditions in the organization that leaders are directly responsible for. It may be time to focus on these as the most urgent and critical barriers to transformation rather than to continue to blame people and culture. If these responses reflect reality, then there is more cultural capital to tap into than leaders think if only they update structures, management and people processes for the digital age that is emerging.

LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN

ACTION IMPLICATIONS FOR SUPPLY CHAIN AND BUSINESS LEADERS Every organization today sits at the tipping point of the fourth industrial era. It’s an era being shaped by smart technology, globalize/nationalize tensions, the convergence of many fields (e.g., biology, neuroscience, digitalization), and social and environmental problems carried forward from previous revolutions that pose existential threats. It’s also a time when technology and media-driven visibility and transparency are blurring many boundaries: between organizations and all parts of their value stream from and to customers; among all silos in the traditional business; between the company and the natural environment that provides raw materials as well as previously free “storage” grounds for waste and other “externalities.“ It’s a time when supply chain leaders

How to respond? There are many action implications. We suggest the following as initial steps. •

Assess where your organization is on its evolutionary (maturity) journey and tailor your change plans accordingly. Focus on both the human and technical dimensions. Remember that maturity stage is a description of where your enterprise is on its evolutionary journey, not an evaluative metric. At each maturity stage you build capabilities that are foundational for moving to the next, but as you move into new stages you must also shed some of the features of the old.

who previously identified primarily with logistics and maybe procurement, find themselves leading the entire flow of value that is the business, including influencing strategic and sales and operations planning at one end, and dealing with environmental, customer, and societal concerns at the other. As organizations turn horizontal and move across the Great Divide into Maturity Stages 4 and beyond, the supply chain – the value stream – becomes the business. This is a time that deserves to be called transformational. As the stewards of the technologies and emerging business models that are driving this transformation, today’s supply chain leaders have a big change leadership responsibility. As we said earlier in this report you may not have asked for a business transformation role, but it has found you.

For example, in stage 1 (reactive) the organization sets its course, path, and founding story. In 2 (project) organizations build basic processes focused primarily on activities that build products and services, and on some cohesion mechanisms across project groups. In 3 (functional), organizations build their unique specialist strengths and implement cross enterprise programs (e.g., quality, agile, lean) that become intangible business capabilities that carry over into the more horizontal organization forms of maturity 4 (end-to-end value stream) and beyond.

Each stage is foundational for building later more complex capabilities.

FUNCTIONAL REACTIVE

PROJECT

Firefighting; limited inbuilt proactive capability

Company as build up of projects run by experts

Improvements are driven by functions or crossorganization themes (e.g “lean, quality.”)

END-TO-END VALUE STREAM Decisions prioritize the end-to-end, demand-driven value chain

WIN-WIN VALUE NETWORK Enterprise viewed as a network, with all internal and external roles optimized

ECOSYSTEM All parts are self-aligned and ‘smart’, continually adjusting to changes

•

Evaluate your performance on the external factors as part of your point-in-time and ongoing supply chain and business strategic planning and goal-setting. This will probably mean finding ways to measure dynamism and the other three external factors that are often not considered critical organization metrics.

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Whatever your evolutionary stage, don’t wait to introduce “across the Great Divide” thinking and action. Undoubtedly you are introducing some advanced, stage 4 and beyond technologies. There will be problems if the organization isn’t ready for the radical changes these require. Some ways to accelerate the process, in addition to ensuring that your foundational capabilities from stages 1,2, and 3 are strong, include:

Create new visual representations of your business. Replace or augment the traditional organization chart with flow and network diagrams that show the end-toend value stream and various primary and secondary participants in it. Encourage people to see where they are in this bigger picture. This will create a subtle but always present force that can affect how people see their roles and relationships in the larger customer-focused system. (I behave differently if I see myself as part of a flow to the customer vs. a box on the cascading organization chart.) Expand participation in your planning activities. Begin to cross-educate the supply chain staff with other discipline’s professionals – beyond the traditional purchasing, manufacturing, logistics. Involve training/learning professionals early in as many plans and decisions as you can. Expect them to help you address the talent and skills problems the business and supply chain face and will continue to face as the world of work and technology continues to change and as your supply chain matures. Learning/training experts can also help you create an enterprise where learning is ongoing, a shared responsibility of individuals and the company, and embedded in work and processes. Don’t treat learning and development as an afterthought or a collection of courses. Expect high levels of strategic support and anticipatory action from this part of your business.

Target your change strategies and investment at improving the internal factors – not just technology. Do a rigorous assessment of the three internal factors identified in this research: your organization design, information flow efficiency, and human energy optimizing levels. These factors play a major role in your ability to advance along the maturity scale and they affect your overall business results. Measure the strength of these internal factors in order to determine highest leverage areas for action. Involve people in your organization in this assessment and planning process. Use parts of this report as a focal point for conversations that deepen discovery and identify action areas (related to both strengths and weaknesses).

INTERNAL CONDITIONS AND PRACTICES Organization Design Purpose and strategy Structure How people are managed and aligned People engagement Information Flow Efficiency Ease/speed of horizontal decision-making/problem solving Speed of innovation transfer in the organization and supply chain Speed of response to competitive challenges Speed of detecting/acting on game changing threats Human Energy Optimization People engaged/aligned for common purpose Ability to access needed expertise Trust/transparency across all boundaries

SUPPLY CHAIN PERFORMANCE/RESULTS Dynamism Attraction of best talent Introduction of industry-shaping, disruptive products and services % revenue from new products Retention of best talent Customer Centricity Key customers service levels Customer retention/loyalty Perfect order performance Socio-Environmental Responsiveness Emissions reduction/climate impact Crisis response time Social license to operate Strategic Potency Speed of detecting and acting on game changing threats Percent of strategies achieved

LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN

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Engage your leadership team in scenario planning or a foresight exercise focused on your evolution as a business. It’s common to do scenarios for the industry and what the business will do. But less common to examine the business/supply chain as an evolving entity – living and moving in space and time in a radically changing environment. Consider stepping out of your supply chain and business as it is today to examine where it is, what it will do or is doing when it meets the Great Divide, and how it may evolve as a stage 4, 5, or 6 business. Perform a rigorous review and redesign/replacement of your people management processes and structures. These should support the information flow efficiencies that were among the weakest areas identified for all groups in this research. Also be sure these processes align and unleash human energy and prepare people to work with technology in the more horizontal, just in time workflow environment that digitalization is helping to create. Remember, the ratings on trust and engagement are higher than those related to information flow, innovation, speed of decision making. In order to operate more horizontally and with a light touch from leadership in the hierarchy, people need the skills and mindsets of self-management to unleash some of their engagement energy. Redesigned management processes need to foster these kinds of capabilities.

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Prepare yourself and other leaders to lead within a post-Great Divide enterprise. Leadership models have been changing to be more collaborative and inclusive. However, the traditional and still dominant way of leading assumes hierarchy, silos, and a priority on the technical vs. human dimensions. Across the Great Divide far less command and control is needed as technology, visibility and transparency take on many traditional alignment and control functions. What will it take to lead an end-to-end value stream? A win-win value network? An ecosystem? Leaders will become more like choreographers, convenors, relationship builders, as well as decision makers in domains like broad strategy, resource allocation. The boss? Technology may sometimes be the boss, but the human leader can support performance engagement, energy, and continual learning and development. There is also a big role to help the workforce make the shifts required to function in a more horizontally flowing enterprise, network, ecosystem. They too have learned how to operate in the predominantly hierarchical and siloed environments of early stage enterprise. For success in the later stages, people must step into a new kind of power and accountability within new kinds of structures and with technology

that will both guide and demand action. People, too, need to evolve into higher levels of autonomy, mastery, and contribution. The new leadership thinking is only emerging. Any supply chain leader can have a say in how it evolves. The key is to realize that the business changes occurring are very disruptive for leadership itself. This may be the biggest disruption of all.

LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN AND BEYOND The intent of this research was to focus on leadership and transformation in the supply chain. So, we will close with a special message to supply chain leaders as leaders of transformation for the business as a whole as well as for their supply chain. First, note that not all maturity stage progressions are transformational. Transformational changes disrupt and change the main rules of the game. They shake up relationships and require new assumptions. For example, the shift from Stage 3 to 4 is a transformational shift that significantly changes power relationships. Many information filtering functions of hierarchy, silos, and hard job boundaries are replaced by the new controls of visibility and transparency. The mental image of the enterprise shifts from the organization chart to a flow diagram. This affects leaders’ supervisory and control roles, but it also makes it both easier and critically important to focus on the Leadership Impact areas in this survey. Respondents rated structure, and management and people processes relatively weaker than purpose and strategy, and culture and norms. The survey indicates that all four leadership impact areas need development for both EARLY MATURITY and LATER MATURITY groups. We suggest that supply chain and business leaders not only focus on and strengthen these areas as potent leadership leverage points, but also transform them to fully support the more horizontal business of stage 4 (End-to-End Value Stream), the extended network of stage 5 (Win-Win Value Network), and the Ecosystem stage 6 enterprise. It’s up to leaders to adapt and create the best organization design, information flow efficiencies, and human energy optimization (the three internal factors) to support their businesses as they move into different

maturity stages. If you are a supply chain leader introducing digitalization or struggling to get the results it promises, pay attention to the list of digitalization differentiators between EARLY MATURITY and LATER MATURITY groups that are implied in Figure 23. Because new approaches to the three internal factors and to technology change (digitalization) are emergent in stages 4,5, and 6 (even the End-to-End Value Stream is in its early form across the industry), it will be important for companies in or entering these stages to experiment, invent, share lessons learned, and remove dysfunctional practices related to these internal variables. Also, it will be important to continually measure the external results, knowing that there will be a lag between changes in the internal actions and business results. If this sounds like a major leadership challenge that involves organization changes as well as personal changes in how leaders use their power and

time – it is. However, buried in this data is a resource that you may be able to draw on in new ways: engagement, trust, and other cultural support from your people seem to be rising. Both EARLY MATURITY and LATER MATURITY respondents indicate that these are relatively stronger than other areas (less strong for EARLY MATURITY). This indicates there may be a reserve of energy and human potential ready to support you in your change work. While it continues to be important to support engagement and other cultural factors, plan also to draw on it while you focus your main leadership attention on removing barriers from legacy systems, improving organization design, and removing the physical and mental information flow impediments up, down, and sideways so that work can flow the way it wants to flow – from and to the customer, with limited friction and optimal stakeholder relationships. Remember, you may not be looking to lead this major transformation challenge, but it is looking for YOU.

THE AUTHORS AND CONTRIBUTORS Pat McLagan, CEO McLagan International, Inc. Patricia brings 50 years of change and transformation work with executives, change teams, union leaders, and people at all organization levels and across industries. Examples include extensive work with NASA executives during the transition years between the moonwalks and space shuttle; with General Electric during its shift from conventional to electronic technology in the 70’s and 80’s; and with AT&T during the telecommunications renaissance of the 80’s and 90’s. Her work spans 6 continents, including largescale change projects in South Africa, where she lived for most of the 1990’s. She has guided change projects in technology companies, financial services institutions, utilities, and cyber-security companies. She was the external advisor on an organizational change within Defense Intelligence Agency in the aftermath of 9/11 and helped a state Governor to designand implement a major statewide transformation initiative. She is a speaker and a prolific author of books and articles on change, including on supply chain transformation, and an award winning learning and development professional interested in how people evolve and change.

Mark Rhodes Mark is a social psychologist who is the research design and analysis expert for this survey. He advises clients on the use of multivariate statistics to determine importance weights, gleaning the true priorities for improvement out of survey data. He has advised on organizational design, redesign and start-up efforts. Mark’s experience spans service, manufacturing, tribal and government sectors. Mark received his Ph.D. from Harvard University. He also holds Psychology degrees from Furman

University and Wake Forest University. At Harvard, Mark studied with Robert F. Bales, one of the forefathers of the study of work teams and group facilitation. The authors thank the following people for their contributions to this effort:

Future Insights Network Team Maria Villablanca, Andrew Brown, and Rory Pilbrow provided the platform and encouragement for bringing this diagnostic survey and report to Future Insights’ supply chain network. They also contributed the digitalization section of the survey and participated in reviews.

The Late Roddy Martin Roddy and Pat McLagan developed the more comprehensive diagnostic survey and implementation process that this research draws from. They worked together on a number of projects in South Africa and in the US until his death in 2021. His influence will continue in this work as the research process evolves and, hopefully, makes a difference for supply chains and their businesses.

John Gattorna The author of many thought leading books on Supply Chains as dynamic systems, Dr. Gattorna authorized access to his company’s Customer Alignment model. He also reviewed and commented on various drafts of this Report.

Quinn Rhodes Quinn ran the statistical analyses for this research. He is a graduate student in Behavioral and Decision Sciences from the University of Pennsylvania with studies in Multivariate Statistics at Wharton Business School.

LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN

APPENDIX: STATISTICAL CHARTS A-1: Factor Analysis of External Variables External variables were subjected to factor analysis using the “R” routine for Principal Component Analysis and employing Varimax rotation. The factor loadings shown in the table show correlations between each particular variable and the factor. The Principal Component Analysis yielded four factors among the external metrics in the survey, named as follows: DYN = Dynamism CC = Customer Centricity SER = Socio-Environmental Responsiveness SP = Strategic Potency

Factor Analysis of External Variables Variable Definition

DYN

Attraction of the best talent

0.79

Retention of the best talent

0.72

Percent revenues from new products/services

0.41

Introduction of disruptive-indusrty shaping products/services

0.39

Attracting new customers

0.35

SER

0.37

Key customer service levels

0.88

Perfect order perfoermance

0.56

Customer retention and loyalty

0.55

Crisis-response time

0.35

0.32

Speed of detecting and acting on game changing trends and threats

0.78

Percent of strategies achieved

0.50

Social license to operate - reputation as a responsiblehigh integrity enterprise

0.73

Emissions reduction/Climate impact

0.48

A-2: Factor Analysis of Internal Organization Variables Internal variables were also subjected to factor analysis using the “R” routine for Principal Component Analysis and employing Varimax rotation. This analysis yielded three factors. Factor loadings shown in the table indicate the correlations between each variable and the factor. OD = Organization Design IFE = Information Flow Efficiency HEO = Human Energy Optimization Factor Analysis of External Variables Variable Definition

IFE

In your view - to what extent is your business - as a whole - positioned and equipped for sustainable competitiveness as it moves into the future?

0.65

Is your business/enterprise structure a strength or weakness for success as your business moves into the future?

0.62

Are your business/enterprises purpose and strategy strengths or weaknesses for moving into the future?

0.61

To what extent is your organizations culture (norms - values-in-action - power relationships etc) a strength or weakness as it moves into the future?

0.57

Is how people are managed - aligned and supported (management and people processes) in your business/enterprise a strength or weakness as it moves into the future?

0.51

To what extent does your data allow you to deliver tactical or strategic insight for your supply chain and business?

0.39

HEO

Extent to which people are engaged and aligned for common purpose at work

0.66

Ability to access the expertise you need wherever it is and whenever you need it

0.59

Level of trust and transparency across all boundaries (up-down-sideways)

0.55

Achievement of on-time - at cost - at quality implementation of technology and other transformation initiatives

0.41

Ease and speed of decision making and problem solving - up and down the organization

0.77

Ease and speed of decision making and problem solving - across horizontal levels and functions (silos)

0.77

How fast innovative and improvements transfer from one part of the supply chain/ enterprise to another

0.59

Speed of response to competitive challenges

0.52

LEADERSHIP AND TRANSFORMATION IN THE SUPPLY CHAIN

A-3: Causal Model based on Regression Analysis The graphic below shows our causal model derived from analysis of the survey results. The model shows, from left to right, how internal variables determine the current state of an organization along the six phases of our Maturity Model, and then the influence of an organization’s Maturity as cause of the four external performance

ORGANIZATION DESIGN

r=.38 r=.44

INFORMATION FLOW EFFICIENCY

r=.33 r=.37

UNLEASHED HUMAN ENERGY

r=.26 r=.29

factors. The statistics in red and green are the Pearson correlations between the factors and the maturity model scores on two maturity questions, one focused on metrics (red “r”), the other on approach to change (green “r”). The R-Square figures at bottom show, respectively, the percent of variance explained in the Internal and external variable on measures relating to the Maturity Model.

MATURITY LEVEL

R-SQUARE = 25%

r=.18 r=.23

DYNAMISN

r=.24 r=.25

CUSTOMER CENTRICITY

r=.15 r=.08

ECOSYSTEM RESPONSIVENESS

r=.22 r=.34

STRATEGIC POTENCY R-SQUARE = 13%

Metrics maturity question as dependant variable

A-4: Canonical Regression For a look at the direct effect of the Internal variables on the External measures of success, unfettered by the intervening maturity scale, we turned to canonical correlation11, enabling us to determine that the internal variables accounted for 76.2 percent of the variance in the reported external results, while the external results accounted for 22% of the variance in

Change approach maturity question as dependent variable

internal results. This means that internal results drive the external results more than external results influence internal variables. This helps answer the frequent question: do better results cause better internal conditions or vice-versa. We have evidence here that the internal conditions enable external performance.

APPENDIX: FIGURES Figure 1: Survey Framework Figure 2: Respondent Headquarter Locations and Industries Figure 3: Business Revenues Figure 4: Level of Top Supply Chain Leader Figure 5: Supply Chain Organization Size Figure 6: Survey Respondant Level Figure 7: Focus on Maturity as a Moderating Variable Figure 8: The 6-Stage Maturity Model for Supply Chains and their Businesses Figure 9: Where Respondents are in Their Maturity Journey Figure 10: Focus on Results the Organization is Achieving Figure 11: Stronger result areas for both groups Figure 12: Areas of major differences between Later Maturity and Early Maturity organizations Figure 13: Focus on What the Organization is Doing

Figure 14: A shared stronger area for both maturity groups Figure 15: Internal Condition Differences Between Groups Figure 16: Biggest Internal Conditions Differences between Maturity Groups Figure 17: Leadership responsibility and impact areas Figure 18: Both Maturity Groups: Most involved Strategy Participants Figure 19: Additional Strategy Participation Groups Figure 20: Shared Digitalization drivers Figure 21: Additional Digitilization Drivers for each Maturity Group Figure 22: Likely Benefits of Digitalization Figure 23: Factors Limiting Digitalization Figure 24: Maturity of Data Analytics Figure 25: Factor Clusters

Canonical correlation analysis is used to identify and measure the associations among two sets of variables. Canonical correlation is appropriate in the same situations where multiple regression would be but is used in cases where are there are multiple variables on both sides of an independent variable / dependent variable relationship. T. R. Knapp notes that “virtually all of the commonly encountered parametric tests of significance can be treated as special cases of canonical-correlation analysis, which is the general procedure for investigating the relationships between two sets of variables.” 11

The Supply Chain Transformation Report 2022 © Copyright 2022. McLagan International, Inc Research and Report in collaboration with Future Insights Network A company purchasing this Report may share it within the company only.