The slogan for the March 2012 IE group summit in Berlin is ‘IBP innovation’. As innovation is defined by ‘the act of introducing something new’ it is good to see that the IE group wants to start thinking beyond the current definition of IBP. Integrated Business Planning is often seen as a natural progression from S&OP, which came to life in the 80’s to align sales and operations. Although there are many discussions on the difference between S&OP and IBP, many agree that IBP has a larger scope then the traditional S&OP. So how can we make sure we will really innovate IBP?
If patents are an indicator for innovation, IBM is king. In 2011 IBM earned most patents in the U.S. for the 19th consecutive time. More then impressive! In total 6180 patents, the odd 1300 more then 2nd Samsung and a staggering 3800 more then Microsoft. Apple, often perceived as the most innovative company, wasn’t mentioned in the top 10. There is proof that for effective innovation you need diverse teams with different cultural background, knowledge and values that challenge each other to create new insights and…innovate.
On IBM, Shirley Ann Jackson, the first African American woman to receive a doctorate from MIT, already noted in 2006 that ‘if we want to cultivate and to nurture innovation in our nation, in our states, in our communities, in our universities, and in our corporations, then, we must cultivate and nurture diversity, as well.’ 1
P&G is another company well known for its innovation in consumer products. Robert McDonald, CEO and 30 year veteran at P&G, has as one of his ten leadership principles: ‘diverse group of people are more innovative then homogenous groups’. He led P&G from 15% of innovations making its profit and revenue targets in 2000, to 50% in 2010. 2
These world leading innovators understand that diversity is essential for innovation and they made it part of their core values and business principles. In this way IBM and P&G made their innovation strategy sustainable. If we now talk diversity and the future of IBP innovation, I’m getting concerned. Unfortunately there are indicators that show that IBP thinking is mostly done from a supply chain perspective, as the traditional S&OP thought leaders, consultancies and practitioners move to IBP. Some of these indicators are:
- Functional interest: 58% of the 142 respondents from 31 countries, who participated in my 2011 S&OP pulse check survey, are reporting in supply chain. This shows a high diversity from cultural perspective, but a narrow interest from functional perspective in S&OP.
- Consultancies: S&OP and IBP maturity models developed and used by consultancies in implementations are mostly starting from demand and supply perspective and define things like demand driven value networks as the highest maturity stage for S&OP. These are supply chain biased terminologies. Most of these consultancies with an IBP offering have a supply chain background, which indicates a lack of diversity.
- Software: there has been an explosion of S&OP and IBP offerings from software houses that previously focused on advanced planning and execution systems to support the supply chain. Picking up the S&OP/IBP trend they now flood the market with things like next generation S&OP, rapid implementation S&OP. Some software companies scream S&OP and IBP while their sales people don’t know yet what IBP is and still sell functional packages separately. It’s a scary thought if these software companies drive thought leadership on IBP.
- Industry depth: While a good IBP model should be applicable and have value for any industry, IBP seems mostly applied in manufacturing companies. We don’t hear many IBP success stories from the finance industry, not for profit organizations, governments etc.
- Lack of attention: Now we don’t need to have president Obama talk IBP, but there is no noise from strategic consultancies on IBP. Although strategic consultancies like McKinsey discussed zero based budget forecasting and dynamic budget forecasting in the McKinsey Quarterly, there has been no mention of IBP. The most visited McKinsey Quarterly article in 2011 Have you tested your strategy lately, provides 10 tests to review a company strategy.3 Although some of those tests are similar to IBP capabilities or can be accommodated by IBP, the term integrated business planning is not used in the article. Doesn’t McKinsey get it? I think they do, but IBP is not on their radar yet to track strategy and strategic capabilities.
All these factors limit diversity and therefor innovative IBP thinking as there is not enough diversity and challenge that drives thinking beyond the current IBP. If we really want to have a business process that can plan a company’s future E2E in an integrated matter, we have to start adding additional perspectives to develop real E2E IBP, otherwise IBP runs the risk to remain ‘a supply chain thing’.
If you go to the IBP innovation summit http://operations.theiegroup.com/ibp-berlin and mingle with the visitors, you will be surrounded by 60%-80% supply chain biased thinkers. My advice if you really want or break down the walls of the functional silo’s; go for diversity and look for the 20% non-supply chain thinkers! History will help you, as it has shown that Berlin is a pretty good place to break down walls!
- Harvard Business Review, June 2011