The rise of open supply chains

I have seen with great pleasure the new version of the EFQM Excellence model. Having been at the periphery of the EFQM community for ten years now, this is an interesting exercise. I believe this new version is a great step forward that builds on the foundations of the Excellence movement while addressing some contemporary challenges. In terms of foundation, I am glad to see the word execution at the center of the new EFQM model. The Excellence movement have always focused on getting things done and on the quality and depth of execution. I am glad to see this so clearly at the center of the model. Today there are a lot of agitated people who rush from project to another and bump into glass walls. We hear a lot about the agile imperative but systematic ways of working that combine simplicity, collaboration, speed and value creation are still scarce. Too often transformation programs are piling up on each other. Instead of focusing on a few breakthrough goals for the whole organization, every department and units pursue their own transformation programs and require the contribution of others. This leads to a collaboration overload and rigidifies organizations. The revised EFQM model recognizes that multiple change can impact an organization, but it also advocates that organization should have one purpose, one vision and transform themselves accordingly. It is good to see this so clearly on the forefront of the revised EFQM model. In terms of contemporary challenges, I believe that the extensive use of the word ecosystem within the new EFQM model is a great step forward. Thirty years ago, industries were depicted as a chain of players with sequential inputs and outputs. Industries were giant economic silos that have now merged, recombined and interpenetrated each other. Innovation is everywhere and continuously accelerating. As the result, traditional value chains are shaken. We now have dynamic ecosystems with organizations that simultaneously collaborate and compete against each other. These ecosystems are going through steady and sometime rapid evolution. All organisation tries to escape the commodity trap and to regain differentiation by harnessing open innovation and external opportunities. So, thank you EFQM for helping people reflect on ecosystems. Finally, I might share a call to go even further in the future. A lot of change has been implemented in the revised EFQM model. This is great. But moving from an assessment to a transformation logic might require more than a gentle upgrade of the RADAR logic. RADAR is great for assessing advanced organisation. Let’s use it for this. To help organisation transform I would encourage EFQM to develop a forward looking way to use its revised model.
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Today Open architectures, Open Hardware and Open Source Software are making progress across diverse industries where they could disrupt supply chains and bring to life open supply chains. This will not happen overnight, but it is worth understanding such developments. The present article aims at describing what open supply chains are about. It builds on the Open RAN example in the telecom sector.

Whether you look at a phone, a copier, a microprocessor, a data center or a telecom equipment, you have a box in front of you. That box is composed of multiple blocks of hardware and software (to keep things simple). Altogether this form an architecture. The architecture defines interfaces that connect the blocks. To use the box, you might also need additional services, software and complementary tools… so you can design, implement, use and maintain the box.

Some companies who have developed proprietary boxes have been able to create a dominant market position. They sell the box, the complementary tools together with the additional services as a “turnkey” solution. Today, as such market have globalised, very few actors remain, and you need to choose either one or the other.

A first step that challenge such a dominant market position is to establish an open architecture. As the interfaces become standard, this suddenly open ups the possibility to replace the provider of a proprietary box by multiple suppliers of off-the-shelf hardware and software. Any software can work on any hardware and multiple pieces of hardware  can be assembled together. Anyone who had to pay a huge amount of money for a cable will understand this easily.

The next steps could include creating blocks available as open hardware or as open source software. With open hardware, the hardware block can be manufactured by any company capable of delivering according to the needs of the customer (volume, quality, reliability…). With open source software, the code is available and can be supported by any service provider.

Doing this leads to the dis-aggregation of the supply chain. It creates an open supply chain where there is a high level of flexibility for supplier’s selection.

Achieving this is nevertheless very challenging as this requires creating and imposing on the market the interfaces and the design of the blocks. This also requires suppliers with adequate manufacturing capability and complementary software, services and tools providers. They might not be available on the market. It can also require operating the supply chain differently as the integration capabilities of proprietary box providers need to be replaced.

Over the past years, this has nevertheless been initiated in some industries. This include data centers, telecom equipment’s and microprocessors. The idea behind open source software and open data dominate the tech industry and they are now moving towards neighboring industries.

To do this, large scale collaborations have been created. They are led by foundation with specific structured governance mechanism and intellectual property guidelines. Companies that want to be part of such open supply chains have joined these foundations as members. Some of these members contributed to the design of the interfaces, of the software or of the hardware; some can provide the complementary services, tools or manufacturing capabilities needed to contribute to deliver full value proposition. The word ecosystem is used to describe such groups of organizations.

An example from the telecom sector can be used to illustrate this.

A Radio Area Networks (RAN) is one of the main building blocks of a Telecom infrastructure. With proprietary RANs provided by companies such as Nokia, Ericsson or Huawei, the software and hardware are coupled together.

Open RAN is a recent initiative under the umbrella of the Telecom Infra Project (TIP). With Open RAN the software and the open architecture allow to assemble common-off-the-shelf (COTS) hardware from diverse suppliers to build a network. This offers cost reduction opportunities; it avoids vendor lock in and allows to innovate faster by assembling the design capabilities of multiple companies.

Telecom operators such as Vodafone and Telefonica have worked with Open RAN suppliers. A few Request for Proposals have been completed and the scope of the project they initiate is increasing. This is clearly an attempt to challenge the dominance of Ericsson, Huawei and Nokia

Vodafone CEO, Nick Read, has publicly stated that the company was seeking to “actively expand” its supplier network for Open RAN. This creates an Open Supply chain for RAN.

If the benefits are obvious, this remain a challenging development. The Telecom Infra Project brings together hundreds of companies. To be successful such an ecosystem needs to adopt new ways of collaborating across companies that can challenge years of industry practice.

If you are interested in open supply chains, you can look at other project such as RISC-V for Microprocessors, Open Compute Project for Data centers. Project such as Apollo Auto for autonomous cars and Lora alliance for the Internet of things are slightly different but also of interest.

Open supply chains might become more common in the future. We therefore need to further study them.

Join the discussion! Share your views on my post on LinkedIn!

Hervé Legenvre, PhD

EIPM Value Creation Observatory Director