Platt Perspective on Business and Technology

Macroeconomics and the fallacy of a pure meritocracy system – 6: adding in supply chain and related systems 2

Posted in macroeconomics by Timothy Platt on October 4, 2012

This is my sixth posting to a series that can perhaps best be seen as addressing the longer term and macroeconomic impact of business ethics, and of what happens when they fail (see Macroeconomics and Business, postings 108 and loosely following for parts 1-5.) I started, in Part 5, a discussion as to how it is in the enlightened self-interest of businesses to monitor and influence the behavior of others businesses that they collaborate with. And that the most effective tool they have for applying influencing pressure come from their decision making processes as to which business partners to take on in supply chain and similar collaborations, and under what terms.

• When effective participation in business to business collaborations significantly increases market strength and competitive advantage for participating businesses, the threat of sanctions and exclusion from more productive collaborative arrangements due to perceived risk concerns from prospective partner businesses, becomes a powerful influencing tool.

And with that I turn to the topic area for this posting, and with a question:

• Strategically and operationally, how should businesses do this, as they consider, enter into and participate in, and with time move on from specific supply chain and other business to business collaborations?

How do you make the goals inherent in my first bullet point above, into practical and cost-effective policy and practice and as part of a business’ ongoing risk remediation and due diligence systems?

As a broad brushstroke response to that question, I would argue that the challenges I raise here directly impact on the core capabilities of a business. I have recently been writing about building businesses to work more effectively in business to business collaborative contexts and for scalability in that (see Moving Past Early Stage and the Challenge of Scalability 9: supply chain-ready business models. I have also written in the past few days about fine tuning a business with its current business models, operational systems and strategic plans in place to be more supply chain and business to business collaboration-ready (see Fine Tuning and Adjusting a Business in the Face of Change 7: tapping into supply chain partnerships and collaborations.)

• I would argue that to the extent that a business depends for its success on its participation in effective supply chain and similar collaborations, it should hold due diligence management of these collaborations as one of its core business requirements and capabilities, and include this in its basic business model.

Note that I have not said here that this belongs in a business mission or vision statement. If that is how these functional needs and requirements are addressed, and if that is where this stops, nothing is going to happen of any real meaning or value. Some of the most toxically predatory and self-destructive businesses of recent history, that have done the worst in harming their partner businesses, their industries and the economy as a whole have all written in moving prose of the virtues of business ethics in their public statements – their mission and vision statements definitely included. And as an example of that, I cite Enron but I could just as easily cite a list of the larger financial institutions that brought us to the brink of a new Great Depression with the Great Recession. This needs to be included as a priority in actual day to day business processes and actions, and in the decision making processes that govern them.

• As a final thought here, actually making that works means businesses offering transparency as to their pertinent business policies and their actual practices, to their supply chain and other business collaboration partners.
• And this means requiring this same type and level of transparency from them as a core due diligence requirement in determining which collaborative relationships to enter into and stay in.
• And this can and should be matched with active sharing of best practices and certainly for risk containment and reduction.

I am going to step back in my next series installment to look at the issues I have been raising in this series at the level of entire marketplaces and business ecosystems, and entire economies, and I note here that as our world and our global community become more real-time, ubiquitously connected and interconnected, all three are becoming one and on a global scale. So risk from business ethics and related failures in any one place and coming from any one business, can and will have global reach. You can find this and related postings at Macroeconomics and Business.

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