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Polycrisis, Antifragility, and What’s Missing from Digital Transformation

By February 23, 2023Uncategorized

Feeling overwhelmed by the persistence and prevalence of crisis? There’s a new word for this current state: polycrisis. Wishing your supply chain were strengthened rather than strangled under these conditions? There’s an older term now being applied to supply chains for this capacity: antifragility. Are you trying to figure out how NOT to join the 70% who fail at digital transformation? There are a couple of decades-old concepts that are the missing ingredients for success: people and process. As much as we conflate digital transformation with technology, without these missing ingredients your initiative will fail. And the true secret sauce to excellence is to fold in systems thinking and organizational learning.

“Polycrisis” was the talk of Davos at the recent meeting of the World Economic Forum, which defines it as “…a term used to describe the current global situation, where multiple complex, interconnected crises are occurring simultaneously.” Our abundance of serious threats may be one reason for the buzz around another term coined almost a decade ago by Nassim Taleb, antifragility: “The resilient resists shocks and stays the same; the antifragile gets better.” While the concept isn’t new, its application to supply chain is emerging, albeit without clear definition yet. I’m sure of this: achieving antifragility in a time of polycrisis cannot be done with outdated, manual systems and processes. Digital transformation is no longer optional.

Digital transformation in a time of polycrisis

Supply chains are no strangers to disruptions, like the recent earthquake in Turkey and Syria, but polycrisis is meant to describe interconnected impacts of crises with repercussions rising to a much more serious level. In light of the magnitude of disruption supply chains have faced since the pandemic and the continued aftershocks, the aim of antifragility is not just resisting shocks and delivering the same results but getting stronger. A polycrisis may not be able to be prevented or predicted, but we can be prepared by getting better each time.

The urgent need for resilience increased the pace of digital transformation. A McKinsey study found that 90% of supply chain leaders expected to transform their planning systems. Overhauling disconnected, legacy systems to automate and strengthen supply chains is a critical priority. McKinsey also found that 60% of these projects exceed budget and timeline while failing to deliver the expected results.

Believing that digital transformation is about technology alone is an all-too-commonly-followed recipe for failure. Technology may be the impetus, but success requires transforming people and process also. These are major change management initiatives reliant on all three legs of the stool. New enterprise software may be fully implemented, but if we merely lift and shift underlying processes without upgrading the skills of our people, investments will fail to reap their true value.

The three legs of a digital transformation stool – people, process, and technology

Technology as one leg of the stool is foundational. A survey by boom! of supply chain professionals found that their number one wish to increase work satisfaction is better, integrated tools. Supply chains are systems, and the current retail inventory glut is the classic illustration of the bullwhip effect in action, the consequence of cascaded planning in silos. MIT professor Peter Senge, one of the leading management thinkers of all time, understood this, devoting the third chapter of his classic book, The Fifth Discipline, to the Beer Game, which was developed in the 1960’s at MIT to teach supply chain concepts like the bullwhip effect.

The current clamor for supply chain “visibility” can illustrate another consequence of planning in silos. Senge described systems thinking as “…a discipline for seeing wholes. It is a framework for seeing inter-relationships rather than things, for seeing patterns of change rather than static snapshots.” Visibility alone often delivers static snapshots that leave companies merely “admiring” their problem.

Transparency into the inter-relationships of actions clarifies their systemic impact, not just the effect on a single node. A snapshot may optimize one link but won’t optimize the chain. Concurrent planning enables systems thinking – planners can see a holistic view across the chain, so they can learn together and collaborate for the best decision for the company, not just for their department.

Transforming processes is the second leg of the stool. McKinsey points out that organizations need to plan for what “good looks like” and defeat the prevalent response that “things have always been done this way.” Software shouldn’t be configured to the old ways but to the new vision. As two leading supply chain experts, Nada Sanders and Morgan Swink, found when they studied supply chain digital transformation, organizational issues were the biggest obstacles to success.

Investing in people is the third leg of the transformation stool. Accenture’s recent study found that only 38% of executives feel their teams have the digital skills needed to capitalize on the technology they are given. They argue that those companies who do invest in their teams will be the ones in the lead.

Learning and systems thinking are the magic sauce

People can do more than they think if they are pushed to grow. Key to Senge’s argument for systems thinking is the importance of organizational learning. He describes a learning organization as one “…where people continually expand their capacity to create the results they truly desire…” Investing in expanding capacity can dramatically improve productivity, but what does it take to help organizations learn?

Four out of five leaders expect to use artificial intelligence and machine learning (AI/ML) in their supply chains, making it one of the leading drivers of digital transformation. Algorithms “learn” patterns from data to predict decisions that can be automated, saving planners from the tedium of routine updates. However, this learning requires large volumes of data to “train” the models. Disruptions often interrupt these patterns and produce rare events, which challenge the algorithms designed to learn from prior patterns.

Humans uniquely can apply learning from other contexts and experiences and collaborate to transfer and combine knowledge. In a recent interview, Senge points to a study of HP, a company well-known for its technological. Two divisions had similar access to tools and technology, but one group was far more successful than the other because of its knowledge network — they were well-connected and willing to help each other with information. They reaped the full value of their technology investment by learning together and outperformed their peers in other departments.

We often say that challenges are “learning experiences” that make us stronger. If organizations expand their capacity to learn they grow stronger with each crisis. For example, giving people common information in real-time lets them see consequences of any decision and learn to collaborate to make better ones.

Paris-based Technicolor found that concurrent planning enabled their teams to plan together, instead of in isolation. Giving planners access one source of truth prevented buffering with inventory, reduced both conflict and millions of dollars of inventory, and increased the accuracy of information shared with suppliers and customers. Technology enables learning together and increases organizational capacity to make the best decisions across the chain, not just for their link.

Learning to get better and achieve antifragility

Resilience is about experiencing shocks and being able to deliver the same results, but is “the same” still enough? Insanity is when people do the same thing and expect different results; I call it futility when we do the same thing and expect the same results, even when our environment has changed. A world characterized by polycrisis has changed too much to even produce the same results – the world is too interconnected. Climate change is biggest crisis of all, the ultimate example of interconnected systems. Addressing it means recognizing supply chains for the complex systems they are and no longer expecting that planning in silos will be sufficient. We cannot control a polycrisis, but we can prepare by mastering systems thinking and leveraging our collective learning.

In his clarion call for systems thinking and learning, Senge wrote: “What if, in light of what organizations could be, ‘excellence’ is actually ‘mediocrity?’” If we want digital transformation to achieve more than mediocrity, for crises to not deflate us but develop us, we must transform far more than our technology. We need modern technology, but we must also transform our people and process. Continuous learning is the magic sauce that can enable companies to not only withstand ongoing shocks but get stronger. Quickly learning together from failures and successes allows us to incorporate these lessons into the future. This kind of learning increases capacity and allows us to get better. And getting better is the key to antifragility, which will set those who achieve it far apart from their competitors in a time of polycrisis.

Polly Mitchell-Guthrie is the VP of Industry Outreach and Thought Leadership at Kinaxis, the leader in empowering people to make confident supply chain decisions. Previously she served in roles as director of Analytical Consulting Services at the University of North Carolina Health Care System, senior manager of the Advanced Analytics Customer Liaison Group in SAS’ Research and Development Division, and Director of the SAS Global Academic Program.

Mitchell-Guthrie has an MBA from the Kenan-Flagler Business School of the University of North Carolina at Chapel Hill, where she also received her BA in political science as a Morehead Scholar. She has been active in many roles within INFORMS (the Institute for Operations Research and Management Sciences), including serving as the chair and vice chair of the Analytics Certification Board and secretary of the Analytics Society.

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