Going digital effectively blurs the edges of the business you are supposed to manage and requires a broad focus on cooperation and collaboration as much as it does on strategic direction and operational control. In an ideal digital value chain, information is shared amongst all contributors so that each can actively contribute to an overall optimization strategy in the specific context of each relationship in which they participate. There’s significant upside to getting this right, but sharing also comes with potential risks. What happens if your value chain partners get acquired by your competitors, or byb their competitors that serve yours? Who’s responsible for things like data integrity and end-to-end information security? In the old analog world, it was possible to identify clear “boundaries” that defined the edge of each participant’s roles and responsibilities. In a fully integrated digital world, that’s too inefficient – duplicating some processes and misaligning others – even where it’s still possible.
Generating strong trust in the digital world is therefore essential. There can be no weak links in the technology, human or process chains that tie the operational value chain together. There will have to be standards that everyone actively buys into and implements completely and correctly. There will have to be processes that both effectively onboard relationships with new partners and sever relationships with old partners. There will have to be policies that determine what can be retained after relationships are severed and what can be shared immediately when relationships are first created. And there will have to be agreements on the many elements of operational and strategic governance. All these without slowing down the ability to respond to the pace of change.
It’s no longer sufficient to rely just on contracts and service level agreements, even if these may still be needed to memorialize the scope and commitments of the value chain relationships. We will need to create trusted connections based on reputation, mutual transparency and collaboration. That’s going to be challenging for the many companies who participate in multiple value chains and must securely segregate information and activity visibility to maintain confidentiality and trust with their many business partners.
There’s going to have to be a lot of focus on good governance, especially good data governance. Data sits at the heart of virtually everything digital and if you don’t know where all that data came from, how reliable and current it is, what it’s there for, who owns it and who has permission to use it for what purposes, bad things can happen. It’s also likely that when you start looking at your data in detail, you’re going to find inconsistencies and gaps. You’ll need policies on how to deal with these issues – and they’ll need to align with your value chain partners’ policies and practices. As powerful as our data management tools have become, they can’t solve all of these issues without human effort. Given that this effort is generally going to be significant – not just for shared master data, but eventually for all data – the time to get started was some way in the past. When everyone has to depend on a common set of information, you can’t afford to tolerate inconsistency – and because inconsistency is inevitable in many circumstances, processes and resolution practices that do tolerate it are essential and will need to be developed.
Waiting to get them in place won’t make it any easier.