Even though the business environment today changes with unprecedented speed, perceptions of business continue to be rooted in tradition, more specifically - traditional hierarchy structures and the resultant management practices.
While the business community continues to focus on the traditional hierarchy of an organization, what is often overlooked is the much larger network of associated parties that have an increasing bearing on a company's performance, longevity and reputation.
We recently analyzed the financial reports of the Dutch AEX25 (between 2009 to 2011) to look at how they were performing in terms of headline reporting statistics - below is the aggregated data from the analysis.
The data is encouraging and prompts some important questions. Revenue growth over the period stands at an impressive 44 percent - while labor costs grew just six percent. Hardly surprising then, that labor costs as a share of revenue have fallen 27 percent.
But, significantly, non-labor costs grew by 49 percent, slightly ahead of the revenue growth increase. Even in 2009, these costs were three quarters of revenues - demonstrating just how sizeable the supplier management opportunity really is. And the impact that corporate virtualization will have on tomorrow's company.
What is 'corporate virtualization'?
No longer is a company made up of its people, its offices and its factories. It is now a network of people and organizations supported by, and contractually connected to, a web of suppliers.
These suppliers are either the principle agents for implementing the strategy of the business, or enable the workforce to be more effective / productive in implementing that strategy.
The greater degree of externalization, or 'corporate virtualization' as it has become known, is yet to become fully entrenched in corporate strategy, but for an increasing number of businesses, it offers a number of compelling opportunities (discussed in more depth in the full research paper)
How are you planning on dealing with 'corporate virtualization'? Who is responsible for ensuring suppliers are being managed consistently and in alignment with your corporate objectives?