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Thoughts from EurOMA Palermo: Operations Management and the Innovation Economy

Just finished speaking at the EurOMA conference in Palermo, and was excited by the discussions and feedback over the course of today.  I arrived in Palermo yesterday, and had an opportunity to wander the streets and experience the wonderful food, carefree and friendly people, and of course the wonderful mix of architecture and cultures that exist on this island.  During my visit, Giovanni Perrone, also emphasized how the Italian economy is seeing a resurgence of manufacturing and product development.  My walks through the city led me to many thriving markets bustling with small manufacturing and design enterprises, and Italian designers and apparel makers are no doubt some of the best in the world.  But there are many other industries that are also growing, which is heartening to see after many years of stagnant growth.

The discussion at EurOMA focused very much on the role of innovation in the networked economy.  The latter point is important, because it is becoming increasingly clear that organizations are part of a network, and that we can’t simply focus on buyer-supplier dyads.  The multi-tier nature of today’s supply chain means we need to think about customer integration, supplier integration, internal stakeholder integration, and also tier 2 suppliers and customers.  This poses many interesting problems for the research community.

Nowhere is this more important than when it comes to innovation.  As I discussed in my talk, one can think about product innovation, but a core component is also process innovation, and the ability for operations and supply chains to execute in the face of global complexity, challenging infrastructure, increasing government regulation, and talent shortages.

Product innovation will rely on the ability of organizations to harness and leverage the brain power that exists in their supply chain.  Several individuals I spoke with, including Steve Brown, Editor of IJOPM, emphasized that the biggest drivers of the economy will be small enterprises as the driver for innovation, and the ability of larger companies to identify, locate, develop, and commercialize innovations from their entrepreneurial roots, and bring about solid operations practices in doing so.  Many issues came up in discussions with researchers at the conference.  Intellectual property will continue to be an issue of concern, as companies need to find the best commercial contractual mechanisms to satisfy the lack of relational trust that exists in many of these smaller companies.  Another issue will be the ability of companies to establish business development methods that create the right blend of licensing, contract research, development, and manufacturing, leading to the idea of a “supply chain of knowledge”.  These are areas ripe for exploration in the future.

One of the big differentiators of process innovation will be the ability to deal with complexity and risk.  Organizations are faced with an increasing number of disruptions, and while there are strategies to deal with global disruptions (such as economic downturns) or local disruptions (such as supplier performance), there is comparatively little that exists when we think about systemic disruptions that involve one or more parties somewhere in our supply chain.  This will be a crucial differentiator for the future.  As companies begin to better understand the structural complexity of their supply chain, they will need to think about broader strategies that will also involve the government as part of the supply chain. This is especially important in finding solutions to inadequate or bottlenecks in infrastructure, compliance issues, human health and safety, and inadequate visibility into product and service flows.  Research issues will focus on innovations that provide greater insight into how to configure human decision-making, global process standards, and technology analytics to create the right blend of responsive and agile capabilities.

In my mind, a lot of this require that organizations focus on the core of the problem – getting the right people.  As discussed in my earlier blogs, People are at the core of the issue.  This means developing the right strategy for the long term that treats the problem of human capital development as a “Sales and Operations Planning” problem, including building a forecast, establishing demand requirements, estimating supply, and developing sources given uncertain retention, hiring, and recruiting success rates.  Because people are at the core of innovation.

Thanks again to Giovanni and the team at Palermo who put this conference together – great job!