A Word of Caution for Supply Chain Technology Startups

This is an Influencer Post by Adrian Gonzalez, President at Adelante SCM & Founder/Host of Talking Logistics

Untitled“A group of logistics entrepreneurs is launching a Silicon Valley-style accelerator [named Dynamo] for supply-chain technology startups, aiming to draw new investment and talent to the freight business,” reported Loretta Chao in Sunday’s Wall Street Journal. Here are some additional details from the article:

The accelerator will have a $3 million budget raised from [a $12 million logistics venture fund] and other partners to put toward startups focused on logistics-oriented technologies such as autonomous-truck operations, drones and software.

The Dynamo backers hope their program will help attract top technology talent to the more industrial side of distribution, which has a reputation for being old-fashioned and resistant to change.

“Programmers right out of school are not wanting to get into this industry. Let’s be honest. They’d rather go work for Amazon, Facebook, or someone like that,” said Ted Alling, one of the program’s three founders.

Why is a supply chain technology accelerator needed when you have so many existing vendors in the market that collectively invest at least $100 million annually on R&D?

Part of the answer, of course, lies in the word accelerator. Startups can bring new ideas to life faster because they are unencumbered with legacy solutions, slow decision-making processes, the need to spread out R&D resources and money across too many projects, and other burdens and constraints existing vendors face. Startups can approach a problem with fresh eyes, focus on it intensely, and leverage the latest and greatest technologies, which often results in less expensive and faster-to-deploy solutions.

Of course, many of these startups, the ones that succeed, ultimately get acquired by the established vendors in the market.

Related Read:  Working, Fast & Slow

If I were involved with Dynamo, where would I put my money? Two main areas:

Solutions that further “consumerize” the user interface/experience of supply chain applications. As I wrote almost three years ago in Will Supply Chain Software Vendors Start Competing on Design?, we’re starting to see the ‘consumerization of IT’ as a generation of workers who have grown up in the Web/Mobile/Social era enter the workforce, take one look at the enterprise systems they have to work with, and collectively say, “Are you kidding me?!” Existing software vendors have made good progress on improving the user experience of their applications over the past three years, but there’s still a long way to go, especially when it comes to mobile interfaces.

Another promising opportunity is voice recognition as a user interface (think Apple’s Siri or Amazon’s Alexa). Voice recognition is already used in the warehouse, so why not in other areas such as transportation management? Instead of manually conducting searches and executing tasks, why not speak them? “Show me all uncovered loads” you can say to a transportation management system (TMS) and up come the results on the screen. “Will any of my private fleet trucks be near an inbound pickup location on Thursday?” “How am I doing on my carrier commitments this week?” You get the idea.

Solutions that leverage blockchain technology to facilitate and automate supply chain processes. Check out my previous posts on this topic for additional details: One More Prediction for 2016: Blockchain Technology Will Make Its Debut in Supply Chain Management and Bitcoin: A New Supply Chain Operating System?

The reality is that there are plenty of opportunities in the supply chain and logistics realm for technology startups to focus on. A word of caution, however. The danger with accelerators is accelerating too far and too fast beyond what most companies are willing or ready to implement.

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The sad reality is that you can develop the most modern, powerful, and sexy supply chain application on the market, but it’s only as useful and effective as the quality of the data that goes into it, and despite all the advancements in technology over the past twenty years, we still have a big, crappy data quality problem in supply chain management.

Also, as I wrote in Forget Innovation, Just Execute Better, many companies are still at the point where they should just focus on executing better with the systems and processes they already have in place than try to chase the next technological or process innovation. In other words, technology is not a silver bullet cure. If you’re still operating in functional silos, if you’re not “walking the talk” on collaboration with external partners, and if you’re still dealing with data quality problems, then jumping on the technology accelerator bandwagon is only going to accelerate your ills and failure.

And finally, as we saw with marketplaces and exchanges during the dotcom era, if your aim as a startup is to revolutionize a supply chain process — that is, completely transform the way it is managed today — your chances of failure are high. Enhanced evolution is a better strategy for success than radical revolution.

What do you think? Post a question or comment and share your perspective!

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