Digital, innovation and the future of logistics
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Digital, innovation and the future of logistics

November 2016

Ahead of his presentation on digital disruption at Fujitsu Forum 2016, we ask Paul Richardson, Managing Director for Supply Chain Specialist Services at global logistics giant Deutsche Post DHL, for his perspective on how digital has become the driver of enterprise innovation.

TRANSFORMING THE BUSINESSTo what extent has technology moved beyond the remit of the IT organization to become an integral part of the business?

In supply chain logistics, technology has become embedded in every aspect of our business so much so that it is now the product we sell to customers. Logistics has traditionally been thought of as an analogue industry but it is powered by data. Insight on volumes and consumption trends now define how we operate and allow us to deliver the most efficient service to our customers’ customer.
Paul Richardson
Paul Richardson, Deutsche Post DHL

The formerly physical aspect of the industry is also heading towards a period of technological transformation — disruptive manufacturing and the factory of the future are on the horizon and we are going to see the use of AI and machine learning enhance the way we operate.

This kind of wholesale transformation wouldn’t be possible if IT was contained in one department. The vision and skills needed to deliver this kind of digitization have to exist in all aspects of our business.

OWNING DIGITAL

Does the evolving mix of digital stakeholders in business — from the CEO to the CMO — create an obvious (and healthy) new tension?

If every key stakeholder wants to lead the change in digitization, it means that your entire organization believes in the opportunities that technological transformation presents. That is very positive, but, yes, it can create a challenge through leadership stakeholder friction.

Sensible organizations put in place collaboration processes that ultimately lead to success. Where digitization or technological transformation is at the heart of the business strategy everyone will be pulling together to achieve it according to their role, in the same way that they would with any other business strategy.


Who drives digital-led innovation within the business?

At DHL we believe that digital-led innovation and innovation in general can come from anyone. That’s why we have a patents program that encourages everyone from all levels of the organization to bring forward great ideas. The person or team who develops an original idea worthy of patenting gets a one-off payment; then for any future commercialization of that idea they receive a percentage of the revenue that it brings in. It’s a really significant way of giving people an actual stake in the future success of our business and it pays dividends for the company too.

 

Recently a team of four DHL employees — an operator, an engineer, an accountant and a senior manager — designed a new vehicle to service DHL’s airline customers, that would increase the capacity of goods to aircraft by more than 70%, in turn leading to a 20% reduction in costs. This is now being used by some of our major airline customers.
INNOVATION CULTURE
How do large, established companies foster the kind of innovation culture that will allow them to rival disruptive start-ups?

Our customers demand innovation as part of the service we provide which keeps us focused on the future.   

Our model for delivering against these expectations could be described in line with Clayton Christensen’s definitions of innovation in his book The Innovators Dilemma which references how you successfully manage and apply disruptive innovation, sustainable innovation and efficiency innovation. The key is in understanding the difference between those within your organization.

Our sustained innovation is the incremental improvements we make on an on-going basis to all aspects of our business — this is culturally expected across our organization and ensures we’re delivering consistently high levels of service and keeping one step ahead of expectations.  

But in addition to this we’ve made the conscious decision that we need to go further and take a more entrepreneurial approach through disruptive innovation. This is where we focus on delivering market-changing ideas that aren’t necessarily being demanded of us.
This kind of innovation might require a different type of management or investment to the rest of the business, but that’s crucial to enabling progress and ensuring ideas aren’t stifled by large-company processes.

What innovation models has DHL employed — innovation hubs, spun-out companies, acquisitions, partnerships with start-ups or others?

As part of our commitment to delivering innovation we have a separate business unit called Specialist Services — it’s the disruptive part of our organization driving growth into new markets with new concepts.

Specialist Services is enabled to deliver innovation through entirely new business models, not constrained by the financial or operating model of a traditional logistics company. The philosophy of this business unit in particular is to solve problems, not just to think of logistics developments.

One of the key focus areas of Specialist Services is digitalization, in particular AI and machine learning. It’s an exciting time as our industry takes major steps into the future.

What kind of role do partners play in that co-creation?


One of the ways in which we differ from other large organizations is that we embrace the skills of partners. We know that by harnessing the capabilities and R&D commitment of other types of businesses we enhance our offering.

Paul Richardson will be speaking on ‘Digital disruption: How can companies like DHL keep up with digitization?’ at Fujitsu Forum 2016 in Munich, November 16 & 17. Also keynoting at the conference: Deutsche Post DHL’s CIO for Global Supply Chain, Markus Voss.

First published November 2016
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