CXO Research Insights + Vision© Newsletter; March, 2022: Mega-Supply chain Risks, Defusing the Hype-bomb, CEO Workforce Hiring Reset
Forward-looking ideas from leading research for executives
March 2022’s Issue of CXO Research Insights + Vision© Newsletter offers SME executives with 250 to 7500 employees actionable insights for short impact notes:
- Escalating Supply Chain Risks: China, Russian War, Longshore Contract – 2022 GeoPolicial and Labor Risks – it’s escalating faster than thought, but Boards/CXOs should plan for colossal global supply chain risks for a challenging year.
- Defusing the Vendor’s Hype-bomb – With 30 years of overhyping technologies and solutions, today’s SME buyers should apply hands-on research advice and playbook to protect themselves from seller harm.
- Innovation and Employee Work-Life Balance: Apply both for Great Hiring Reset – provides SME corporate boards and CEO/CXOs actions to reset strategic innovation and workforce playbooks to attract hard-to-find tech skills and minimize workforce turnover.
Here is what you need to know.
1. Escalating Supply Chain Risks: China, Russian War, Longshore Contract
By Steve Hawald
In 2022 and into 2023, the US and its supply chain partners will continue to have significant challenges. For example, corporate boards and CEOs require more planning for geopolitical and seaport workforce challenges. These new supply chain risks – China, Russian War, and Longshoreman – may escalate quickly this year and in 2023. These unknown/evolving risks may require board and CEO mitigation strategies now.
Board and CEO Takeaways
- Reevaluate/leverage regional suppliers outside China, including Taiwan, for AsiaPac/India
- Reevaluate/leverage America’s regional countries/local suppliers
- Explore/consider split up critical Chinese shipping to Non-West Coast Ports-NY/NJ, GA, FL, SC
- Set up CEO/CXO Cyber Review Board for active management-oversight/readiness
- China supply chain shipments should clear CA seaports before May 31, 2022.
1.1. China Risks
China’s large covid outbreaks continue to be a roller coaster, locking down large cities and ports like Hong Kong – a global financial center, and Shenzhen – a significant technology center for manufacturing. China’s Zero Tolerance Policy appears to be business-as-usual with massive covid quarantine cases. With low vaccinations of the elders and its overall population, Chinese financial services to manufacturing parts/products, especially technology components, will be affected throughout early 2023.
Shipping Vessels Challenges
According to Bloomberg, China’s Shenzhen seaports’ incoming vessels waiting for a LA berth fell to 43 on March 14, 2022, from early January’s peak of 109 seaports vessels – a significant dropoff with a 60% delivery shortfall. It’s due to Chinese city/port lockdowns/factory closures. It should be back to normal again in early 2023.
Container Transportation Skyrockets
China’s transportation costs have accelerated, especially the global price of gas and oil. According to Bloomberg, the shipping cost for a pre-covid container increases from $4,000 per 40-foot container to today’s $23,000, with pricing changing every two weeks. Corporations must reassess if supply chains in China are cost-effective, reliable, and sustainable models for 2023.
1.2 Russian War Risks
China War Support Impact Unknown
Currently, China’s discussions with Russia’s Ukrainian war support is in-play. It’s a given that Russia’s excess gas and oil contracts from NATO will likely meet and respond to China’s economic needs. However, suppose China provides military and related arms to the war. In that case, US and NATO could turn up sanctions quickly on trade-in finance services, manufacturing, and others for Western supply chain disruptions. In addition, the war in Ukraine halts half of the world’s neon output for critical lasers to make semiconductors.
Another war unintended global risk could be the acceleration of China’s Hong Kong Playbook on Taiwan. Taiwan is the world’s largest producer of semiconductors – about 64%. TSMC – Taiwan Semiconductor Manufacturing Company, the world’s largest chip manufacturer. It produces over 53% of the world’s supply with over 90% of the most sought-after chips. Most US parts/products using technology are exposed to unplanned shortages at any time. Globally, semiconductors have an about 20% shortage run-rate now throughout 2023. Therefore, China’s takeover would dictate this supply chain marketplace.
Russian Cyber Attacks Spread Globally
As in the past, Russia continuously tests Ukraine’s cyber defenses on critical infrastructure daily. Ukraine is also Russia’s testing bed for newer cyber warfare attacks. As the war drags on, these tested cyber security attacks are highly possible to move out of Ukraine to NATO countries, especially the US.
“Little chance that (Russian) cyberattacks will be limited to Ukraine. Governments and corporations should closely heed what’s going on there because cyberwar can — and has — quickly spread across borders”- Stuart Madnick, MIT Professor, School of Engineering, Director of Cybersecurity at MIT Sloan
It’s not just federal, state, and local infrastructure but any other organization’s significant operations/products/services supply chains.
Companies would be well-advised to:
• Ensure to apply all software and infrastructure cyber-ready updates each day
• Leverage different cloud backup services strategies for vital operational data changes daily, if possible, for less downtime
• Perform weekly incident exercises throughout your operations/supply chains
• Perform cyber disaster attack exercises for disaster recovery weekly for hardening efforts
• Perform reoccurring critical supply chain reviews and testing with suppliers and any third-party vendors’ cyber certification of preparedness reviews.
1.3 Longshore/Warehouse (ILWU) Labor Contract Risk
By June 30, 2022, the International Longshore and Warehouse Union (ILWU) will require a new contract for its West Coast workers.
West Coast seaports have continued to rely on critical frontline ILWU workers throughout the last two-year covid waves. Pay and benefits will be complex negotiations for higher wages with an increased risk of work lockout/strikes. If so, it will dramatically affect many supply chain parts/products, especially retail, for the rest of the year with a colossal backup of cargo containers and shipping lines.
Caution. CXO should evaluate/leverage non-West Coast shipping ports from China until the new IFWU contract. The supply chain downside would be rerouting schedules, production integration, and extra shipping days/cost for alternate ports.
- Validate Chinese seaport shipping orders for scaling up with projected delivery out of West Coast seaports/warehouses before mid-May.
- Explore/evaluate split up critical Chinese shipping to Non-West Coast Ports-NY/NJ, GA, FL, SC,
- Reset supply chains for alternative sources and monitor continuous disruptions for long port delays to the end of 2022.
For the rest of 2022, CXOs will be in for a “Wild Ride” to navigate the supply chain waters!
2. Defusing the Vendor’s Hype-bomb
By Tom Austin
Buyer beware: Hype has probably been around for more than 10,000 years. In 1994 – the year before Gartner’s Jackie Fenn introduced that firm’s now-famous “Hype Cycle” research model – I wrote a paper evaluating “Is all this hype really necessary?” After examining the question in detail, I concluded, “Yes! Hype speeds the development of markets.” It’s an essential ingredient in high-tech marketing. If sellers don’t indulge, they’ll be drowned out by all the other hypesters out there, or so it seems.
“Buyers need to protect themselves from the harm hype generates.”
Overgeneralization is a characteristic of marketplace hype.
- Does one positive result in a research lab prove that AI will address all needs everywhere?
- Does success in one industry or geography guarantee the same results in other sectors?
- Does unanimity in the extensive consulting and analyst firms’ messaging mean they’re all right?
No, no, and no!
The largest companies are different from the smallest or the midsize (SME) firms globally. What works for one size doesn’t work for all.
Don’t settle for success stories and testimonials. They’re weak indicators and are more valuable in bolstering confirmation bias than guiding a purchase decision.
Here’s what to do:
- Get connected to people who have failed to do what the vendor is proposing you do. Vendors will initially deny failures exist. Then they’ll claim the failure was caused by a toxic corporate culture, the lack of senior executive support, or not following the seller’s implementation guidance.
- When salespeople issue denials like this, coach them: they’re killing their credibility. Maybe they’ll open up.
- Exercise caution. Dig on your own – or with the help of others – in online user communities on Reddit.com and similar sites. Why? Most Sellers often whip up a frenzy of overgeneralized positive claims. Then, critics often whip up a frenzy of overgeneralized adverse claims in public commentary.
Reset Your Vendor Evaluation
For each new vendor solution evaluation, your acquisition team must fully unwind the hype and overgeneralizations; ask the seller to:
- Provide use cases and success stories for firms in your industry and geography of similar size to your firm and similar business models and operating environments.
- Divulge the best, and worst-case results you might expect and the conditions under which what they’re offering has delivered them.
- Consolidate vendor documentation, presentations, use cases, and relevant success stories for a contract ability-to-deliver attachment.
This attestation is a critical litmus test and may be helpful in case of later disputes: Get the seller to attest that they’ve disclosed all significant limitations and risks that you should be aware of before using it.
Attach the attestation and all disclosed significant limitations and risks to the contract as an Ability-to-Deliver attachment.
Always Get it in writing!
3. Board and CEOs Playbook for a “Great Hiring Reset”: Part 1 of 2
By Steve Hawald
Today, over 90% of the Small-Medium-Enterprises (SMEs) workforces won the in-office debate for new hybrid and flexible work models. Last year, almost 50 million US workers walked off the job to do something else, aka the over-hyped “Great Resignation.”
In February 2022, the US labor marketplace had over 3 million open jobs. The current labor shortage should continue in the US labor market from 2022 to 2023. It’s a perfect storm for workforce turnover!
With ongoing turnover, corporate boards and CXOs continue to have stressful workforce conversations on too many open skilled positions and “innovation transformation risks.”
The Board and CEOs must understand that the workforce is redefining their relationship with employment for a better work-life balance.
- Reshape 2022-2025 corporate board strategy and CEO employee messaging to link innovation strategy and its workforce value to attract/retain talent
- Reset 2022 Workforce Hybrid/Flex Work-Life Balance Policy/Plan and Pay Scales
Here’s how to reshape your corporate board and CEO’s Great Hiring Reset strategic playbook.
Start with CEO corporate strategy communications, linking the workforce to its purpose.
Over 75% of the SME workforce, especially the frontline workers, support the corporate strategy but fail to see how it ties back to their efforts and value-add. This missed corporate communications opportunity leaves the employee without a sense of purpose and culture to buy in for a long-term career.
Board and CEO Actions
- The corporate board must articulate and reset the strategic vision for the future value of its savvy innovation leadership for new talent.
- The CEO with CXO teams’ ongoing messaging must include a solid strategic linkage supporting the importance of having a workforce work-life culture to attract hard-to-find talent and help retain workers.
- CEOs must reset the workforce pay scales and work-life benefits for the new normal.
CXO’s communications must continuously flow from the CEO and CXOs to the workforce and link priorities and goals for collective buy-in success. The outcomes should be a more robust employee culture and purpose working toward the shared mission and connected value-added work.
Don’t Fight the Hybrid Workplace; Focus on Work-life Balance Now.
Most SME corporations are finalizing a hybrid and flex work model(s). Two or three days (Tuesday-Thursday) in the office are widely accepted. Since about 80% are frontline workers, the flexibility option allows and works out for both the business and the workforce. Let the Wall Street players and mega-consulting firms burn out their new employees within two years.
One of the key reasons many employees quit their jobs is better Work-Life Balance. Post-Pandemic, employees need a better life/work balance in their everyday lives. Research shows that retention can improve up to nine years, with employee happiness supporting home and workplace norms and culture. Notably, flexible working can help reduce gender inequality by enabling mothers to stay in the workforce. See April’s Part 2 on women’s childcare required support.
- CHRO resets a new Workforce Hybrid/Flex and Employee Work-Life Balance Policies and Playbook.
- CHRO reshapes the Leadership Hybrid /Flex Workforce Training Guide focusing on Work-life Balance.
Copyright @ 2022, STEVE HAWALD CEO CIO ADVISORY LLC and CXO Research Insights + Vision© Newsletter©. DISCLAIMER: These articles are entirely the author’s opinion without financial payments and engagements. The peer review was by Tom Austin.