One on One with Rich Cohen

 

CEO, Distant Village Packaging, 2011 Winner: Best in 3sClass – Most Innovative Program

Here is an interview by Wanda Lopach, Chair of the GSC3S Awards, with Rich Cohen, founder and CEO of Distant Village Packaging, winner of the special “Best in 3sClass – Most Innovative Program” Award in 2011.  Distant Village is an award-winning sustainable design and production firm producing handmade packaging and products from natural materials.  Innovative design, socially-responsible fair trade business and triple-bottom-line sustainability is at the foundation of everything created at Distant Village.

WL:  What was the significance of this recognition for Distant Village?

RC:  As one of the early pioneers in sustainable packaging, the recognition we receive from this award is especially valuable.  It validates businesses and people care about packaging which is authentically sustainable, specifically the direct and positive impact we have had uplifting small artisan communities.  We proudly display our award and announce it broadly.  The award has increased the attention and focus on Distant Village’s mission beyond the beauty and elegance of the amazing sustainable packaging we are producing for premium brands.

WL:  What prompted you to participate last year in the GSC 3s Award Program?

RC:  A friend encouraged me, and we decided to enter after much prodding.  Of course, we were happy we decided to join!

WL: The 2011 GSC 3sA winners have received a modest cash awards to advance their 3s Programs.  Can you please share with us how Distant Village has utilized the award?  What are the results/outcomes?

RC:  As a small business we have fundamental operational needs that require funding.  As we develop new product lines, enter new markets, and engage in more online marketing and social media, the cash award was helpful in funding activities in these areas.

WL: Please unveil for us, what is on the agenda of Distant Village for the incoming year?

RC:  The big news for the coming year is the rapidly growing interest in our Wild Grass Pressure Sensitive Adhesive Labels, called PURE Labels.  Businesses are seeking to establish more sustainable packaging and labels are no exception.  We are the world’s only producer of this style label and we expect tremendous growth in the coming year.  In addition to our orders in the USA, we have already shipped labels to Europe, Australia, and Canada. □

 

Rich Cohen is the founder and CEO of Distant Village Packaging, a specialty packaging and design company with an established reputation in sustainability since 2000.  Mr. Cohen has lectured at Loyola University, Bradley University, and University of Illinois Chicago on topics ranging from sustainability to international strategic planning.  Every chance he can, he enjoys running with his family in forest preserves and sharing whatever he can about nature and social responsibility to the future generations.  You may contact him at rich@distantvillage.com

 


Impact Sourcing: A Common Interest to Promote Sustainable Growth and Social Responsibility

Last December, I was invited to Johannesburg to attend a conference entitled “Impact Sourcing: An Emerging Path to Sustainable Job Creation?” The event, supported by the Rockefeller Foundation, offered an exciting opportunity to gain insight into some of the most encouraging recent developments in education and job creation and a chance to recognize some of the people at the forefront of these fields. Perhaps more importantly, it provoked some interesting points for discussion that I would like to share with you over the course of this article.

Impact sourcing is a new term that refers to the purchase of administrative services from a remote area where the lack of job creation has a significant detrimental impact on the local populace.

This concept provides a means in which the converging interests of two different organizations, each with their own separate motives, can be mutually realized. The creation of jobs in developing nations is beneficial for both the governments of these nations, seeking to mitigate economic stagnation, and the outsourcing industry, allured by the promise of low-cost labor.

In order to understand how impact sourcing can help meet this demand while also becoming an agent for sustainable growth and social responsibility, it is first necessary to examine the various benefits it provides for each organization.

First and foremost, impact sourcing provides a stimulus for the economies of emergent nations. Governments of developing countries are often faced with very high unemployment rates among younger generations, due in no small part to the scarcity of job opportunities in the agricultural and industrial sectors. A large percentage of young people drop out of school because their parents cannot afford the cost. Unable to then find employment in their villages, many of them relocate into nearby towns, often contributing to the growing population of slums.

Because impact sourcing allows for the rapid creation of jobs with limited capital investment, it can help establish administrative positions in these small villages and provide local young people with the training necessary to fill them. Electricity and an internet connection are the only prerequisites.

Impact sourcing also provides obvious benefits to the outsourcing industry in the form of cheap and plentiful labor. The outsourcing industry has been developed on a business model based upon labor arbitrage, a term denoting that the greater the difference in average salaries between the country of the end customer and the country of the delivery center, the greater the savings for the end customer and the outsourcing service provider (SP).

The SPs in Europe have spread from Western Europe to Eastern Europe, then to India, and now, to a lesser degree, to China, South America, and Africa.

In each country, they settle first in the main city (tier 1), which typically contains a thriving labor market and an educated workforce. They then create delivery centers in smaller cities (tier 2), where salaries are generally lower, and eventually move to even smaller cities (tier 3), where they find even cheaper labor and a more loyal workforce deprived of other economic opportunities.

The bane of the outsourcing industry is its high turnover rate (+20-30% per year). Employees often take the first job offered, settling for minimum wage, but after a few months move on to other similar jobs offering a slight salary increase. This recurring cycle of hiring and training is costly; however, it ultimately proves more financially prudent than increasing the salaries of current and prospective employees.

The current business model of the outsourcing industry, dependent upon an already entrenched infrastructure and educated workforce, has reached the end of the road: the remote villages of India and Africa. There is nothing beyond except jungle or desert.

Impact sourcing proposes a new model in which an educated workforce is established from the ground up, not simply tapped from an already existing pool. Is this model viable? It relies heavily upon the cooperation of two fundamental pillars: the government and the service provider.

The government will initiate and support the creation of employment opportunities through the financing of the infrastructure and by providing administrative work to the service provider. These unskilled, repetitive, bureaucratic tasks form the “low base of the pyramid.”

The service provider will be a reliable organization who will interface with the end user. The non-governmental client will trust the organization and provide loyalty and support when it decides to move part of the work to a smaller village. The service provider will ensure full quality of service wherever the job is performed. The employees will be satisfied because they received education, training, and a job.

 

There are, however, fundamental risks involved in the implementation of impact sourcing for both the employers and the employees. For the employers, there are concerns about the profit potential of an essentially weak business model. The creation of value is a very simple process. It consists of the input, the transformation process, and the output. If the output is more valuable than the input, the process is considered profitable. For example, a brick possesses more inherent value than a handful of clay and water.

On the other hand, if you have a bureaucratic process that yields little difference between the input and the output, those tasks will be eliminated in the short or middle term through the process of reengineering or technology. Betting on the “low base of the pyramid” is a short-term bet that may create false hopes if there is no commitment to move up the pyramid and bring more valuable and cost-effective tasks to the employees.

The outsourcing providers and their clients are profit-oriented organizations with little philanthropic motivation. Moving work to a remote location results in concerns regarding security, confidentiality, reliability, and safety of working conditions that would otherwise not exist in a closed, secured town building with supervision, management, and pool of employees to ensure business continuity. The client will not be willing to put its company image and business at risk if the working conditions and the service level agreements (SLAs) in a small village are not identical to those in a second-tier city.

For the employees, there are understandable concerns about exploitation. In these small villages, the service provider often assumes a monopolistic position over its employees. There is no other employer around, therefore allowing the service provider to set the precedent for wages and working conditions. For example, there was a discussion about a scheme in which the employee may have to take out a loan to pay for his education and training. The loan would be gradually repaid through deductions to his paycheck, fostering in the employee a sense of obligatory loyalty to his job.

I do not, however, want to conclude on a negative tone. Some of the young people I met in South Africa who received training and employment were extraordinarily bright, happy, skilled, and motivated. The managers of those pilot training and delivery centers are wonderful personalities who give testament to humanity’s ability to positively change the world.

Ultimately, when considering the viability of impact sourcing, one essential question remains: What steps need to be taken in order to ensure that such a promising idea does not allow for the exploitation of poor people? I propose the implementation of a process and control for impact sourcing similar to the one put in place for the fair trade agricultural products grown by small farmers in developing countries. Another option is to have an association, like the Global Sourcing Council in the United States, issue certification for the impact sourcing providers and ensure end users that an “Impact Sourcing Code” related to sustainable growth and social responsibility is respected and enforced.

There are certainly many ways to further the development of impact sourcing that will benefit all the stakeholders. If you have suggestions, please do not hesitate to open the dialog. I will collect and forward your ideas to the promoters of impact sourcing. □

 

François Degueldre is a seasoned BPO and ITO professional with an expert foundation in finance and the global management of multinational enterprises. François currently serves as Managing Director of OPULUS where he leads consulting efforts in financial transformation, strategy and planning initiatives, and sourcing initiatives from location assessments to negotiation and third party selection through implementation.  His email is francois.degueldre@opulusconsulting.com

Why Good Managers Murder Innovation

It’s interesting (well, some of us don’t get out much), if you invite contenders for the great innovations of the twentieth century, you might hear the microchip, the web, the mapping of the human genome, global sourcing – O.K., it depends whom you ask.  But, whomever you ask, the nominee for the award for great innovation is unlikely to be ‘management’.  As with many omissions, it is so obvious that the ordinary person misses it.  I know I did.  It took renowned strategist Professor Gary Hamel, “the world’s most influential business thinker”, according to The Wall Street Journal, to enlighten me. Think of what management science and professional managers have made possible: mass production, efficiency and quality control, sophisticated supply chain and distribution models, multinational corporations, and extraordinary wealth creation.  Improbable as it may sometimes feel, management was once a pioneering technology that genuinely helped things get done.

The theory that good management can survive (for a while at least) poor leadership—the ‘show must go on’ principle—implies that good management is, well, good. For a variety of reasons, the sourcing industry is populated by good managers.   Promotion and advancement tend, quite sensibly, to follow classic metrics of management performance, that is, the cost and quality control paradigm: measurable and predictable results, risk containment, expense control, resource maximization, demonstrable, accumulated experience that becomes ‘applied expertise’ and so on.  Only a fool would dispute the economic merit of these management outcomes.  The 21st century innovator however, will immediately perceive the inherent inadequacy of this model when confronted by the leadership challenge of strategic innovation. The innovation challenge necessitates a dramatically different set of skills.  Whilst management propels the core business forward – doing  things right ever more efficiently –  the leader’s challenge is to constantly question what the right thing is, today, and what it may be tomorrow.

The leader setting an innovation agenda has to chart a future course that ensures the business avoids doing the wrong thing ever more efficiently.  Self evident? Surprisingly not. While businesses are very rarely suddenly disrupted, the magnetic field of today’s high margin product or service can be a powerful force constricting exploration of outer spaces, untested territory and attention to the as yet ‘weak signals’ of the emergent disruptor.

This is not the territory of absolute answers but of framing the important questions. The ascent of questioning over solving is symptomatic of the complex nature of the problems businesses face in our hyper-connected, radically changing, and technologically explosive 21st-Century global economies. Problems assume the qualities of dilemmas—without a ‘right’ answer, only an optimum, feasible response. Educational norms and professional experience, however, have inculcated in most of us, except, perhaps, pure researchers, that success comes to the answer-person. It is not an easy, nor necessarily safe, habit to kick. (The answer to many of the threshold planning and budgetary questions at early-stage innovation tends to be “it depends”.  Is this a big idea?  Well, it depends on when, how, in whose hands.  It even depends on things we do not control.  To the traditionalist, “it depends” does not cut is as an answer; to the innovator, it is the only way to cut through the dense forest of our assumptions in order to uncover the answer).

The cruel paradox, and I don’t know about you but I don’t come across cruel paradoxes every day,  is that certain of the valued attributes that fuel professional advancement within a traditional management context such as firm predictions and linear planning become disablers for the dramatically different executive task of leading breakthrough innovation initiatives.

This is not to say that management excellence – for example, the skills that propel an organisation to be ‘best in class’ – are not vital to organisational performance. It is simply that the innovation battle engages in a different arena. This arena is where we are all destined to be gladiators, sooner or later, because the productivity, service level and efficiency contest inevitably ends in a draw.

The fabulous thinker Bob Johansen uses language coined by the US Military College to describe this “space”.  Dr. Johansen, former head of the renowned”Institute for the Future”, speaks in his most recent book “Leaders Make the Future: Ten New Leadership Skills for an Uncertain World” about navigating a ‘VUCA’ universe. This is a universe defined by: Volatility, Uncertainty, Complexity and Ambiguity.

In today’s global sourcing industry, we know this much is true. Deeper than that, in our lives today, we know this much is true. So the question presents itself, how do we, as individuals – and we may as well concede now that the manager-leader distinction was over-emphasised for simplicity – with simultaneous management and leadership responsibility, how do we make sense of this VUCA universe? Its challenges do not relieve or reduce our imperatives of building relationships across our value chain, sustainable growth, defending against margin pressure, attracting and retaining customers profitably.  In other words, how do we, in these shifting times work with and for people so that our business and its beneficiaries thrive?

One answer, maybe the answer, is that a leader who can navigate the VUCA conditions will have the quality of entrepreneurial mindset that the Chicago School economist Frank Knight as the person who “plays a human role over a vast range of activities, involving management, judgment, insight, intuition and creativity”. Moreover, the leader who can nurture these attributes broadly in the organisation’s talent pool will create a further competitive advantage. Ironically, knowledge-based economies may commoditize knowledge itself over time. Demographic shifts and the ubiquity of global sourcing mean that intelligence, diligence and strong work ethics can be bought or substituted to an historically unprecedented degree. Creativity, insight and intuition—and the judgment skills to deploy these for commercial ends—are much harder to subcontract and replace.  It is time for the hierarchy of exceptional competence to embrace a hierarchy of exceptional creativity.

This is an exciting and enabling perspective for many reasons. Management is still at the fore, so our toiling at the Leaders Make the Future still has value. But, the non-conventional attributes are rich in possibility because we all have access to them irrespective of hierarchy or advantage. It follows that the innovation landscape, albeit difficult terrain, will open up possibilities to a breadth of diversity of perspectives and ideas that the traditional schematic did not.

The literature and case studies already tell us that innovation is notoriously non-linear and especially ‘messy’ at what is termed the “front end” of innovation – the idea stage. Innovation, as has been proved, also comes with failure as a frequent, non-optional extra. This is why Professor Knight’s reference to the “human role” resonates so compellingly.  Innovating, discovering, embracing change, connecting the unconnected –  are innate human capabilities.  In the 20th century we thought of technology as substituting for or replacing people.  The seismic shifts in the technological and global business landscape of the 21st century mean that we must now think of technology as connecting and enabling people.  People create and innovate, not systems, not processes.

What matters is to ensure that the essentially human dimensions of interpreting and succeeding in the VUCA world are nurtured and capitalised as organisational competencies. Insight and creativity are not ‘soft’ goals on the performance review. They are indispensable keys to differentiation. Enhanced management and leadership, because I can now admit how often they are conflated, are allies not enemies. It is at the intersection or, better yet, mutual exchange, of solid traditional management orthodoxy, and the passion, initiative and creativity of an innovation paradigm that exciting value creation will occur.

In conclusion, I offer the following “temperature takers”:

Ask yourself if your organisation’s vision is so compelling that the volatility we know surrounds us recedes dramatically.

  1. Consider in a world of such uncertainty if your organisation is building and enhancing understanding of shifting trends, behaviors, outcomes, in a way that creates confidence.
  2. In the face of pervasive complexity, are you energised by a clarity of purpose that diffuses that complexity?
  3. Global changes of unprecedented size and speed challenge assumptions and lead to dilemmas, which unlike problems have no ‘right answer’.  Do you have the support and tools you need to inhabit ambiguity?

Leaders don’t manage innovation. They champion, inspire and enable it.  When the optimum equilibrium between imagination and discipline is struck, the manager leads the business into the future each and every day. □

Karen Morris is a Strategic Advisor to WR Berkley group of insurance companies.  She specializes in all aspects of innovations strategy and execution.  With over 25 years of experience in law, management, underwriting, and multinational business, she is a frequent speaker and writer on innovation as well as an adjunct professor at Fordham University. Her email is kmorris@wrberkley.com.

Skilled Workforce and Strong Economic Growth: A Source for Sustainability?

We hear a lot about China and other BRICS countries luring investors, especially as a shift towards services occurs in these booming economies. But what about emerging markets right in Europe’s backyard?  Way too often, they seem to be bypassed.

Of course, I am speaking of central and Eastern Europe. Investors are increasingly conscious that outsourcing business, knowledge and IT processes to Eastern Europe can be both cost-effective and sustainable.

Unlike its western European neighbors, overall the Eastern European countries did not suffer as badly from the global economic meltdown.  Only one EU country in the “Emerging Europe” group, according to the IMF, went through most of the most recent financial meltdown with a growth GDP.  That country is Poland.   And this trend should continue through the following years, as per experts from IMF, Ernst & Young and more.  (http://www.emergentsky.com/pdf/news.pdf)

There are several theories why Poland has been so successful.  But one expert with years of experience on the Polish IT market, Jacek Levernes, VP of Hewlett-Packard’s Global Business Services (GBS) in Europe, Middle East and Africa and president of the Association of Business Service Leaders (ABSL), told me in a recent interview he believes that Poland’s success is attributable to three major factors– structural changes applied by Polish economics-savvy politicians in the 1990s, Poland’s absence from the Eurozone, and “really highly-skilled labour force, both in production as well as services.”

 

Cost-effectiveness and sustainability

The weakness of the Polish currency, zloty, means the country is cost-effective for foreign investors, especially those coming from the Dollar and Euro markets, Levernes said.

But while the economic meltdown will eventually be ameliorated, the source of long-term sustainability lies somewhere else– in the local skilled workforce and the innovation factor.

In 2009, according to the European Commission data, five EU member states reported more than two million tertiary students– Germany, the United Kingdom, France, Poland and Italy.  (http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Tertiary_education_statistics ). Together with Spain, these countries accounted for two thirds of all EU students. According to a recent pole, approximately 45 percent of Poles speak at least one foreign language: 25 percent speak English, 20 percent Russian, 12 percent German with a smaller percentage speaking Slovakian, Dutch, Spanish and other languages.

Polish employees in the 337 business services centers are on average 29 years old and speak on average 2.4 languages. An estimated 65 percent of these employees are women; 93 percent have a Master’s degree, according to Levernes. That gives a representative glimpse of the Polish work force, which tends to be highly educated and young, reflecting that Poland is demographically one of the youngest EU countries.

With this demographic profile, as well as a balanced economy and its focus on sustainable development, Poland has been receiving an increasing amount of attention from foreign investors including its existing base such as HP, Google, Sony and IBM.

Here, there is one important factor distinguishing Eastern European countries that are EU members, like Poland, from countries like China or India, which are currently popular outsourcing destinations. That factor is data protection laws.

While the data protection has always been important, with the advent of cloud computing, data protection is key.  As an EU member, Poland meets the strict EU data and IP protection standards, unlike many Asian countries as well as even the United States.

These laws, already very strong, are going to be tightened up even more.  For example, in January 2012, the EU Commission proposed a reform of the EU legal framework on the protection of personal data, which will strengthen individual rights and tackle the challenges of globalisation and new technologies. (http://ec.europa.eu/justice/newsroom/data-protection/news/120125_en.htm ) As a high-ranking European Commission official expressed recently, the policies’ goal is to make the rules of data protection safe but user-friendly for both consumers and businesses.http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/12/26&format=HTML&aged=0&language=EN&guiLanguage=en .  The numbers and actual policies are proof that Poland is on the fast lane to sustainable development.

 Talent-driven

As far as innovation goes– and Poland, of course, has to compete with India and China — — Polish IT engineers have a very good reputation. And, Poland is creative in other aspects of innovation. As a case study, one can look at the Silesia region in southern Poland, with its capital in Katowice, once a stronghold of heavy industry, now one of the greenest cities in the country oriented increasingly towards services.

Katowice (http://en.invest.katowice.eu/) is presently home to IBM.  The city’s  technologically skilled workforce is expected to attract even more technology giants to southern Poland, as the city is known for its university of technology graduates as well as appropriate infrastructure, like the Katowice Technology Park, already home to multiple international corporations.

The city has had a graceful shift from a heavy-industry capital to a clean and innovative place where 45 percent of the surface is now covered by forests and parks.  And baffling experts for the past several years, it has quickly climbed the ranking of Polish cities with the best quality of living standards.   The ABSL released a new report recently naming the city and the Silesia region one of the fastest growing destinations for business service centers and foreign direct investment in Poland. (http://outsourcingkatowice2012.wordpress.com/2012/05/16/business-research-company-names-katowice-3rd-most-attractive-investment-destination-in-poland/ ) Newsweek magazine ranked it as the best city to live in while a PricewaterhouseCoopers Report on major Polish cities ranked Katowice as having the highest value of culture, according to city data.

As for answers to this change, they seem to relate to sustainability, education and planning.  A partial answer to this rapid change might be in the innovative and government-backed strategic plan for restructuring the city’s infrastructure as well as its business model.  And the Silesia region is known as one of Poland’s largest academic and scientific clusters, with academia profiles being predominantly economic and technical studies.

Another aspect of Silesia’s sustainability is its 200,000 students, accounting for about ten percent of the total number of students in Poland. There are on average 80 thousand university students in Katowice alone, according to the city’s most recent data. (http://en.invest.katowice.eu/people/28/education.html.)

 

Luiza Oleszczuk is a newspaper journalist, a freelance business reporter and a marketing expert. She holds a Master’s degree in English form University of St. Andrews in Scotland. Among her interests are international politics and business, the role of technology in social innovation, globalization , women in business and politics, new media and culture. She contributed to multiple publications, including The Economist.  Her email is loleszcz@gmail.com

A Huge Thank You from the Global Sourcing Board for Chris Bullen on Her Retirement from Active GSC Board Participation

At the last Global Sourcing Board Meeting, Chris Bullen announced her retirement from active GSC Board participation.

Not only is Chris a founding member, she is a dear and cherished friend. She is a diamond, a force of nature and someone to whom the GSC owes an enormous debt of gratitude. Today, we say thank you.

It’s a very sad day that we say farewell to Chris from active Board duty but we recall her contribution with nothing but appreciation and wonder.

Chris was one of the early few who grasped the vision instantly and applied the energy, organization and dedication to move the GSC forward. Very few connected the 3 tenets of the GSC in 2007 – Sourcing, Sustainability and Social Responsibility. Chris did.

Ask anyone who has grown an organization from an idea – it takes much more than money and much more than ideas. It takes passion, persistence and commitment. Chris has been part mentor, part leader, part colleague and friend. On a road with as many twists and turns as our journey to date, she has kept the pace – and helped set the pace. None could ask for a more generous and inspired colleague to walk with – and it has been our undoubted pleasure.

As a Board and on behalf of the GSC, we offer our sincere thanks to Chris for her work and contribution. You are a treasured friend of the GSC and we stand on your shoulders

Statement from David Kinnear on behalf of the Board of Directors, April 2012