60 seconds with Jim Rice, MIT

Jim Rice
Massachusetts Institute of Technology
Title/company: Deputy Director, Center for Transportation and Logistics (CTL), Massachusetts Institute of Technology
Location: Cambridge, Mass.
Experience: More than 30 years working in the supply chain, including 20 years at MIT
Primary Focus: MIT’s CTL develops supply chain innovation with its business partners and then drives it into practice in the supply chain domain.

Modern: Jim, innovation is in the air. TV commercials tout innovative new products and opinion makers say innovation will lead the economy out of its funk. How did you get interested in researching innovation?
Rice: The thing that motivated me was how frequently I heard people talking about innovation, including our business partners. Most companies wanted to have it, but there wasn’t a clear understanding of what it is they wanted. I wanted to understand what constitutes supply chain innovation, so I talked to a lot of people, read a lot and tried to synthesize it into a simple approach.

Modern: How do you define innovation? What is it?  
Rice: Most people think in terms of product innovation, like the iPhone, but the concept can apply to processes as well, such as a supply chain process. Supply chain innovation—very distinct from product innovation—is the combining and application of a mix of inventions, existing processes and technologies in a new way to create improvements in cost, quality, cash and/or service.
 
Modern: Are there different kinds of supply chain innovation?
Rice:  Adapting from Clay Christensen’s work, I say there are two. First, there’s sustaining innovation, or all the things we in the supply chain have been doing for decades. We’ve called it many things, including kaizen and business process re-engineering. These are methods for doing things better, faster, cheaper and at a higher quality. Then, there is disruptive innovation, which significantly changes the economics of a particular process. We say it changes the dominant design, which is a term coined by Jim Utterback at MIT. In the product space, the mobile phone changed the dominant design of the telephone and the DVD challenged the dominant design of recorded media from VHS as standard. In the supply chain, think about computers before Dell. The dominant design was to make a computer to stock that consumers would buy off the shelf. Dell changed the dominant design by making computers to order and selling directly to the consumer. There are other examples, but there aren’t as many examples of disruptive innovation in the supply chain as there are of disruptive product innovations.

Modern: Why is that?
Rice: In the Innovator’s Dilemma, Christensen argues that disruptive innovation doesn’t typically come from the market leaders because they risk alienating existing customers. So if you want to upset the apple cart, you have to be prepared to risk your market position. Plus, it’s not easy to identify a process that is contrary to the dominant design that also is dramatically lower in cost or cycle time. Dominant designs enable various production economies, and so new approaches have to dramatically change the economics of the most economic approach. It’s not easy. Most companies need the continuous improvement from sustaining supply chain innovation, but are unwilling to risk their existing market position to attract to the appeal of a disruptive supply chain innovation.

Modern: Is innovation a necessary ingredient to success, profitability or market leadership?
Rice: I think that companies have to innovate to improve, but not all companies need to pursue disruptive supply chain innovation. In the supply chain, we are slaves to the needs of the go-to-market approach, which means that the supply chain has to serve the business strategy. Supply chain innovation can help serve that need in different ways. If your go-to-market approach is to be responsive, then your supply chain has to be responsive. If you compete on low cost, the supply chain has to figure out a way to be low cost. It’s OK to disrupt the design as long as you can serve that business need.