The Role of the Sphere Economic Model in Digitalising International Business Processes
Digitalisation is revolutionising international trade, offering unprecedented opportunities for efficiency, cost savings, and transparency but for who. At the Paddy Ashdown Forum we believe that the Sphere Economic Model should play a crucial role in this transformation by addressing the complex, multi-faceted nature of global trade. By providing a framework for seamless integration across the many siloes of business functions that support each transaction.
Challenges
International trade processes involve managing a multitude of steps and risks. For instance, international freight transactions contain 15 distinct components, each from quoting to final payment. Each step with its own risks and complexities. For example, managing the sales process/accounts, handling foreign exchange (FX) and letters of credit, coordinating with banks, overseeing production, packaging, loading, and shipping, as well as liaising with freight forwarders. The entire process generates a plethora of paperwork, from customer files to shipping orders, certificates of origin to bills of lading requiring meticulous coordination and communication across internal departments.
In the 1970s, as a management trainee at Ciba-Geigy Pharmaceuticals, I gained hands-on experience in each of these departments. This experience was hugely valuable highlighting the inherent potential for siloes within organisations and the frequent miscommunications that occur between them. Despite advancements in technology, still today, many businesses, particularly small and medium-sized enterprises (SMEs), including institutions, continue to rely on legacy systems cobbled together or tailored to their specific needs with no flexibility or future planning. The lack of systemic integration can leave businesses struggling to find performance gains and competitive advantage, which further dims the ability to clearly account for the viable investment in terms of revenue return.
Savings and Benefits
For the primary beneficiaries of digitalisation in international trade, such as banks, insurance companies, and third-party logistics providers digitalisation is a cost-effective game-changer, allowing them to eliminate cumbersome legacy processes. By adopting new, integrated online solutions, these companies can reduce staff, minimize errors, and streamline operations. The financial savings are substantial, but typically it is the institutional shareholders rather than their customers who, in many cases, bear the costs of software upgrades and integrations.
There were estimated to be approximately 332.99 million SMEs worldwide in 2021, slightly more than in 2019 when there were 328.5 million. These businesses represent the backbone of the world economy. Representing over 90% of businesses and close to 70% of jobs and GDP worldwide (WEF Dec 2022). SMEs face a different set of challenges to the institutions, while being vital components of value chains, they often lack the resources to invest in new systems and manage complex integrations. Additionally, they may find that the benefits of digitalisation are skewed towards larger partners who drive the adoption of new technologies without bearing the associated costs. This is creating a chasm between the multi-national Third-Party Logistics providers and the smaller freight forwarders or shippers in terms of costs and efficiency.
The Sphere Economic Model: Linking Silos for Greater Efficiency
The Sphere Economy offers a solution to boosting SME performance and embedding resilience into institutional value chains to cocreate and share the value of digitalisation though sustainably viable resource planning.
The Sphere Economy model facilitates a more ordered frictionless interaction between multiple departments such as legal, finance, production planning, packing and dispatch, shipping documentation, account management and so on… This means businesses can achieve not just enduring cost savings but lower risk and create fresh opportunity from the compelling arguments to change long-standing routines with a fresh validation of safety and efficacy with operational processes.
The bottom line
For example, in a mid-sized company, the Sphere Economy Model can create links between multidisciplinary activities aligned with the overall business strategy. This integrated approach not only enhances efficiency but also fosters a culture of sustainability, where each process is designed to minimize waste and maximize value.
At PAF, we specialize in creating these links and implementing processes that exceed budgeted savings and generate sustainable futures for businesses. Our approach leverages the Sphere Economic Model to move beyond the circular economy into a three-dimensional world of economic stability. This means it is not a collection of tactics, it is a whole new way of viewing and managing the organisation. This agile structure permits the organisation to become relationally functional. This means it drives performance because it cuts out waste, risk, cost and uncovers opportunities foregone.
Realising the Benefits of Digitalisation
For SMEs to truly benefit from digitalisation, it must be part of an integrated program using the Sphere Economic Model. This model enables SMEs to overcome the challenges of legacy systems and complex integrations by providing a framework for seamless collaboration and efficiency.
By adopting the Sphere Economic Model, businesses can achieve:
- Integrated Processes: Linking different departments and functions for cohesive operations.
- Sustainability: Turn sustainability into a coherent strategic value creation process.
- Cost Savings: Realising significant savings through improved efficiency and reduced waste.
- Coherence: building advantage from decisions made with sight of the interdependencies of decisions over time.
- Economic Stability: Moving beyond short-term gains to achieve long-term economic stability.
In conclusion, while large organisations stand to save billions through digitalisation, SMEs can also reap substantial benefits by adopting the Sphere Economic Model. This model not only facilitates efficient and sustainable operations but also ensures that the financial savings from digitalisation are realised across the entire business ecosystem. At PAF, we are committed to helping businesses navigate this complex landscape and achieve their full potential through strategic digitalisation and integration.
At the Paddy Ashdown Forum we believe that the Sphere Economic Model should play a crucial role in this transformation by providing a framework for addressing the complex, multi-faceted nature of global trade linking the many siloes of business functions that support each transaction.
Lesley Batchelor CBE – August 2024 ©