Interview – Michael Marks

Riverwood Solutions, the innovator in managed supply chain services and operations consulting, announced that on January 1, 2015 the company opened a software solutions development center in St. Petersburg, Russia, to expand its service offerings by developing specific software solutions based on the company’s innovative and proprietary processes and methodologies.

Michael Marks is managing partner of Riverwood Capital Management, an early investor in Riverwood Solutions and former CEO of Flextronics International. I reached out to him with a few questions on the strategy.

You are making significant investments in software development, how much of what Riverwood has learned working with its customers can be coded into software and how much will still need to be conferred on a case by case basis?

That’s a great question Phil and one that quite frankly we don’t yet know the answer to. Certainly the detailed, step-by-step methodologies can be coded to a considerable level. Some of the key decision logic that’s been developed to help OEMs design and build-out optimized supply chain solutions can also be codified to a great extent. And of course there is all of the proprietary supplier data that Riverwood possess, and our team in St. Petersburg has developed very powerful analytics tools for mining that data in novel ways to inform a whole new level of manufacturing and supply chain optimization.

You’ve chosen Russia to develop the software, why?

The decision around Russia, and specifically St. Petersburg was a case of strategy meets opportunism. There are incredibly talented software developers there and very robust academic infrastructure for continually developing new talent. The economics were incredibly favorable when Riverwood Solutions began looking at software development locales and the recent decline in the Ruble has made those economics even that much more compelling. But a big part of the decision was based on some specific talent that we knew of in St. Petersburg that has deep expertise developing software solutions in manufacturing and supply chain.

In the era of big-data, the ability to mine and make good decisions based on that data is paramount. Can you create intelligent solutions that make sense of the data the Internet of Manufacturing (IoM) provides?

Clearly using the data to make better decisions faster is a big part of this initiative. It’s amazing to see how many OEMs large and small embark up designing and executing a supply chain based on their gut and what feels right –even those OEMs with access to amazingly powerful data. But in terms of the Internet of Manufacturing as you call it, we see the real power in that being on the shop floor and systems like what you describe will probably be developed by both new and traditional players in the MES space.

What will the software resources you develop look like and how might a typical brand owner utilize them?

Well Phil, I don’t want to give away all of Riverwood’s secrets just yet. But in the most basic terms we see two parallel paths for our software and solutions development efforts. There will be an entire suite of supply chain design, implementation, and ongoing supply chain management tools that will be completely captive and proprietary to Riverwood Solutions. This tool set should allow us to scale our existing consulting and managed services business much more aggressively as we become a bit less dependent upon very experienced high level operating executives, which as you well know, are pretty rare. We also plan to make available a version of many of these tools through a cloud-based SaaS offering. We expect that this may cannibalize a small portion of our existing service offering, but we fully expect that cannibalization to be on the low-end of our value-add. But the proprietary internal tools we are developing should allow us to replace that revenue perhaps 3 to 1 with much higher value- add advisory services and technically complex managed services.

Thank you for the insight Michael and all the best with the new development.

–PHILLIP STOTEN

Michael Marks is a founding Partner of Riverwood Capital. Prior to establishing Riverwood, he was a Partner and Senior Advisor at Kohlberg Kravis Roberts & Co. in 2006 and 2007. Before KKR, he spent 13 years as CEO of Flextronics International Ltd. and built the company into one of the largest technology companies in the world. As its CEO, Michael led Flextronics as it increased annualized revenues from $93 million to approximately $16 billion, while establishing operations in over 35 countries and integrating over 100 acquisitions.

As Chairman, he helped Flextronics grow to annualized revenues of $36 billion. Electronic Business Magazine named Michael one of the Top Ten Most Influential Executives in Silicon Valley History and CEO of the Year for 2003.

Michael earned an MBA from Harvard Business School and a BA and MA from Oberlin College in Oberlin, Ohio. He is a director of SanDisk Corporation (Chairman), Schlumberger Limited, GoPro, and iFLY. In addition, Michael serves as a Trustee of the Juilliard School.

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