No matter what your role in business, you've probably been told in some way, shape, or form that "the customer is always right." But let's face it -- it's not true. In fact, some customers are just a pain in the neck. You know the ones I'm talking about. No matter how hard you work or how much attention you give them, it's just not enough. They constantly change their mind. They hem and haw over the most minor details. They distract you from your larger or more loyal customers. And in the end, sometimes they wind up buying from your competitor instead.
It's maddening. We've all fallen victim to it at some point. And you know what? It's bad for business. In the time you spend serving that one customer, you could have served many other customers and brought in more money to your business. It's a resource drain. And in fact, in some cases, you may be losing money by serving that customer, depending on the cost to revenue ratio.
But what do you do about it? Do you analyze that ratio to decide if this customer is costing your company too much? Do you "fire" the customer? Or do you do take the "any money is good money" mentality and bend over backwards for these customers on the job (and probably scream about it at the top of your lungs in the car on your way home)?
Well there is a solution. (Both a "solution" in the traditional sense as in a concept to solve a problem and a "solution" in the SAP sense). The concept is called customer stratification and it's pretty much what it sounds like. You analyze your customers, group them into categories and then determine how much time and effort you should devote to each group to improve your company's profitability. Although it's not as simple as that.
For example, some customers may be something of a resource drain and spend very little with your company today, but they may have big potential in the future so the effort may pay off down the line (assuming your vocal cords survive those rides home). And determining the right amount of effort to dedicate to those customers today requires some true analysis.
So how do I know so much about customer stratification? The concept was explained to me in great detail by John Mansfield, Vice President of Business Development at industrial distributor Graybar, who just happens to be the cover story in the latest issue of insiderPROFILES. Graybar was introduced to the concept of customer stratification when a company executive read a groundbreaking piece of research compiled by Texas A&M and published by the National Association of Wholesaler-Distributors. From there, customer stratification became a companywide initiative including detailed training and technology development.
In fact, Graybar didn't simply buy into the concept of customer stratification as a way to improve profitability -- the company leveraged the data in its SAP ERP to gain real-tiem insight and is now co-innovating a new solution suite with SAP, which is powered by SAP HANA.
It's a unique and intriguing concept for many industries to consider. And frankly, the timing couldn't be better, as companies in all industries continue to seek to improve profits with limited resources.
And, oh, one more thing: it works both ways. Somewhere, right now, one of your suppliers may be considering your company in its customer stratification model and putting you into a box. So you might want to take a look internally to make sure you're not on the "resource drain" list as a customer as well.
While most business processes leverage data today, some are simply more data-driven while others will always require more human-driven strategy and competence to meet their goals. No other area of business represents the cross-over between data and operations than supply chain. Gaining visibility into supply chain data helps companies plan and execute the various steps in the supply chain process.
A recent survey by IT market researcher Gartner highlighted the value of demand data in planning supply chain processes. And the first point that Gartner highlights is that organizations must define the balance between statistical modeling and collaborative forecasting. In other words, you have to understand how much emphasis to put on the data and how much to put on organizational collaboration in your forecasting.
That balance is different for each process and each company. Getting that balance right will increase the accountability of that forecast while also enabling continuous improvement across the organization, says Gartner.
"The company should be able to address what items should be statistically modeled, what items are reliant on a collaborative process, or both," says Gartner's Steven Steutermann, research vice president.
A recent insiderPROFILES story tells the story of a company that was relying too much on collaboration and not enough on data in creating its demand forecasts.
“Previously, forecasting inventory involved business units doing a high-level estimate of what they expected to sell, and then they met with finance to discuss it,” says Carole Edwards, Director of Production Control at NVIDIA. "We were using a very simple model to compare our build plans with actual demand."
NVIDIA leveraged SAP Advanced Planning and Optimization and SAP BusinessObjects solutions to provide company executives with demand and inventory planning data dashboards. The result has changed the supply chain process at NVIDIA as well as the company's perception of data.
“The executives trust the outcome and focus on the decisions needed, rather than questioning data," says Edwards. And that change can drive many business processes.
And if you're interested in reading more about the role of data and collaboration in marketing and customer stratification, be sure to read the issue of insiderPROFILES that's coming out very soon (hint hint).
As the volume of data available to the enterprise explodes, more companies are tasked with harnessing the power of big data to improve strategic value both internally and externally for customers. A 2011 report from the McKinsey Global Institute confirms that the market is “on the cusp of a tremendous wave of innovation, productivity, and growth, as well as new modes of competition and value capture – all driven by big data as consumers, companies, and economic sectors exploit its potential.”
Just how big is this opportunity and where exactly is it coming from? I gathered up a few bits of research lately that might help put this opportunity in context.
Social technology, one of the key contributors to this data explosion, provides a unique example of the opportunities available today. In its early days, many businesses may not have seen this technology and its masses of data as a conduit to productivity and increased competitiveness. But today, the collaboration capabilities and customer information gained through social technology offer big upside for many companies looking to grow their business. The McKinsey Global Institute concludes that “twice as much potential value lies in using social tools to enhance communications, knowledge sharing, and collaboration within and across enterprises …. By fully implementing social technologies, companies have an opportunity to raise the productivity of interaction workers—high-skill knowledge workers, including managers and professionals—by 20 to 25%.”
Another major contributor to the growth of big data is information being collected and shared between devices, much of which went on completely behind the scenes, leaving masses of useful data on the table. According to a report by MarketsandMarkets, by 2013 there will be more than 1 trillion connected devices sharing data. The total M2M market is expected to reach $86 billion by 2017 growing at a rate of 26% from 2012 to 2017. All of that data can be levered by business users for competitive advantage if they can find the right solutions to do so.
The availability of so much data is changing the decision-making process and roles in the enterprise dramatically. More roles within the enterprise are relying on analytics to make their decisions. Gartner reports that the number of users who will need to access analytics will rise to 50% of all employees by 2014. And by 2020 that number will grow to 75%. Gartner also predicts that, by 2013, 33% of BI functionality will be consumed via handheld devices.
Cloud computing is no longer viewed as vague IT solution deep in the data center. Today it is viewed as a solution that can be leveraged to collect or analyze data more quickly and put more power in the hands of functional roles. In a recent survey by CFO Research, 76% of finance executives polled agree that a solid cloud computing strategy will be important for their company’s success within the next 12 to 18 months. In addition, 67% say that the cloud would improve their IT department’s capacity to innovate, and focus on activities that add value to the business, such as implementing more analytics technology instead of managing in-house servers and applications.
The opportunities are there, right in front of you. The only question is how will you capitalize on them. And will it be before or after your competitors do?
That's the million dollar question. It's no longer a question of IF cloud will become the standard enterprise software delivery model, it's a question of WHEN that tipping point will be tipped. I've been writing about cloud (when did we dro
p the "computing" part anyway?) since its earliest days and frankly, I had my doubts about its broad acceptance within the enterprise. There are still days when I worry that certain sectors of the market have gone cloud crazy, but mostly I'm drinking me some cloud Kool-Aid.
It's hard not to become a convert when there are so many experts not only telling you it's happening, but telling you why. For example, in a recent interview independent analyst Cindy Jutras provided me a very succinct analogy: Remember when online shopping first emerged and we were all a bit ske
ptical about plugging in our credit card info to a web site? Well, Jutras says a similar "trust factor" is happening with cloud based-ERP lately.
"Now, there’s less fear," she says in the insiderPROFILES interview. "It’s less of an emotional issue and more of a focus on the value SaaS and cloud solutions can bring. People are coming around."
A recent article in the Deloitte Review entitled "Cloud Hits the Enterprise" also predicts a continuing migration to cloud-based ERP.
"SaaS ERP will likely grow significantly as Oracle and SAP continue to pursue aggressive development and acquisition strategies. The focus will initially be on small and mid-size companies but over time will likely expand to include ever larger enterprises. However, it may be years before SaaS solutions develop the deep end-to-end capabilities necessary to compete with traditional ERP systems in the large enterprise space."
The article goes on to provide several suggestions on preparing your IT organization for the transition to cloud. It's definitely worth a look.
Research firm CompTIA is another enterprise cloud believer and presents a convincing argument as to why cloud is so attractive in the enterprise. “Advanced software for analytics, unified communications, enterprise resource planning, customer relationship management and other sophisticated technology solutions were often out of the price range or skill set of many businesses. With cloud-based solutions and delivery and either set monthly pricing or a pay-as-you-go model, these technologies come within the financial reach of even the smallest of small businesses.”
But vendors, consultants and analysts predicting a trend are one thing. Hearing from companies that are actually doing it is another. And Bart & Associates, an IT provider to the U.S. government, recently implemented SAP Business All-in-One in the cloud and cited some benefits that are pretty difficult to argue with.
"The benefits we were looking for when choosing a solution were a completely integrated system, a single platform, real-time data, real-time analytics on the data, the ability to add more applications as needed, and certainly the functionality of a project management system," says Jonathan Evans, Vice President of Service Delivery, Bart & Associates in an insiderPROFILES article. "What the SAP software did for us was to bring all that together in a single integrated platform with business analytics, project management, and the ability to see all of this information in real time."
So, what do you think? Are we close to that tipping point where cloud is the go-to delivery method in the enterprise? Five years off? 10 years?
One of the things I enjoy about my job is I get to peek behind the scenes at some very interesting and often well-known companies. It's always interesting to learn how a product you might use every day was created or for the geeks among us, the role IT played in the product's development.
The last couple issues of insiderPROFILES have been especially full of these behind-the-scenes peeks and I thought I'd highlight a couple of them for you.
In the cover story for our January-March issue, we looked at how toymaker Hasbrois using IT to expand its business around the world. When a kid in Russia picks up his Mr. Potato Head to play with, it's in part thanks to the IT department and SAP technology. (In fact, for even more inside scoop, you can check out the video we put together from our visit to Hasbro).
I can't imagine anyone that hasn't used a product from Kraft Foods recently. Oreo cookies, Trident gum, Ritz crackers, A-1 sauce, the list goes on and on. As described in our latest cover story, Kraft is using SAP BusinessObjects technology to better understand its diverse and growing product lines and businesses and make sure it gets me my Oreos!
When we needed a photo for ourstory on McCormick & Co.'s efforts to reduce its database size, it wasn't hard. We opened our cupboard and there was a new bottle of McCormick seasoning waiting for its photo shoot.
If you're my age or younger, LEGO blocks likely played a major role in your childhood. Our family had a set and then our neighbors, whose kids were older, gave us their set, doubling my collection. And they all snapped together without any problems. After writing this story on LEGO's use of SAP PLM, I understand why those blocks snapped together so easily and how Lego is bringing its great toys to an even broader universe of children.
You've probably touched or used a Bayer product today already and may not have known it. Their plastics might be in your car or PC, their crop science products might have helped grow your lunch, and their healthcare products might have cured the headache that showed up after that 10 a.m. conference call. Well, Bayer has headaches of its own. For example, have you ever wondered how Bayer decides when to decommission its data? You can find out in this story. (I bet you saw that coming, right?)
If you've ever walked through a video game store with your kids, you know how much that industry relies on impulse buys. The kid sees the game and even though they didn't have that in mind going into the store, that's instantly the one they "have to have or I will just dddiiieeee!" But have you ever wondered how a company in that industry forecasts its demand? Well, you can find out in this story about graphics chipmaker NVIDIA. (Spoiler alert: It has to do with SAP BusinessObjects).
Of course, SAP technology is running behind many companies in many industries, and you haven't heard of many of them. But for me, these peeks behind the scenes of the household names tend to bring a bit more ... relevance?
Now if you'll excuse me it's time for lunch and writing this blog has made me extra hungry for some reason....