Dr. Michael WilliamsMBAM 603Fall 2007

Competition, Strategy & IT

Class Agenda

• 6:00- Introduction

• 6:10- Quiz

• 6:20- Presentation

• 7:05- Debriefing

• 7:20 - Break

• 7:35 - EPR/CRM

• 8:35- Strategy & IT

• 9:40- Self-reflection

1:00 - Introductory comments1:10 - Quiz1:25 Presentation - ERP2:15 - Break2:30 - ERP Review3:00 - Presentation - CRM3:45 - Break4:00 - Presentation Review4:15 - Customer Relationship

Managemet4:40 - Self-Reflection

Quiz

Finishing ERP…

Why ERP?

Acct.

HR

Mktng

SalesMfgr.

Dist

= Data reqs.

= Information Systems

Who tracks sales? Who’s data is

right?

ENTERPRISE SYSTEM

NOTE: Most IS and data are now in ERP, but not all.

The Silo Organization

ERP Primer

• What is ERP?– ENTERPRISE resource planning– Generic representations of typical

business processes (e.g., financials, HR, manufacturing)

• What are the benefits of ERP?– Shared data– Shared interfaces– Best practices

ERP Vendor/Products

• Who are the primary vendors of ERP systems?– SAP– Oracle / PeopleSoft / JDEdwards– Many niche players (e.g., SCT)

• What is the ERP Product line?– Usually varies by industry

• An example- OneStart at IU

ERP Costs

• Varies widely based on– Firm size, Existing IT infrastructure,

Organizational complexity, Functional modules (e.g., financials, HR…), Amount of process redesign

• According to a study by Meta Group (survey of 124 firms)– Average implementation time took 24

months– Hi=$300 Million, Low=$400,000,

Average=$15 Million or $53,320/user– However, it returned a median annual

savings of $1.6 million/year

ERP Costs (Cont.)

• Software expenses are often a SMALL piece of the expense– Implementation costs range from 5x to 10x the

price of software itself!• Don’t overlook the costs of

– Training– Integration/Testing– Consultants– Data Conversions– Increased HR values/costs– Extended ROI cycles

ERP Costs (Cont.)

• Training is a big, and necessary expense– 17% of the total cost should be training.– Companies that budget less than 13% of their

costs for training are three times more likely to see their ERP projects run over time and over budget when compared with companies that spend 17% or more on training.

http://techrepublic.com.com/5100-6315_11-1054263.html

ERP Failures

• Many ERP implementation fail– Well-known examples include Hershey’s

Food, Whirlpool, FoxMeyer Drug

• However, this is almost NEVER an IT problem but a management problem

So, Managers Beware

• Carefully review your processes to decide which, if any, to keep.

• Select powerful champions across functions.

• What cultural clashes will standardized data create? How will you overcome those?

• What are the ethical (i.e., power) considerations of the project?

Customer Relationship Management

A review of how technology enables closer relationships with

customers

…a little history

1990’s - ERP

Then…

Early 2001 -

Technology tends to move in waves…

What’s the problem?

• Who are your customers?

• What do they want?

• How can you drive demand for your products?

• What new products would be most appealing to them?

• What ad dollars $ drive new sales?

The changing face of IT

Angels & Demons

• CRM is more of a mindset than a single system.– “Customer Relationship Management”– A strategy that uses IT to capture and

manage information about customers’ needs and behaviors in order to develop stronger ties to them.

• CRM helps firms to identify and manage both “angel” and “demon” customers.

Comparing Customers

Sales Marketing Customer

Service

Returns Customer

DecisionUnder $300 5 Touches Low High ??

Average $500 3 Touches High Low ??

Why manage customer relationships?

• Segmentation

• Prioritization

• Acquisition

• Customization

• Personalization

• Anticipation

• Education• Innovation• Cross- and Up-Selling• Loyalty through delight,

value and relationship• Retention

CRM Market: What is CRM?

PACE

Com

pany

Info

Acco

unts

& Le

dger

Products

& Inventory

Vendors& Bills

Customers

& Payments

B

CRM

Marketing Automatio

n

Sales Force

Automation

Customer Service

Pricing & Config

Engines

Lead

Distrib’n &

Mgmt

Opportunity

Manageme

nt

Acco

unt

Man

agem

ent

Conta

ct

Managem

ent

Live/Chat

Interaction

Web S

elf-

Service

Help

Desk

Call C

ente

r

Field Service

Personaliza

tion

/

Recommendati

on

Marketing

Campaign

Direct Mail/Email

Data Mining/

Warehousing

Lead

Generation

Marke

ting

Ency

clopedi

a

Knowledge Base

CRM-Sales Force Automation

• What information and processes does management need from sales staff?

• What information and processes do sales staff need to achieve superior results?

CRM-Customer Service

The Firm

Web

Email

Catalog

Phone

Store

Web

Email

Catalog

Phone

Store

Customer Information Communication EffortsWITHOUT CRMWITH CRM

One message to customers

One message to customers

CRM - Marketing Automation

The effective management and tracking of all marketing media to personalize your message to each customer and

increase marketing ROI.

Customer Knowledge ManagementCapture, analyze, and apply information about customer needs, behavior, and transaction history needs to maximize value delivered to the customer and value captured by the firm across the customer lifecycle.

Integrated TechnologyA comprehensive integrated technology architecture must be put in place that cuts across existing organizational boundaries and is founded upon a customer-centric view of the business.

Optimized Customer ContactsDevelop and implement business processes to ensure consistent, high-quality, and tailored interactions with customers that increases customer satisfaction and collects valuable data on their needs and preferences.

Collaborative OrganizationThe organization must evolve a consistent customer-centric philosophy across human resource management and internal communications.

CRM

CRM Components

CRM Technologies• No single “CRM” technology, but there are attempts at one-

stop CRM solutions– Microsoft CRM– Oracle/Siebel Systems– SalesForce.com

• Some “CRM” technologies include– Data warehouse– Data mining– Intelligent agents– Unified marketing management– Unified Multi-channel customer contact technologies (web,

email, chat, voice)– Contact management– Web-based customer self-service

CRM Costs

• It depends on your “target”

• Single applications can cost as little as $10,000-$50,000. But these usually don’t provide too much value.

• CIO Magazine’s 2001 survey found that 50% of firms (n=1600) had a CRM budget of less than $500,000.

• That same survey showed some firms spend > $10 M on CRM projects.

Benefits of CRM

• Discover, Acquire, and Retain Customers

• Increase Customer Satisfaction and Profitability

• Help Sales Staff Close Deals Faster

• Cross Sell Products More Effectively

• Make Call Centers More Efficient

• Simplify Marketing and Sales Processes

• Purchase Inventory with Better Accuracy

• Allocate Labor Dollars More Strategically

• Streamline the Supply Chain

Where and How to Start?

• Give every customer a unique ID• Capture transaction data• Capture human insights• Create and articulate a customer strategy• Create a customer-focused organization• Identify useful information & benefiting users• Provide simple, fast, convenient access to customer

information and knowledge• Don’t irritate or stalk customers & employees• Start small, solve problems, add value,

build on successes

CRM Target and Lessons

What was unique, interesting, insightful, or revelatory about the

Goodhue et al. article?

CRM Targets

Install individual customer-oriented applications (e.g., database marketing 56%, call centers 53%, web portals 40%…)

Build CRM infrastructure into organization (e.g., network and consistent data)

Transform the organization to customer centered (e.g., process redesign)

Source: Goodhue et al., 2002 MISQE 1:2

CRM Lessons

1. Each target has unique costs and benefits

2. Sponsorship varies by target3. Each target evolves4. Each target is messy5. Scalability is key since each target

evolves6. Targets involve increasing role from

users

Presentation Review

Get together with your teams and answer the following.

• What was the most compelling content provided in the presentation?

• What content area of the presentation needed more development?

• What can you learn from this to improve your next presentation?

Post your answers in the Discussion Board in Bb

For the presenting team, answer the following:– What did I learn about myself

from this team experience?– What did I learn about

working with others from this team experience?

– What will I do differently next time?

Post your answers in the Digital Dropbox.

Team Exercise

• In your teams, review the Tesco, UK case on p. 59 in the textbook. (10 minutes)– Discuss the three questions following the brief

case.– Post your responses in Blackboard.

Self Reflection

…every experience in life enriches one’s background and should teach

valuable lessons. Mary Gilson, Economist

What’s Past is Prologue 1940

IT & Strategy

Strategy and IT

How are / might Information and Process Systems

help your firm address these strategic challenges and opportunities?

Achieving a Competitive Advantage

Strategy and the Internet

What was unique, interesting, insightful, or revelatory about the

Porter article?

Strategy and the Internet

• With your team identify and define at least 6 terms in the Porter paper that are new and relevant (i.e., switching costs, barrier to entry…)

Discussion QuestionsIn your teams discuss the following and submit

your answers to Blackboard:• Who will capture the economic benefits that the

Internet creates?

• Will all the value end up going to customers, or will companies be able to reap a share of it? How?

• What is the Internet’s impact on industry structure?

Happy Birthday!