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V o l u me S i x , N u m b e r 3 J u n e 2 0 0 2
theROI
Report
theROI
Report
Featur ed Organi zat i on:
Brother International
Corporat ion
Case Studies Analyzing
the Return On Investment of
Customer RelationshipManagement (CRM) Initiatives
Brother Pursues Fully Integrated
CRM Strategy to Develop Customer
Loyalty, Projected 129% ROI.
Benefits
Reduce Returns.Each 0.25% reduction in returns
Saves More than $1.6 Million Per Year
Consider Customers Lifetime Value (LTV)not just transaction value.
Ant icipate Customer Needsfor new product or software upgrades.
Maximize Cust omer Exper ience:increase accessory sales & revenue growth.
Reduce Servicing Timefor end users, 40%; & dea lers, 50%.
Consistently Improve Quality of Service.Share knowledge across the organization through
the Solution Database.
Campaign to
Tightly Focused Target Groupswithin hours.
The ROI Reportis published by Hill| Holliday,
200 Clarendon Street, Boston, MA 02116. Copyright
2002, The ROI Report. Reproduction prohibited.
For more informat ion, please call 1-800-283-1SAP.
Please refer to material No. 50 056 102.
Introduction andCompany Profi le . . . . . . . 4
Business Context, Mission
and Driver, St rategy,Business Case . . . . . . . . 6
BusinessTransformat ion . . . . . . . . 8
Proceeding wit hSAP CRM . . . . . . . . . . . 11
CRM: Strategy, Defining
Key PerformanceIndicators . . . . . . . . . . 13
Implementati on . . . . . 15
ImplementationCosts . . . . . . . . . . . . . . 16
Benef its . . . . . . . . . . . . 17
ROI . . . . . . . . . . . . . . . . 19The Future . . . . . . . . . . 19
Lessons Learned . . . . . 21
About t he ROI Report . . 22
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20 Glover Avenue Norwalk,CT 06850 V 203.642.5121 F203.642.5126 w w w.1to1.com
At Peppers and Rogers Group, we believe that the goal of Customer
Relationship Management (CRM) initiatives is the development of Learning
Relationships with customers. CRM practitioners leverage deep understanding of
individual customers to make their products or services increasingly smarter overtime relative t o each customers needs. Customers are hesitant to reinvent this
relationship with another firm.
Building these types of relationships require a company to make difficult
changes in their firms. So why invest in CRM at all?
Dr. Martha Rogers and I have always considered CRM to be, first and fore-
most, a solid financial concept. CRM builds on the axiom that it is more cost-effective
to keep and grow an existing customer than to acquire a new one.
We were honored to be asked by SAP and Hill Holliday to review the design
and execution of this ROI Report. Our firm is often asked to conduct similar studies fo
clients. And we are pleased to report that the processes used to uncover the financial
benefits and derive the financial formula for Brothers CRM initiative were fully-consis-
tent with our own rigorous approach to measuring ROI.In fact, we think the final ROI calculation is probably conservative. This is due
to the fact t hat most companies dont yet measure baseline customer lifetime value
(LTV)the sum total of expected future profit flows from a customer. Effective CRM
increases LTV. But without a baseline measure of LTV, we cant compare the changes
from CRM to the baseline. So, we use existing metrics to measure the short-term
impact of CRM. Despite t his conservatism, Brother still reports ROI in excess of 100%
After learning about the Brother initiative, we are not surprised by this result.
Brother addresses customer needs that extend beyond the product itself, assisting cus
tomers on issues of interoperability with other devices. In combination with the compa-
nys intelligent approach to collecting and storing the right customer data, Brother is
positioning itself to be able to deliver "smarter" service than its competitors over time.
Now that Brother has increased the percentage of the Kings that they can
identify, they might gain further benefit from ranking customers according to t heir
growth potential. This would help Brother allocate more resources to invest in such
accounts, perhaps providing even more proactive and regular supportensuring that
these customers continue to choose Brother as they grow.
Brother is making huge steps towards becoming a trusted advisor to their cus
tomers. Many customers are willing to pay a premium for products and services where
they can count on a company to "pick up the conversation where it last left off." As
Brother continues to turn customer data into powerful business strategies, they assure
themselves of continued CRM success!
Sincerely
Don Peppers
Founding Partner, Peppers and Rogers Group
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Brother is a growing global brand, recognized worldwide for providing high quality
value added products in the office and home. With the growth of the Small office and
Home Office (SOHO) market as well as corporate cost cuttings, Brother has established
itself as the value supplier. Brother International Corporation of USA (BIC, hereinafter
referred to as Brother) generated approximately $1 billion in revenues for 2001, more
than 70% coming from its Business Machine Group which sells office equipment such
as printers, fax machines, Multi-function Devices (MFDs), and Ptouch Electronic
Labeling Systems. Other businesses of Brother are personal and home products, and
industrial machinery and solutions. The Business Machine Group operates in a hyper-
competitive market with fragile margins. It is extremely sensitive to customer loyalty,
and is therefore a major focus for CRM. Brother sells its information and document
products predominantly thought retailers, resellers, and distributors, but takes sole
responsibility for all after sale customer contacts. The National Service Division of
Brother is organized to provide service to its Customers, and resellers as well as manage
Brothers Parts Distribution, Return Center, and Customer Contact Centers.
Information and document products nowadays have to offer a dazzling array of features,
as well as interoperate with complementary products such as personal computers. Users who
become frustrated with products that dont operate with their personal computers right out
of the box will either call for help and/or return the product. The vulnerability is manifested
by a high percentage of product returns in excess of 12% throughout the information and
document products industry.
E X E C U T I V E S U M MA R Y
Brother Pursues Fully Integrated
CRM Strategy to Develop Customer
Loyalty, Projected 129% ROI.
V o l u me S i x , N u m b e r 3 J u n e 2 0 0 2
theROI
Report
theROI
Report
Featur ed Organi zat i on:
Brother International
Corporat ion
Case Studies Analyzing
the Return On Investment of
Customer RelationshipManagement (CRM) Initiatives
The ROI Reportis published by Hill| Holliday,
200 Clarendon Street, Boston, MA 02116. Copyright
2002, The ROI Report. Reproduction prohibited.
For more informat ion, please call 1-800-283-1SAP.
Please refer to material No. 50 056 102.
Introduction andCompany Profi le . . . . . . . 4
Business Context, Mission
and Driver, St rategy,Business Case . . . . . . . . 6
BusinessTransformat ion . . . . . . . . 8
Proceeding wit hSAP CRM . . . . . . . . . . . 11
CRM: Strategy, Defining
Key PerformanceIndicators . . . . . . . . . . 13
Implementati on . . . . . 15
ImplementationCosts . . . . . . . . . . . . . . 16
Benef its . . . . . . . . . . . . 17
ROI . . . . . . . . . . . . . . . . 19The Future . . . . . . . . . . 19
Lessons Learned . . . . . 21
About t he ROI Report . . 22
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Int roduct ion andCompany Profi le
Brother is a continually growing globa
brand, recognized worldwide for providing
high quality value added products in the
office and home.
Brother International Corporation o
USA (BIC, hereinafter referred to as Brother
the subject of this study, was established in
1954 and is the fully owned US subsidiary
of Brother Industries, Ltd. of Nagoya, Japan
Brother in turn has several subsidiaries
including those in Canada, Mexico, Brazil
Chile and Argentina. Brother recorded $1 bil-
lion in revenues, constituting 37% of Brother
Industries total revenues of $2.7 billion fo
2001. Brother Industries, Ltd. as a group
consists of close to 60 subsidiaries world-
wide. Hence Brothers top-level vision is
summed by the Four Gs of Group, Global
Growth, and Green.
Brother Industries started in 1928 by
manufacturing sewing machines and is a world
leader in sewing machines for home and indus-
try, however sewing machines constitute a rel-
atively small portion of the business nowadays
Brother Industries is now concentrated in four
major areas consisting of the information and
document business, the personal and home
business, the machinery and solution busi-
ness, and the retail and real estate business
4 Reproduction Prohibited. Copyright 2002, The ROI Report.
Brother International
Corporat ion
theROIReporttheROIReport
Reduce returns. Each 0.25% reduction in returns savesmore than $1.6 million per year.
Enable viewing the lifetime value rather than just one time
transaction value of a customer.
Identify customers when they come close to needing a new
product or need software upgrades.
Maximize customer experience during each call, increasing
accessory sales, revenue growth.
Reduce time for servicing end users by 40%, $1.8 per
customer call.
Reduce times for servicing dealers by 50%, $3.5 per work
order, and up to $10 per swap.
Achieve consistent improved quality of service by spreading
the knowledge that was in the customer service reps mind
through the Solution Database.
Lower database maintenance costs by business users as well
as by MIS.
Campaign to tightly focused target groups within hours.
Eliminate multiple systems; use one common software
solution to support the growth of the business and its
processes. Identify and disseminate best practices.
Brother had chosen SAP in 1994 as its ERP system to replace all other mis-
sion critical legacy systems. In 2000 Brother proceeded with mySAP.com as its
CRM solution to continue with a fully integrated strategy. The new measure of
business success going forward would be the Return on Relationship requiring
the ability to turn customer data into business strategies and thereby customer rela-
tionships into equity. The National Service Divisions service center solution would
be the gateway for realizing the strategy. Further reduction in returns and increased
sales would be the end games. The ROI Reporthas projected the internal rate of return
on the investment of $1.7 million by Brother International Corp. into CRM to gen-
erate an estimated ROI of 129%.
E X E C U T I V E S U M MA R Y cont inued
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Over 70% of all revenue is generated
from the Business Machine Group which
produces office equipment such as print-
ers, fax machines, Multi-Function Devices,
and Ptouch Electronic Labeling Systems,
based on Brothers deep competency in
printing technologies. The Business
Machine Group operates in a hyper-com-
petitive market with relatively fragile mar-
gins, and is extremely depend ent on
technological innovation in electronics for
remaining competitive. Steady sale of sup-
plies provides some stability for ongoing
profits. Hyper-competition also means that
the information and document business
is extremely sensitive to fickle customer
loyalty, and is therefore a major focus for
CRM and this study.
Personal and home products include
embroidery and sewing machines. Personal
and home products share some similarities
with the information and document business
in terms of customer relationships and service.
These products too have become more sophis-
ticated and interdependent with advances in
information technology.
The machinery and solutions business
may perhaps be considered as being the
direct descendent of Brothers original sewing
machine business. This business consists of
highly sophisticated indus-
trial sewing machines and
machine tools serving indus-
trial customers in the appar-
el, automotive and IT
industries among others. In
line with the general trend in
manufacturing industries
this business has redefined
itself as a solutions business
focusing on the customers
production line and productivity. More recent-
ly with reduced product cycle times of the cus
tomers, the machine tools have evolved from
being specialized to being general purpose and
configurable in order to support flexible pro-
duction cells and lines.
Brother sells its product line through
various dealers, resellers, retailers, office
superstores, and distributors.
Reproduction Prohibited. Copyright 2002, The ROI Report. 5
Brother International
Corporat ion
theROIReporttheROIReport
BROTHER INTERNATIONAL CORP. USA AT A GLANCE Fig.
Sales:
$1 billion in 2001.Employees:
1,200 in Americas, of which approximately
200+ in National Service Organization.
Headquarters:Bridgewater, New Jersey.
Operations:American subsidiaries in Canada, Mexico,
Brazil, Chile and Argentina. US R&D center in
Tennessee. US Dist ribution Centers in
California and Tennessee, US Customer
Contact Centers in Calif ornia and Tennessee.
Businesses and products:
Information and document business producingoffice equipment including printers, fax
machines, Mult i-Function Devices (M FDs), and
Ptouch Electronic Labeling Systems.
Manufacture and sale of supplies for same;
Personal and home products business producing
sewing and embroidery machines; Machinery
and solutions business producing industrial
sewing machines and machine tool solutions
serving chiefly apparel, automotive and IT
industries.
Key Executives in CRM Initiative:
Terry Koike, PresidentDean Shulman, Sr. Vice President
Charles H. Stadler, Vice President
National Service
Joy Applebaum, Director, National Service
CRM Project Leader
Dennis Upton, Chief Information Officer
Tony Serignese, Director, MIS
CRM Project Leader
Terry Koike, President, Brother International Corporation
I t s cr i t i cal to have an end gamefor implementing CRM.
One has to think ahead and ask
How wi l l w e knowwe d id bet ter wi t h CRM?
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6 Reproduction Prohibited. Copyright 2002, The ROI Report.
Brother International
Corporat ion
theROIReporttheROIReport
Business Context,Mission and Driver,St rategy, BusinessCase
The National Service Division of Brother
USA was formed in 1980 and has more than
200 employees most of whom are customer
service agents working at customer contact
centers. The charter of the division can be
summarized as Customer Satisfaction.
Deceptively simple as it may sound, defin-
ing customer satisfaction and defining the
customer relationship took many years, and
is a never-ending quest for Brother. The
National Service Division is organized into
four groups. These groups are King
(Customer Service,) Queen (Technical
Support,) Parts Distribution, and Returns.
The King is the ultimate end user and is
extremely demanding and must be serviced
at all times. The Queen is the dealer/reseller
who sells the ultimate end user Brother
products and also needs to be supported.
Having a Queen sell the end user meant
that Brother had to consistently produce
value-oriented product with high functionality.
Brother was committed to serving the right
features to the right customers by providing the
richest set of features when compared against
competitors at every critical price point. Brother
was always well known for being the best value
provider in the information and document
sector, especially appealing to small office and
home office (SOHO) users, because these
users tended to be more value conscious than
corporate purchasing bureaucracies.
The SOHO market was a niche unti
the recession and corporate downsizing in
1991 created a boom of formerly employed
workers who now became self-employed
Having a home office or being a consultant
was no longer a stigma. Brother was per-
fectly positioned for this market segmen
and further established itself as the value
supplier. Dean Shulman, Sr. Vice President
explains, During difficult times even the
CUSTOMER CALLS Fig. 2
0
500
1000
1500
2000
1996 1997 1998 1999 2000
800
1400
1545
17701844
Telephone Call s Answered
0.1
0.3
0.5
.28 .43 .48 .48 .48
Calls Per U nits Sold
Calls per unit sold are stable.
Source: Brother Internat ional
Brot her recognized that i twas t ime to focus on
retaining and developing i t s
customer base.
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Reproduction Prohibited. Copyright 2002, The ROI Report. 7
Brother International
Corporat ion
theROIReporttheROIReport
richest Kings look to save money and
enhance their bottom line, but most refuse
to sacrifice quality. Brother products thrivein this type of market. This scenario was
repeated after the Internet bubble burst in
2000, further strengthened by the trend for
businesses to increasingly make use of flex-
ible telecommuting type work practices.
Brother, once again with its value philosophy
was best positioned to penetrate medium to
large businesses and corporations.
As the economy recovered after 1991,
Brother recognized it was time to hold on
to and to develop all these customers. Itwould be necessary to somehow view the
lifetime value rather than just one time
transaction value of a customer. Everybody
knew that it was far less costly to keep an
existing customer and sell them something
else, but it wasnt clear who these cus-
tomers actually were, or how they would
continue to be Brother customers. The
first step would have to be collect all the
important information about the customers
in one place.
At the time it was very difficult and
expensive to do the required type of data
collection and database management. Brother
struggled for several years with the tradi-
tional warranty cards in the box approach
which yielded only marginal results. It was
apparent that the customer information was
in the hands of the Queen, the dealers, so
Brother opted for a strategy strongly sup-
porting the Queen. Brother assumed mos
of the burden from the retailers by taking
responsibility for after sales related activi-
ties and calls. This worked well enough bu
still did not close the loop and answer the
burning question for Brother, who was the
King and what did the King think?
In addition to the long-standing strate-
gic marketing requirements above, additiona
factors conspired to make CRM a burning
need for Brother in the new millennium
Information technology had become ubiq-
uitous among non-technical users such as in
the SOHO market. Information and docu-
ment products increasingly had to interoperate
with a great variety of personal computers
TOTAL CUSTOMER SATISFACTION Fig. 3
Who is
the Customer?
What has
Customer
Purchased?
When has
Customer
Purchased?
How is it
Used?Has Customer
Called?
What were
the Issues?
Has Customer
had Service?
Customer satisfaction is a continuous feedback process.
Source: Brother Internat ional
Dur ing d i f f i cu l t t imes,customers work to enhance their
bot tom l ine wi t hout sacr i f ic ing
qual i ty. Brother thr ives in th is
environment.
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operating systems, and application programs.
Brothers products had become highly inter-
dependent with, and indeed vulnerable toweaknesses in complementary products such
as personal computers and applications.
Users were becoming frustrated with
products that wouldnt operate with their
personal computers without significant con-
figuring and troubleshooting effort on their
part, even when Brother was not really at
fault. In addition to heavy usage of auto-
matic fax-back and e-mail systems, calls
were avalanching into Brothers five cus-
tomer contact centers. Brother was spend-
ing millions annually on customer service
and was not able to keep up with all thecalls. The vulnerability was manifesting
itself very painfully, in a high percentage
of product returns, typically in excess of
12% throughout the information and doc-
ument products industry.
BusinessTransformation
The immediately identified need was to
do something to reduce the product returns
Brother had determined as far back as 1996
that simply answering more calls from the
approximately 1.8 million distinct callers
would address a significant portion of the
product returns. Of the calls, only 46% were
being answered, and those in turn were no
being serviced using anything other than a
rudimentary database. The database appli-
8 Reproduction Prohibited. Copyright 2002, The ROI Report.
Brother International
Corporat ion
theROIReporttheROIReport
BROTHER KEY PERFORMANCE INDICATORS Fig. 4
Source: Brother Internat ional
Critical Success Factor:
Error-free Order Processing
Critical Success Factor:
Speed of Order Processing
Strategic Object ive:
Total Customer Sat is fac t ion
General Performance
Indicator:
On time deliveries
Measurable
Performance Indicator:
Orders withDeliveries On Time (%)
Measurable
Performance Indicator:
Orders withCorrect Volumes (%)
General Performance
Indicator:
Volume accuracy
General Performance
Indicator:
Sales order cycle time
Measurable
Performance Indicator:
Cycle Time Goods Issue
Measurable
Performance Indicator:
Cycle Time Invoicing
General Performance
Indicator:
Return Rate
Measurable
Performance Indicator:
Returns AmongSales Order Lines ( %)
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10 Reproduction Prohibited. Copyright 2002, The ROI Report.
Brother International
Corporat ion
theROIReporttheROIReport
BROTHER KEY PERFORMANCE INDICATORS Fig. 5
King ( customers) Service:
MEASURE CURRENT TARGET CHANGE
Work order cycle t ime 5.3 minutes 3.5 minutes 40%
Outsourced employee turnover 90% 72% 20 % points
First Call Resolution 89% 94% 5 % points
Fax and Printer phone call time 7 minutes 6.5 minutes 60% of calls by 10%
Unique callers answered 64% 74% 10% of all callers
Accessory sales ratio - - + 1% of all calls
Uniformity or responses - - Qualitative
Training time 3 days 2 days 400 hours/ year
Queen (retai lers) Service Administ rat ive:
MEASURE CURRENT TARGET CHANGE
Swap cycle t ime 20 minutes 10 minutes 50%Work order cycle t ime 7 minutes 3.5 minutes 50%
Research time per problem - - -20%
Vendor inquiries to on-line help 0% 75% 75% of total
Outbound calls 42 per day 6 per day 85%
Uniformity or responses - - Qualitative
Queen (retai lers) Service Tech Suppor t:
MEASURE CURRENT TARGET CHANGE
Research time per problem - - -20%
Incorrect referrals 100% 0% Eliminate
Dispatch efficiency - - 75%
Uniformity or responses - - Qualitative
Parts Department :
MEASURE CURRENT TARGET CHANGE
Customer order cycle t ime - - - 1 hour
Returns - - -10%
Consumer inquiries - - -15%
Average talk t ime 3.25 minutes 3 minutes 8%
Service level (calls answered) - - + 15%
Consumer Sales:
MEASURE CURRENT TARGET CHANGE
Accessory order ratio 27% 30% 3% of calls
Callbacks - - -50%Outbound mail and fax - - -30%
Kana response time 29 hours 18 hours 38%
Time assisting other customer contact centers - - -75%
Order entry - - 50%
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sories. The last of these was a distinct oppor-
tunity as Brothers products had a wide vari-
ety of optional accessories and supplies not
being stocked by the retailers, and business
could be expanded without competing with
the retailers.
Executing the identified processes well
would result in: Shortened call times and
efficiencies reducing call center costs;
Customer base accumulation in the busi-
ness information warehouse saving call time
used for re-keying basic information and;
Building a one-to-one relationship with the
customer using the collected information
together with email, fax, surveys, and demo-
graphic or other differentiating information.
Based on an average 3-year product lifetime,
it would be possible to identify customers
when they came close to needing a new prod-
uct. In Dean Shulmans words, There would
be an opportunity to retain the Brother cus-
tomer forever.
Proceedingwith SAP CRM
Brother had chosen SAP in
1994 as its ERP system to
replace all other legacy sys-
tems for all its mission crit-
ical processes. After an
arduous project lasting 25
months and utilizing all the
energies of 10 Brother MIS
SAP staff, plus over 20 dif-
ferent outside consultants
and project managers, a less
than smooth Go-Live was
achieved for 600 R/3 users
in mid 1997. Despite this difficult start,
Brother stayed with the vision to integrate all
its departments into one system and to con-
tinue to add any new functionality to the
integrated system rather than create dis-
parate systems over time. Brother was com-
mitted to a single integrated system philosophy
having implemented 16 SAP bubbles to
support the business.
From 1998 to 2001, the
same core Brother MIS team
was able to expand SAP to
cover the consumer sales
and parts operations, per-
form a new SAP imple-
mentation in Mexico, as well
as upgrading the versions
of R/3 being used at sub-
sidiaries in th e US and
Canada. All of these projects
were achieved on time and
under budget. By 2001 the
Brother MIS team was con-
fident it could take on any other SAP expan-
sions including CRM without difficulty. Today
this group supports over 900 SAP users, inexcess of 300 being within CRM.
Terry Koike, President of Brother
International Corporation, recalls, In June
of 1997 we implemented SAP for our busi-
ness and the MIS staff, business people, and
I spent many countless hours through the
implementation period making it a success
Our drive has always been to have our busi
ness people become owners of the system
and use it to continually improve the way
they do business. To that end we are very
proud of the CRM implementation as anoth-
er example of our business people taking
ownership of the system and working with
our MIS staff to ensure that our system efforts
reflect what we need to run our business as
effectively as possible.
Brother had been introduced to the
CRM concept in 1998 but SAP CRM was no
deemed to have the required functionality a
the time. The urgency of the need for CRM
motivated looking at other vendors solu-
tions however these were
all bolt on and would undo
many of the benefits
obtained from having one
integrated system. They
would also create new risks
and be more costly to imple-
ment because MIS would
have to re-learn much o
what had been learned dur-
ing the SAP implementa-
tions. Dennis Upton, CIO
recalls having to be patient
with a disciplined
Reproduction Prohibited. Copyright 2002, The ROI Report. 11
Brother International
Corporat ion
theROIReporttheROIReport
Dean Shulman,Sr. Vice President
BROTHER WINS CUSTOMER SERVICE AWARDAND GETS CITED AMONG TOP 500 IT USERS
The National Service Division of Brother International
USA was awarded the 2001 Brother Industries Presidents
Award for striving to achieve true customer satisfaction and
building long lasting customer relationships contributing to
increasing market share. Brother was among the first to
implement such a sophisticated CRM solution and their
proactive strategy was recognized as being the potential
benchmark target for other Brother group companies. Mr.
Charles Stadler, Vice President of the National Service
Division while accepting the award on behalf of the employ-
ees, stated Service jobs can be very difficult and often
unrewarding, which makes me especially proud of the excel-
lent job that has been done. Brother was also chosen as
one of top 500 users of IT by Infoweek.
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approach, future development could be done
more economically.
The appearance of mySAP prompted
Brother to re-evaluate the feasibility of real-
izing its CRM needs along the originally
envisioned integrated strategy. This time the
technology was deemed sufficient so the
decision was made in June 2000 to proceed
with an ambitious project. Dean Shulman
sums it by saying despite challenges, con-
ceptually mySAP is a fully integrated solution
to help you build a house with a solid foun-
dation from brick and mortar and not of
cards. R/3 is a solid foundation.
Having made some, even if painful
progress in reducing product returns with-
out using integrated CRM, Brother did not
proceed with mySAP and CRM until man-
agement was completely clear about the
business mandate and required process
transformations for doing so. Dean Shulman
warns, Horror stories about CRM exis
because people do not honestly ask the ques-tion, So what? Companies tend to imple-
ment existing processes rather th an
questioning their value. Its critical to have an
end game for implementing CRM. Are we
implementing CRM because its integrates
the customer information well? Capturing
more of the same unusable information
would be worthless. Is it because we wan
to answer more customer calls? You can do
that with just adding phone lines. How wil
we k now that we provided better customer
satisfaction with CRM?
12 Reproduction Prohibited. Copyright 2002, The ROI Report.
Brother International
Corporat ion
theROIReporttheROIReport
CRM- BW PRODUCTION ARCHITECTURE Fig. 6
CRM PartsOperation
(Dealers)
CRMModule
Server
BIC SAP R/ 3
Production
EmailTech Support Fax Product Registration
Brother Mail
Interner Functionality www
SAP BusinessWarehouse
Reporting
CRM Call CenterOperation
(Consumers)
Source: Brother Internat ional
mySAP prompted Bro therto r e -evalua te the f easib i l i t y o f
rea l izing i t s CRM goa ls .
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CRM: Strategy,Defining Key
PerformanceIndicators
It was clear to Brothers management
that the new measure of business success
going forward would be th e Return on
Relationship requiring the ability to turn
customer data into business strategies and
thereby customer relationships into equity.
The National Service Divisions service cen-
ter solution would be the gateway for realiz-
ing the strategy. Further reduction in returns
and increased sales would be the end games.
Eliminating multiple systems and using
one common software solution to support
the growth of the business and its processes
was a prerequisite. It would be possible to
improve customer satisfaction by improving
the procedures, processes and the informa-
tion quality for the processes. Process pro-
ductivity would benefit from not only
streamlined processes but also by using bes
business practices. Process measurements
would then be among the lead indicators for
total customer satisfaction.
The process improvements would feed
into lowered transaction costs, in terms of
Reproduction Prohibited. Copyright 2002, The ROI Report. 13
Brother International
Corporat ion
theROIReporttheROIReport
CRM MODULES AT BROTHER Fig. 7
Selling
ServicingRetaining
Prospecting
Online ProductRegistration
registermybrother.com
Internet Self ServicePersonalized
Web SiteReal-Time Online
Consumer Support
InteractiveIntelligent Agent
CTISolution Dat abaseEmail, Fax and Mail
Solution D atabaseSymptoms and
SolutionsAdaptive Learning
EngineAtt ach Drawings,
URLs, Videos
Service SolutionsASC Search
Swaps or Work OrdersAccessory Sales
Orders
Parts Orders
Source: Brother Internat ional
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individual transactions with customers, as
well as back-end transactions within internal
processes. A common approach would be
established across all of the National Service
departments and Brother divisions. For exam-
ple, the same customer number would be
used for customer tracking, call tracking,
customer history, machine swaps, repairs
and parts tracking.
The business warehouse would be
instrumental by being the definitive repos-
itory of all the data collected and generated
by all the processes. The business ware-
house would also provide powerful report-
ing tools. For the first time Brother could
become a real-time customer driven enter-
prise, and the customer as well as vendor
relationships would be transformed to one-
to-one relationships.
National Service was organized to direct-
ly target the King, Queen, Parts Department,
and Consumer Sales with dedicated cus-
tomer service agent groups. The Queen,
being the dealers, had two groups support-
ing them for administrative and technical
support respectively. This grouping allowed
for further development of
expertise by the customer
service representatives in
each particular field. Charles
Stadler, Vice President of
National Service says,
When we started with an
Internet and FAQ system,
all the knowledge was still
in the customer service reps
mind. Therefore quality of
service depended largely on
the particular customer ser-
vice rep answering a call.
Fortunately the overall quality of customer ser-
vice was high because Brothers Nationa
Sales Group enjoyed an unheard of turnover
rate in the industry, approaching virtually
zero. Therefore over time all of the customer
service reps had become very knowledge-
able. Yet the rapid introduction of new prod-
ucts and models meant tha
a knowledge gap would be
created whenever a new
product was released, which
by definition would also be
the time when more callers
needed information abou
that particular product. The
Solution Datab ase wa
therefore seen as very valu-
able, and one of the firs
modules of CRM needing
implementation.
14 Reproduction Prohibited. Copyright 2002, The ROI Report.
Brother International
Corporat ion
theROIReporttheROIReport
REMEMBER THE ABCS Fig. 8
CommunicationsBusiness VisionWhat's ChangingImpact t o My Job
KnowledgeProcess OverviewsProcess FlowsScenarios
SkillsNavigationTransactionsPracticesStructured On-the-JobTraining
Point-of-Need HelpOnlineReference and How-To'sProceduredPoliciesJob-AidsHelp Desk
A wareness B usiness Process C ompetence S upport
Brother communicated the vision and project to employees thoroughly from the start.
Source: Brother Internat ional
Tony Serignese, Director, MISCRM Project Leader
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Call measures and targets were devel-
oped for each customer service group sepa-
rately. (See fig. 5) The in-house customercontact centers were located in California,
New Jersey, and Tennessee with outsourced call
center operations located in Tennessee and
in Montreal. Based on prior experiences the
quality of outsourced customer contact cen-
ters was thought to be less than the in-house
customer service centers. This was mainly
because outsourced staff did not have the
same motivation to accumulate the deep
knowledge as Brothers own employees, and
also because the employee turnover rate at
outsourced customer contact centers was as
much as 90% annually. The cost advantage of
outsourcing if any, was mainly due to the ease
of downsizing outsourced customer contac
centers during periods of slow demand such
as due to an economic slowdown or for sea-sonal variations. National Service opted for
the best of both worlds by having a steady
bulk of calls handled by the in-house cus-
tomer contact centers, and having the vari-
able amount handled by outsourced customer
contact centers. One of the outsourced cus-
tomer contact centers was furthermore co-
located inside Brothers call center operation
in Tennessee to be able to benefit from the
same management practices as the in-house
call center there.
Implementation
Based on the business requirements for
King service, Queen service, the Parts
Department, and Consumer Sales, flow charts
and scope documents were developed for
each. A critical success factor was the use o
activities to document the whole relation-
ship with the customer. The system and hard-
ware were sized, and the SAP/MIS and
ongoing resources were planned. Data migra-
tion from legacy systems was among the firs
tasks. R/3 contained customer master data
plus material and pricing master data. Data
containing some previous customer master
data and customer transaction data as well as
product registration information was con-
verted from Lotus Notes. Information for
the solutions database was converted from fla
files and FAQ lists.
Several levels of data were to be cap-
tured and stored in CRM and the Busines
Warehouse for company reporting require-
Reproduction Prohibited. Copyright 2002, The ROI Report. 15
Brother International
Corporat ion
theROIReporttheROIReport
IMPLEMENTATION TARGET DATES Fig. 9
January 2001Business OrganizationCompleted
May 2001
Production Hardware In Place,Software Loaded All Servers,BW and R/ 3 Connections Made
June 2001Business Warehouse
June 15, 2001Campaign Management
August 2001Inbound Email
Management
July 2001Solutions Database
Internal Review
September 2001CRM Order Entrywith Credit Card ValidationSeptember 4, 2001
System "Live" Date
August 2001Online Product Registration
June 2001Data Loads
All target dates were met by not allowing scope creep.
Source: Brother Internat ional
Before CRM, qua l i t y o f serv icedepended la r ge ly uponthe par t ic u la r customer serv ice rep
answer ing the ca l l .
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ments. A custom screen for
data gather ing was
designed. Custom enhance-ments consisting of ABAP
programs, Ztables, and user
exits within CRM were writ-
ten. SAP consultants were
used on a part time basis
over a period of six months.
The length of time spent
on site by external consul-
tants was staggered as one
week at Brother and two
weeks off-site. One SAP
consultant was matched
with each Brother developer and super user
at the start of the project. The staggered
on-site presence and using the buddy sys-
tem optimized the knowledge transfer from
the SAP consultants while building the
competency of Brothers own MIS. Brother
insisted on veteran consultants for the pro-
ject. All SAP consultants were released
before starting to roll out the system in June
2001, and Brother took over the entire pro-
ject thereafter. The technical team consist-
ed of veterans from previous R/ 3 projects.
The ability of the MIS staff to provide tech-
nical support for the software from the out-
set was a significant credibility enhancer
and critical success factor. Dennis Upton,
CIO recalls, We were definitely able to
leverage the knowledge gained during R/3
implementations into the CRM extension.
A critical success factor for the imple-
mentation was the acceptance by the end-
users of job reassignments to match the new
processes and functions, as well as to absorb
the impact of development and transition.
There were changes in the project team com-
position throughout differ-
ent phases depending on
the focus and more dailytasks had to be taken over by
existing staff to allow the
super users to take part in
system development.
Management commitment
and continuous communi-
cation was critical.
Brother was able to imple-
ment all of the planned
CRM functions on time and
within budget. Tony
Serignese, Director of MIS and the MIS CRM
Project Leader explains, Staying focused
on the initial scope of the project was a crit-
ical success factor.
Implementat ion Costs
The major headings to be budgeted andcontrolled were added hardware costs
($400,000), added software costs ($550,000)
external consulting fees ($700,000), and
MIS staff plus super users outside training
costs ($77,000), totaling just over 1.7 mil-
lion dollars. Brother already had R/3 licens-
es and was able to convert these into
mySAP.com licenses while adding 10% more
users and Internet transactions for a tota
of 950 licensed users. Software license main-
tenance costs would remain 17% of the orig-
inal R/3 license costs, estimated at $94,000
annually. The same MIS SAP core team that
had implemented and was supporting numer-
ous R/3 modules would continue to also
support the new structure including CRM
This was made possible by Brothers
approach of using external consultants as
mentors for Brothers own development staf
and rapidly achieving self-sufficiency
Likewise training costs were kept minima
16 Reproduction Prohibited. Copyright 2002, The ROI Report.
Brother International
Corporat ion
theROIReporttheROIReport
IMPLEMENTATION COSTS Fig. 10
Hardware
Software
Consulting
Outside Training
400,000
550,000
700,000
77,000
35%
20%
4%
41%
Total $1,727,000
Project Costs
Source: Brother Internat ional
Charles H. Stadler, VicePresident National Service
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by investing to train the super users who
would in turn be trainers for users inter-
nally. The total additional operating costs
would therefore consist mainly of software
maintenance costs and would be about
$94,000 annually.
Benefits
Brother can be expected to benefit from
CRM in tangible financial terms, as well as
in longer-term operational and strategic ways.
Unfortunately being in a hyper-competitive
industry, many of the operational benefits
could be rapidly neutralized rather than set-
ting Brother apart. Although the same oper-
ational benefits have potentially the highest
returns on investment, they can also be
viewed as the price of being allowed to do any
business at all in the hyper-competitive infor-
mation and document products industry. As
for the strategic benefits, they are highly sen-
sitive to managements execution and could
be somewhat speculative also due to the
high rate of technological change.
Nevertheless, operational changes are
what drive financial results in the short term.
Consolidation of nine separate legacy databases
into one integrated database is the enabler
for almost everything else. The benefits olower database maintenance costs, by business
users as well as by MIS accrue immediately
and are compounded as the customer base
grows over time. Over a million customer
records have been created thus far and some
6,000 are being added daily.
One of the most visible new processes
enabled by CRM is campaign management
Brother was among the first companies in
the US to link CRM and Business Warehouse
for the purpose of campaign management
The old campaign process required consol-
idation of several downloaded files followed
by data scrubbing to eliminate duplicate or
bad records. Further data integrity reviews
were done to eliminate records missing
required fields. Multiple customer lists con-
stituted a maintenance nightmare when
removing customers from email or other
mailing lists. The process required severa
days to a week of effort for every campaign
but can now be accomplished within hours
The new campaign process can generate
tightly focused target groups for campaign-
ing and identify the effectiveness of a cam-
Reproduction Prohibited. Copyright 2002, The ROI Report. 17
Brother International
Corporat ion
theROIReporttheROIReport
ANALYSIS THROUGH THE CAMPAIGN PHASES Fig. 11
Planning/ Targeting
Execution
Analysis
Planning/ Targeting
Marketing AnalysisMarket Potential AnalysisPortfolio AnalysisCompetitor AnalysisSales AnalysisTarget Group Modeli ngPlanned Costs/ Revenues
Execution
MonitoringKey Performance IndicatorsActual Costs/ RevenuesAlerts/ Thresholds
Analysis
Success M easurementLead Generation
Response RateCost BenefitChannel Efficiency
Source: Brother Internat ional
We were de f in i te ly ab leto leverage the knowledge
ga ined du r ing t he SAP R / 3
imp lementa t ion in to the
CRM extension.
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paign processed from CRM. Ad hoc scenar-
ios can be performed for estimating cam-
paign size. Data integrity is assured thanks tothe CRM data entry points where inputs are
validated during entry. Duplicate records are
eliminated using the search logic within
CRM. Reports are generated with informa-
tion on quantities of products sold as a result
of a particular campaign. The simplified
CRM campaign tools provided allow super
users to create and execute campaigns with-
out any MIS help or intervention. Multiple
sales campaigns have been conducted and
sales increased soon after implementation.
On the service center operations side
some 30,000 calls are being logged weekly
into CRM. Approximately three months of
call data was transferred into CRM from the
legacy systems. In the beginning, less than
2% of all calls were from customers in the
system. Over a six week period, this was
increased to more than 20% as more cus-
tomer records existed in the system. Thismeasure alone is an indicator of improving
customer service levels. Some 170,000 prod-
ucts have been registered and some 23,000
inbound mails have been received for pro-
cessing into CRM thus far.
On average the customer service agents
achieved pre implementation talk times in less
than 3 weeks. A significant reduction of 40%
in work order cycle time for servicing the
King (end users) is expected. This translates
to approximately a $1.80 reduction in cost per
customer call processed. Likewise a 50%
18 Reproduction Prohibited. Copyright 2002, The ROI Report.
Brother International
Corporat ion
theROIReporttheROIReport
CAMPAIGN MANAGEMENT IN CRM Fig. 12
Campaigns
What When Who
Planning
Budgeting
Monitoring
Modeling
Profiling
Selecting
Telephone Web Mobile Email Success Management (e.g. ROI)
Third Party Dat a
Profiles
SAP BW
Marketing and Campaign Planning
Campaign Execution/ Activity Management
Target Group Selection
Campaign Analysis
Source: Brother Internat ional
Brot her expects to benef i t
f rom CRM in t ang ib le
f inanc ia l te rms, as we l l as
in longer-te rm st ra teg ic and
opera t iona l ways.
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reduction in work order
cycle times for servicing the
Queen (dealers) is expect-ed. This translates to approx-
imately $3.50 cost savings
per work order, and up to
$10 per call in the case of
swaps. When asked about
progress on some of these
measures, Joy Applebaum,
Director at National Service
and CRM Project Leader,
realistically states we are
on track yet we probably
wont realize the full benefits of the new
processes and system for another 6 months.
Considering that this would still add up to less
than a year, the speed of return on investment
is evident. Additional call center related ben-
efits include the ability to report on perfor-
mance of distinct call handling groups down
to the level of individuals requiring addi-
tional coaching. This can also be used to
identify and disseminate best practices.
Even the most modest reduction in
returns attributable to CRM is sufficient to
justify Brothers decision to invest in CRM.
Each 0.25% reduction in
returns, results in savings of
more than $1.6 million forthe first year and every year
thereafter. Brother achieved
a 7% reduction continuously
over the five-year period
from 1996 to 2000, and it
is clear that there is still
room at the bottom.
ROI
The ROI Reporthas projected the inter-
nal rate of return on the investment of
$1,727,000 by Brother International Corp.
USA into CRM to generate an ROI of at least
129% in the most conservative scenario.
Sensitivity analysis shows that the time to
break even in all scenarios is about 2 years.
The largest portion of the CRM benefits
is obtainable from reductions in returns,
which are easily measurable and impact cash
flow directly. Benefits attributable to R/3
and initiatives other than CRM were exclud-
ed in this exercise. Contributions due to
transaction efficiencies were ignored for this
exercise because they are highly sensitiveto multiple assumptions and some of them
are already included in th e reduction o
returns. In reality these benefits could be an
order of magnitude larger, and have even
greater strategic value for the business. Also
significantly, sales growth in general as wel
as sales growth directly attributable to CRM
was assumed to be zero, because of the hyper-
competitive nature of the business.
The Future
A significant number of additional CRM
functions are planned for implementation
on top of the basic functionality already in
place. As these go live the activities will
become more focused on fully using CRM
in an integrated fashion to fulfill the origi-
nal vision for total customer satisfaction. In the
longer term, management can leverage the
strategic impact of CRM. This will be possi-
ble once all the information being generated
by the processes is condensed and analyzed
to seek larger trends and shifts in the marke
for Brother to proactively take advantage of
Reproduction Prohibited. Copyright 2002, The ROI Report. 19
Brother International
Corporat ion
theROIReporttheROIReport
Dennis Upton, ChiefInformation Officer
Customers say I app laud you fo r des ign ing a
system tha t ma in ta ins
the h is to ry o f your customer .
BUILDING CUSTOMER TRUST
Most customers are positive however there are some who are sensitive about giving the
personal information required to create a business partner in CRM. Some might say Why do
you need this information? I only want pricing. When the customer service representative
explains that this is t o better serve the customer in t he future if they were to ever call again
and that they won't have to repeat the information, most customers feel comfortable. Already
the sales areas are reporting a 50% find on business partners that they don't have to create.
Some customer reactions have been "You have all that informat ion in there? Cool, comput-
ers, way to go!" "I applaud you for designing your system to maintain the history of your
customers.""Oh, you already know who I am!""You have me by my phone number?"
Starting wit h the first call, a relationship and the trust that goes with it are being built.
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Then CRM will become a part of higher-level
strategy processes within the company. For the
immediate future, Brother has planned adetailed time line till the end of 2002.
In the second quarter of 2002 catalog and
content management tools within CRM will
be put into use; Business-to-Consumer and
Business-to-Business Internet sites using
the CRM product catalog (e-selling) will be
developed; Telesales and telemarketing will
be implemented; Marketing planning and
customer segmentation will be enhanced;Customer self-service will be encouraged by
web enabling the solutions database and;
Outbound e-mail functionality will be expand-
ed to other CRM applications.
In the third quarter of 2002 call center
scripting will be implemented; Cross-sell-
ing and product proposals will be initiated
Inbound e-mail management will be expand-
ed to other product lines and; web basedlead generation will be integrated into the
CRM Activity Monitor.
In the fourth quarter of 2002 work order
processing will be fully implemented and
the opportunity management functionality wil
be expanded within sales force automation
20 Reproduction Prohibited. Copyright 2002, The ROI Report.
Brother International
Corporat ion
theROIReporttheROIReport
CRM COMPONENTS Fig. 13
InternetSales
InternetCustomer
SelfService
FieldSales
FieldService
CustomerInteraction
Center
BusinessPartner
Collaboration
Telesales
TelemarketingInternet
Marketing
ProductBrand
Management
MarketingAnalysis
SalesManagement
andSupport
ServiceCenter
CustomerDevelopment
TieredServicing
RetentionManagement
Selling
Servicing
Prospecting
Retaining
Source: Brother Internat ional
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Lessons Learned
Brother had a solid vision for total cus-tomer satisfaction in pursuing CRM. The
lessons learned can be summarized as follows.
1. Know your Ki ng and Queen.
Although you may think you know who your
customers are, take a closer look to see if
there is a Queen (e.g. dealers) and other
essential players who will also determine if
the customer is satisfied by your products.
CRM may turn out to be the solution for fill-
ing service and support gaps where your
Queen cant do so.
2. Know where your product
ends, or doesnt end. Brothers informa-
tion and document products are highly inter-
dependent with other IT products such as
personal computers and operating systems.
Therefore customer service inevitably for-
ays into solving system problems that are
not necessarily contained only in Brothers
own product. While solving a problem caused
by an operating system vendor may not be the
most cost effective use of your CRM system,
not solving the problem may mean you los-
ing your customer.
3. Identif y core processes that
will use CRM and deliver total customer sat-
isfaction. Without the processes, CRM is justanother database and is no guarantee for
delivering value alone.
4. Low t urnover at the same time as
cost effectiveness in customer contact centers
is possible by investing in long term training
and tools including CRM and solution data-
bases which help service agents to provide a
high quality service to the customers while
keeping them challenged and motivated.
5. Monit or data f lows across BW
and CRM linkage points. Identify the poten-
tial data flow points of failure and develop
processes to monitor data flow on a daily
basis. Avoid record duplication and ensure
consistency of the information.
6. Avoid scope creep. Brother
stayed focused on the originally planned
feature set during implementation, and rel-
egated any additional requirements that
were time intensive to future implementa-
tion. This was the most critical success fac-
tor for bringing in the project on time and
under budget.
7. Call Center doesnt have to be
the first part implemented within CRM.
Brother chose to implement a business infor-
mation warehouse and campaign manage-
ment capabilities first which yielded
immediate benefits and learning, followed
by call center implementation that required
a longer time frame.
8. Mi x outsourci ng with in-house
call-centers and keep enough flexibility to
adjust when demand fluctuates. Keeping a
large percentage of the call-centers in house
ensures high quality service and long-termlearning, which results in more satisfied cus-
tomers as well as lowered training costs
9. An Experienced development
team is a golden asset. Brothers developers
had all been with the company for at least 5
years and were experienced in the business
processes and several SAP implementations
10. Focus tr aining by using outside
consultants as top-level trainers and advisors
to the MIS staff and super users who in turn
can lead and train the other users.
Reproduction Prohibited. Copyright 2002, The ROI Report. 21
Brother International
Corporat ion
theROIReporttheROIReport
In the longer te rm,management can leverage the
s t ra teg ic im pact o f CRM .
PROACTIVE CUSTOMER SERVICE
By having a complete view of the end
user Brother can proactively plan and
execute software upgrades for its infor-
mation and document products which
have to interoperate with a great varietyof personal computers, operating sys-
tems, and application programs. Often
times when a major operating system or
office application vendor releases a new
version of their products, Brother also has
to make available software upgrades for
compatibility or to take advantage of all
of the latest software features. Using
CRM it is now possible to inform individ-
ual users by e-mail and point them to the
latest drivers etc. applicable for the par-
ticular Brother products they own. This
proactive approach maximizes the bene-
fit s for the end users and their experience
with Brother while also saving them from
potential software aggravations later.
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About the ROI Report
This publication is a periodic report on the imple-mentation of enterprise-wide client server applications,
such as R/ 3 and CRM from SAP R/ 3. The ROI Report
is written for senior managers of Fortune1000 orga-
nizations around the world. The report is published
by Hill| Holliday, a Boston-based communications con-
sultancy that combines rigorous business analysis and
marketing expertise with powerful creative and inte-
grated communications across all media to build brands,
create customer relationships and drive sales.
ROI Methodology
The ROI Reportinterviewed Brother International
Corporation executives, managers, and users about
their implementation of SAP R/ 3 and CRM. In addi-
tion, Brothers internal financial reports, planning
documents, and other materials were reviewed. A lit -
erature search also was conducted to obtain addit ional
information and to identify key issues. The ROI cal-
culation was based on a model that evaluated the
projected impact and benefits. Working capital car-
rying costs were analyzed and valued at the estimated
inventory carrying costs and Brothers cost of capital.
Financial projections for future years were based upon
The ROI Reports analysis of internal company doc-
uments and comparative industry analyses. The
investment analysis included the estimated cost of both
external and internal Brother implementation expens-
es. The ROI was calculated by determining the InternalRate of Return (IRR) using the t ime-value-basis of
money. The IRR method was chosen because it is felt
to be the most conservative approach.
Authors
Ali Pirnar is a researcher at the MassachusettsInstitute of Technologys Intelligent Engineering Systems
Laboratory and Director of Technology Strategy for
the System Design&Management, and Leaders fo
Manufacturing groups. He researches strategy and
innovation in the software industry and has consulting
experience including benchmarking, reengineering, busi-
ness and product development spanning the high-tech
telecommunications, finance, oil, construction, and pro-
fessional services industries. Mr. Pirnar has an SM
in Management of Technology, and an SM in Technology
and Policy from Sloan School of Management and
School of Engineering at MIT.
Linda Plazonja is a consultant and founding part-
ner of The ROI Report. Her professional practice
focuses on change management, organizational dynam-
ics and project management. Ms. Plazonja has a
Bachelor of Arts from the University of Connecticut
and a MSW from the Simmons Graduate School of
Social Work.
Robert Scalea is Executive Vice President of
Marketing Sciences at Hill| Holliday, and is a found-
ing partner of The ROI Report. Mr. Scalea is a graduate
of the Massachusett s Institute of Technology. He per-
formed post-graduate studies at the Pasteur Institute
University of Paris.
For More InformationThe telephone number for The ROI Reportis 800-
283-1SAP. The electronic mail address is SAP.COM
We look forward to hearing and reading your com-
ments on how we can make The ROI Reportmore
valuable to you.
Reproduction Prohibited. Copyright 2002, The ROI Report. 22
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Corporat ion
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