IT Strategic Planning (Case Studies)

Slide 1: IACT 401 IT Strategic Planning Customer Relationship Management Seminar By Nurhazman Abdul Aziz Hoh Whay, Loh Imtiyaz R.

Slide 2: Agenda 1. Objective of this seminar 3. About the Author 5. Article 1: Keeping eBusiness Perspective 7. Evolution of eBusiness Solution 9. Article 2: Where is the benefit in CRM technology investment 11. Evaluation 13. Conclusion

Slide 3: Objective of this seminar We are going to cover 2 article by Tim Coltman, linking up the strategic viewpoint from both articles why Customer Relationships Management is important in an IT strategic planning. We are also going to used the aid of real scenario (video), from a top CRM Solution provider to enforce the article 2, with much understanding. Apart from that we are going to related this article to other previous articles, as well as other articles and source and that be match and enforce in today ideas.

Slide 4: About Author : Tim Coltman • He has published more than 20 articles in leading journals such as California Management Review, Advances in Strategy and Communications of the ACM. • In the last five years he has written more than 40 papers and presented at leading business schools and international Research Interests conferences in the US, France, Singapore, Australia and New •e-Business Strategy & Zealand. Performance • He is currently involved in pioneer research that is combining •Project Management choice models and information acceleration to investigate a wide range of practical problems for companies such as Motorola and •Customer Relationship Westpac. Management (CRM) •Supply chain • Additionally, he has recently completed research projects in Manamgement (SCM) ebusiness and customer relationship management for organisations such as the SAS institute, SAP, Fairfax Business Research and •Choice modelling and MIS magazine. experimentation

Slide 5: Article 1: Keep eBusiness Perspective Objective •The objective of article is to determine the appropriateness of eBusiness to a firm/organisation Two related questions is raised in this article “… where is eBusiness concentrated …?” “… why is eBusiness occurring as it is …?”

Slide 6: Where is eBusiness concentrated? “… The actual impact of eBusiness on the way people shop and the way business is conducted on a day to day basis (theory in use) contrasts sharply with the way it is talk about and reported by the techno-elite and popular media (espoused theory) ...” Coltman, (2002) VS Espoused theories Theories in use

Slide 7: Where is eBusiness concentrated? From the two perspectives of the technology in use’s … 1. Business to Consumer (B2C) • statistical sources indicates that most people still lack or choose not to have Internet access. • electronic business among consumer is at formative stage (in year 2002) • many business related barriers have still needs to be overcome – security, privacy, uncertainty, low bandwidth,consumer protection and network access. Before, we can begin to speak of a revolutionary change in customer outlook and behavior

Slide 8: Where is eBusiness concentrated? 2. Business to Business (B2B) • Large companies are generally better equipped to communicate electronically, due to their existing telecommunication infrastructure, like email & EDI • Companies are more cost conscious. • A Company aimed at reducing costs and increasing efficiency & network effects have a particularly strong impact. Overview Map in B2B activities Source from Illicon (B2B)

Slide 9: Why is eBusiness occurring as it is? • The real benefit of such investments is more apparent in B2B activities. • Dell, for example, uses simple commodities through a supply chain rather than a detailed design process. • Dell uses an online catalogue that provides quick response, low cost fulfillment system characterized by direct customer interactions and Dell Supply Chain Process made to order manufacturing- Source from Business Intelligence easily translated to the web. http://www.businessintelligence.com/ex/asp/id.4/page.1/xe/biextractdetail.htm

Slide 10: Why is eBusiness occurring as it is? • Predictions of the impact of e-business included: – Brands will die out. The Internet will be a major threat to brands making brand strength weaker • In reality, it is most likely to gravitate towards brands as a way to simplify choices, reduce costs and build trust. – Middleman will die – computer network revolution is to remove middleman. • The key is to find ways to move into a new distribution channel without jeopardizing existing channel relationships.

Slide 11: Why is eBusiness occurring as it is? – Scale is irrelevant – Size will be less important for online form • Networks either virtual or real, work to a relatively simple logic, larger the network the more attractive they are to the customer. Companies such as Microsoft can benefit due to standardization, & bargaining power to encourage cooperation among fellow channel members. – Lower Prices – E-business leads to more efficient markets, lower prices. • While the cost of getting the right item to the customer is cheaper, there is no guarantee this result in lower prices.

Slide 12: You say you want a revolution? • The common assumption regarding the criteria of revolution is generally derived from technology itself. • What must be considered is whether the occurrences of e-business is driven by technology itself or the changes occurring in business management and how it affects the use of technology. • Makes reference to Manuel Castells who was a professor of Sociology at the University of California, Berkey. He stressed that revolutions are influenced not only by the technologies impact but rather characterized by their “pervasiveness across all domains of human activity” (pg.9) • States Social requirements still govern technology but technology does not govern social requirements. • Emphasizes how E-business is not a phenomenon that evolved on its own rather development was progressed by other movements such as the Online and Computer revolution.

Slide 13: Final Wrap • Despite the advance changes in information and technology, there has not been any significant change in the way business decisions are made. • Basic principles such: – Identifying customer value – Assembling the right people – Assembling the right processes and technical resources Are as relevant today as they have always been. • The areas that have been modified as a direct result of technological advancement include hierarchies within firms, established supplier relationships and order/payments systems. One must be reminded that this has not changed the business in general, rather the psychology of the business.

Slide 14: Author Conclusion • E-Business is not for everyone • As B2C is yet to take off to its full potential, E-Business businesses may not be the most feasible option for organisations who are after short term profit rewards. – Brands that revolve around Emotional associations may adapt better to e- Business than brands that rely on facts and beliefs. • Coltman stresses the Media attention that surrounds e-Business can often be misleading. World renown online businesses such as Amazon.com and e-Bay represent specialised categories and to not represent how E- business is an ideal solution that all organisations should invest in.

Slide 15: Evolution eBusiness Solution Business-to-business (B2B) is set to have a significant effect on the global economy. The old-economy cycles of boom and bust resulted in enormous economic waste, as businesses struggled to harmonize their operations with those of their suppliers and customers. B2B, with its instant transfer of information between business partners, has the ability to drastically eBusiness & Enterprise Portals reduce the mismatch in supply and Source from Verticity Solutions demand, and provide conditions for http://www.verticitysolutions.com/services/ebusiness_enterprise_portals.asp an actual sustained economic growth.

Slide 16: Evolution eBusiness Solution The customer focus is a complete inversion of the model that companies have operated with in the past. Rather than be driven by the bottom-up priorities of production, the company is answerable only to its customers. The customer has complete control of the production process which includes design, innovation and marketing which become the core of the company’s success. eBusiness & Enterprise Portals Source from Verticity Solutions http://www.verticitysolutions.com/services/ebusiness_enterprise_portals.asp

Slide 17: CRM as one of eBusiness Solution What is Customer Relationship Management • The generally accepted purpose of Customer Relationship Management (CRM) is to enable organizations to better serve their customers through the introduction of reliable processes and procedures for interacting with those customers. eBusiness & Enterprise Portals Source from Verticity Solutions http://www.verticitysolutions.com/services/ebusiness_enterprise_portals.asp

Slide 18: Customer Relationship Management • In today's competitive business environment, a successful CRM strategy cannot be implemented by only installing and integrating a software package designed to support CRM processes. • A holistic approach to CRM is vital for an efficient and effective CRM policy. • This approach includes training of employees, modification of business processes based on customers' needs and an adoption of relevant IT- systems (including soft- and maybe hardware) and/or usage of IT-Services that enable the organization or company to follow its CRM strategy. • CRM-Services can even replace the acquisition of additional hardware or CRM software-Licence.

Slide 19: Qualitative Benefits of CRM Qualitative Benefits of CRM as an introduction to the benefit Before, starting into the discussion into “where the benefits in CRM technology Investment” by Coltman, 2005. Let’s take a look into the Qualitative Benefits of CRM, but ONYX Software, a CRM solution providers. Their client is Netegrity, a security software Solution company. This will give us an ideal about what will the next article discuss about, Including the strategic planning. http://www.onyx.com/customers/video/library/netegrity/?id=6

Slide 20: Article 2 Article 2 : Where are the benefits of CRM technology investment? Objective Identify the human and technology capabilities required to successfully execute a CRM program Introduction • Customer Relationship Management (CRM) is not only a tool but can be thought of as being apart of a deeply embedded strategic disposition. • Unfortunately, CRM failed to live up to expectations. Software glitches, poorly trained staff and disparate legacy systems continue to characterize CRM technology today. • Therefore, CRM programs must be feasible and this requires a wider understanding of the structural and behavioral limits to organizational alignment.

Slide 21: Figures on Failure of CRM Introduction • Research and advisory groups claims 50% of CRM projects fail to meet expectations • 30 % chief technology officers said CRM is over hyped. • Negatives include Software glitches, poor staff training and disparate legacy systems. Some of the principal reasons and area to the failure of CRM Accenture http://www.accenture.com/xdoc/en/services/crm/road_to_riches.pdf

Slide 22: Theoretical Background of CRM • What is a customer orientated strategy – Organizations should allocate resources to systematically gather and analyze customer and competitor information. – This knowledge is shared in the market and then used to guide strategy recognition, understanding, creation, selection, implementation and modification. Source: Customer Strategy : The Naïve to Natural Model http://www.beyondphilosophy.com/ourtoolsandtechniques/images/5-1_naive-natural-orientation.jpg

Slide 23: Theoretical Background of CRM • For CRM to be successful: – Programs must be feasible – Wide understanding of organization structure & behavior. – An adroit combination of human, business and technological capabilities is required to successfully execute a customer strategy. – Each capability is nested within an intricate organizational system of interrelated and interdependent resources. – Bharadwaj  classifies IT based resources as • IT Infrastructure • Technological and managerial skills • Knowledge assets and synergy.

Slide 24: Theoretical Background of CRM – Tippins and Sohi  IT competency consists of three components: – Extent till firm possesses body of technical knowledge of IT systems. – Extent to which firm uses IT – Number of IT artifacts. – Such combinations drives CRM processes such as cross selling, up- selling, marketing & fulfillment, customer service and support, field service operations and retention management. – These technologies are vital for integration of customer content, customer contact info, end to end business processes.

Slide 25: Theoretical Background of CRM – 3 measures of customer relating capabilities are: • Skills and experiences at converting data to customer knowledge • Level of CRM information structure • CRM business alignment of incentives, customer strategy and structure. – Large companies should not be overly concerned with reactive responses to expressed needs, rather they seek a proactive orientation that directs attention towards latent or unarticulated demand.

Slide 26: Theoretical Background of CRM • What to take into account with CRM • Close relationships are path dependant • Close relationships require investment in relationship specific assets • Close relationships take a long time to materialize • Targeted customers may not be receptive.

Slide 27: Model Structure • Day and Wensley model is based on a relatively simple deterministic relationship between sources of advantage, positions of advantage and performance. • The relevance of this model to an assessment of CRM performance is threefold: – enables one to assess the contribution that superior CRM capabilities ― human, technological and business capabilities ― have on competitive advantage. – recognizes the mediating impact that positional advantage (i.e., customer orientation) has on performance. – captures the path dependent nature of performance, prior investment in sources of CRM advantage is used to enhance future performance and sustain competitive advantage.

Slide 28: Model Structure

Slide 29: Instrumental Development & Measure • Business performance is central to the information systems field: – First, organizational performance is a multidimensional construct that encompasses both internal and external measures. – Second, it is commonly accepted that the causes of organizational performance are difficult to determine. • Past studies suggest that measures of performance need to exhibit three key attributes: – it should provide a multidimensional and balanced assessment of performance. – it should incorporate a competitive assessment element, – it should address the notion of performance over time.

Slide 30: Instrumental Development & Measure • This three-dimensional method is applied to a balanced scorecard view of performance that includes: – (a) Financial measures such as return on investment, – (b) customer satisfaction including sales growth, – (c) business process improvement as reflected in the reduction in cost of transacting with customers, and – (d) innovation or success generating revenue from new products.

Slide 31: Instrumental Development & Measure

Slide 32: Instrumental Development & Measure • To fully capture the expansive nature of CRM a similar approach is taken to implement a CRM capability. • Three items were used to establish the higher order construct CRM capability. • The three measures of customer relating capability are: • (1) skills and experience at converting data to customer knowledge, • (2) level of CRM information infrastructure, and • (3) CRM business alignment of incentives, customer strategy and structure.

Slide 33: Instrumental Development & Measure

Slide 34: Discussion & Structural Model • The main effects model reveals a number of other interesting findings. – First, a CRM capability is primarily driven by human skills and experience that is supported by appropriate business architecture (i.e.,incentives and structures). – Second, the effect of conversion effectiveness is quite robust with negative and significant effects on both measures of market orientation

Slide 35: Quantitative Benefit of CRM Earlier on, we were looking at the Qualitative Benefit of CRM, as an introduction to the article. Now, let’s take a look at some of the Quantitative Benefits of CRM provided ONYX Software. This will summaries and putting us in a good strong viewpoint about “where is the benefit in CRM technology investment?” http://www.onyx.com/customers/video/library/netegrity/?id=6

Slide 36: Plausibility of the Conceptual Argument • The paper is very recent 2005 • Has a good model and hypothezied relationship explained to assesses of CRM performance • Empirical data are acquired from organisations who are traditional users of CRM. • Show a number of statically to prove the benefit of CRM technology • CRM is more than a tool. It’s part of a deeply embedded strategic disposition that enables them to outperform their rivals in a fiercely competitive market. Supporting Idea: Source: Significant Performance Advantage George, S D, (2002), Wining the Competition for Customer Relationship

Slide 37: Empirical Relationship • The article is being enforced further in detail with the presented video, from Onyx. Onyx is the one of the leading CRM solution provider. This is actually explained the article in the real world, where the actual benefit can be observed here. • Accurate forecasting • Increase revenue dramatically • Increase sale • Greater throughput • Go from loss to profit • ROI up to 300% • etc

Slide 38: Empirical Relationship Supporting that IT Infrastructure is Unimportant • Main article states that “IT infrastructure is relatively unimportant compared to what the marketing divisions of companies like Siebel, Oracle and SAP would like us to believe.” • A study by George S. Day and Christoper Van den Bulte, in the article – “Superiority in Customer Relationship Management: Consequences for Competitive Advantage and Performance”. • They states that IT is merely a necessary condition for CRM, it contributes little to either relational advantage or performance. • The main implication for managers aiming for CRM leaderships is “how firms organize their effort” • Like incentives, measures oragnisation structure and accountabilities.

Slide 39: Empirical Relationship Relation to Porter’s Five Forces Model • CRM has profound impact on the five forces that influence the industry attractiveness. • If CRM is to be more strategic, it clearly needs to have a more strategic purpose. • In Porter’s terms, it needs to provide a competitive advantage in terms of cost leadership or marketplace differentiation. • This is actually shown in another article, Calder, B. (2005), CRM and Relationship Branding. Source: McFarlan, F. W., 1984, ‘information technology change the way you compete’, Harvard Business Review.

Slide 40: Empirical Relationship ` • CRM and the value chain Inbound Product Outbound Sales Service Logistic Logistic Marketing CRM Other Solutions Source: Porter, M, Strategic & Internet, 5 Forces, e-reading. Using the previous Porter’s diagram and the value chain, we can identify that CRM actually being used for the sales, marketing and services in the value chain of the business.

Slide 41: Empirical Relationship In relation to Ross’s Strategic IT Architecture Competency, CRM technology has move up from an application silo to the modular architecture. In the past, CRM application is a place where data of business people just dump their data into. But now, CRM is more than that. Eg, from the video. Source : Ross, J. (2003), Strategic IT Architecture Competency

Slide 42: Generalization • CRM is a business strategy that can optimize profitability, revenue and customer satisfaction. However, a combination of human and technological capabilities is required. • Furthermore, it must be feasible and requires wider understanding of the structural and behavioral limits to organisational alignment. • CRM capability is primarily driven by human skills and experience that is supported by appropriate business architecture. • IT infrastructure is relatively unimportant. • CRM capabilities are stronger on proactive market orientation compared to reactive market orientation.

Slide 43: Author’s Conclusion Article 2 • CRM programs should be directed towards customer value that competitor’s cannot match. • More relationship building is not necessarily better, but rather building the right type of relationship is the key to performance improvement.

Slide 44: Author’s Conclusion Overview from both articles Author’s stressed on the importance of identifying customer value, be it e- business and CRM. They should be targeted towards these values. The theories-in-use for e-business and CRM show a different story compared to the espoused theories that techno-elite or by marketing divisions of big companies.

Slide 45: Seminar Conclusion We have covered from the top view of eBusiness Operation, right down to one of the solution, Customer Relationship Management. • taking the consideration for strategic planning to implement such solution planning • try to relate with real life situation, by presenting the videos from a real CRM solution provider, providing a strategic implementation to another company. • went further to investigate if this article relates to the previous articles • In short, CRM is not merely a technology, but it needs human and business capabilities, and work better from the proactive market orientation.

Slide 46: Suggestion • Article is too statistical and technical • Improve on the explanation of empirical results and models. • The list of measures used are not exhaustive and should include other factors. E.g. Profitability, motivation, etc. • Rather hard to understand at first glance because it did not convince whether CRM is really worth investing.

Slide 47: Questions & Discussion • Any questions and discussion to share with us? • Any points to bring up, which we have miss? • Lastly, we are still learning in this subject of IT Strategic Planning (CRM), as the three of us never have the real experience before. • We really appreciate your presence and thank you. • And we would like to thanks Noel Parker for his advice in this field too.

Slide 48: References 1. Coltman, T (2002), Keeping eBusiness in Perspective, IACT 401 e-reading 2. Coltman, T (2005), Where is the benefit of CRM technologies investment, IACT 401 e-reading 3. Pew Internet & American Life project Survey, Nearly a quarter of online Americans use the Internet at places besides home or work, (online), available: http://www.pewinternet.org/ 4. Ilicon (B2B) , ILLICOM's position in the B2B integration marke, Online, Available: www.illicom.com/uk/marches_integration_b2b_uk.htm 5. Business Intelligence, Dell Supply Chain Process. Online, Available: http://www.businessintelligence.com/ex/asp/id.4/page.1/xe/biextractdetail.htm 6. Verticity Solutions, eBusiness & Enterprise Portals 7. Online, Available: http://www.verticitysolutions.com/services/ebusiness_enterprise_portals.asp 8. Onyx Softwar, Customer Success: Netegrity, Online: http://www.onyx.com/customers/video/library/netegrity/?id=6 9. Accenture ,Some of the principal reasons and area to the failure of CRM, online, Available: http://www.accenture.com/xdoc/en/services/crm/road_to_riches.pdf 10. Beyond Philosophy, Customer Strategy : The Naïve to Natural Model, Online, Available: http://www.beyondphilosophy.com/ourtoolsandtechniques/images/5-1_naive-natural-orientation.jpg 11. Harris, L.C. (2001) Market Orientation and Performance: Objective and Subjective Empirical Evidence from UK Companies. Journal of Management Studies, 38(1):17-43. 12. Day, G.S. (2002), Winning the Competition for Customer Relationships. The Wharton School:Pennsylvania. 13. Coltman, T., T.M. Devinney, and D.F. Midgley (2003), Strategic drivers and organizational impediments to ebusiness permance: a latent class assessment, in AGSM Working Paper Series. 14. Day, G.S. and C.V.Den Bulte (2002) Superiority in Customer Relationship Management: Consequences for Competitive Advantage and Performance, in Marketing Science Institute.Cambridge. 15. Ross, J. Creating a strategic IT Architecture Competency, IACT 401 ereading 16. Porter, M, Strategic & Internet, 5 Forces, e-reading. 17. Calder, B. (2005), CRM and Relationship Branding, Online, Avaliable: http://www.medill.northwestern.edu/faculty/malthouse/ftp/crmbrand.pdf