Touch ‘Em All – Customer Impact & The Enterprise Value Chain By Paul Greenberg President, The 56 Group, LLC BPT Partners Chief Customer Officer Co-Chairman, Rutgers University CRM Research Center Author: CRM at the Speed of Light, 3 rd Edition

“ CRM is a philosophy and a business strategy supported by a system and a technology, designed to improve human interactions in a business environment ” Paul Greenberg, “Reality Check” CRM Magazine 2003 The Business Ecosystem Changed

“ CRM is a philosophy and a business strategy supported by a system and a technology, designed to improve human interactions in a business environment ”

Paul Greenberg, “Reality Check” CRM Magazine 2003

“ People have changed more than the business organizations upon which they depend. The last 50 years have seen the rise of a new breed of individuals, yet corporations continue to operate according to a logic invented at the time of their origin, a century ago. The chasm that now separates individuals and organizations is marked by frustration, mistrust, disappointment, and even rage. It also harbors the possibility of a new capitalism and a new era of wealth creation.” – Dr. Shoshanna Zuboff, The Support Economy The Business Ecosystem Changed

“ People have changed more than the business organizations upon which they depend. The last 50 years have seen the rise of a new breed of individuals, yet corporations continue to operate according to a logic invented at the time of their origin, a century ago. The chasm that now separates individuals and organizations is marked by frustration, mistrust, disappointment, and even rage. It also harbors the possibility of a new capitalism and a new era of wealth creation.” – Dr. Shoshanna Zuboff, The Support Economy

Pre 90s Product/Demand driven corporate ecosystem Separate demand and supply chains Late 90s to nearly present Customer driven corporate ecosystem The enterprise value chain Present Customer ecosystem 2006 - the “Era of the Social Customer” Personal value chain The Business Ecosystem Changed

Pre 90s

Product/Demand driven corporate ecosystem

Separate demand and supply chains

Late 90s to nearly present

Customer driven corporate ecosystem

The enterprise value chain

Present

Customer ecosystem

2006 - the “Era of the Social Customer”

Personal value chain

Definition of a customer has changed Traditional: Someone or a group that paid you for goods and services Paying client a.k.a. end client Contemporary: Anyone or any group that you exchange value with Paying client Employee Channel/Partner Vendor/Supplier NOTE: Every B2B relationship has a “C” at the end of it somewhere NOTE 2: Though the sales process and location are different – the interactions are still AMONG HUMANS – just like B2C The Customer: Not Just Your End Client

Definition of a customer has changed

Traditional: Someone or a group that paid you for goods and services

Paying client a.k.a. end client

Contemporary: Anyone or any group that you exchange value with

Paying client

Employee

Channel/Partner

Vendor/Supplier

NOTE: Every B2B relationship has a “C” at the end of it somewhere

NOTE 2: Though the sales process and location are different – the interactions are still AMONG HUMANS – just like B2C

Enterprise value chain Corporate ecosystem’s greatest achievement Seamless one works to please single customer Didn’t care what part of the chain had issues, brandholder responsibility Personal value chain Customer ecosystem’s paradigmatic transition Competitive Expectation Level (CEL) (e.g. FedEx v. UPS) The customer demands a personalized experience that can draw from multiple value chains if need be Your business can’t control the personal value chain The Business Ecosystem Changed

Enterprise value chain

Corporate ecosystem’s greatest achievement

Seamless one works to please single customer

Didn’t care what part of the chain had issues, brandholder responsibility

Personal value chain

Customer ecosystem’s paradigmatic transition

Competitive Expectation Level (CEL) (e.g. FedEx v. UPS)

The customer demands a personalized experience that can draw from multiple value chains if need be

Your business can’t control the personal value chain

The Enterprise value chain you DO control must work flawlessly Seamless interactions between your back & front offices Cooperation between partners, suppliers, vendor Croatian food companies All processes value must be determined by how much customer value is identified and embedded The Business Ecosystem Changed

The Enterprise value chain you DO control must work flawlessly

Seamless interactions between your back & front offices

Cooperation between partners, suppliers, vendor

Croatian food companies

All processes value must be determined by how much customer value is identified and embedded

Demand Chain Customer-facing: sales, marketing, support Supply Chain Inventory management, parts planning, logistics, delivery Support Chain Channel support services – complex Personal Value Chain Each person has multiple value chains that are enterprise value chains they call on for each set of interactions/transactions All The Pretty Value Chains Laid Out In A Row

Demand Chain

Customer-facing: sales, marketing, support

Supply Chain

Inventory management, parts planning, logistics, delivery

Support Chain

Channel support services – complex

Personal Value Chain

Each person has multiple value chains that are enterprise value chains they call on for each set of interactions/transactions

Traditional demand chain Customer-facing functions at company Sales Marketing Customer service Contemporary demand chain Incorporates customer collaboration along with traditional functions Customer as an advocate if the experience is optimal – extended sales & marketing team E.g. Proctor & Gamble social networks – Innovation Network, Vocalpoint, Tremor The Demand Chain

Traditional demand chain

Customer-facing functions at company

Sales

Marketing

Customer service

Contemporary demand chain

Incorporates customer collaboration along with traditional functions

Customer as an advocate if the experience is optimal – extended sales & marketing team

E.g. Proctor & Gamble social networks – Innovation Network, Vocalpoint, Tremor

Differentiators are no longer products & services Pretty much the same from company to company Key differentiator is the customer’s experience with the company Provides a business value for the experience with the products/services Comfort Convenience Simplicity Ubiquity Timeliness Contemporary technology use (e.g. mobile technologies, not Oracle) Wow factor Customer feels sense of importance, self-control, ownership The Demand Chain

Differentiators are no longer products & services

Pretty much the same from company to company

Key differentiator is the customer’s experience with the company

Provides a business value for the experience with the products/services

Comfort

Convenience

Simplicity

Ubiquity

Timeliness

Contemporary technology use (e.g. mobile technologies, not Oracle)

Wow factor

Customer feels sense of importance, self-control, ownership

Creating a community of self-interest Personal value has to be mapped to business objectives Incentives need to be designed to make improvement in customer experience “worth it” to other customer groups Changes in compensation for employees that focus on customer satisfaction Supplier premiums for beating the baseline guarantees of SLAs Partner rewards for customer satisfaction to be applied for benefits The Demand Chain

Creating a community of self-interest

Personal value has to be mapped to business objectives

Incentives need to be designed to make improvement in customer experience “worth it” to other customer groups

Changes in compensation for employees that focus on customer satisfaction

Supplier premiums for beating the baseline guarantees of SLAs

Partner rewards for customer satisfaction to be applied for benefits

But there is a BIG potential problem in how effective that experience will be Disconnect between: Satisfying customer requirements versus Available product Concerns over forecasted production Inventory availability Delivery versus Internal operations Financial processes Day-to-day activity Human resources planning The Demand Chain

But there is a BIG potential problem in how effective that experience will be

Disconnect between:

Satisfying customer requirements

versus

Available product

Concerns over forecasted production

Inventory availability

Delivery

versus

Internal operations

Financial processes

Day-to-day activity

Human resources planning

The disconnect is dangerous because it decreases the customer experience’s value & chances for success Supply Chain (SCM) Back Office (ERP) Demand Chain (CRM) Support Chain The Delinked Chain No transparency

The disconnect is dangerous because it decreases the customer experience’s value & chances for success

Traditional supply chain management (SCM) Came from a product-driven world Originally the planning, execution and measurement of a product from production to marketplace SCM was aimed at cost reduction & improving efficiency Planning Execution Not seemingly impacted directly by customers, though had an impact on customers Collaboration not seen as a necessity The Supply Chain

Traditional supply chain management (SCM)

Came from a product-driven world

Originally the planning, execution and measurement of a product from production to marketplace

SCM was aimed at cost reduction & improving efficiency

Planning

Execution

Not seemingly impacted directly by customers, though had an impact on customers

Collaboration not seen as a necessity

Contemporary supply chain management Components of SCM from procurement through delivery have evolved from back office functions to customer-facing need Customers continue to be affected by the supply chain, but more importantly directly impact it No longer just efficiency of automated processes but directly affect the customer’s experience Customer desire directly affects the success or failure of the supply chain Collaboration with suppliers, vendors and customers a part of the new value chain The Supply Chain

Contemporary supply chain management

Components of SCM from procurement through delivery have evolved from back office functions to customer-facing need

Customers continue to be affected by the supply chain, but more importantly directly impact it

No longer just efficiency of automated processes but directly affect the customer’s experience

Customer desire directly affects the success or failure of the supply chain

Collaboration with suppliers, vendors and customers a part of the new value chain

Collaborative Planning, Forecasting & Replenishment (CPFR) Cooperative planning between all suppliers and brand holder to improve inventory management and delivery time to customer In corporate ecosystem, unthinkable due to revealed competitive information In customer ecosystem, collaboration & forecast sharing to fill customer need at reduced cost The Supply Chain

Collaborative Planning, Forecasting & Replenishment (CPFR)

Cooperative planning between all suppliers and brand holder to improve inventory management and delivery time to customer

In corporate ecosystem, unthinkable due to revealed competitive information

In customer ecosystem, collaboration & forecast sharing to fill customer need at reduced cost

“ If you can’t drive sales and deliver product at the point of purchase, you lose.” – Jake Barr, GM, Supply Chain Innovation The Supply Chain: Proctor & Gamble

Streamlined supply chain because of understanding of the “enterprise value chain” and its relationship to customers (2002) Sixty percent of P&G sales due to “events” (organized experiences) – can be promotions (e.g. Max the Stack – decoder cards for teens at theme parks or concerts) “ Pull” events meant “pull” supply chain – i.e. produce only what the customers are buying – cut out excess inventory Scary due to out of stock means 41% of the time the sale is lost and 28% of the time a competitor is chosen. Also scary because 5000 key retailers & 30,000 key suppliers had to buy into the changes The Supply Chain: Proctor & Gamble

Streamlined supply chain because of understanding of the “enterprise value chain” and its relationship to customers (2002)

Sixty percent of P&G sales due to “events” (organized experiences) – can be promotions (e.g. Max the Stack – decoder cards for teens at theme parks or concerts)

“ Pull” events meant “pull” supply chain – i.e. produce only what the customers are buying – cut out excess inventory

Scary due to out of stock means 41% of the time the sale is lost and 28% of the time a competitor is chosen.

Also scary because 5000 key retailers & 30,000 key suppliers had to buy into the changes

Key Performance Indicators Out of stock rates Total supply chain response time – from purchase at register to purchase of raw materials to replace product Shelf level quality – damaged or unappealing packages on store shelves – reduction to zero Pricing design from the shelf back – what price is appealing to customer and then reverse engineer to see if product can be produced to make that price point Results? 7.6% out of stock rates rather than 16.3% from 2003 to 2004 Earnings growth went from 15% in 2002 to 20% in 2004 Annual savings between $50 and $100 million Increased sales from $40 billion in 2002 to $43.4 billion in 2003 The Supply Chain: Proctor & Gamble

Key Performance Indicators

Out of stock rates

Total supply chain response time – from purchase at register to purchase of raw materials to replace product

Shelf level quality – damaged or unappealing packages on store shelves – reduction to zero

Pricing design from the shelf back – what price is appealing to customer and then reverse engineer to see if product can be produced to make that price point

Results?

7.6% out of stock rates rather than 16.3% from 2003 to 2004

Earnings growth went from 15% in 2002 to 20% in 2004

Annual savings between $50 and $100 million

Increased sales from $40 billion in 2002 to $43.4 billion in 2003

Traditional Enterprise Resource Planning (ERP) The back office Financial systems Human resources Operational Tactical Contemporary ERP All processes that govern the back office are impacted by customers Intimately tied to the overall EVC – through the employees and their interactions with customers Technologically, through service-oriented architectures – web services tied to business rules/processes that are available on whatever medium they need to be Financial processes & demand forecasts ERP: Internal & Operational

Traditional Enterprise Resource Planning (ERP)

The back office

Financial systems

Human resources

Operational

Tactical

Contemporary ERP

All processes that govern the back office are impacted by customers

Intimately tied to the overall EVC – through the employees and their interactions with customers

Technologically, through service-oriented architectures – web services tied to business rules/processes that are available on whatever medium they need to be

Financial processes & demand forecasts

When channel partners are seen as competitive they have no visibility into the supply chain or internal operations of the brand holder When they are seen as collaborators in an extended enterprise value chain Collaborative forecasting and planning Product distribution and availability Scheduling optimization and improved delivery The Support Chain

When channel partners are seen as competitive they have no visibility into the supply chain or internal operations of the brand holder

When they are seen as collaborators in an extended enterprise value chain

Collaborative forecasting and planning

Product distribution and availability

Scheduling optimization and improved delivery

EVC demands transparency between supply, demand and support chain Between back and front offices All processes need to have customer value Even if this makes them apparently less efficient , it makes them more effective All of this is in collaboration for and with the customer Enterprise Value Chain: 21 st Century

EVC demands transparency between supply, demand and support chain

Between back and front offices

All processes need to have customer value

Even if this makes them apparently less efficient , it makes them more effective

All of this is in collaboration for and with the customer

With an enterprise value chain, “capable to promise” becomes the 21 st century asset management paradigm replacing “available to promise” as the new mantra “ Available to promise” meant the product was assumed to be available in inventory or being manufactured and delivery was based on that but the supply chain was siloed from asset management “ Capable to promise” identifies not only the accurate delivery date but also the manufacturing and inventory constraints through a “collaborative” effort between the supply chain and asset management systems. Enterprise Value Chain: 21 st Century

With an enterprise value chain, “capable to promise” becomes the 21 st century asset management paradigm replacing “available to promise” as the new mantra

“ Available to promise” meant the product was assumed to be available in inventory or being manufactured and delivery was based on that but the supply chain was siloed from asset management

“ Capable to promise” identifies not only the accurate delivery date but also the manufacturing and inventory constraints through a “collaborative” effort between the supply chain and asset management systems.

“ Capable-to-promise” is an example of an EVC-centered best practice . For you, it involves processes like: Manufacture to order Maintenance, repair and operations scheduling/planning Resource allocation and planning Order management Sourcing scenarios/planning Order simulation for the sourcing scenarios Date and quantity controls Alternative supply models Partnership/Distribution channels and processes associated Scheduling, delivery and logistics planning Enterprise Value Chain: 21 st Century

“ Capable-to-promise” is an example of an EVC-centered best practice .

For you, it involves processes like:

Manufacture to order

Maintenance, repair and operations scheduling/planning

Resource allocation and planning

Order management

Sourcing scenarios/planning

Order simulation for the sourcing scenarios

Date and quantity controls

Alternative supply models

Partnership/Distribution channels and processes associated

Scheduling, delivery and logistics planning

To the customer, it involves: Order item/service Deliver item/service That’s It! Enterprise Value Chain: 21 st Century

To the customer, it involves:

Order item/service

Deliver item/service

What changes? Keep in mind, to go from a siloed set of chains to an EVC, demands major culture change Not only the employees relationships to customers Right now only 38% of the supply chain managers have financial incentives linked to supply chain performance (Bain, 2002) Worse, 78% of the 38% who do have incentives don’t account for consumer feedback or vendor results Percentage is higher for CRM customer satisfaction incentives Enterprise Value Chain: 21 st Century

What changes?

Keep in mind, to go from a siloed set of chains to an EVC, demands major culture change

Not only the employees relationships to customers

Right now only 38% of the supply chain managers have financial incentives linked to supply chain performance (Bain, 2002)

Worse, 78% of the 38% who do have incentives don’t account for consumer feedback or vendor results

Percentage is higher for CRM customer satisfaction incentives

RFID Tagging along gets a whole new meaning “ Microchipped” tag for tracking how, what, when and where in real time using radio frequencies Passive – powered by tag reader Active – internal battery power Tags can be read through substances Developed for missile tracking originally Used in Europe for animal tagging among other things in the early stages Enterprise Value Chain: 21 st Century

RFID

Tagging along gets a whole new meaning

“ Microchipped” tag for tracking how, what, when and where in real time using radio frequencies

Passive – powered by tag reader

Active – internal battery power

Tags can be read through substances

Developed for missile tracking originally

Used in Europe for animal tagging among other things in the early stages

Designing the Customer Experience Enterprise Value Chain: 21 st Century

Enterprise Value Chain: 21 st Century

Benefits Data sharing between suppliers, brand holders, and customers using open data models Time to market improved Customer expectations accurate (delivery issues) Costs reduced through increase in effectiveness of inventory/supplies management Enterprise Value Chain: 21 st Century

Benefits

Data sharing between suppliers, brand holders, and customers using open data models

Time to market improved

Customer expectations accurate (delivery issues)

Costs reduced through increase in effectiveness of inventory/supplies management

Benefits The value of functional integration? Forecasting demand leads to adjusting marketing programs Customer demand drives supply allocations Product configuration constrained to available inventory Price & revenue optimization possible Supplies brokered to appropriate channel partners Order fulfillment across an “extraprise” Optimized scheduling to handle customer complaints according to criteria such as SLA requirements or customer lifetime value Enterprise Value Chain: 21 st Century

Benefits

The value of functional integration?

Forecasting demand leads to adjusting marketing programs

Customer demand drives supply allocations

Product configuration constrained to available inventory

Price & revenue optimization possible

Supplies brokered to appropriate channel partners

Order fulfillment across an “extraprise”

Optimized scheduling to handle customer complaints according to criteria such as SLA requirements or customer lifetime value

ROI More accurate forecasting Increased customer retention Increased revenues Self-service configuration for customers via web reduces costs of order to cash Much more effective targeted marketing Improved profitability Enterprise Value Chain: 21 st Century

ROI

More accurate forecasting

Increased customer retention

Increased revenues

Self-service configuration for customers via web reduces costs of order to cash

Much more effective targeted marketing

Improved profitability

THANK YOU For further information: Paul Greenberg The 56 Group, LLC [email_address] 703-551-2337