CRM & The Enterprise Value Chain

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

“ 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

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

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

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

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

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

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

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

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

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

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

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

“ 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

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

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

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

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

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

To the customer, it involves:
Order item/service
Deliver item/service
That’s It! 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

Designing the Customer Experience 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

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

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CRM & The Enterprise Value Chain

by Paul Greenberg on Dec 13, 2006

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CRM & The Enterprise Value Chain — Presentation Transcript