InformationWeek
Defining The Business Value Of Technology
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December 11, 2000 |
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Playing For Keeps
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By Eric Chabrow
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Robless envisions this information being delivered to many more locations and channels, including devices in automobiles, hotel rooms, and airport kiosks. United's goal is to use IT to simplify air travel from the time passengers seek a reservation until they pick up their luggage at an airport carousel. "We want to create an experience in which the traveler walks on, walks off, just like on a bus," Robless says.
Using technology to meet customer expectations is a given among Innovation 100 companies. But often, it's technology that lets a company go beyond expectations to offer additional services that complement their core products.
Emerson Electric, the largest maker of compressors for refrigeration, heating, and air conditioning systems, two years ago used the Internet to enter a new service industry: remotely monitoring these systems. Recently, alarms in its data center in Atlanta alerted monitoring personnel that the electricity powering compressors in refrigerators at a Whole Foods supermarket was flowing intermittently, threatening to shut down the store's power system. An Emerson staffer quickly notified a store manager, who dispatched an engineer to fix the problem. "They would have lost $100,000 in that store in fresh foods if the refrigeration system failed," says Charles Peters, senior executive VP and E-business leader at Emerson.
The compressors contain sensors that are attached to control boxes, which continually feed information through an Internet connection to an Emerson homegrown database used to monitor hundreds of refrigeration systems. The monitoring system employs algorithms to predict a pending failure and can even advise when important but nonurgent procedures should take place, such as cleaning refrigeration coils. Each store sets up rules on when an alarm should sound and who should be notified.
Before the advent of the Internet, a central monitoring system would've been too expensive to operate because of high communications costs. "The Internet allows you to monitor everything on a real-time basis," Peters says. "This creates an entirely new business for us, not only from our installed base of customers, but from businesses using our competitors' controllers, too."
David Neel, director of Cap Gemini Ernst & Young's AccelerEight Center, which co-developed the Innovation 100 methodology with InformationWeek, sees the creation of a unit such as Emerson's remote-monitoring system as one of the dominant trends among innovators--that is, companies providing "blurred" offerings of product and service. "Every product has a service and every service has a product," Neel says. "Companies that deliver blurred offerings anticipate customers' needs before they're aware of them. By anticipating a customer's need, companies create new opportunities to sell. Information systems create that opportunity. Companies that adopt this business model will enjoy the greatest market capitalization possible."
For Emerson, the growth potential is enormous. In the grocery business alone, there are 30,000 supermarkets in the United States, and Emerson monitors just 600 stores. Emerson says it isn't worried about competition. "One of the real subtleties in this is that our knowledge of this equipment differentiates us, being the largest manufacturer of compressors in these systems," Peters says. "Unless you have deep application knowledge, it'll be hard to succeed in these service businesses."
The Internet not only lets businesses sell products and services to supplement core offerings, but it lets customers control the relationship. More than seven in 10 of the Innovation 100 give customers round-the-clock access to information regarding products, orders, and fulfillment.
With a catalog of 500,000 items, ranging from sophisticated hydraulic and pneumatic motion and control systems to individual parts, Parker Hannifin Corp. receives 140,000 inquiries a day from customers and distributors, including 70,000 product orders. The $5.4 billion Mayfield Heights, Ohio, manufacturer is rolling out 20 self-service, Web-enabled applications that its larger customers--such as defense contractor BAE Systems, formerly British Aerospace, and equipment-maker Caterpillar Inc.--and 2,500 North American distributors can use to save time and money. The self-service applications, linked to a homegrown enterprise resource planning and inventory system running on IBM mainframes, let customers configure, order, invoice, and ship products. CIO Paul Carson estimates the self-service apps will save Parker Hannifin 8% to 15% in personnel and phone expenses. "And," he adds, "it'll save us the cost of aggravation as well."
The Internet can also make it easier for customers to try before they buy certain products. When General Electric Co. needed prepackaged software components to complete a project to build an online executive information system, GE senior systems analyst Tim Oliver downloaded the two files--a grid module and a chart-generator--from ComponentSource Inc., an Innovation 100 company that sells prepackaged software components over the Internet. "Immediately downloading a component makes it quicker to test, evaluate, and integrate it into our applications," Oliver says.
ComponentSource, in Kennesaw, Ga., didn't always distribute components via the Web. In its early years, the 5-year-old company placed all of its components on an encrypted compact disc shipped to customers. Customers provided a credit-card number and ComponentSource issued a coded key to decrypt only the purchased components. In 1995, ComponentSource marketed fewer than 100 components; today, it offers more than 5,000.
To simplify purchasing, ComponentSource lets corporate purchasing managers preset spending limits for individual employees, giving them some control while letting buyers get product over the Web when needed. Not only does ComponentSource furnish the code, but it provides call-center employee help in five languages. "Friday nights are our busiest time as developers realize they must finish a project by Monday morning," says Orla Palmer, ComponentSource's VP of customer services. "We can walk them through their options."
Soon, ComponentSource will provide an Internet service to host components on its server. Customers no longer will need to download the component to incorporate it into their applications Instead, they'll pay a license fee for the functionality of that component, which can be accessed through the Net. "The customer will always have an up-to-date component," says ComponentSource CEO Sam Patterson.
Even the most innovative companies know they need to keep offering new ways to sell and communicate with customers. Yet this expansion of technology and opportunity makes it even more important--and sometimes more difficult--to keep the focus on what's most important, cautions Office Depot's CIO Bill Seltzer: "Instead of being channel-centric, we must be customer-centric."
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