InformationWeek
Defining The Business Value Of Technology
April 3, 2000
How To Unlock Customer Value
By Charles Pelton
But these are internally focused metrics. Far more important than wealth creation is the role of the customer. It would be ideal to have a direct link between the aspirations and needs of customers and the stock valuation of the companies that serve them. Stock price should be dependent upon customer satisfaction and the value of the customer experience.
We've long known of concepts such as lifetime customer value, which includes the number of times customers return to your business, their loyalty to it, and the diversity of products they buy. We also should measure the value of having customers determine product sets, service levels, and market possibilities.
At the InformationWeek Executive Boot Camp in Berkeley, Calif., late last month, 65 students from companies as diverse as Charles Schwab and Thiokol Propulsion used customer centricity to propose solutions to three real-time case studies. The students--largely IT executives and managers--prepared solutions to present to a senior marketing or IT executive from the company being studied toward the end of the five-day camp.
The cases revolved around challenges from three well-known companies: BMG Entertainment, Sabre, and E-Trade. In BMG's case, students examined how the company needed to meld business and technology processes with a public that's increasingly turning to digitally delivered music. For Sabre, the students proposed effective business-to-business strategies. And for E-Trade, they examined how the company should serve customers who use non-PC devices such as personal digital assistants, cell phones, and kiosks to trade securities and obtain financial information.
While nine teams (three for each case) came up with solutions for BMG, Sabre, and E-Trade, all shared one trait: The key isn't using IT to enhance the customer experience, it's getting the customer to modify the company's behavior.
The BMG teams wanted to enhance customer involvement by developing a stronger sense of community through physical storefronts and online "clubs." But the real challenge is allowing consumers, especially teen-agers, to experience and buy music on demand. Will the MP3 phenomenon drive record labels such as BMG to give away music, deriving revenue from leasing or subscription models?
Students who worked on the Sabre case emphasized building a single, unified brand. We know when we buy a PC if Intel is "inside," but do we know when we purchase an airline ticket or make a hotel reservation if Sabre is inside? Apart from its core reservations infrastructure, Sabre has many E-business plays that the students felt would benefit from a unified customer interface. These include a consumer-oriented strategy through its Travelocity spin-off; a business unit that promotes business-to-business travel sales and bookings; a nascent electronic marketplace that Sabre is building with Ariba to buy and sell travel services; and a 5-month-old Web site, VirtuallyThere.com, that lets travel agencies pass real-time flight-tracking information to customers.
Many students who examined E-Trade focused on anywhere-anytime delivery of services. The theory: E-Trade customers want several channels to obtain financial information and trade securities. Why not trade over a cell phone, obtain market alerts on a pager, or glean financial news on an automated teller machine, as well as via a PC? The point is the same: The customer is in the driver's seat.
At an InformationWeek roundtable in New York last week, Chase.com executive VP Denis O'Leary pleaded for enhanced customer "entertainment." The customer-company experience needs to be simple and fun, O'Leary said, but most technology employed today isn't fun.
What the Boot Camp and roundtable sessions demonstrate is that we need a better set of business metrics. It shouldn't merely be a matter of how much a company earns, but what it learns. It isn't how long a process takes, but what a customer feels.
Until we develop a strong set of metrics that take a customer-in-charge attitude, we won't truly understand how to retain customers and enhance lifetime customer value--the richest business experience of all.
Charles Pelton is InformationWeek's editor-in-chief/ events. He can be reached at cpelton@cmp.com.
e all want to get rich. As competitive beings, we unlock value in ideas, companies, products, and services. Our public markets are set up to calculate the value of these ideas and the management teams that execute them. Markets then measure the opportunities released within companies.
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