CIOs today are in the perfect position to lead the next wave of customer-centric business evolution.
Here are some tangible examples of how a handful of companies are transforming parts of their businesses to meet shifting customer requirements, culled from a pile or diverting articles from The Wall Street Journal over the past several weeks. As I was looking at some of them over the weekend, they coalesced into the larger theme of active, market-facing innovation versus terrified paralysis. Plus, to add a little spice, I've set those anecdotes up as a true/false quiz:
True or false:
Procter & Gamble and its buff-topped icon, Mr. Clean, now operate car washes.
Xcel Energy can remotely turn down thermostats in the homes of private citizens.
Kodak is changing its name to Kodiak and acquiring Build-A-Bear.
McDonald's offers leather seats, flat-screen TVs, and high-end coffee while feeding 58 million people a day.
Wal-Mart runs a traditional retail bank that serves consumers and finances suppliers.
The U.S. Postal Service is debuting yellow sticky-pads called "Postal Notes."
Oracle sells hardware and Cisco sells servers.
Lexus leases parking garages and lets only Lexuses park on the first floor.
1. Procter & Gamble launches Mr. Clean Car Washes: True. While a traditional P&G strength has been its ability to charge premium prices for premium products, the current global recession has squeezed those businesses and forced P&G to look for nontraditional growth prospects. CTO Bruce Brown, quoted in the Journal, put it this way: "We need to look for new opportunities to allow us to grow. That isn't limited to things within our current business model." Guided by that externally focused view, P&G acquired a chain of car washes late last year and plans to expand that to a national chain in pursuit of a sizable chunk of that $35 billion business. CIO question: In sectors where your business is soft, are brand extensions viable? And how can you pursue those in ways that optimize your core businesses?
2. Xcel Energy can remotely turn down thermostats in homes of private citizens: True. Of course, that capability requires the permission of the individual home owners, but it represents the extensive scale of fresh thinking Xcel is bringing to its experimental $100 million project called SmartGridCity in Boulder, Colo. The overall project is designed to let customers manage their energy usage and options via their own Web-based accounts, letting them choose energy sources, evaluate variable-pricing programs, and in select cases allow the energy provider to cap energy usage or even tap into energy stored in battery packs in people's homes. Xcel CIO Mike Carlson was quoted as saying that in these early stages, Xcel is "testing how far we can go with this." CIO question: Within your organization, are you initiating discussions like this? Or are you holding back out of concern you'll be told that (a) this is not the time for new ideas or (b) that's not the job of the CIO or (c) you should leave customer issues to the sales team and keep your focus on the servers?
3. Struggling Kodak is changing its name to Kodiak and acquiring Build-A-Bear. False. But oh how Kodak probably wishes it did own Build-A-Bear! Kodak continues to reel in the wake of its collapsed traditional film business, and its financial difficulties have forced it to explore ways it might keep some promising new technologies alive via licensing deals or even funding from strategic partners. Meanwhile, the company says it will focus on its ink-jet businesses: consumer printers as well as high-speed machines for businesses, and look for alternative approaches to continue pursuing ventures in high-end digital press and semiconductor image-sensors. CIO question: Two years ago, Kodak sold its medical-imaging business for $2.1 billion. Although that would appear to be an attractive diversification move for Kodak, the sale seems to indicate otherwise. As you consider new strategies for your company, what lessons can be learned from Kodak's medical-imaging exit?
4. McDonald's offers leather seats, flat-screen TVs, and high-end coffee while feeding 58 million people a day. True. Very few companies have come through the past rotten six months with a steady stock price, but venerable Mickey D's is one of them. A great story last week in The Wall Street Journal indicates that those stalwarts of the intelligent enterprise -- great BI systems, real-time data analysis, and powerful data mining all in the service of better and faster decisions -- are playing a huge role in that ongoing success. As the economy contracted, McDonald's cut back on new-store openings, giving lie to the rumor that it's primarily in the real-estate business. And with growth in drive-through sales outpacing growth for over-the-counter sales, store expansion might stay at low levels for some time to come. But for existing restaurants, the push is on to create better experiences for customers and smarter options for employees. In the dining area, most McDonald's restaurants now offer a wide range of salads, the chain is looking to hammer away at Starbucks with high-quality but less-expensive coffee drinks, leather seats are popping up in some stores around the world and so are flat-screen TVs: It's all about the experience, right? Meanwhile, behind the scenes, the company is creating systems that give individual store operators greater latitude over price adjustments based on customer demand rather than corporate attempting to impose a single global pricing scale that flies directly in the face of today's requirement to, well, have it your way. But my favorite line is from company president Ralph Alvarez about the power of business intelligence, as quoted in the Journal story: "I love numbers. I think data used well really tells a story." CIO question: The data your company collects is also telling a real story -- what's the moral of that story? And regardless of what type of business you're in, do you and your team know as much about your company's customers as you should know? And if you don't, how will you stay relevant in this rapidly changing world? P.S.: Yes, it's also true that McDonald's feeds 58 million people per day.
5. Wal-Mart runs a traditional retail bank that serves consumers and finances suppliers. True. Launched last year in Mexico, Banco Wal-Mart has banking facilities in 425 stores in 125 cities in Mexico and is run by Jose Maria Urquiza Gonzalez, who says this about the synergies Wal-Mart Mexico hopes to realize with its new banking business: "Retail banking is very profitable, but I can tell you, because I come from a traditional bank, that retail banking has a lot of 'banking' in the business but very little 'retail.' " Based in Wal-Mart stores and driven by Wal-Mart's disciplined approach, that dynamic is sure to change, Urquiza Gonzalez told a recent gathering of securities analysts in Mexico as posted in a transcript on the Wal-Mart site. The No. 1 goal for Wal-Mart Bank, he said is to make money; the No. 2 goal is to boost sales of the overall "Walmex" operation via its traditional retail stores; and No. 3 is to enhance Walmex's experience with its suppliers by helping them with financing during the current credit crunch and then with payroll-management services. (Now, that's supply chain you can believe in!) Banco Wal-Mart currently has more than 150,000 customers but, after its cautious entry into the banking business, says it's ready to crank up its recruitment efforts because it has the necessary infrastructure and systems in place to handle much larger volumes of customers. Urquiza Gonzalez said that last year, Banco Wal-Mart staged about 1,000 customer-recruitment events that attracted 35,000 new clients; this year, it will increase those efforts by 500%. CIO question: Where does your core business infrastructure have extra capacity to handle big numbers of new clients? Or what infrastructure is missing that would allow your company to seize growth opportunities with existing customers and prospects? And how much responsibility do you hold for taking action on that?
6. The U.S. Postal Service is debuting yellow sticky-pads called "Postal Notes." False. But hey -- it is planning another rate increase, so post that!
7. Oracle sells hardware and Cisco sells servers. True. The HP Oracle Database Machine uses Oracle software and Hewlett-Packard hardware, but a look at the description of the product on Oracle's Web site shows there's no question that Oracle considers the Machine to be an Oracle product. Be that as it may, it could very well lead to a wave of similar types of line-blurring hardware/software bundles involving enterprise-class companies that aren't afraid to assign higher priorities to customer-centered innovation than to status quo industry relations. As for Cisco selling servers, it's moving aggressively into that area on its own after years of partnering with HP. Not coincidentally, HP has been intensifying its efforts to push into Cisco's core market by selling more HP networking products and services to enterprise customers. Hey -- think back to the saccharine lyrics of "Puff the Magic Dragon": dragons live forever, but not so industry alliances. And if business customers can gain greater value by getting to choose from competing product lines from two large, powerful companies with excellent reputations for product quality and reliability, then everyone will be better off -- and again, kudos to HP and Cisco for putting customers ahead of industry buddies. CIO question: In your company's markets, are you bypassing growth opportunities because of some outdated industry alliance that not only has outlived its usefulness but also might sooner rather than later put you at a distinct competitive disadvantage?
8. Lexus leases parking garages and lets only Lexuses park on the first floor. True. It's just too goofy to have been inserted as a red herring -- after all, if it weren't true, who could possibly make such a thing up? But Dallas city magazine says a plan is in the works between Dallas-area Lexus dealers and the Dallas Center for the Performing Arts: "In each garage, the first level will be reserved for Lexus drivers, meaning all other patrons -- whether they use the valet or circle through the garage to self-park -- will have to drive through a floor filled with cars made by the popular luxury brand." CIO question: Let's set aside the smart-aleck comments and focus on the core idea of helping highly valued customers have high-value experiences with your products: Does your company have such programs in place? If it doesn't, don't you as a C-level executive have the responsibility to change that? And aren't you as CIO ideally situated to make that happen?
Final thought: Yes, all of these ideas required time, collaboration, CEO sponsorship, flexible thinking from lots of folks, and a truckload of rock-ribbed will to keep pushing when everyone made it very clear they would much rather you just drop the whole thing. Because of the recession, because it's difficult, because we've never done those types of things, and because, well, CIOs just don't get involved in those sorts of things. So you could say that no one will blame you if you just push this whole concept aside and focus instead of IT systems. But if you do, then don't blame anyone else if they perceive you as detached from the core business of creating excellent products and services and connecting deeply with customers, and unwilling to take your share of responsibility for the financial success of the company. The problem is, once that perception sets in, then it's a very short transition to the much-uglier one that too many CIOs have allowed to set in: of the CIO as an industrious but internally focused, risk-averse, market-unaware, tactical cost center. And as the poet once said, that way madness lies.
Bob Evans is senior VP and director of InformationWeek's Global CIO unit.
To find out more about Bob Evans, please visit his page.
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