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Play To Your Strengths

Midsize companies can use customer intelligence to out-maneuver the big firms, but executives will have to learn to share the knowledge and the authority to act.

Indeed, midsize firms' smaller size often invites heightened expectations among customers, calling for superior responsiveness. "Our customers are asking us for very tactical and operational information," CoBank's Corrigan explains. "And we give it to them quickly."

The World Is Flat

Because midsize companies aren't as hampered by bureaucracy and overhead, they can focus more on revenues and profits. Most midsize executives look at financials frequently — often weekly — in contrast to the quarterly financial analysis practiced at larger companies. They can thus respond to conditions and make quick adjustments.

For instance, if products aren't moving after only a week, a company can adjust marketing campaigns, offering specials and price breaks or changing the product mix. Managers can call manufacturers to modify forecasts, sometimes daily, and steer the supply chain to prevent product out-of-stock situations or the need for huge markdowns.

The flatter organizational structure endemic to most midsize firms factors heavily into their BI maturity. In these firms, having only two or three management levels is common. Operations are more transparent across the executive team. For instance, it's typical for CFOs to understand marketing costs or for vice presidents to know which products aren't selling. The decreased likelihood of so-called fiefdoms fosters an understanding that applications are tools and data must be shared. The concept of data as a corporate asset is culturally entrenched in midsize companies.

However, a midmarket company's size doesn't guarantee nimble decision-making. The ability to turn on a dime depends on the authority of the decision makers. Thus, the continuing challenge for midsize firms is their willingness to adopt a knowledge worker culture. The same flat organizations that are so well suited to quick decisions often limit decision-making to those at the top.

Indeed, companies that lack a middle-management layer often have no knowledge workers at all. One midsize data communications firm only let its chief financial officer see customer purchase reports, which he would then summarize into spreadsheets and e-mail to the vice presidents of marketing and sales, who would reinterpret and redistribute the results to their own teams. The company's front-line workers, interacting with customers daily, had no insight into customer preferences or behaviors. Many heard about customer acquisition statistics, successful marketing campaigns or sales increases only anecdotally.

As midsize companies grow and mature, they'll be more likely to push decision-making down from the executive ranks to the staff worker, as shown in the diagram at right.

As top-down authority cedes to knowledge worker autonomy, desktop reporting capabilities are only the beginning. When a knowledge worker culture pervades, companies become less tolerant of gut-feel decisions, and "fact-based decision-making" becomes a battle cry at all organizational levels. Midsize companies combining front-end BI reporting with sustainable back-end databases are poised to serve their customers better, launch more effective campaigns and sell more products and services.

Since joining window treatment retailer Smith+Noble in 2003, marketing vice president Mary Shanahan has watched the firm's customer intelligence blossom. Smith+Noble began by reclaiming customer data from its catalog mailing house. The resulting BI environment helps the retailer do more than just run-of-the-mill segmentation.

"Not only do we have customer name and address data," says Shanahan, "we have contact and purchase history. We can mine the database to understand the best customers to send fabric swatches or those who might be the best targets for multichannel marketing campaigns." Smith+Noble uses customer analytics to calculate customer lifetime value and contribution over time. Shanahan is pleased with the results. "We're really optimizing our marketing programs both on- and offline."

The 2006 To-Do List

When asked about their priorities for the coming year, most midsize-company executives echo their Fortune 500 counterparts, citing industry trends, branding issues and better customer service as overarching goals. However, there are a few items that show up on every midmarket executive's 2006 priority list, including:

  • Better BI. Many midsize firms have transcended the standard sales-and-revenue reporting that represented their first forays into customer intelligence. They're now looking for more sophisticated OLAP-type functionality and predictive analytics to round out their BI repertories.
  • Broader BI. Midsize firms that started with customer analysis in the sales or service areas are now offering information access to broader organizational swaths. For instance, a customer service department tracking trouble tickets can provide history to salespeople who want to know more about their customers' experiences across the company.
  • More infrastructure investment. Midsize companies that have delivered customer intelligence through so-called point solutions are now focused on wrapping additional IT infrastructure around those capabilities. "Next year, we'll be executing many infrastructure projects," confirms CoBank's Donna Corrigan. Her CoStar team will work with the infrastructure team to upgrade servers and database releases and migrate from a storage area network to networked attached storage.
  • Data management. The most forward-thinking midsize firms are looking beyond the established platforms and tools, examining processes and policies around data. Data quality audits and regulatory compliance issues are taking center stage.
  • Additional data. Midsize companies are also eyeing new data sources, both inside and outside company walls. "We'll be making our data a lot richer," says Smith+Noble's Mary Shanahan. The company plans to acquire transactional and demographic data from external providers. "This will help us improve our forecasts and understand our customers even better."

As midsize companies shed their operationally focused, authoritative cultures and embrace BI, faster response times and happier employees are only the beginning. With steps already taken to improve efficiencies and enable fact-based decision-making, product innovation and demand creation can't be far behind. All it will take is continued executive commitment.

That, and a little money.

Jill Dyche is a partner and co-founder of Baseline Consulting as well as the author of "e-Data" and "The CRM Handbook" (Addison Wesley, 2000, 2002). Write to her at [email protected].

This article is part of a CMP Media Package on Business Innovation within midsize companies. For links to related stories from CRN, InformationWeek, Intelligent Enterprise, IT Architect, Optimize and VARBusiness, as well as other online features, go to businessinnovation.cmp.com.