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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.

The most famous line in The Great Gatsby was once uttered over dinner by F. Scott Fitzgerald to his companion, Ernest Hemingway. "The rich are different from you and me," Fitzgerald said.

"Yes," Hemingway responded. "They have more money."

The story may be apocryphal, but it makes the point. The curse of midsize companies is to be brutally aware of the budget luxuries of their large corporate competitors. Five years ago, this budget gap meant a huge disparity in IT infrastructure, time to market and innovation. Midsize companies had neither the staff nor the automation in place to compete with the big shots.

But all that's changing. Nowadays, midsize companies are working harder and smarter than ever. Without the burdens of aging legacy systems and unwieldy organizations, midsize companies are quickly deploying and using systems to understand their customers even better. The challenge is pushing customer intelligence and decision-making authority to front-line workers. If midsize companies can make this transition, the difference with big companies might only be a matter of money.

Midsize Myths

"Our executives understand the value of information to the bank and by extension, to our customers," says Donna Corrigan, director of business intelligence (BI) at CoBank. "Consequently, funding hasn't been the top issue for our BI program."

CoBank is a midsize lender serving the Farm Credit system and agribusiness. Corrigan knows what the bank's customers want, and that includes data. Corrigan's CoStar program offers a range of services, from data management to BI to data provisioning, via a data warehouse. The focus is on quick and consistent provisioning of corporate data for internal and external purposes.

Until recently, a solid, well-thought-out customer intelligence environment was a rarity at midsize companies. But many firms are challenging tired myths, such as:

  • Midmarket firms don't think strategically. Although their appetite for weighty McKinsey-class strategy planning might still be low, managers of smaller companies are hungry for any information that helps them compete. Most of them recognize customer intelligence as a strategic enabler.
  • Midmarket executives don't prioritize IT. True, they don't have the patience for benchmarks and protracted conversations on feeds and speeds, but midsize managers are often more flexible when it comes to acquiring and rapidly deploying new technologies.
  • Midmarket firms don't buy customer analytics. Conventional wisdom says that midsize firms are more focused on operational pain and that understanding customers is considered a luxury. But new vendor offerings include a slew of BI solutions targeting companies with revenues of less than $1 billion. It turns out these companies are buying at a faster clip than the big shots.
  • Midmarket companies are slower to innovate. On the contrary, flatter organizations and management involvement foster a higher degree of consensus about how to be smart and fast.

Midmarket firms aren't only investing in IT for more strategic programs, they're investing proportionately more money than larger firms. A June 2005 AMI Partners research study predicts IT spending by midsize retailers will top $30 billion by the end of the decade, representing a compound annual growth rate of nearly 7% — compared to the 4% increase expected for large companies. Along with wireless technology, the AMI study foresees midmarket investments in CRM, data warehousing and BI having the most impact on business objectives such as customer acquisition and retention.

Midmarket BI's Changing Landscape

Peruse Digital Insight's 2004 annual report, and you'll read about customer focus in action. A $188 million company that provides online banking services to financial institutions, Digital Insight is not only out to help its customers make money, it's out to improve the experience of its customers' customers. Online banking consumers are up to 40% more profitable than their offline counterparts, according to a Citibank survey. Digital Insight's mission is to help its bank and credit union customers increase online banking adoption.

"One of our first steps is to provide our clients with data about their operations and customers," says senior vice president and CIO Bill Kontgis (see Debriefing). Kontgis's team is not only rolling out an enterprise data warehouse replete with data from across the company's heterogeneous departments, it's also deployed a comprehensive CRM platform that tracks customer marketing and service activities.

"Our reporting spans end-user activity, Web site statistics, scheduled activities, administrative activities and overall operational management reporting," Kontgis says. "Of course, having enterprise-level data also lets us service our internal data needs."

Many midsize firms that put their faith (and money) in BI two or three years ago are now reaping the rewards. As success stories start streaming in, business and IT managers obsess less about costs and more on downstream returns. But fast deployment remains the Holy Grail.

"We have a large number of customers that fall in the $250M to $750M range," says Morris Beton, CEO of Noetix, a portal-based reporting tool for Oracle and Siebel implementations. "Customer intelligence is a huge issue as they face larger competitors. The common denominator isn't cost as much as the need for quick-to-deploy reporting. The midmarket doesn't have the time or patience for big, custom-developed applications."

These companies are arguably even more responsive to their markets than the big players. They engage their customers often and are more likely to poll individual customers about specific preferences and needs. Many of their customers prefer doing business with smaller firms because of the perception of high-touch service and personal relationships with company representatives.

For instance, customers of specialty retailer Build-A-Bear Workshop can find founder and CEO Maxine Clark in one of the company's stores two to three times a week. She also maintains an e-mail list of "cub advisors" who represent the firm's children-under-12 customer base. Digital Insight's client advisory board meets regularly with company executives and product developers to discuss new product plans and review upcoming release features.

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