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Firing on All Cylinders

Improve efficiency and horsepower by tuning up business operations.

by David A. Kelly

Executive summary:

The challenge: Organizations must use periods of slow growth to step back and invest in strengthening their business models and their abilities to dynamically manage processes, products and customers.

The solution: A solid data infrastructure can help increase effectiveness as well as efficiency. Specifically, technologies such as data warehousing, business intelligence (BI) and customer relationship management (CRM) are vital to making smarter decisions about streamlining operations and maximizing opportunities.

Sometimes challenges bring about changes for the better. Instead of simply cutting back, smart companies can use dynamic financial swings to revive business and identify new opportunities. By leveraging data warehouse, business intelligence (BI) and customer relationship management (CRM) systems, organizations can uncover hidden insights to fine-tune or optimize business processes.

Reducing costs through greater efficiency and increasing revenues through improved effectiveness are the two most common ways to effect major change. But regardless of whether an organization focuses on one or both, the critical underlying factors are solid data and good BI.

“When things are going well, people don’t pay as much attention to the details as they need to,” says John Hagerty, vice president and research fellow at AMR Research. “When performance starts to erode, people need to get a better handle on exactly what contributes to an organization’s performance and what’s really driving business. They need to analyze performance at all different levels. That’s what business intelligence can do.”

Business leaders face even more decisions when economic growth is stagnant: Which stores do we keep open? What new product should be introduced? To whom should we market? What are the optimal price points in the current market? Such questions become even more important when profits are waning.

"When performance starts to erode, people need to get a better handle on … what’s really driving business."

—John Hagerty, AMR Research

Making the correct decisions requires starting with accurate data and having the proper tools to work with that data. Organizations need the right data infrastructure to support effective decision making. When used correctly, analytics can help target marketing efforts more effectively, identify the most profitable customers or products, and even find ways to drop unprofitable customers or products.

“During lean economic times, it’s more important than ever for companies to know where their marketing money is going and why,” says Adam Sarner, research director at Gartner. “The value proposition of good business intelligence is the ability to focus marketers on key insight and actionable information that they would not have realized naturally. Marketers need help spending their budgets in the right places.”

The power of CRM data:

Many organizations focus first on cost-cutting measures to bolster the bottom line. But that’s not the only option. In fact, a good customer relationship management (CRM) strategy can lead to effective and targeted investments that encourage growth.

Just because one segment of the market isn’t buying, doesn’t mean another isn’t. For example, while luxury sales taper off during a recession, retailers might find that consumers are purchasing lower-end products—and perhaps in even larger quantities. A store might sell the same number of bottles of wine, but with a much higher percentage of low- to mid-priced varieties. The key is to optimize product mix and market the right products to the right customers.

Similarly, the more effectively an organization can manage customer relationships and leverage its knowledge of the consumer, the better position it will be in.

From a CRM perspective, that means investing in technologies that create a positive impact in the short term while building a foundation for the long term. In other words, some CRM components may pay off with bigger returns during a downturn.

“The key is to pick technologies that will have the maximum impact on the organization’s strategic goals in each economic environment, while providing a solid foundation to build on, regardless of what happens with the economy,” says Adam Sarner, research director at Gartner.

That way, once the economy picks up, the organization will be ahead of the game. Waiting for a recovery to adopt CRM technology can jeopardize the company.

When considering a solution, organizations should look at these capabilities:

  • Marketing resource management can take the lead in managing an organization’s marketing investments.
  • Event-triggered marketing can communicate customer-specific, meaningful information to individuals, as opposed to generalized e-mail blasts or mass marketing.
  • E-marketing helps build the customer base and broaden reach.
  • Intelligent customer dialogue, based on knowledge management or business intelligence (BI) applications, can grow revenue through cross-sell or up-sell opportunities.

When a business faces uncertain economic conditions it has to make smarter decisions and get the most out of its resources and investments in a timely manner. This typically translates into fewer “trial and error” marketing efforts and a greater focus on generating a quick return on investment (ROI).

—D.A.K.

Why data matters

With deeper knowledge, instead of reaching out to everyone or investing in more speculative ventures, a company can maximize existing relationships and target areas for expansion. That’s why the ability to turn data into actionable intelligence, profitable decisions and more satisfied customers is crucial.

Data warehousing, BI and performance management are key technologies in understanding the fundamentals of profitability and identifying new opportunities. For example, BI can provide visibility and consistent analysis that might be spread across an organization, enabling decision makers to generate the insights needed to grow the business.

“Business intelligence and performance management technologies allow companies to understand and model performance so they can see what may happen in the future and plan accordingly,” says Hagerty.

Take the example of a call center: When considering staffing cuts, data on employee performance can be used to make smarter decisions. In addition, data analysis of customer value can identify the clients costing the most money as well those who are most profitable. With this understanding, the remaining staff can be allocated to effectively serve the most valuable clients and spend time improving the value of those who are marginal.

"It’s more important than ever for companies to know where their marketing money is going and why."

—Adam Sarner, Gartner

Knowledge at work

Along the same lines, consider these examples of how data analysis can help companies profit:

  • Targeted marketing. A data warehouse allows businesses to identify their best customers, empowering them to allocate precious resources to reach out and sell to those individuals. One such opportunity is the integration of Web behavior data with offline consumer data. A person’s online browsing behavior can be used to quickly identify what products, services, brands, sizes, destinations, etc., a visitor is interested in. A business can then use that data to communicate to the customer through any channel, whether it be via a personalized catalog, e-mail or mobile text promotion, a “by the way” comment to an inbound caller, or a relevant pop-up ad on its Web site or at an ATM. Web behavior can be a great filter to route callers to the right person or department in the call center.

    • A time to let customers go?

    Customers may come to a company through a variety of channels—including walk-in stores, direct mail, telemarketing, Web sites, e-marketing and partners. Different types of customers may consume different products or place different burdens on an organization. That’s why it’s important to understand exactly how an individual affects profitability.

    A data warehouse is a good place to begin to understand the relationship between consumers and profitability.

    That’s where value analysis comes in. Value analysis identifies not only the clients returning the highest profits but also those who are costing a company the most money. For example, a telco might identify habitual roamers who require the company to pay more in fees to other networks than these individuals pay in subscriptions. Encouraging them to join another carrier could save the telco millions.

    Powered by a data warehouse, profitability analysis can illustrate the profit and loss drivers for customers in specific segments and across different channels. Instead of just segmenting individuals into high- or low-revenue categories, profitability analysis allows organizations to account for expenses and differences of servicing consumers via various sales and marketing channels.

    While more complex than basic customer analysis techniques, profitability analysis allows organizations to dig deeper and really understand who their best clients are and why. This type of understanding can make the difference between long-term success and failure.

    —D.A.K.

  • Intelligent staffing. In an uncertain economy, organizations frequently struggle with how to best utilize human resources to minimize labor costs while ensuring maximum productivity. Employing operational BI capabilities can improve efficiency by updating a maintenance crew’s work priorities on an hourly basis. Mechanics’ schedules can be coordinated with the arrival of required parts, eliminating wait time. Moreover, the most important repairs can be prioritized so they are completed in the optimal order. The results include minimized labor costs, more work completed and fewer delays due to maintenance issues.
  • Improved corporate efficiency. Properly integrated throughout an enterprise, a data solution can improve an organization’s line of sight and enable better control of local operations through centralized purchasing, administrative and business services functions. The results can include a standardized and leaner list of top-performing vendors, more efficient supply chain processes, and significant monthly close-cycle reductions. In addition, interactive, real-time discount analysis can offer greater insights into which customers and suppliers should receive certain discounts and which should be charged more.
  • Optimizing inventory and resources. Having the right data can also assist inventory and resource optimization. Without a way to model the business or analyze what-if scenarios, companies can do little more than guess what the right mix is. But organizations that use BI tools to leverage historical data can optimize inventory, resources and even business processes. For example, retailers might use near real-time data analysis to determine the expected sales rate for top items by store. Within minutes, management can detect which items might soon be “not on shelf” and contact clerks to check. For a manufacturer, improved demand planning based on frequent and accurate data about orders, inventory, sales, shipments and promotions is essential. This critical information can be leveraged to reduce stockouts and eliminate excess inventory.

Norfolk Southern does more with data:

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Norfolk Southern Corp. (NS) uncovered greater efficiency and cost savings by tapping into the capabilities of its data warehouse. The railroad company, which earned $10.7 billion in revenue in 2008, had a growing number of customers demanding the latest information about their shipments.

Clients learned where their railcars were by calling the NS marketing, customer service or transportation departments. Staff spent hours looking up the information online, running reports and sending them to customers.

To replace this inefficient process, Blair Hanna, manager of e-commerce, and Mark Wittl, manager of customer applications, developed a Report Wizard so users could modify existing reports or build their own. Through this self-service approach, more than 12,000 customers now use the company’s accessNS Web portal for 24x7 access to shipment information.

With customers serving themselves, fewer employees are needed to take calls and manually prepare reports. This has translated into a significant cost savings for NS as the company adjusts personnel levels accordingly.

NS has realized the return on investment (ROI) in reduced expenses, while better serving its customers.

—Mike Westholder

Turn insight into profits

There’s no doubt that organizations are trying to make the most of what they have. By leveraging corporate data effectively to make optimal decisions, they can not only survive but even prosper.

"Business intelligence and performance management technologies allow companies to understand and model performance so they can see what may happen."

—John Hagerty, AMR Research

Forward-looking companies can use these periods of uncertainty to step back and invest in strengthening their business model and in their ability to manage business processes, products and customers more dynamically. To that end, a solid data infrastructure can help increase effectiveness and efficiency. More specifically, technologies such as data warehousing, BI and CRM can be vital in enabling smarter decisions about streamlining operations and maximizing revenues and customer opportunities.

David A. Kelly is a Boston-based freelance writer who specializes in business, technology and travel writing.

Photography by Getty Images
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