Are Your IT Priorities Upside Down?

You've finally done it. After 30 grueling months of implementing an enterprise resource planning system, your managers now have access to data that's integrated company-wide. But while you were busy getting your financial data in sync with your manufacturing data, an upstart competitor invested its resources in cutting-edge technology for its frontline staff. Your competitor now has happier employees and more satisfied customers, and has managed to increase market share and profits. Your profit margin hasn't budged and customer churn is as high as ever. Are your IT priorities upside down?

In traditional top-down organisations, most IT investments focus on executive information systems (EIS) and back-office systems (such as manufacturing information systems, marketing information systems and HR information systems) with the front lines getting only low-level, mature transaction support systems (such as automated cash registers or sales contact management systems). These companies typically graft on separate data collection systems to drive their EIS and back-office systems, sampling a random subset of customers or conducting periodic surveys. Frontline functions (including sales, installation, customer service, technical support) are each managed separately and optimized locally, and are therefore disjointed and not integrated. Even in companies that have implemented enterprise resource planning (ERP) systems, frontline customer-contact employees continue to occupy the lowest tier in terms of status, responsibility and compensation levels, and consequently they tend to have low morale and high turnover. Their impact on customer satisfaction, however, is arguably greater than that of any other group. Not surprising, such companies are beset by high levels of customer discontent and churn, and weak financial performance.

Forward-looking companies, however, focus on deploying cutting-edge IT directly at the front lines for use by customer-facing employees as well as for direct access by customers. Information needed for monitoring and control is captured at the source and fed directly to back-office systems and EIS; it is detailed (every transaction is captured, making it possible to drill down to the level of individual customers) and timely so that it represents a rich source for analysis and enables the development of personalized offers for specific customers. In these companies, frontline employees are highly professional and competent.

Such technology deployments can provide companies with sustainable competitive advantage because empowering frontline employees with powerful information tools has a large and demonstrable impact on customer satisfaction and retention. Evidence marshaled by Frederick F. Reichheld in The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value (Harvard Business School Press, 1996) clearly demonstrates that retaining the right frontline employees contributes significantly to customer loyalty, which in turn leads to greater profitability. Process redesign, automation and the use of sophisticated frontline information systems can greatly raise frontline employee productivity while increasing customer satisfaction and thus retention.

Frontline Systems in Action

High-performance companies such as General Electric, Dell, Wal-Mart, Cisco, Ingram Micro and USAA have all invested heavily in frontline information systems (FIS). Examples of aggressive-and successful-adopters of cutting-edge FIS include Federal Express (with its early use of wireless scanning devices and current leveraging of the Internet to provide customers with automated package tracking), Hertz (which automatically creates customised maps and uses wireless technology to process car returns) and Fidelity (which equips its best customers with specialized pagers that can be used to initiate trades and can let them know when stock prices rise or fall by a given amount).

Many frontline systems were designed primarily for processing customers efficiently. But progressive companies are starting to recognize the potential of FIS to serve as a powerful marketing tool. For example, customer-service employees with access to customer buying histories can be empowered to be more responsive to customers and to recommend complementary products to customers who call in for service.

A good FIS not only provides front-line employees with industrial strength tools to respond in real-time to customer needs, it also makes available the expertise of the entire company to the individual employees who serve customers. For instance, Andersen Consulting equips its consultants with a CD-ROM called the "Global Best Practices Knowledge Base," which contains best practice information on 170 business processes. Armed with this proprietary resource, Andersen consultants can quickly show potential clients how to improve many basic business processes.

Companies that leverage laptop computers, wireless communications and the Internet for their sales forces have improved their performance and productivity in the areas of account management, lead management, literature fulfillment, reporting, proposal generation, responding to customer inquiries, quote status, inventory checking and so on. Those salespeople spend less time on sales administration and paperwork; there is no need for a salesperson to contact marketing for literature or manufacturing for inventory availability. Since salespeople are not available 24 hours a day, technology can be used to answer customer questions and fulfill their needs around the clock.

Extraordinary ROIs

Successful FIS projects tend to generate exceptional ROIs, with investment payback periods often measured in months or even weeks. Back-office systems and EIS projects, on the other hand, rarely exhibit ROIs greater than 20 per cent. This is because the use of sophisticated FIS leads organisations to achieve quantum improvements in both the effectiveness and efficiency of their marketing activities. The unit costs of most frontline technologies drop steeply with volume, making their deployment across the entire front line quite economical.

In general, FIS projects carry a higher risk but a much greater potential return; deploying them successfully requires close partnerships with IT suppliers as well as a deep understanding of customer behavior. Many vendors are eager to add greater value to their products by turning them into frontline systems. But beware: Systems designed to meet generic needs of the average customer may not meet the specific requirements of a company seeking to provide top-notch customer service.

In an increasingly high-tech environment, technology alone cannot offer sustainable competitive advantage. Companies must develop very strong interactive marketing capabilities; companies with the strongest, most personalized customer relationships will prevail. Technologies that enable and strengthen such relationships-such as frontline information systems-will be an absolute necessity for companies that want to remain competitive.

Spending your money where it shows is far better than spending it on arcane management information systems. That visible frontier is the front lines, where the rubber meets the road, where the company meets the customer and where futures are assured or decimated.

For too long, IT investments-and the attentions of IT executives-have focused on the back office; it is time for IT to move aggressively to the front lines. It is time to turn your IT priorities upside down.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

• Bookmark this page
• Share this article
  •  
  • facebook
  • slashdot
  • digg
  • Reddit
  • stumbleupon
  • linkedin
  • twitter
• Got more on this story? Email CIO
• Follow CIO on twitter

• Share
  Share this article

  •  google+
  • facebookfacebook
  • slashdotslashdot
  • diggdigg
  • RedditReddit
  • stumbleuponstumbleupon
  • linkedinlinkedin
  • twittertwitter
• print
• email
• Bookmark