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Build the Business Case

Build the Business Case

Extracting value from the customer's customer is no easy task.

CIOs had better be able to swiftly implement effective IT solutions for their companies’ customers. Fail at that and you’re fired. But strategically savvy CIOs recognise that future rewards will come from implementing effective solutions for their customers’ customers. Think of it as CCRM — customer’s customer relationship management.

That’s precisely the implementation challenge confronting Ticketmaster CIO Sean Moriarty. Los Angeles-based Ticketmaster is, of course, the world’s largest and most technologically intensive ticket vendor. It has two customer sets — the people who actually buy the tickets, and the stadiums, venues, teams, leagues, bands and acts that want to sell them. I was struck by a comment Moriarty made about what most worried him as CIO.

His real management problem, he says, isn’t the technical execution of innovative ideas but convincing Ticketmaster’s best customers to give him access to their best customers. Ticketmaster wants to serve both. For example, when Ticketmaster sells tickets to a Knicks game at Madison Square Garden, it would also like to book dinner for that customer at a restaurant near the Garden.

The catch is that there may be ticket-sellers that don’t want Ticketmaster to drive their businesses. While ticket buyers — the customer’s customer — might be quite happy to obtain discount dinner coupons along with pregame reservations at a nearby restaurant, such offers could cut into lucrative concession sales at the sporting event. And that would make the venue very unhappy. That creates a classic channel conflict. How should Ticketmaster strike a balance between investing in its customers and investing in its customers’ customers?

Moriarty’s CCRM conundrum transcends tickets. Virtually every company in every industry faces some facet of this conflict. Brokers might think twice about how much access a mutual fund should have to its clients. While the funds would love to market directly to the client, the brokers don’t want the competition.

Network technology makes it even easier for channel conflicts — and channel opportunities — to arise. Ticketmaster has decided that future growth depends on its ability to use technology as a medium to create value with and for its customers. That means Moriarty has no choice but to invest time in persuading his counterparts at key client companies to participate in pilots and prototypes. And if that means Ticketmaster bankrolls the bulk of the development, so be it.

Money is just one reason customers are reluctant to jointly pilot new initiatives; Moriarty acknowledges that some clients are also nervous about sharing customer access. “We think we can make it sufficiently cheap and easy to get our clients on board,” he says. “But you have to make more of a business case than a technical case to get them to do it.”

In other words, CIOs are becoming portfolio managers of pilots. It’s not enough to get their own management committees to invest in pilots, CIOs have to get customers to co-invest with them.

At this level, technical quality becomes a necessary but not sufficient condition for effective implementation. Managing the collaboration and splitting the proceeds become the dominant business issue.

Ironically, a pilot that’s too successful — that is, one that cuts too dearly into a venue’s profits — can pose an even greater threat to a collaboration than one that fails. Unambiguous success can inspire unalloyed greed. Were Ticketmaster to sell Bruce Springsteen albums online as well as concert tickets, the promoter and the record company would be furious with the middleman for stepping on what they consider their turf.

So unless the business incentives are perfectly aligned — such as, we can’t do it without them and they can’t do it without us — collaborating on a good idea will prove easier than implementing a great one.

The rise of networked pilots, supply chains and channels has to bring a greater level of transparency to the business enterprise. If you want your partners to be more open, you have to be more open. So at the very least, Ticketmaster would have to let a Madison Square Garden know how many people took advantage of that dinner promotion.

“When business goes online, transparency should be your friend,” Moriarty says. “If it isn’t, you’re screwed.”

He’s right. The key to successful piloting with partners will be making it easier for everyone to see how the benefits of collaboration will outweigh the costs. CIOs simply can’t serve their customers’ customers in the dark.

Michael Schrage is codirector of the MIT Media Lab’s eMarkets Initiative. He can be reached at schrage@media.mit.edu

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