Enables Smart Enterprises

As the foundation for building smart enterprises, business intelligence (BI) has become the key to competing in the customer economy. It has become a key enabler for creating smart enterprises--characterized by smart applications, smart customer interactions, and smart decisions--by integrating major enterprise-class applications such as ERP, CRM, supply chain management, information portals, and enterprise-class finance and risk management applications.

With a BI system in place and a company on track with smart-enterprise thinking, executives can launch a campaign to work with IT management to develop a smart enterprise, allowing it to do the following:

• Define and find low-risk, high-profit customers
• Determine which products produce the most profits
• Determine the lifetime value of each customer
• Find the company's most loyal customers
• Determine the relative effectiveness of all marketing programs
• Determine how quickly the company responds to customers, particularly via the Web and e-mail
• Analyze the types of postsale services that are most likely to increase repeat business

The use of BI is a means to addressing how to accomplish these tasks and then designing and deploying the smart-enterprise applications that will enable a company to maintain competitive advantage over its customers.

BI is pervasive in all major industries, with specific missions and functions in each segment. Table 1, on page 2, identifies some examples of the use of BI throughout various industries.

CUSTOMERS ARE THE KEY

Regardless of the industry, no customer interaction--including one-to-one marketing, customer services, or sales, for example--can be intelligent without the key concept of developing a single view of the customer. This view encompasses sales, marketing support, and ERP. It entails all communications channels, including Web, phone, fax, mail, and e-mail. Its purview crosses all lines of business: loans, insurance, and various accounts. There is a record with detailed transactional histories for each customer and often a view of an entire household's relationship to the company. Smart enterprises must strive for a single view of their customers and then work to develop real-time personalization and interactive customer dialogue. This is the essence of smart company customer management, and of business intelligence.

Most executives have heard various general business mantras that address the critical importance of maintaining good customer relationships:

• A 5 percent improvement in customer retention doubles profits.
• It costs more than 10 times as much to acquire a new customer as it does to retain an existing one.
• Corporations lose half of their customers every five years.

These and other common beliefs may not address your specific customer retention or lifetime value issues, but they assuredly speak to the business challenge that all enterprises face. In addition, an estimated 85 percent of business information is unstructured, spread around the organization in e-mails and documents locked in personal computers, and not generally available to the enterprise.

Marketing to customers is a multibillion-dollar business in the U.S. alone, and all companies worry about the effectiveness of their marketing expenditures. Without a single view of your customers, you can easily be wasting substantial percentages of your marketing budgets while losing competitive advantage in your existing customer base and failing to keep pace with your industry in attracting new customers.

Creating single customer views means optimizing processes related to product marketing, engineering, manufacturing, and customer service. It's also critical to be able to reuse customer knowledge; to generate leads, promotions, and campaigns; to integrate ongoing sales force automation efforts; and to close sales or deals. A customer feedback loop (as represented in Figure 1 on page 3) enables smart enterprises to capture and share customer knowledge; get customer feedback; retain customer knowledge; and reuse customer knowledge in many areas of the business, such as new product design.

THE IMPORTANCE OF ONE-TO-ONE CONTACT

Creating a single view of customers and working to capture customer knowledge leads to more-efficient ways of identifying your best customers and realizing some of their lifetime value to your business. Once you've taken the step of creating a single view, you can continue down this path by increasing the level of one-to-one customer contact.

The Internet and the World Wide Web--paradoxically, in that they encompass a highly impersonal medium with which people often have intimate, personalized contact--can serve ideally as a way for smart enterprises to communicate with their customers. Rather than flooding customers and prospects with expensive mass marketing campaigns, for example, smart enterprises invest in technologies to increase the level of one-to-one customer contact. This all starts with leveraging technology to build a dialogue and a learning relationship with customers.

Although companies have multiple points of contact, or touchpoints, with each customer, the information gleaned from each contact is kept in isolated applications such as marketing, sales, and service databases that are rarely incorporated into a single data system that merges historical data with intelligent analytical models. As a result, many companies cannot easily pinpoint which customers are profitable and which are not, which are likely to default on a loan, or which are likely to respond to particular products or promotional offers. More important, few companies can identify those customers or prospects that have the greatest potential to become profitable customers over time.

For CRM solutions to be used as an effective competitive strategy, smart enterprises need to empower them with their BI systems as well as other enterprise applications. Identifying target customers requires leveraging the customer information hidden in traditional operational systems such as customer order entry, ERP, and transaction processing.

An effective CRM strategy entails two-way, asynchronous, and real-time communication with customers, leveraging Web and personalized e-mail communications. This is the foundation for building a learning relationship with customers. Also key are processes and systems for integrating customer information from sales, marketing, and other systems into a historical and cross-functional data warehouse--as well as workflow management tools for automating business processes. Finally, real-time, secure, reliable customer interaction requires integration of CRM solutions with operational and analytical information systems. Such integration enables companies to personalize every customer interaction, resulting in more opportunity for sales and improved customer retention.

BUILDING THE SMART ENTERPRISE

Companies should follow several common-sense principles in building business intelligence into their enterprise. Many of the same underlying principles are also followed by companies building CRM and ERP solutions. In fact, a CRM or ERP solution will be ineffective without a BI component, and BI is of little value in a vacuum but, rather, needs to be integrated into enterprise-class applications such as CRM. So all companies that seek to become smarter should follow some basic guidelines:

1. Start small, plan for expansion, and ensure scalability. Implement technology in phases to allow users ample time for training and becoming familiar with new processes and tools.
2. Perform cost justification and return on investment (ROI) analysis. Select initial projects based on availability of customer and product information and the anticipated ROI resulting from the BI integration.
3. Focus on the business, not the technology. Define the company's customer relationship management goals. Articulate how information will be used to support marketing, sales, and customer service goals.
4. Find the right business sponsor. Get senior management on board and out front to endorse the technology-enabled BI strategy and ensure its adoption throughout the organization.
5. Put end users on the implementation team. This assures development of CRM solutions with cross-department functionality and practical usability.
6. Form a cross-functional committee involving departmental representatives who will use or manage the BI-enabled applications.
7. Align information technology strategies with marketing, sales, and service strategies to support the company's customer development and management objectives.
8. Develop a solution with multiple communication channels based on customized customer preferences.
9. Consolidate essential customer, sales force, and sales channel information in a central data warehouse to support customer interaction operations (sales, call centers, campaign management) and business intelligence operations (query and reporting, customer segmentation, predictive modeling).
10. Make it easy for customers to provide the information you need in order to serve them through multiple interactive communication channels.

In contrast with traditional enterprises, smart enterprises are always on, intelligently interacting with customers across the world in real time via many channels of communication, including the Internet and the World Wide Web. This intelligent and real-time customer interaction requires massive processing power and continuous real-time performance. All the components of any enterprise-class solution must work together in a cohesive architecture that supports the company's plans for immediate success and sustainable, long-term growth. Broad user accessibility, scalability, flexibility, investment protection, and interoperability with other business systems are critical.

In an ideal world, companies will integrate business intelligence into the core enterprise information system architecture. The reality is that many companies will need to find ways to modify and extend legacy operational database systems to support BI initiatives. In either case, working with a trusted team of experienced network business leaders can make it easier to plan, develop, and deploy powerful BI solutions in the shortest-possible time frame.

An apt analogy for BI involves the automobile. Just as it makes no sense to build a beautiful, high-performance car but forget to include a steering wheel, it would be unfortunate to construct a masterful CRM or ERP solution without including a serious BI component. Imagine yourself or your top people as the skilled, knowledgeable drivers of that completed car, and you are on your way to the road that leads to the smart enterprise.

Cyrus Golkar is a senior information technology professional specializing in enterprise business solutions at Sun Microsystems. He is responsible for incorporating his background in business intelligence, CRM, intranets, knowledge management, and portals into Sun's enterprise solutions.