Chapter 3: Control - Leverage Corporate Ecosystems

A company is an ecosystem. Information sustains and enables the connections between the disparate members ”customers, suppliers, partners and internal operations. But for many companies fragmentation has disrupted the connections. Without the free flow of information throughout an enterprise the ability to ask questions, get answers and solve problems is diminished. Opportunities are missed. Frustrated employees are less productive.

How do we structure our organizations to best capitalize on the access and use of our information resources? How do we eliminate fragmentation and optimize our opportunities? By consolidating the disparate data fragments spread throughout our various divisions and units, so that everyone who needs it has access to timely and accurate actionable information from one centralized resource, we ensure that everyone in the ecosystem has one consistent view of the business. One resource means one view.

Fragmentation and Consolidation

Fragmentation costs money.

Consider this ”a global manufacturing company with buying managers around the world has an enormous procurement budget. Without knowing it, the company s managers may be buying supplies from the same companies in different parts of the world. If they knew, they could aggregate their buying power and potentially save millions of dollars a year.

The buying managers need one view. The company needs information resources feeding its network of relationships. If the information is available, managers can act on it, and not just managers, but downstream deep into the organization employees will be better able to make daily decisions. The savings are immediate. Controlling outcomes expands opportunity.

It is of course possible to patch together the scattered information sources in a company and create makeshift links, dotted line connections. But those links will only be as strong as the question they were originally built to answer. Makeshift connections are not agile. Makeshift connections can t accommodate new ways of looking at problems. They can t instigate new questions or offer new solutions. Patches are necessarily constructed to fix an existing problem ”they don t prepare a company for the unexpected. Retrofitting is, unfortunately , exactly what it says ” backward-looking, unable to adapt to an uncertain future. No one drives by looking in the rearview mirror. Why run a business that way? Information sources linked by makeshift connections will generate mistakes like multiple, different sales offers sent to the same marketing prospect, or new loans approved for bank clients currently in default.

Patching doesn t solve fragmentation, and it doesn t save money. Information has to be truly consolidated into one centralized resource. Information is only an actionable, forward-looking resource when it delivers a complete, consistent view of the business and thus can answer any question into the future.

This may sound like a grand scale, expensive project. It s not. A strategically targeted , incremental consolidation plan will result in cost reductions right away. Start with input from users and develop a small but scalable first step. The demonstrable results will fuel the natural expansion of the project. It s simple economics. Getting rid of silos , stovepipes, divisional units ”in other words, getting rid of fragmentation ” always makes good financial sense. The benefits of consolidating are cost savings and revenue opportunities. Let s look at some top companies who are making the right changes. Here are just three companies across the banking, retail and package delivery industries that have proven the simple economic truth ”consolidating pays off. Let s turn to the banking industry first.

Bank of America

After years of an aggressive acquisition strategy, Bank of America s information systems were an amalgam of many different companies. Prior to merger, each company had operated as its own entity. And, that meant in the wake of a decade of organizational consolidation, the state of the information resources remained scattered, inconsistent and incomplete. As Cathy Bessant, Chief Marketing Officer says, ships passing in the night conversations were common and time consuming as people debated over competing data, instead of honing in on solutions. Bessant said it was clear to executive management that one version of the truth is essential to improving the business. Achieving a single version of the truth became a shared goal throughout the company. Having access to one consistent set of facts significantly enhances risk management, balance sheet management, decision-making and, ultimately, the customer experience. It also means the bank can better protect the privacy of customers information ”among the highest priorities for Bank of America as foundational elements to earning trust and strengthening relationships.

Getting disparate departments to agree on the budgetary requirements of achieving the vision of a single version of the truth was complicated. Fortunately, the Bank of America team, thinking pragmatically, demonstrated that the first crucial decision could be made based on simple economics. The cost savings of having one consistent, reliable, sustainable, centralized hub for all information resources would be substantially less expensive than continuing the fragmentation ”a $60 million savings over three years. In the first year alone the project was self-funding. The decision to centralize was only the first of what will be many decisions.

The project of achieving a single version of the truth is ongoing, but enormous progress has been made. Once people understood they could trust the new information capability, the demand for access to it skyrocketed. Less time is spent on the data debate. Conservative estimates are that productivity increased 20 percent. The velocity of customer contact increased, and at 150 customer contacts per second, there s no doubt that even the smallest increments of improvement in those moments are a gold mine of untapped value. With reliable data at their fingertips, frontline associates will be better able to serve the particular needs of clients in real-time, while understanding the profit implications to the bank. Not only will customer satisfaction and profitability be improved, employees will be energized. Eliminating fragmentation unleashes employee creativity and the results show up on the bottom line.

 

In the retail industry, here s one of the ways that Office Depot has been retooled.

Office Depot

Office Depot is one of the largest suppliers of office products to individuals and businesses. The company leads the industry in every distribution channel, including catalogue , Web, retail stores and contract services. The company bet a significant amount of its advertising budget on the idea that store customers would ultimately migrate to the Web and vice versa. Office Depot believed that customers in one distribution channel would become customers in another channel if they were offered the right incentives. The decision was based on assumptions derived from summary data from each channel, which, it turned out, was misleading when aggregated from the disparate sources.

When the company centralized its information and was finally able to look at the details of its assumptions, this long-held principle was proven wrong. It turned out that customers who shop through a particular channel tend to stay in that channel, and not switch to another. Office Depot realized a $26 million savings in its advertising budget simply by dropping the cross-channel promotional initiatives targeted at switching customers to new channels. The money saved was redeployed to proven profitable initiatives.

 

In Germany, Deutsche Post is realizing the value of consolidating on the quality management front.

Deutsche Post

In 1998 German postal giant Deutsche Post s quality management was in need of improvement. There were several ways of doing things. Information source availability as well as a clear understanding and common view on the required data needed to be developed. The information on a package was kept in separate systems, so it was difficult to track the full cycle of a package delivery. This made the short- term rectification of quality issues difficult.

Deutsche Post was able to save significant resources just by consolidating its information, instead of housing information in disparate parallel locations. But the real value was realized through quality improvements made possible by the centralization of information. The ability to truly measure and manage quality issues through key performance indicators resulted in delivery time improvements in the order of 5 to 6 percent over three years, which, for the postal business, is materially significant.

Added to those improvements is the fact that with reliable information consistently available, the workplace culture has become more dynamic. Employees have changed from information seekers to information analysts. The more involved employees are, the more creative, solution-oriented and productive they become ”yet another example of how processes can be optimized as well as cost savings realized.

 

Doing business better doesn t cost money. It earns money. Eliminate fragmentation. Centralize, standardize and make accessible the information resources in the company. It makes economic sense.