The U.S. WestDayton Hudson Story

The U.S. West/Dayton Hudson Story

In 1999 U.S. West (now a part of Qwest Communications), was an $11 billion telecommunications company that served more than 25 million customers in 14 states, including residential, small- and medium-sized businesses, federal, education, Internet service providers, and large customers. In 1999 U.S. West served 32 strategic accounts that generated $400 million, or 30 to 40 percent of U.S. West's revenue from large industrial and commercial businesses. Twelve senior account managers served the largest of these strategic accounts (Dayton Hudson Corporation, Wells-Fargo, Boeing, etc.). For four years Vicki Towey had been the SAM for Dayton Hudson, the retailing giant (Dayton's, Hudson's, Mervyn's, Target Stores) based in Minneapolis. It was a complex job at which she excelled.

In 1999 Towey estimated that she was maintaining or orchestrating more than 60 relationships at Dayton Hudson—at all levels of the organization. She spent a great deal of time working with Dayton Hudson's operations people, its planners, the firm's managers, and executives. Managing multiple relationships, she said, allowed her to determine what was keeping both middle and upper managers awake at night. It also allowed her to determine Dayton Hudson's strategic and day-to-day business needs—in many cases before Dayton Hudson fully realized those needs.

In the mid-to-late nineties, Dayton Hudson was undergoing the pain of consolidating three autonomous divisions' information systems & communications infrastructure. At the same time, Dayton Hudson was planning to build a 14-story office tower in downtown Minneapolis. Dayton Hudson employees at many levels confided in Towey that they were not looking forward to a similarly complex task of designing and managing the IT and communications infrastructure for the new building.

The task was complex because it required managing the multiple suppliers needed to establish the routes through which voice, video, and data flow in an organization. This communications infrastructure can involve hundreds of services, all of which need to smoothly work together and most of which need to be easily accessible from the employee's desktop. For Dayton Hudson's new building, the required services included E-commerce, fiber-optic cabling, voice, video, and data services, LAN switching services, WAN connectivity, disaster recovery services, and work-at-home portfolios—just to name a few. Each of these services was offered by multiple vendors, which meant that in a given project someone had to manage dozens of suppliers so everything came together on time and under budget.

But where Dayton Hudson saw a major hassle, Towey saw a major opportunity: to gain the majority of the communications-infrastructure design business by becoming accountable for those hassles. She would bundle all the necessary services by acting as a general contractor for the design and development of the Dayton Hudson building's communications infrastructure. When Dayton Hudson sent the RFP out, Towey believed she had a major opportunity to apply the knowledge and relationships she had developed over nine years to capture the lion's share of the business. She said she "wanted to own the desktops" at the new Dayton Hudson office tower. When Dayton Hudson sent the project out to bid, it narrowed the choices down to 20 suppliers, then 8 suppliers, and then 1 (U.S. West).

Dayton Hudson chose U.S. West because of the unique service bundle that Towey and her team had structured. Essentially, Towey had translated all the concerns voiced to her by Dayton Hudson middle and upper management into a customized bundled solution. U.S. West would act as the general manager for designing and developing the communications infrastructure (voice, video, data), assuming responsibility for project management and offering competitive flat labor rates for most of the required tasks. This meant that Dayton Hudson would not have to deal with multiple communications infrastructure vendors, only with U.S. West. With the resources allocated and ready, service-level agreements and technical specifications drawn up, U.S. West started delivering its Dayton Hudson "service delivery partnership solution."

The number of services bundled was so great that, in many cases, the products Dayton Hudson bought were not U.S. West's. For example, Dayton Hudson bought a switch from one of U.S. West's major competitors, but the competitor simply installed the switch and then U.S. West installed all peripheral equipment (sets) at the flat labor rates, saving Dayton Hudson significant costs in the process. Towey continued to manage internal relationships, introducing U.S. West and subcontractors to her Dayton Hudson contacts and making sure that the project went smoothly. She says that at this point she spent a great deal of time "keeping all the balls in the air." Towey's solution allowed Dayton Hudson to do what they did best—retailing—and allowed U.S. West to assume the total project management accountability for infrastructure design and development, and to reap the rewards for so doing. It was one of those times when supplier performance was easily judged and tracked: was Dayton Hudson having to assume any of the communications infrastructure hassles, and did that infrastructure allow the effective delivery of video, voice, and data?

Dayton Hudson estimated that U.S. West's "service-delivery partnership solution" saved it millions of dollars. And customer satisfaction was never higher. In 1998 Dayton Hudson's Executive Vice President and CIO Vivian Stephenson awarded U.S. West its DH CIS' Best Business Partner Award. As Stephenson said in her award letter, "These awards recognize vendors who have achieved excellence in service, leadership, and execution."

There are also major benefits for U.S. West. First, the contract generated $5 million in incremental business. Second, because U.S. West designed the building's technical specifications and installed the vast majority of hardware and software, U.S. West knows the building and its communications infrastructure better than anyone and will be providing technical assistance, including dedicated on-site technicians, for many years. Third, Dayton Hudson was about to begin an even bigger project, a new 32-story corporate headquarters building in Minneapolis. No firm was better positioned than U.S. West to develop that building's communications infrastructure—and U.S. West again won the bid and its $10 to $15 million incremental revenue. Without the 60+ relationships and deep knowledge of Dayton Hudson challenges, Towey would not have been able to identify the opportunity. Without her project management abilities and her support folks, she would not have been able to take advantage of the opportunity. Towey's success positioned her and U.S. West for even more business from Dayton Hudson. Deep customer knowledge and firmwide relationships led to huge dollar paybacks for both supplier and customer.

Such in-depth relationships and account knowledge also led 3M in its success with IBM Storage, which we describe below.