Payment and Transaction Processing economics
January 5, 2014
Ever since I worked at American Express and I still hear from folks that “oh these credit card companies make 4% of the transaction dollars”, I feel like documenting the whole flow of this industry and see the economics behind this. The way the transactions work are very well explained on this virtual school link: http://virtualschool.edu/mon/ElectronicProperty/klamond/credit_card.htm
The mix of payment instruments evolves from the dynamics between customers, retailers and issuers – cash, checks, credit cards, debit cards, fleet cards, mobile payments, biometric payments, etc. From the retailers’ perspective, the range of instruments that retailers choose to endorse depend on the costs and benefits of each – with remaining transaction values as below:
For credit card transaction processing industry in particular, the value chain of this industry is as below:
But the current trends in this industry are as below:
- Merchants, like Starbucks, have expanded pre-paid and store-card operations with payment processors, bypassing high cost clearing/ settlement networks
- A consortium of major banks, such as BofA, Chase and Citigroup, have started or purchased a rival clearing / settlement network
- Game-changing mobile and internet initiatives, like GSM and Paypal, have expanded into the traditional payments marketplace and captured a small but growing market share
- New lower cost alternatives, such as RevolutionMoney, have successfully attracted merchants in direct competition with traditional providers and established a low cost credit card alternative
- Core banking providers have developed integrated payment solutions embedded in their core banking applications
- Interchange is the fee Processors pay to the issuing banks via VISA/MasterCard and these rates are set by VISA/MasterCard through their associations. Typically interchange rates are based on a % of volume for credit cards & a rate per item for debit cards. This is evolving as new players are jumping in.
Plus add to this the mobile payments with companies like Google Wallet jumping into the fray. The mobile ecosystems consists of the usual players- retailers/merchants and financial institutions but also adds handset manufacturers and network operators.
Due to these platforms that needed built, the adoption varies in geographic areas. Currently the percentage of people that currently use a mobile phone for Banking Transactions at least once a month (according to EDC-GSMA Mobile Financial Services Survey):
Big Data – within, at, and outside your Company boundaries…
November 16, 2013
So the title of this blog is so uninviting and overflowing in people emails that I will have to do Push marketing to make people read this :-) .But with all our clients in almost all industries - from hospitality to financial services to retail - I never leave some strategic meeting where people wonder about the true strategic value of Big Data and get questions like “Is it really that new? “You know us oldies in business and technology, we have seen it all and someone just came up with a new buzz.” “What is this hoopla about the elephant called Hadoop?"
Well, like all things in life there are always perspectives and point of views. The usage of a process or technology to effect the top line growth and operational efficiencies is up to the culture, intent and execution mastery of organizations.
So Big Data from social media impacts a lot of business functions but greatest is in the front end of any business – your customer relationship management (CRM) processes and systems. It implies a fundamental shift in the way organizations interact with prospects, customers, employees, partners and other stakeholders. Leaders must take the first critical step of changing their mindsets and revising some long-held beliefs about building and managing customer relationships.
The traditional 4 Ps of marketing (famous framework by Jerome McCarthy) has a new dimension – PEOPLE. The technology has enable people to talk to anyone within the organization or outside.
- Outside the organization there are Customer Peer - Customer peer conversations (Opinion sharing, Discussions, Idea sharing, Complaints, Questions, Jokes, Gossip, News, Etc.) for Information sharing, Relationship building. These are “Off Board” Outlets – (e.g. Facebook, Twitter, YouTube, etc.) Public Internet Outlets that organizations do not control, but can choose to participate in
- At the company - customer touch points there are Customer - Employee conversations (call centers, chats, forums, Sentiment Monitoring, Brand association monitoring, etc. for Information sharing, Relationship building. These are “On Board” Technologies – that can be integrated into your public facing website to engage your constituents. Examples include discussion forums, ratings and reviews, idea solicitation communities, blogs, etc
So Big Data especially in the Entertainment & Hospitality business is surely evolving and rapidly for usage. Hotels, travel agencies, airlines, vacation clubs, and other industry players are unlocking the power of Big Data to dramatically improve products and services, thereby enhancing their competitive position and benefitting customers.
- Within the company walls there are employee – employee conversations (Opinion sharing, Questions, blogs, Etc.) for Information sharing. Hopefully nothing like NSA goof-up. “In Board” Technologies – that leverage social media techniques to facilitate collaboration and knowledge sharing between an organization’s internal employees.
But a major caveat to using all this is – data quality. I was on a Consulting panel recently where a good friend mentioned that companies are like true organisms – with a brain, muscle, fat etc. But the data is truly the blood that keeps this organism alive and running. I loved this analogy and carried it further in my head. Bad data can spoil the functions. Also polluted data (aka too much alcohol in the blood) can be devastating. Some threshold is OK. But that’s why we have data czars (aka police) catching folks doing DUI (aka management making wrong decisions under the influence of bad data). Now with sudden infusion of more diluted blood into the stream, how can we use the RBCs (red blood cells) properly. The elimination of a lot of White Noise in this big data to get to the little clusters of information wealth is where value is. The things to note on Big Data are:
- Enhanced revenue management: Hotels recognize that data analytics are helpful in establishing the optimal price for rooms and ensuring that as few as possible are empty. Hotel chain Marriott takes this approach further, using big data for price optimization in restaurants, catering, and meeting spaces too.
- Better relationships with hotel guests: When customer data is aggregated, instead of being fragmented across a hotel’s various divisions, the analytical insights lead to better marketing and customer service.
- Targeted Marketing Promotions and Targeting is being focus even more to enhance extra marginal revenue.
- User-generated content is often triggered by emotion
- Amplified via the “viral effect”
- Impact cannot be stopped or undone
- Does not follow the conventional rules of commerce
- Forces companies to act in shorter cycle times
- Fast and truly global
Healthcare Payment Integrity
October 10, 2013
A lot of Health Plans can generates incremental prevention savings by improving existing business practices, increasing the enforcement of claim payment policies, and developing new, robust solutions to increase claim payment accuracy.
Health claims functions everywhere face a similar set of challenges which inevitably lead to claims overpayments. Claims overpayment is one driver of increased medical cost that clearly can be controlled. In this world of Obamacare and the uncertainty associated with it, a lot of Healthcare companies are honing up this capability.
The typical methodology for calculating incremental prevention savings is structured around the establishment of a savings baseline using the four following inputs:
- Payment Ratio Report: To calculate a ratio that can be applied to a denied claim in order to derive the expected value of the denied claim (i.e. to determine the value of the claim, had it been paid). This is generally done by extracting all finalized paid claim lines over a 12 month period. Then one has to group the data at the claim type level (Facility/Professional) and calculate the ratio of the paid amount (net of any member liabilities) to the billed charges.
- Denials Baseline: To determine the value of historical denials associated with a particular payment integrity initiative prior to prevention implementation. This establishes a savings baseline that the company seeks to exceed through implementation of robust prevention measures.
- Leakage Baseline: To determine the value of claims inappropriately or inaccurately paid associated with a payment integrity initiative prior to prevention implementation.
- Denial Rate: The Baseline Denial Rate represents the percentage of the total suspect population that the Client would expect to deny for a particular claims payment integrity initiative prior to prevention implementation. This is done by dividing the value of the Denials Baseline by the value of the total suspect population for the initiative.
July 25, 2013
Fleet Management, of which Strategic Sourcing is a core part, is an integrated set of actions, which occur in a rational and logical manner, with the overall objective of attaining lowest Total Cost of Ownership (TCO). Key issues in fleet management involve capital commitments and management, as well as operating effectiveness and cost. Fleet asset utilization is not typically tracked or measured, which leads to unwanted outcomes, such as having more vehicles than necessary, additional operating and maintenance costs and not always having the right vehicles for the jobs they are needed to do. Additionally, fleet costs are usually fragmented and a rarely captured in total, which leads to problems in trying to adequately and accurately assess operating efficiency and evaluate out-sourcing opportunities.
The first step for true optimization is getting a good handle on the existing fleet in terms of its make-up, utilization and operating cost, reviewing the administrative and operating practices related to procurement, operations, maintenance and disposition, as well as determining replacement scheduling. The foundation is based upon the following three areas:
The areas to explore the fleet management practices:
- Strategy (replacement scheduling, outsourcing/insourcing and fleet organization)
- Operations (vehicle pooling, maintenance & repair, inventory management, fuel management)
- Administration (Standards & specifications, fleet utilization, budget & cost reporting)
- Fleet inventory (including but not limited to manufacturer and model year, type, location, VIN #, GVWR, acquisition price, options purchased, lease payment, annual operating and maintenance costs, sale price if retired, auction fees and class – how it’s used)
- Equipment Utilization – Miles, hours or both on equipment where there may be two measures of utilization
- Fleet “spend” at invoice level and at options level if available.
- Current agreements and in progress negotiations
- Current leases, short term rentals, and ownership models
- Fleet Rationalization, Utilization and Fleet Mix - Once the standards and specifications process has taken place, putting rigor and focus in the area of rationalization and utilization brings value and savings to the company and fleet. The goal of this component of the process is multi-dimensional:
Focus on the 80/20 rule when it comes to prioritizing fleet opportunities. Develop standards and specifications for the portion of the fleet that can be standardized and will provide the highest value/impact, such as passenger vehicles, SUVs, LD and MD trucks aerial and digger derricks. Utility and construction equipment is often overlooked
- Ensuring that the proper utilization targets by class and location (e.g.,: metro v. rural) are set and used to reduce the number of low-use vehicles in the field
- Rationalizing the fleet based on job function and job assignment.
- Developing a fleet policy that optimizes the use of pooling vehicles, how and when to use short-term rentals and take home vehicles.
- Identify fleet operating needs that may include needs for surplus vehicles including seasonal work requirements, construction projects, regulatory mandates, etc.
- Fuel - In most cases, not incorporating the sourcing of bulk fuel (v. fuel management services) as a part of any fleet sourcing engagement. Past experience has shown that this exercise returns almost no incremental value and usually devolves into an exercise around sourcing transportation from supplier fuel racks to client bulk tank facilities.
- Maintenance & Repair - Achieving the lowest TCO for fleet, maintenance and repair is an integral component of the equation. Inherently maintenance and repair costs will decrease as an output of developing the standards and specifications and replacement schedule process. Other areas should also be evaluated, such as opportunities for network consolidations of maintenance and repair shops, etc.
- Determining a “Levelized” Replacement Schedule - Developing a “Levelized” Replacement Schedule is a key concept in improving fleet management and obtaining benefits from strategic sourcing. Sharing the information with both internal finance and external vendors and suppliers is instrumental in planning for future fleet acquisitions and capital needs as well as structuring multi-year deals.
In summary, maximizing fleet effectiveness depends on managing it like a business, in an integrated and holistic fashion, across two major dimensions.
- FLEET OPERATIONS – Operating revenue, Operating costs, Contribution margin, Productivity metrics and measures, Performance metrics and measures
- FLEET ASSET MANAGEMENT – Fleet sizing, Standards and specs, Strategic sourcing, Life-cycle management, Maintenance and repair, Disposition management
May 21, 2013
Over the years working with Loyalty programs with so many companies in the Retail sector, I feel I can summarize some observations:
- True customer loyalty is created when the customer becomes an advocate for the organization
- Rewards alone don’t generate loyalty. If a loyalty marketing program is just about earning points you end up buying loyalty not earning it. The loyalty is to the program not the product or the company.
- Rewards-only programs can be easily replicated by the competition, will quickly be commoditized and become a defensive play that no competitor can afford to unwind.
- Loyalty can be attained, but the organization has to work at it, continuously, and it will not possible with all customers.
- These is NO One-Size Fits-All Loyalty Program
- A win-win relationship must be established, and this cannot be accomplished if both parties cannot realize benefit. The two poles must be attracted to each other.
1. Compelling Value Proposition
- That which provides the customer with a tangible benefit if he or she decides to join a benefit program.
- Leading organizations adapt the value proposition for different segments of clients.
- Customer satisfaction is the degree to which customer feel their needs are met.
- Short-term perspective, very much based on the transaction with the customer.
- It is a feeling of connection to, and belief in and enterprise and its proposition, created by a “feel good” factor from interaction that lead to continued relationships.
- Loyalty is ultimately the crucial measure and it is more difficult to achieve than satisfaction.
- A customer can be dissatisfied despite being loyal.
- Loyalty can only be created on the basis of trust and repetitive positive experiences over time.
In the last years, many banks talked a lot about the importance of customer knowledge but only few of them have put successful actions behind their words. Companies still struggle with the basics of revenue growth areas:
- The pinnacle of customer loyalty is where the customer acts as an advocate for the enterprise.
The ability to classify or cluster customers / prospects based on certain business rules or inherent customer data behavior, pattern using advanced statistical modeling tools and techniques. To effectively use the gold mine of customer information, banks must develop at the same time the capabilities to aggregate, analyze, and use the customer data. And the best way to develop these capabilities is to create a specific unit at Headquarter level / enterprise level. Let’s call this unit “Marketing Factory”.
- Customer Segmentation: Who are my customers, and how do they differ?
- Differentiated Treatment: How should I treat each customer segment?
- Optimization: How can I optimize treatment decisions to maximize value at an individual level?
- The first is create an integrated view of each customer: marketing analytics achieves this goal developing superior data management capabilities
- The second goal is understand and predict customer behaviours: marketing analytics achieves this goal
- Developing propensity score
- Realizing segmentation and profiling analysis
- Realizing analysis of customer profitability and long term potential value
- Developing analysis on customer satisfaction and loyalty
- Develop marketing and sales dashboard
- The third goal is to provide insights that directly improve sales effectiveness. Marketing analytics achieve this goals:
- Identifying relevant commercial events and related offer
- Defining next product to offer for each customer
- Identifying the most profitable combination of customer segment/channel/product thanks to optimization tools
A fool with a tool is still a…
March 7, 2013
Today I was chatting with the global CIO of a fortune 100 company and just discussing how the alignment of his initiatives was going. He had some interesting analogies of how the business conducts the IT aspects of its business. He said, “If you run a small business and you buy MS Excel, it doesn’t mean that you can manage cash flow better. Accounting is has a process to it, a language, etc. that is key to understand before you do things on XLS.” He added, “Its like my daughter buying an expensive digital camera - doesn’t mean the pictures will be better. You need to understand the basics of field of depth, lighting, speed, apertures, before you can leverage that tool to your advantage”.
The debate between TOOLS vs PROCESS and what is more important happens at every strategic meeting and decision making juncture. The third leg of the stool – PEOPLE – is always assumed present or can be brought in easily.
Processes and tools go hand in hand, so the question again is which one comes first though- the chicken or the egg conundrum. It all depends on the industry you are playing in, the position you are in and so most importantly which CAPABILITIES you need. Technology is ever evolving, and with tools resulting from technology, one can argue that tools must lead the way for the activities we perform. But a good product, for example, has a limited life span in the marketplace. A good product development process, however, enables a company to create appealing new products over and over again. The alignment of processes and tools, is about Efficiency - it is all about HOW the organization should be doing what it decides to take on. For this companies need to think in 3 dimensions:
- Differentiation “on the outside”—They need to have a clear view of what makes them unique—product, sales, service, brand, or business model. They need to deliver a consistently positive experience for customers in each market segment.
- Simplification “on the inside”—They need simplicity in everything they do and this means standardized or componentized internal products, processes, and systems, with scalable and repeatable business models across the enterprise.
- Execution mastery—They need to prioritize execution as a core capability with the right leadership skills, culture, and change and risk management.
February 16, 2013
As more and more companies embark on historical looking metrics to gauge performance or future looking predictive analytics to make savvy business decisions, the debate on what to measure is often always on in the c suite.
The importance of measurement is widely understood to try to effect the right behavior. Data translates into information, which finally morphs into knowledge or wisdom that can be used by the organization to create some sustainable competitive advantage. But before we explore why we need to measure and what we need to measure, it’s good to understand the different nuances of measurement systems:
The use of metrics or scorecards should encompass the following objectives:
- A Measure is a quantitative indication of the extent, amount, dimension, capacity, or size of some attribute of a product or a process. It is a single data point (e.g., number of defects from a single product review).
- Measurement is the act of determining a measure.
- A Metric is a measure of the degree to which a system or process possesses a certain attribute.
- An Indicator is a metric or series of metrics that provides insight into a process, project, or product.
Some of the good principles while designing these metrics:
- Verify achievement of deliverables associated with the initiative/project.
- Behavior Modifier - Verify achievement of financial gains anticipated from the initiative/project.
- Cause and Effect Relationships -Verify benefits achieved were a result of the efforts of that particular initiative/project.
- Accountability for results - Make sponsors accountable for results within their areas.
- Enable reuse of processes, models, etc. for future initiatives.
- At Level 1, you need to restrict the number of KPIs at each organization level to 10
- These should be linked to strategy
- The organizational structure is guiding for KPI breakdown, with special “perspective” reports
- Selected KPIs must be valid, simple, measurable and controllable
- KPIs must be structured in a logical, mutually exclusive, breakdown structure and should consolidate upwards
- Define clear and structured ownership of KPIs to avoid local optimization
- High quality of KPI structure is crucial for organisational acceptance and needs to be prioritized during KPI design
- KPIs are designed to govern results on group level. Governance culture must be in line with the governance structure on which the KPI design is based
Agile Development and Testing
February 8, 2013
I was working with some digital marketing folks and they have agencies doing the websites and mobile apps for them. The discussion with business on trying to get to short time-to-market always leads to how IT and agencies are building the websites. “Agile” comes up without fail. I have written a bit before about Agile Methodology and received feedback from so many readers.
Before analyzing the points of the Agile Manifesto in detail, it is important to consider the last sentence. The Manifesto does not state (as an example) that “responding to change” is important and that “following a plan” is not important. This is a common misinterpretation. Looking more closely, it states that both items provide value, although “responding to change” provides more value than “following a plan.” In other words, it is important to follow a plan, but it is even more important to respond to change.
There are several different flavors of Agile Development that I wrote in details about - Extreme Programming (XP), Crystal by Alistair Cockburn, Scrum by Ken Schwaber, Feature Driven Development by Jeff DeLuca, Dynamic Systems Development Method. But the Agile themes and principles are somewhat uniform:
- Welcoming change: Embrace change in order to promote faster delivery of value to the customer and, ultimately, a superior and more creative solution.
- Deliver working software early and often: Deliver working software to the customer as early and as often as possible.
- Simple design (YAGNI): Add only what you need to the system. YAGNI = You Aren’t Going to Need It.
- Pair programming: Developed code by having two developers working on a single computer with one being a developer who thinks tactically about the method being created, while the other thinks strategically about how the method fits into the class.
- Continuous integration: Integrate software changes into the evolving solution as quickly and continuously as possible.
- Close customer collaboration: Work closely with the customer to ensure that their concerns are incorporated into the systems development process.
- Measure progress through working software: Measure progress by measuring the number of required features, or user stories, that are actually working in the application. Maintain constant pace. Work a reasonable schedule with no “heroic” peaks.
- Continuous improvement. Consider what is working well and what is not working well—and then adjusting the process accordingly.
- Test-driven development: Test early and often. The test is used to drive design and programming.
- Continuous Integration: This can occur as recommended by Agile, but instead of going directly to Production, new functionality goes to a “Staging” environment, enabling thorough functional testing and providing a platform for users to observe the impact of the sprint.
- Addresses concern for quality: The V-Model Test Stages exist for a reason. Agile Methods theoretically drive exceptional Component (and possibly Assembly) Testing but do not take a holistic view of validating functional requirements or integration with upstream and downstream applications. The “Staging” and “Integration” environments enable the execution of Application Product Test and Integration Product Test. Also, normal Product Test documentation would be required and entry/exit criteria would be adhered to entering IPT (but not APT).
- Folks generally advocate limiting the number of mid-pass releases into a test environment to avoid disrupting that test (and injecting quality issues). However, it is assumed that lower-level Testing (i.e., Component and Assembly Testing), through the concept of Test-Driven Design, will enable higher quality code to be delivered to APT which offsets the need for tightly controlled code drops in the test environment.
A Smart phone a day keeps the doctor away
January 24, 2013
Another splurge on the media in the New Year is the deluge of ads for health and weight loss. They know the new year’s resolution is the time to close new members into gyms, diet courses, equipment sales, etc. But in this day and age of health options and the onslaught of mobile technology, it’s amazing to see how this industry is evolving. The interactions with people and patients is going from “episodic” to “continuous” with the advent of this technology:
With 85% of physicians using smartphones, there are many areas that mobile solutions will get into on the provider side too:
- SIMpill: Smart pillbox to monitors medication and communicate with doctors
- Proteus Pill: Ingestible sensor which sends digital signal to on-body receiver
- Asthma Assistant: A 6-month pilot study of children and teens with severe persistent asthma found that the technology-enabled daily communication helped patients to better manage their conditions. Over the study period, patient adherence was high and there were no emergency department (ED) visits among the study population, compared to a national average of 2-3 annual visits among asthma patients. This technology enables data collection by the patient and then on a as needed basis monitoring by the medical team and provide feedback based on medical algorithms.
- Diabetes Assistant: LG Glucophone is already in use in S. Korea – this works alongside Infobia’s Eocene diabetic management system to ease the task of blood glucose management. The results of the blood tests will be sent to a secure server that graphs and manages the disease, sets up automatic texts of results and creates reminder alarms.
- Texting for health: Available at http://www.texting4health.org/page5/page5.html. Nearly three-quarters of the people in the US have cellphones. SMS can be used to remind patients about their medications and also deliver info and encouragement to help patients manage their health.
- In 2006, the drug maker PediaMed launched a mobile compliance campaign called 8TDAZE involving a prescription acne treatment called TAZORAC. – remind teenagers to apply the treatment regularly.
- Text4baby is a free mobile information service designed to promote healthy birth outcomes and to reduce infant mortality among underserved populations.
- Mobile Imaging: http://www.sciencedaily.com/releases/2008/04/080429204303.htm
- Nearly three quarters of the world population don’t have access to essential medical imaging technologies (ultrasound, MRI, etc.). UCB researchers are creating portable medical imaging using mobile phones (data acquisition + display; remote computer for processing). The data acquisition device can be made with off-the-shelf parts that somebody with basic technical training can operate. As for cell phones, you could be out in the middle of a remote village and still have cell phone access.
- Symptom Navigator: Use the Symptom Navigator to figure out what you’re suffering from.
- iEyeExam: With this app, you can give yourself a quick eye exam.
- Schedule and scheduling management
- Clinical record management
- Patient accounts management
- Accounts receivable management
- Electronic insurance billing
- Insurance claims management
- Online patient registration and communication
Retail - Holiday shopping
December 14, 2012
With the holidays around the corner, everywhere you go, you get stuck in traffic especially if you are near a mall these days. The online and offline activity this season determines the economic flavor for at least a quarter or so. The retail industry anyway is pretty broad in that the value chains work differently for different consumer products and goods. But there are certain trends that are common:
In these scenarios, when you begin analyzing the individual company needs, it is clear that winners will survive and gain market share by doing three things right:
- “Retailization” is spreading as businesses across all industries vie for closer customer connections
- Retail channels are continuing to blur and expand, generating new expectations from consumers and more cross-channel challenges for retailers
- Shoppers are continuing to gravitate toward products and experiences that offer individual focus, interaction, customization, and cradle-to-grave offerings
- Demand for online capabilities (and for a consistent experience) is increasing
- Demographic shifts in spending power are driving retailers to rethink go-to-market strategies
The winners in retail spend less money but target the customers more scientifically and execute their investments more swiftly. To understand this, it is important to lay out the details of the value chain of the company. Finance, IT, human resources, and GNFR combine to manage the business, which consists of demand generation and demand fulfillment through various channels.
The retailers have to connect with its customers, whenever they want, however they want, seamlessly.
- Identify target customer by each purchase of target items
- Identify measured value and reference value for daily average contribution profit separately for purchaser and non-purchaser groups, and variance of both values is identified as effect.
- Convert to effect of entire profit increase
- Product available for order on-line and collect in store or local delivery
- Relationship with amazon.jp and other partners for non-stocked items
- 24 hour operations
- Staffed to hourly profiles
Loyalty across channels:
- Loyalty support
- Ordering capability
- E-Payment through phone
- Supervisor (B2E) enablement
They need to have product centric operations, focused on “Right Product, Right Place, Right Time, Right Price”. Forecasting has to be driven by macro-factors as well as local conditions:
- Extensive network of partners with shared, integrated loyalty program
- Customer (history) identifiable in all channels
- Customer call centers should be effective and efficient
Application Rationalization - Get Healthy and Stay Healthy
December 4, 2012
It is widely understood that if a person eats right and exercises then he or she can lose a desired amount of redundant weight and be healthy. But in many cases if the person returns to the same habits of unhealthy eating and lack of exercise then the unwanted weight will return. A recent study by researchers at the University of Missouri (as described by the website Science Daily) takes it a step further. What they found is that even with regular physical exercise, people who are otherwise sedentary are at higher risk for chronic diseases such as diabetes, obesity, and liver disease. They found that it is not enough to exercise regularly if a person otherwise sits in one place for most of the day.
Likewise, keeping IT operations healthy requires more than occasional bursts of helpful activity to rationalize and standardize. For many companies, a majority of IS and IT budgets are allocated to application maintenance and support, often up to 85%. Not only does this decrease profitability but it reduces available capital for discretionary spending and strategic initiatives.
Several major factors have contributed to an increased focus on simplifying the application portfolio through rationalization and improved portfolio management including:
Unless applications are appropriately managed, the entire IT budget becomes operations and maintenance.
- Many years of distributed IS/IT spending and investment within specific functions and/or organization boundaries (no enterprise-wide investment management process)
- Increased cost pressure and desire to improve the synergy of IS/IT investments across organization boundaries (eliminate redundant vendor/technology investments, consolidate IT assets)
- Growing need to integrate infrastructure and enterprise solutions across external customers, suppliers and partners
- Significant merger/integration activity to achieve economies of scale and remain competitive
- Growing demands from the business to increase the strategic utilization of information technology and produce greater impact from the existing levels of IS/IT investment
Rationalization is an ongoing activity to be re-examined as part of a regular exercise like annual planning. Business–IT alignment and integration require that both parties take stock of the current situation, consider in what ways they wish to improve, and then determine how to get there. There are different “physics” that get the firm to this hairball of applications and infrastructure—governance and funding mechanisms, organization structure, changes in capabilities, leadership gaps, etc.
Some key characteristics of potential companies needing this:
- Cloned Systems
- Shadow Spending
- Past M&A Activity
- Lacks budget for initiatives
- Stove-Piped Investment
- High Maintenance budget
Application rationalization is most successful when completed in conjunction with an effort to change the leadership, processes and organization disciplines that manage and control IS/IT spending. Most companies have separate efforts underway evaluating the IS/IT operating model and governance direction. These efforts are complementary to application rationalization activities, and should be pursued in parallel to the application rationalization activities. Application Rationalization drives value for our clients across business, Information Systems (IS) and Infrastructure (IT) areas:
- Application Rationalization is a systematic approach to improving the business performance of IT application portfolios by reducing current system complexity and by aligning application direction to the priorities of the business. The primary objectives of an application rationalization effort include:
- Improve the overall investment mix available to fund strategic new initiatives
- Reduce complexity of the application and resulting infrastructure environment to improve ability to integrate business capability across internal and external parties
- Reduce cycle time for new initiatives by eliminating unnecessary application/system complexity
Business Value Levers
IS Value Levers (Apps)
- Decrease business process cost
- Improve asset utilization
- Better decisions with shared information
- Improve people and skill mobility
- Improved agility in acquisitions
IT Value Levers
- Decrease application development and maintenance cost
- Decrease interface and integration costs
- Decrease conversion cost of new efforts
- Consolidate and reduce software licenses
Application rationalization initiatives should be treated like a program—they require the proper attention, training, budget, communication, staffing and skills, and partners. The application renewal strategies need to be grouped into logical programs. The team needs to identify organizational and process impacts and create near-term and long-term roadmaps. Like any other initiative, the team needs to identify a benefits realization method so that the business case progress can be manage
- Consolidate servers and server support
- Consolidate and reduce storage costs
- Decrease system software licenses
- Simplify and enhance development tools and development environment
- Reduce Operations Support Costs
Print, Print, away…
October 8, 2012
No matter how much people say we are completely digital, there is a still a demographic that prints and uses paper. Surely electronic media continue to reduce paper demand and specially world demand for graphic papers is decelerating. But paper is all around us. “Forest Products” which refers to goods manufactured from the forest (trees) includes everyday products like lumber, pulp, paper, and packaging. Products include common items such as paper, lumber, corrugated packaging and facial tissue. The North America forest products sector is inching toward a gradual recovery in 2011, with a slowing recovery from 2012-2017. The key emerging markets for forest products are Asia, notably China, Latin America, and Russia.
Forest Products generally fall into five distinct categories.
- Wood Products includes building materials like lumber, plywood and particleboard.
- Tissue includes paper, bathroom tissue and facial tissue. This segment will sometimes include technically complex, specialty items like baby diapers.
- The paperboard segment includes products like corrugated and pharmaceutical boxes.
- The Market Pulp segment is a business-to-business segment and is not an end use form. Market pulp is fluff or baled in form and is sold by companies to other forest products companies who in turn convert the pulp into paper, tissue, paperboard or some other product.
- The Paper segment is fairly diverse and covers a range of items such as newspapers, paper grocery sacks, magazines and catalogs.
The forest products value chain is relatively straightforward, although individual process steps can be technically complex.
- First, logs are harvested from a forest. Increasingly, large forest products companies are divesting themselves of their land holdings and outsourcing the harvesting function. The big drivers of divestment have been interest in timber holdings by the alternative investment community and the desire of forest products companies to unlock captive balance sheet value.
- The logs are then transported to a saw or pulp mill.
- In the saw mill, logs may be scanned to optimize yield before processing. After unloading from a truck or train, the logs go through the sawmill and are cut into various forms of lumber and veneer.
- In the pulp mill, the logs are unloaded and then may be cut into smaller sizes before being chipped. The wood chips are conveyed from the chip pile, screened and sent to a digester along with chemicals. The chips and chemicals cook for a set amount of time, are released into a blow tank that separates the fibers, and then are sent to washing and possibly bleaching. A pulp-chemical slurry is formed in stock prep and piped to the paper machine, where it is formed on the wire. The formed sheet then goes through several sections which remove water and then is wound on the dry end of the machine into a large roll called a jumbo roll, which can way many tons. The jumbo roll is typically immediately slit into smaller, easier to manage rolls of paper.
- Conversion is an all-inclusive term for operations occurring after the paper mill. Conversion can refer to sheeting, which is the process of turning web rolls into sheeted product. It can refer to the manufacturing of corrugated products. It can refer to the manufacturing of laminate.
- Finished products are distributed to customers via truck, rail, and ship.
- The final step in the value chain is recycling. Recycled materials are sorted and reintroduced to the pulp mill.
Forest Products Megatrends are that Biomass energy is key. As all industries set goals for the use of renewable energy, forest products, as a trendsetter in this area, will be held to higher standards for renewable energy use. Partnerships inside and outside of the industry will be necessary to further advance in this area. Another key area is Capital Spending. In an effort to protect liquidity, companies are cutting back on capital spending. Expansion projects, especially those outside of the emerging markets, will be few and far between.
Due to the ability to flex manufacturing capabilities and the global presence of major firms, the forest products industry tends to be fairly fragmented when compared to other commodity industries that have gone through major consolidation like oil and steel.
An important aspect of the forest products industry is the focus on sustainability. An outgrowth of this has been the development of certification programs, which validate or verify topics like wood source, harvesting practices, and product recycled content. There are three major certification programs currently competing in the industry: Sustainable Forestry Initiative, Program for the Endorsement of Forest Certification, and Forest Stewardship Council. Certified forest products could serve as an important source of competitive advantage in the future.
Although players currently tend to concentrate in a segment of the industry, many can and do manufacture alternative products. For example, a coated paper manufacturer like Stora Enso or NewPage will likely have the flexibility to produce coated or uncoated paper of varying thickness or weights from hardwoods and softwoods.
Over time, there has been an oscillation between pure play in the segment and vertical and horizontal integration. International Paper is a good illustration. At the companies integration peak in the 1990’s, International Paper owned millions of acres of timberland, operated a chemicals division, and manufactured products that included kraft paper, printing and writing papers, boxboard, wood products, high and low pressure laminates, and oriented strand board among others. International Paper has divested most assets except those directly related to the manufacturing of paper and packaging. Generally speaking, forest products companies have found difficulty extracting the perceived value that integration would bring.
<<Please PRINT this blog for the paper industry>>
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Tomorrow starts today – Future Shoppers and Retail
September 25, 2012
The changes that come across our daily lives are centered around 4 major components: shoppers, technology, society in general, and environment that we live in.
The Changing Shopper - Over the next 10 years, demand for better and highly personalized service is bound to go up as a result of consumers rapidly embracing newer technology. Concerns on sustainability as well as that on consumer health & well-being will also find more prominence in the interactions that an organization has with its consumers
The Changing Technology - In the coming years, newer business technology will enable manufacturers and retailers to become more adaptive of the rapidly changing environment
- Global demand for organic products continues to grow, with sales increasing by over $5 billion a year, according to The World of Organic Agriculture: Statistics & Emerging Trends
- According to the Natural Marketing Institute (NMI), the American Lifestyles of Health and Sustainability (LOHAS) industry is currently valued at US$209 billion, and estimated to comprise approximately 19% of the adult population in the United States, equaling a market of 41 million consumers
- According to a report published by the Waste & Resources Action Program (WRAP), total food waste in the supply chain amounts to 11.3 million tones and total packaging waste to 5.1 million tones.
- Consumers are increasingly leveraging technology (web 2.0, social networking etc.) to stay one step ahead of consumer product & retail companies
- The growth of mobile features and device convergence such as wallet phones will drive up mobile sales
- RFIDalready is and will continue to be a key technology to enable supply chain transparency in the future:
- Conair, a company that manufactures food processors, blenders etc. is leveraging RFID to item -level tag products from its manufacturing location in China to Wal-Mart stores in the US to enhance product visibility
- Kimberly-Clark is collaborating closely with Wal-Mart through RFID technology by sending tagged pallets & cases to the retailer’s distribution center.
- American Apparel successfully piloted RFID at the item level and, once funding is secured, expects to roll out RFID to all of its 260 stores in the futured
The Changing Society - The aging of societies in developed countries will have unexpected economic and political consequences. On the other hand, developing markets will see the rise of middle class and also witness increased levels of urbanization
- The growth of mobile features and device convergence such as wallet phones will drive up mobile sales and Store visits will be enhanced by dynamic digital displays and personalization through a hand-held device or the customers own phone
The Changing Environment - Increased regulatory pressures from Government, depleting level of natural resources and shift of economic power towards the developing markets will completely alter the environment in which an organization functions
- It is estimated that the world economy will be about 80 percent larger in 2020 than it was in 2000, and average per capita income to be roughly 50 percent higher, according to UnHabitat
- Unprecedented global economic growth will continue to put pressure on a number of highly strategic resources, including energy, food, and water, and demand is projected to outstrip easily available supplies over the next decade or so
I guess the next couple of generations will really live in a different world after all.
- Water scarcity will worsen due to unsustainable use and management of the resource as well as climate change
- By 2030, the earth’s projected eight billion inhabitants will need 25% more water
- By 2025, 2/3rd of the world’s population will be living in water stressed areas
- It is interesting to see how this will impact food and beverage giants - Nestlé, Unilever, Coca-Cola Co., Anheuser-Busch, etc. – will approached 575 billion liters per year
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The high cost of bugs
September 13, 2012
The quality of IT applications are the backbone of most business processes today (whether customer-facing or internal), yet, according to Forrester Research “one-third of business stakeholders are dissatisfied or very dissatisfied with the quality of their software.” Poorly tested and integrated software has a severe effect on a business’s customers, sales, partnerships, employees and financial bottom line. NIST conservative estimate of the cost of programming errors in component interoperability just in the capital facilities industry in the U.S. alone is $15.8 billion per year - A primary driver for this high cost is fixing flaws in incorrect data exchanges between interoperating components. Software bugs cost the U.S. economy around $60 billion annually, or about 0.6% of the gross domestic product, as per the Cost Analysis of Inadequate Interoperability in the U.S. Capital Facilities Industry, GCR 04-867.
There are umpteen methodologies and automation mantras to get QA done in an effective and efficient manner. But the root of the issues lies in how the software is produced in the first place:
The picture above describes the interaction of a holistic Quality Planning with Quality Assurance and Quality Control disciplines with other areas. It consists of Test Planning, Test Execution and Test Management.
As below, the key is to focus on:
- Are we developing the right thing? – Requirements
- Are doing it correctly? - The Process
- Are we using the right tools?
Project Managers and Release Managers should understand how the activities outlined in this document fit into the overall context of project and iterative workflows. It is the responsibility of Senior Management, Project Managers, Systems Project Managers, Release Managers and Software Quality Assurance to determine and ensure appropriate tailoring and necessary compliance/deviations. A “common understanding” is critical to the successful analysis, design and implementation of a Software Quality Process that provides both Full and Iterative Life Cycle Testing and Quality—that is, testing across the entire application development or deployment lifecycle and within iterative development (and prototyping) cycles. Testing and Quality are a major process that starts at the beginning of a project (during the requirements phase) and is not considered complete until after the successful product deployment—thus the phrase: “Full Life Cycle Testing”. The following figure depicts an illustrative operational model of a QA testing organization:
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August 9, 2012
With Starbucks signing a deal with Square today and my work in Atlanta which is such a hub of payment processing industry, I keep seeing the debate of what should be the core competence and what should be outsourced within these companies all the time. To elaborate, there are 3 major stakeholders in payments
- Intermediaris: ACH’s, SWIFT, CLS etc.
The mainstream processes include
The Secondary processes include charging, billing, validation, repair, Reconciliation, Handling Rejections, and Process and Monitor Reporting
It is easier to outsource clusters of related processes. The three main clusters of payment processing can be distinguished:
- Transaction checking - Identification, authorization, authentication, reconciliation, warehousing
- Processing transaction - balance verification, , crediting & debiting accounts
- Counterparty related processes - Creating settlement & clearing orders, creating channel report messages
Many companies in this space are centralizing their payments: Control, Cost reduction, Risk Management. This way they can reduce the number of banks they are dealing with. Also theya re implementing a payment factory solution with following considerations:
- Transaction receipt and approve for further processing - receiving and preparing the order for final processing
- Processing of the transaction - using payment information to debit and credit accounts
- Communication with counterparts and clients - sending subsequent orders or reports to involved counterparts or reporting to clients
- Quantitative Factors
- Improved forecasting opportunities – better liquidity management
- Improved reconciliation process for incoming payments
- Less external supplier payments
- Less interfaces
- Improved negotiation power towards preferred bank, i.e. float and transaction costs
- Limited spread on cross border payments
- Less external bank accounts
- Qualitative Factors
- Bank Independence
- Enhanced overview, security, and control of payment flows
- Competitive advantage from highly efficient standardized processes
- The business units to focus on core business, i.e. payment processing handled by a central competence centre
- Standardized EDI solutions
- Meet demands regarding payments from sophisticated suppliers and retailers, i.e. unpack and restructure payment files
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The Buzz about Socialize Enterprise Networks - by Ashley Furness
July 16, 2012
As more and more industry experts are reaching out, I invited Ashley to post her CRM post on our site. She is CRM Market Analyst at Software Advice. Research for this article was provided by Software Advice.
The Buzz about Socialize Enterprise Networks by Ashley Furness
When Microsoft announced plans to buy social enterprise app maker Yammer recently I was a little stunned. The reported $1.2 Billion acquisition price tag seemed like a lot for replicating social networking functions in the business environment. So I decided to find out what all the buzz was about.
“Social is more than a trend, it is a revolution that is changing the way we work and collaborate. Powerful social tools, such as Chatter, help employees work faster and more efficiently—making it a strategic piece of the workforce.” — Dave King, Chatter Product Marketing Director
As it turns out, users have uncovered all sorts of efficiencies unique to these platforms. Not convinced? Here’s seven ways companies have derived real value from Yammer, Chatter and Jive.
1. Find Experts Faster
One of the most mentioned advantages to products such as Yammer, Chatter and Jive is the ability to quickly find internal experts. In fact, Jive Software surveys show sales win rates increasing an average of 23 percent, and time to find experts falls 34 percent.
Centerstance Inc. Managing Partner Greg Lueck says Chatter helps sales staff answer deal-specific questions in the sales moment. He recalled one situation where a partner needed someone certified in Cast Iron software integration who spoke Mandarin. The resource manager working with the partner posted the query in Centerstance’s news feed.
“They had an answer within 30 seconds… in Mandarin,” Lueck remembers. In this and similar scenarios, the employee would have otherwise “relied on a central repository of all company’s experience that is located in one person’s head, or nowhere at all.”
2. Augment Transparency, Accountability and Communications Efficiency
Also, mentioned repeatedly, users touted the unparalleled level of transparency. Since PerkStreet hosts all conversations on Yammer rather than trapped in someone’s inbox, management has continuous insight into the team’s progress.This also prevents work duplication and redundancies because everyone is literally on the same page.
“If you look at someone’s scrum over time, you can see whether they actually accomplished what they said they were going to,” PerkStreet COO Jason Henrichs notes.
Companies experienced fewer emails, meetings and calls; yet they are more connected then ever.
3. Streamline Project Management
Social enterprise networks utilize all kinds of shortcuts to streamline workflow. Software developers at PerkStreet Financial use Yammer shortcuts to facilitate scrum meetings, a key component of the agile software development methodology. Rather than hold their daily morning standup meetings in person, each member of the 37-person team posts “what I did yesterday,” “what I will do today” and “barriers to moving forward” using the hashtag #scrum.
The tag allows users to quickly see what everyone is working on and chime in when appropriate. The poster can also delegate tasks to others with the “@” symbol. With Jive, users can also employ shortcuts such as an “!” to pull information into the thread from CRM and other enterprise systems.
4. Better Leverage Information and Insights
Social enterprise vendors have invested heavily in social and adaptive intelligence. These sophisticated algorithms suggest articles, files and experts based on the user’s position, connections, group memberships and resources they’ve previously accessed.
“Imagine you have 10,000 people in an enterprise. Sales materials, RFPs are constantly flowing through system… Jive makes the most of this information by channeling it to the right people,” according to Jive Product Marketing Director Tim Zonca.
5. Generate More, Better Ideas
Yammer provides several means for employees to contribute ideas–from responding to queries and surveys, to posting ideas in a group discussion threads. Users receive gratification when co-workers and leadership “like” their contribution. Then, they are continually rewarded as they watch project teams bring the idea to fruition.
With one advertising campaign, for example, Deloitte CEO Peter Williams asked employees for their ideas for a tagline. More than 38 groups formed that submitted 1,184 original concepts.
6. Boost Employee Recognition and Engagement
In the four years since Deloitte AU implemented Yammer, the turnover rate for active users has fallen to two percent annually–about 10 times less than for employees who don’t use it. Leadership attribute change to employees feeling more engaged and recognized for their work.
“In a company with 180,000 people, most employees rarely interact with leadership,” says Frank Farrall, national leader for Deloitte Australia’s Online Consulting Practice. “Yammer breaks down those barriers.”
Deloitte leadership uses Yammer to pull reports that identify employees with high engagement and positive feedback. The more a user interacts with groups, downloads articles and responds to queries with the same keywords, the more they are distinguished as thought leaders on a subject.
“This is one key way to rise up in the firm–get recognized as someone who drives connectivity,” Farrall added.
These apps aren’t perfect–as I mentioned several companies responded to this story saying the platform was more “of a distraction” than a value driver. They cited issues with file sharing, inefficient search, lack of customization, and bugs with mobile functionality. Even so, interest continues to grow as technology improves. From what I’ve learned, the question is no longer if socialized business will become the norm, but when.
This article was written by Ashley Furness, CRM Market Analyst at Software Advice. Research for this article was provided by Software Advice.
June 4, 2012
I was working recently with a government agency for taking some of their public content onto a website. The questions that surfaced up were around how much data, how to present, security issues, etc. That’s when one of the executives asked if this would be a portal and that they could provide other data. So after Yahoo blessed us with the first mega portal a few years ago, we all know that a portal is a web application style integrating many different types of applications, content, and services into flexible web site framework. But what are the flavors that are used for different business purposes?
These days, portal technology provides a set of basic services for:
Portals today are leveraged internally and externally as well. For internal portals in the Enterprise, the increasingly connected society is creating the “Wired and Ready Workers”. There is a growing expectation company applications are available either via laptop or on their mobile device. According to Pew Internet & American Life Project, Networked Workers, in the United States, Americans are using more and more information and communications technologies inside and outside the workplace. Among those who are employed, 62% could be considered “Networked Workers” who use the internet or email at their workplace. Also 86% of employed Americans use the internet or email at least occasionally, 89% own a cell phone, 81% have a personal or work email account.
For external portals, success comes when we understand how to maintain a true dialogue with consumers via their preferred channels and technologies. As per a Gartner study Companies Must Change Practices to Target Generation, “By 2015, more money will be spent marketing and selling to multiple anonymous online personals than marketing and selling offline. This transition in customer interaction is being driven by Generation Virtual, also known as ‘Generation V’.”
“… Generation Virtual is not defined by age — or gender, social demographic or geography — but is based on demonstrated achievement, accomplishments and an increasing preference for the use of digital media channels to discover information, build knowledge and share insights.”
- Component based application development model via standards (portlet, widget, web part)
- Real-time control for customization, page layout, look & feel
- Fine grained, access control
- Customization/Personalization of the components on the page. The terms “Customization” and “Personalization” tend to be used interchangeably. Customization is the ability to configure the user’s portal environment, typically without the development of code (customization is normally focused around look and feel, and page layout). Personalization is the targeting of information (data or content) to an individual or particular group of users based on what is known about the user
Many businesses haven’t fully realized the potential of integrating the business processes at the user interface layer. Portal technologies are already natural consumers of distributed computing technology and application integration technology. “Traditional ways of selling to customers, based on demographic information, will become irrelevant in the online world, which has its own merit-based system using personas that conduct transactions and spread influence anonymously.”
- Companies should organize their products and services around multiple online personas.
- Sell to the persona, not the person. A persona will show you how it wants to be treated.
Some of the recent Technology Influences are as below:
- By 2020, the average mainstream consumer will be spending 23% more time online than is the case today. Assume a 21% increase per person in the time spent using fixed/nomadic online applications, and a 46% increase per person in the time spent using mobile data applications. - Source: Gartner, “User Survey Analysis: Next-Generation Communications Consumers, Worldwide, 2020”, 17 Feb 2009
- Young consumers are at the leading edge of fixed-to-mobile substitution of data applications but, in 2020, mainstream consumers will still get most of their news and information through broadcast rather than nonlinear channels. 1
- Providers of third-party customer data, business intelligence (BI) and analytic tools will shift toward consumer applications, eventually arming companies with automated, artificial intelligence, self-learning "persona bots" to seek customers' needs and desires. Source: Gartner, “How 'Generation V' Will Change Your Business “, 3 Jan 2008
Some of the recent Market Influences are as below:
- Emerging Cloud Computing models
- Web 2.0/Enterprise 2.0
- Rich Internet Applications (RIA) & AJAX
- New standards for Portlet interoperability
- Evolving Open Source portal alternatives
- Consolidating Vendor Market
- Emerging SaaS Market
- Collaboration and social networks
- Mashups -> expectations of nimble development.
- Renewed interest in multiple device delivery
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Business Relationship Mngt
April 10, 2012
Working with folks who run data centers or even are responsible for application management once the applications are built, one learns so much about efficiency to operations. The concept of Service Management came about from the work done in ITIL. (Information Technology Infrastructure Library is a registered trademark of the United Kingdom’s Office of Government Commerce. It is a set of concepts and practices for IT services management, development, and operations.) The goal of Business Relationship Management (BRM) is to move away from multiple points of contact for the business for services defined and measured in technical terms. Historically, the IT organization used to service multiple users across multiple business units with day-to-day requests as well as medium-term change management work. The segmentation of the traditional IT department used to be utmost in operational domains—in-house and/or third party (e.g., email, network, servers, etc.). This led to their services having an IT/IS internal focus, random change management discplines, suboptimal IT/IS resource utilization, and poor cost control of service delivery.
The Senior Business Relationship Manager role is overall accountable to the business for delivery of IS demand (projects and services) across a significant proportion of the business (e.g. Transmission, Distribution) and provides leadership for business relationship management within IS and the business as a whole, including leading a team focused on IS-business relationship management.The key reasons this role eolved was:
- Operational/technology rather than business/service focus
- Managers spent ~80% of their time on detailed Information Systems (IS) matters, mainly resolving incidents
- Many IT folks regard SLAs as having low business impact
- SLAs not aligned with business drivers
- Potential ‘gap’ in the service control function
- Role and responsibility confusion
- Many business stakeholders used to rate IS relationship structure as unclear
- Managers were leading incident resolution, because it is not clear who has this responsibility
The message from all these operations is
- Business leads lacked authority to drive business requirements into IS
- Cannot always drive business requirements through IS
- Processes often bypassed
- Inability to have a ‘levers of cost’ dialogue in most cases
- Involve IS AND Business
- Identify the right people in your organization
- Deliver, deliver, deliver and build momentum
March 8, 2012
In today’s world, there is enough talk of Social Media and its importance is specially felt in B2C businesses. For such companies ignoring Social Media is not an option. However, embracing it requires overcoming potential challenges in order to unlock the full potential of effective Social CRM. Social media – supported by technology – brings interactions and inter-connectedness between users to a new level.
These trends complete the seismic “shift of power” to consumers. They are enabled to influence all things and become co-owner of the brand. So it’s not only about anonymous mass nor individual customers, but about individuals within a community; with influencers, creators & consumers. This leads to lines between Marketing, Sales and Service are blurred.
Individuals spend more and more time on social media, spurred by its real-time aspect. As below a study by ConScore Global shows the obvious that we feel these days:
To succeed, organizations need to move beyond the limitations of traditional marketing and customer service to a continuous mode of relationship-building with the customer. People trust the recommendations of others and blog readers are 38% more likely to buy. Brands can be damaged in hours. But Gatekeepers are essential enablers of social media execution. Without them it is extremely unwise to engage with anyone through social media as the chances of serious negative consequences are dramatically increased.
- High accessibility - “One-to-many” and “many-to-many”
- High scalability - Enabled by Mobile technologies
- High frequency - Real-time, easy to use, create & disseminate
- User-generated contents - Can go anydirection in an uncontrolled way
Another challenge is the complex technology evolution that requires functional areas like marketing to become more integrated with IT. There are companies that are using Natural Language Processing (NLP) to understand syntax context. The software algorithms tag parts of speech and entities, understand clauses and relationships, and extract facts. For example if there is a comment like “The EFTPS enrollment for my tax return was easy, but it took too long to get the confirmation package”
So the category sentiment = Positive for “enrollment” and = Negative for “timeliness”
- Cultural Alignment
- Is your company culturally aligned with the idea of Social Media?
- Do you have C-Level sponsorship?
- Customer facing strategy alignment
- Is Social Media in line with the overall Customer Facing Strategy?
- Do the C-level sponsors understand its potential?
- Alignment of Marketing & Communications
- Have the Marketing team been alerted to the Social Media channel? Do they understand it?
- Will all communications be sent to the Social Media team so as to ensure consistency of messages?
- Legal education and alignment
- Have the legal team been told that Social Media will be happening?
- Have they contributed to policies and guidelines to mitigate risks of Social Media engagement?
- Website alignment
- Is the company website in a state whereby customers could be pointed to it for answers?
- Is there a secure area where customer service can be picked up in a private channel?
- Can customers log-in?
February 22, 2012
In this day and age there is an assumed maturity in the way initiatives within a business are sourced and out-sourced. When it comes to IT applications and their development and maintenance, there are 4 possible scenarios that companies deal with:
With this industry evolved over the years, the rationale for IT outsourcing decisions has shifted from cost being the sole consideration to include a number of strategic factors. No doubt cost is still top of the mind, especially with this economy. But a lot of other considerations are in play:
- Insource - Maintain control internally (usually for reasons of intellectual property, privacy, or strategic responsiveness)
- Staff Augmentation - Save money while maintaining responsibility for application support and maintenance activities
- Co-source- Leverage external cost structure benefits and expertise while maintaining an appropriate level of control
- Outsource - Delegate IT (or selected functions therein) to an external organization for which it is a core competency
Business Quarterly indicates 75% of US executives considered financial motivations as secondary to other strategic objectives when outsourcing. Business Week reports, “The really smart business owners have figured out how to use outsourcing as a strategic tool instead of simply looking for savings.” CIO magazine reveals strategic value rivals cost reductions for outsourcing motivations.
Based on some reports by The Outsourcing Institute the top reasons for outsourcing look as below:
- Strategic Importance
- Relative impact of a service area on the company’s revenues and overall profitability
- How strategic is the function to my organization today? How does it fit
into our future plans?
- Current Capability
- Relative strength of a service area's technical & business know-how, processes, and tools
- What are the capabilities of the function? How do those capabilities compare to our requirements, and to our peers?
- Perceived Value / Cost
- Perceived value of a service area relative to the costs incurred
- What is the function’s capacity to adapt and change?
- Ownership Preference
- Relative preference of management to own, share, or transfer out IT assets based on company beliefs, values, and sourcing experience
- How easily can the function be transitioned to another sourcing strategy?
No matter what the goals, the key success factors of outsourcing are always:
- Be clear about objectives-- cost, process improvement, and the ability to focus on the core business are the most common
- Incorporate business outcomes as a performance measure from the outset of the arrangement
- Look beyond price and promises of cost reductions for an outsourcing provider that brings a wide set of skills and strengths, and a long-term track record of delivering results
- Give as much attention to performance measurement and the quality of your relationship with your provider as you do to the contract
- Use active governance to manage the outsourcing relationship for maximum performance
- Task talented executives with optimizing outsourcing arrangements