Key Strategies

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Key Strategies for Winning in the New Economy
Vance Williams LaVelle Senior Vice President,
Chase One Chase Plaza, 14th Floor New York, NY
10081 212-552-7557 vance.lavelle_at_chase.com May 1,
2000
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Topics for Discussion

• Emerging Trends
• New Customer-centric Business Models
• Customer Experience and Brand
• Implications to the Organization
• Key Strategies to Win

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2000 Market Observations

• The B2B market opportunity is rapidly expanding
• Getting the infrastructure up to speed will cost
  billions (600 million 4 billion)
• Content will continue to proliferate broadband,
  wireless and satellite
• Cost savings will be promoted all down the line

Source Bear Stearns Co.
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2000 Market Observations

• Consolidation is in the cards - real and virtual
• Products and services ripe for digital
  distribution win
• Many companies will win through turbo charged
  databases and data mining intelligence
• Reliable, quality products - once a
  differentiator - are now merely the point-of-entry

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2000 Market Observations

• Branding and, especially, service have become the
  key drivers in purchase behavior
• Gaps between service quality and service
  expectations are widening
• Consumers have easier access to information
• Consumers are vastly more empowered than ever
  before

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Consumer demand is causing change.
LIFES PRESSURES...
CREATE DEMAND for SIMPLIFICATION

• Decreasing available time
• Increasing information and choice
• Increasing responsibility

• Simplify daily life
• End-to-end convenience and speed
• Reliable customer service
• 29 of on-line users and gt50 of all on-line
  transactions

Source Andersen, Yankelovich, McKinsey
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And the Internet Changes Everything
Sellers in control
Buyers in control
Before Net
After Net
Price complexity Price transparency
Limited alternatives Choice
Broad Segmentation Customer Personalization
Physical Speed Virtual Speed
Meaningful entry Low entry barriers barriers
Geographic Virtual communities communities
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New business models have emerged making it
possible to earn higher returns by delivering
more broadly on customer intentions.
Value Based Alliances focused on Customer Needs
Customer Managed Relationship
Customer Relationship Management
Product Management

• Product Focus
• PL Product
• Sales Focus
• Volume

• Customer is King
• PL by Customer Product
• Customer Lifetime Value
• Maximize Customer Interactions to Enhance Bond

• Similar to CRM
• Customer Empowerment

• Evolved form In-depth understanding of customer
  drives offers
• Speed to market and Best of Breed define
  partner alliances
• Revenue sources expand

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In migrating from a product-driven to a customer
relationship management business model, superior
customer insight capability is imperative to
deliver relevant offers.
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The Customer Relationship Management model is
quickly giving way to a new model where the
customer is in the drivers seat.
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Innovative players are forging a new business
model by forming strategic alliances to better
meet customer needs.
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These value based alliances can generate new
sources of revenue and superior customer insights
for those who integrate.

includes development, bounty fees royalties
New revenue sources
Source Andersen
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Increasingly, the customer experience is the
brand.
The difference between products and services
blurs to the point that the distinction is a
trap. Winners provide an offer that is both
product and service simultaneously. 1

• Requires a branding strategy that can
• deliver the experience with credibility
• create loyalty and trust
• attract the best alliance partners
• support the evolving business model

1 Source Blur, Stan Davis and Christopher Meyer
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Acting on Opportunity
To measure the customer experience and
continually build the brand, determine the most
important events for high value customers and
take appropriate actions.
Event Opportunity
Tailored Tracking Stream
Communication Stream
Imbedded Customer Intelligence

• Opportunity driven, not campaign focused
  communications.....
• Many parallel communication strategies, across
  multiple channels with diverse, yet, coordinated
  messages.....
• Relevance and timing are critical.....

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The advanced business models create stickiness
through personalizing the customer experience

• Put service in every product
• Personalize and customize the interactions to
  deepen relationships and create repeat purchases
• Anticipate customer desire or intention
• Get smarter with each use - both customer and the
  offer
• Let customers do anything at any time

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And challenge traditional businesses to build
new capabilities for information intensive
marketing.

• Put emotions and personality into every offer and
  all aspects of business
• Cultivate communities to extend relevance
• Extract information from each exchange
• Learn to partner learn to split

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Traditional businesses have similar goals to the
emerging business systems, yet their reliance on
customer information may vary.
Goals Increase market basket and customer value
while optimizing the cost to serve and service
quality More frequently the right offer is
delivered in near real time through the preferred
channel How? Translating customer information
into insights that are actionable Creating
rules-based decisions to action
learning Integrating business processes and
systems to deploy tailored offers and
communications Measuring effectiveness in rapid
cycle to quickly learn and deploy new insight
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Traditional businesses use three main
organizational structures for eBusiness.
eBusiness Organizational Structures

• Integrated
• eBusiness contained within existing lines of
  business (LOB)
• Charles Schwab
• American Express
• Bank of America

• Separate LOB
• eBusiness as a separate unit or stand-alone line
  of business (LOB)
• Citibank
• Espn.com
• Dell

• Separate Entity
• eBusiness as a separate entity (i.e., spin-off,
  carve-out, tracking stock)
• Lucent from ATT
• Marketwatch.com from CBS
• Macys.com from Macys

Source Andersen
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Organizations must be more nimble to effectively
operate in a rapidly changing environment.

• Organization is part of the economy, same rules,
  organic
• source funds from external vs. internal
• virtual teams and free agents
• Strong employment brand - promise and deliver the
  employee experience
• mass customization to meet individual needs and
  interests
• create commitment
• Effective knowledge facilitation to generate and
  share ideas with impact
• Streamlined decision processes to respond quickly
  to opportunities and work at internet speed
• Seek diversity and variety

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The organizational competencies needed to be
successful are changing...

• effective technical skills to integrate software
  and systems
• strong analytical skills with acute learning
  abilities
• passionate focus on the customer and their
  potential value and needs
• ability to find comfort and generate confidence
  in high ambiguity
• develop mastery in emotional intelligence to
  manage self and relationships effectively (e.g.
  teamwork, collaboration, empathy, influence,
  adaptability)

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And will continue to evolve with the digital
age journey.

• Show a deep understanding of traditional
  marketing elements - product, price, promotion,
  positioning and distribution
• Embrace the simple to highly complex data
  analysis methods to formulate decisions for
  prescribing customer interactions
• data mining for customer insights
• decision rules to tailor experiences
• infrastructure deployment for implementation
• dynamic merchandising to deliver fresh content
  with frequent assortment changes
• Recognize and rely on teamwork to deliver the
  brand promise

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As the Chief Information Officer and Chief
Technology Officer roles morph to meet the needs
of the new business systems...

• Rising status of CIO role(s) - stronger support
  from top management regarding IT standards,
  enterprise systems centralized IT policy

• Engaging actively in strategy development

• strategic direction
• organizational structure

• culture
• marketing and financial decisions

• Maintaining operational responsibilities
  (outsourced or direct)

• data center operations
• network uptime

• help desk service
• systems development

• Harnessing new roles of change master and
  strategy maker

• begin with reengineering projects
• process changes

• people changes
• business acumen
• leadership skills

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the challenge increases to attract and develop
expert talent.

• Suggests background in technology with general
  management perspective
• business executive first, technologists second
• Increasing complexity in the environment - open
  architectures integrated well with proprietary
  systems (data, voice, video)

• One school of thought suggests two roles may
  emerge

• CIO for strategy, change and information
  resources
• CTO for technology policy, infrastructure
  planning and operations

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Assume business model adoption is organic. Facets
of organizations will be quicker to migrate.
This may lead to information and infrastructure
challenges due to lack of parity in a
multi-business enterprise as new standards and
supporting architecture continuously
evolve. Focus on

• a specific set of capabilities (e.g. web
  collaboration, data warehousing, etc.)
• in a specific channel(s)
• for a limited number of customers
• and a targeted set of customer transactions to
  produce early economic value
• limit scope to specific product/service offers
• consider outsourcing functions for speed and scale

Build simply and quickly Identify the projects
that require the least effort to implement and
provide the greatest payback

• Assess difficulty to implement
• Greenfield space (i.e. Internet, Web enabled
  projects)

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Summary Points

• Assess the challenges in your industry or newly
  redefined industry
• Determine the business model(s) most likely to
  succeed and a practical pace to guide a
  transformation
• Position your brand for success through customer
  experience management
• Evolve the organizational structure,
  infrastructure and competencies to support the
  strategy
• Focus on what can get done vs. aspirationally
  what is desired
• Build environment to create a rapid learning cycle