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280 posts categorized "Business"

November 04, 2013

Is There a Difference Between Segmentation and Personalization?

Judy Bayer, Director of Strategic Analytics for Teradata International, and Marie Taillard, a professor of marketing and Director of the Creativity Marketing Centre at the ESCP Europe Business School in London, wrote a very interesting article in which they stated that they no longer believe in segmentation. ["A New Framework for Customer Segmentation," HBR Blog Network, 12 June 2013] Obviously, the headline for their article (which they may not have personally selected) undercuts that statement; nevertheless, their arguments are both interesting and persuasive. They believe that segmentation (like dividing consumers by gender, ethnicity, geography, religion, etc.) promotes a "rigid methodology that carves out the market" in unnatural ways. They accept the notion that you "can't be all things to all people," and they believe that rigid segmentation defies that concept. They continue:

Drill and board clear"To resolve these contradictions, we had begun pleading with students and clients to look for 'jobs to be done.' The approach echoes Ted Levitt’s famous comment about selling ¼ inch holes rather than ¼ inch electric drills, and advocates a mindset shift away from selling products to 'doing jobs' that solve customers’ problems. In Clay Christensen’s words, customers 'hire' products or other solutions because they have a specific job to fulfil, not because they belong to a certain segment."

To continue reading, click on the link to the new Enterra Insights site.

November 01, 2013

SAP Discusses the Future of Business, Part 2

In Part 1 of this two-part series, I indicated that I divided the facts presented in an interesting SAP slideshow entitled "99 Facts on the Future of Business" into thirteen separate categories. In that post, I discussed the first five categories: Big Data; Business Leadership; Customer Service/Experience; and Education. In this post, I'll discuss the remaining eight categories, namely: Emerging Markets; Innovate or Perish; the Internet of Things; Risk Management; the Supply Chain; Targeted Marketing; Urban Growth; and a Miscellaneous category. SAP introduced the presentation by explaining:

"Business Innovation is the key ingredient for growth in the future of business. Changes in technology, new customer expectations, a re-defined contract between employees and employers, strained resources, and business and social networks are requiring businesses to become insight-driven businesses. In this presentation, we have gathered 99 facts that represent the changes taking place in the world today. Each fact represents a key insight and suggests where we need to focus and change to become viable, sustainable and growing future businesses."

As noted in Part 1, I placed these facts into thirteen categories to help paint a more coherent picture of the future as seen by the analysts at SAP. In the first post, I included the first five categories: Big Data; Business Leadership; Customer Service/Experience; and Education. In this post, I'll discuss the remaining eight categories, namely: Emerging Markets; Innovate or Perish; the Internet of Things; Risk Management; the Supply Chain; Targeted Marketing; Urban Growth; and a Miscellaneous category.

99 Facts

To continue reading this post, click on this link to the new Enterra Insights site.

October 31, 2013

SAP Discusses the Future of Business, Part 1

In an interesting slideshow entitled "99 Facts on the Future of Business," the folks at SAP paint a picture of the future to which businesses should pay attention. The company introduces the presentation by explaining: "Business Innovation is the key ingredient for growth in the future of business. Changes in technology, new customer expectations, a re-defined contract between employees and employers, strained resources, and business and social networks are requiring businesses to become insight-driven businesses. In this presentation, we have gathered 99 facts that represent the changes taking place in the world today. Each fact represents a key insight and suggests where we need to focus and change to become viable, sustainable and growing future businesses." I've placed these facts into thirteen categories to help paint a more coherent picture of the future as seen by the analysts at SAP. In this post, I'll include the first five categories in this post. They are: Big Data; Business Leadership; Customer Service/Experience; and Education. The remaining eight categories will be provided in the next post.

99 Facts

To continue reading this post, click on this link to the new Enterra Insights site.

October 30, 2013

Enterra’s Cognitive Reasoning Platform™ brings era of Big Data to consumer packaging industry

Enterra_New_Logo_ darker blue w regAs of today, I'm transitioning the Enterra Insights blog to a new platform that will be hosted on Enterra Solutions' rebranded website (www.enterrasolutions.com). The new website was launched to coincide with this week's Consumer Goods Business & Technology Leadership Conference that Enterra helped sponsor. For the next couple of weeks, I will continue to provide links to new blog posts to facilitate a smooth transition to the new platform.

To continue reading today's post, please click the following link: Enterra Insights.

October 29, 2013

Order Fulfillment in an Omnichannel Environment

A year ago, Dan Gilmore, Editor in Chief of Supply Chain Digest, wrote, "In case you haven't noticed, e-commerce is growing at a breakneck pace, putting a near panic in traditional brick and mortar retailers, and of course driving many of them to invest heavily in their own dot com sites and business units – even if most of them are losing money at it for now." ["Multi-Channel Commerce and the Supply Chain," 9 November 2012] As we approach what hopefully will be a good holiday season for retailers, order fulfillment is rising quickly to the top of concerns for many retailers — especially omnichannel order fulfillment. I previously addressed this topic in a post entitled The Impact of Omnichannel Operations on the Supply Chain, but with the holiday season upon us, I thought it might be a good time to discuss it some more. Gilmore continues:

Omnichannel Fulfillment"E-commerce ... is now part of the whole 'multi-channel commerce' phenomenon. Multiple paths of purchase and delivery. Buy anywhere, pick up anywhere. More sales and delivery channels are coming too: your television…vending machines…what else? A senior supply chain executive from one of the country's largest retailers told me at a dinner ... that 'multi-channel is going to create big winners and losers' in the retail sector, depending on the decisions and investments each merchant makes. One of the weird things here is how technology driven this all is. ... Of course, this is not only a retailer phenomenon. Manufacturers and wholesalers of all sorts are dealing with many of the same e-commerce/multi-channel supply chain challenges and questions. How aggressive do we go? Will we tick off our channels? Do we insource or outsource e-fulfillment operations? If we insource it, do we use an existing DC, or a separate fulfillment operation? Etc."

Gilmore's questions point out why omnichannel operations are so difficult to get right. He goes on to discuss three of the biggest questions involved in omnichannel operations: How do you best fulfill orders? How do you manage shipping costs? And, how do you manage inventories.

Omnichannel Order Fulfillment

Jason Denmon, a supply chain management consultant, writes, "Fulfillment can get complex as customers expect a seamless experience across all channels. One of the key decision points is whether to manage fulfillment of each channel in shared or separate distribution centers." ["Aligning fulfillment operations with a changing channel mix," Modern Materials Handling, 29 June 2012] Jim Barnes of enVista told Gilmore:

"We like the idea of combining the dot com and retail distribution operation if and only if the retailer has the ability to consolidate reserve inventory but logically keep it separated using a Distributed Order Management (DOM) or what I like to refer as enterprise commerce flow (ECF). In principle we like them combined, but many retailers don't know how to do it, therefore you see a lot of physical or virtual fences separating dot com from retail order distribution. ... The bigger question is regarding service and this is why there is a strong argument against combining retail and B2C. I believe to keep up with Amazon retailers are going to be required to establish more satellite or spoke locations in larger demographic areas that allow the retailers to service customer same day, at worst case next day."

Denmon agrees that "operating out of a shared Distribution Center is most effective when the channels or segments have common order profiles (item type and quantity) that share the same inventory." But, as Barnes notes, that isn't always the case. As a result, Denmon claims, "Fulfillment with each channel in its own distribution center makes sense when the channels have unique requirements." Denmon concludes:

"Choosing what type of fulfillment operation is best for your company starts with a holistic view across the business, channels and segments. Getting stakeholder alignment across channels is a critical first step. Start by asking these questions:

• Where are the synergies and differences between channels?
• Are you struggling to respond quickly to market demand? Or dealing with excessive mark-downs and out of stocks as a result of allocation problems?
• How is the performance of each channel measured?
• What are the tipping points where you are willing to sacrifice the optimization of one channel for the overall benefit of the organization? How wide is your lens?
• What are the impacts of changing business requirements in your channel mix?
• Do you have true business/stakeholder alignment between channels with an overarching strategy that drives one consensus plan?

"With an understanding of the full impact of multiple channels on your fulfillment operation, you can look for synergies and ways to deliver the seamless experience your customers expect."

Shipping Costs

A lot more retailers are offering free shipping on orders. That makes getting a handle on shipping costs particularly critical. As Gilmore writes, "Discounted/free shipping is sapping the profits out of e-commerce." But, as Bob Trebilcock, Executive Editor of Modern Materials Handling, notes, retailers continue to offer these shipping options because customers expect them. He writes, "Companies] are now operating in a world where cheap or free shipping dominates. Even wholesale businesses are having to guarantee next-day delivery to meet the expectations of business customers that are influenced by consumer expectations." ["Four trends driving automation," 22 May 2012] Jones Lang LaSalle, a global real estate services firm, asserts that the cost of new warehouses designed for omnichannel operations is significantly higher than the cost of traditional warehouses and distribution centers. "Traditional warehouses that support stores require less investment and machinery and fewer staff," they write. "The new e-commerce distribution centers, which involves direct order fulfillment, can cost three times as much and involve three times as many employees." ["Growing E-Commerce Forces Transformation in Distribution Networks, Report Finds," SupplyChainBrain, 25 May 2012] All of that new cost must be absorbed or passed on. Last December, Supply Chain Digest published the following graphic to show "what a number of leading retailers and service providers are doing relative to multi-channel fulfillment strategies."

Multi_Channel_Fulfillment_Strategies

As you can see, with so many fulfillment strategies in play, keeping shipping costs in check is no easy matter.

Inventory Management

Gilmore doesn't believe than anyone has been able to master omnichannel inventory management, but, he writes, "Some of the Distributed Order Management solutions are getting close." Kris Bjorson, head of Jones Lang LaSalle's Retail/e-commerce Distribution Group, told the SupplyChainBrain staff, "Traditional retailers must support the delivery of merchandise and manage both in-store and online inventories and shipments at a frenetic pace against the backdrop of intense competition from pure e-commerce rivals." Stephen Gerrard, Vice President of Marketing & Strategic Planning at Voxware, Inc., notes, "Warehouses are now on the front line of customer satisfaction, but enterprises are still downsizing the supply chain as much as possible. Logistics has to do more with less." ["Warehouses: The New Front Line of Online Customer Satisfaction," Supply Chain Digest, 10 May 2012] It is ironic that at a time when the supply chain is playing an increasingly important role that many executives still only see it as an area to cut costs rather than as an area that will differentiate them from their competitors. Supply chain professionals are fond of saying: The supply chain doesn't support the business the supply chain is the business.

Supply chain analyst Bob Ferrari writes, "Many in the industry believe that there is no single formula for success in this new evolving multi-channel commerce world and each retailer will have to continue to 'tune-in' to customer needs and requirements and provide appropriate, differentiated capabilities that can best balance all physical and online assets." ["Bricks and Clicks - The New Business Model and Supply Chain Capability for Retail Industry," Supply Chain Management, 28 March 2012] Bill McBeath of ChainLink Research concludes, "The rising emphasis on omni-channel has reached a pitched crescendo this year, with no signs of abating. One of the reasons it is 'taking so long' is there are so many dimensions to really doing omni-channel well. It touches everything. Even though e-commerce has been around for well over a decade, we are really just getting started on the journey of putting in place the various dimensions of the foundation for wide spread true omni-channel integration. In reality there are currently centers of gravity—unifying the front-end (the shopper experience) vs. unifying the back-end (fulfillment). For now that is probably the enterprise’s best approach, since, especially the front-end mobile game is just discovering itself." ["Reading the Pulse of Retail at NRF 2013: Omni-Channel Still the Big Thing," 22 January 2013]

October 28, 2013

The Future of Retailing is All About Personalization

"The individualization of customer relation," writes Bertrand Duperrin, Consulting Director at Nextmodernity, "is the new concern of marketing departments." ["The individualization of customer relationship: why and how?" Bertrand Duperrin's Notepad, 24 June 2013] Tresilian Segal, head of Adobe's Digital Marketing across Northern Europe, agrees that "a commitment to personalisation seems a relative no-brainer." However, she asks, "Is the case for personalisation is well understood?" ["Maximise your personalisation process with these 8 tips," Fourth Source, 14 June 2013] A February 2013 survey conducted by inContact helps make the case. According to the survey, "Consumers are making less of their buying decisions based on brand loyalty, but rather on which companies can match their desired experience." ["Consumers Value Personalized Service Over Brand Loyalty," Progressive Grocer, 25 March 2013] The article continues:

Personalisation"According to the findings, 56 percent of U.S. adults would be at least somewhat likely to switch to another brand or company if it offered more options and channels than their current provider. Additionally, younger consumers aged 18 to 44 (64 percent) indicated this was true significantly more than their counterparts aged 55 or older (45 percent), showing a major shift among the younger consumer base in terms of decision making. Based on the findings, the younger generation of consumers — who are used to an influx of information and a variety of choices — showed a desire for options that allow for a tailored experience in their interaction with brands. To that end, younger consumers demand more options and availability to handle these interactions, while companies are at risk of losing customers if they neglect to accommodate preferences or adopt evolving channels of communication in providing service. 'The survey results are clear: consumers expect more choices and more ways to interact with business today,' said Paul Jarman, CEO of inContact. 'The smartest companies are quickly adapting to changing consumer behaviors and needs, extending customer service beyond just phone and email to mobile apps, text messaging, chat and social media.' Survey respondents showed overall that they not only prefer, but expect, companies to offer options for a variety of channels and devices."

In previous posts, I have discussed the fact that consumers are increasingly looking for an "experience" as they shop (be it online or in store). Lauren Hertler insists, "At the end of the day, creating an optimal experience for a customer is determined by the ability to deliver personalized communications." ["Driving Performance through Personalization," ExactTarget Blog, 30 September 2013] Although most pundits concern themselves with online experiences associated with multi-channel retailing, Gavin O'Malley believes that personalization is just as important when a consumer is in a brick-and-mortar store. "Consumers are craving more personalized, less siloed shopping experiences," he writes, "and [they] could be convinced to stop 'showrooming' and actually make in-store purchases." ["Consumers Desperate For More Personalization During Purchase," Online Media Daily, 26 September 2013] The one thing that all of these analysts agree upon is that there is a case (they believe a strong case) to be made for understanding and engaging in retail personalization.

Natasha Hritzuk, senior director of consumer insights at Microsoft, told O'Malley, “Consumers are absolutely desperate for more personalization during their purchase journey. The idea of personalization isn't new, but [the industry as a whole] is still not delivering on its promise." O'Malley continues:

"The retail industry is also failing to appreciate consumers' desire for a more seamless shopping experience, according to Hritzuk. Consumers don't want to encounter gaps between a brand's online, mobile, and in-store presence, she said. 'They want to operate seamlessly.' Along with breaking down the barriers between digital and physical-store experiences, retailers can also use ecommerce learnings to increase in-store purchases, according to Hritzuk. 'We need to understand why people showroom,' she said, referring to the increasingly popular consumer practice of testing products in-store, but preferring to buy them online. For one, 'It’s easier to buy [products] online,' said Hritzuk. 'You can [buy something] online in 3 to 4 minutes compared to the 20 minutes it can take to buy [a product] in stores,' she said. 'We need to take that friction free purchase transaction, and [implement] it in stores.'"

Eric Tobias, Vice President of Web Products at ExactTarget, told Hertler that "personalization can be achieved using four main building blocks." They are:

  • Collection and identification of data
  • Data aggregation
  • Taking action on the data
  • Providing continuity to the customer by nurturing the 1-1 relationship

Tobias continued, "The primary goal, of course, is to deliver the right experience at the right time using the right channel." He then offered four tips "to help all marketers get more personal":

  1. "Let data be your guide–no more guesswork!
  2. "Inject personalized content into transactional messages. Transactional messages are a key component to creating a relationship with your customers–don’t overlook them. Surprisingly, in a study of the top retailers, 79% had no email personalization after an online purchase.
  3. "Capture user behavior during/after the shopping process. Listen to what your customers are doing on your site to help drive recommendations or post-purchase remarketing opportunities.
  4. "Make your data actionable. It's been shown that almost half of all people will completely abandon a brand's communications after only two un-personalized attempts."

Segal agrees that good personalization begins with the data. She explains, "Let the data do the hard work and decide what the most relevant content and offers are to serve the customer at the detailed level." She also agrees that content should be personalized. "Get rid of 'spray and pray' emails," she writes. She also agrees that gathering and analyzing data is essential to capture and analyze the customer's digital journey. "Identifying key points along your customer's virtual path is important," she writes, "as it allows you to decipher where conversion is highest." Nevertheless, she cautions, "While per­son­al­isa­tion may often rely heav­ily on data and analytics, it is important not to completely surrender all con­trol of customer experience management to machines. There is still a role for behavioural tar­get­ing, as long as you test against it regularly. A blend of data-led and intuitive marketing often works the best."

"'Big data' promises to be the solution to getting a 360 degree view of your customer and make more intelligent personalization decisions," writes Linda Bustos. ["Using Big Data for Big Personalization," GetElastic, 11 July 2013] Bustos' article included the following "infographic from Monetate [that] covers the big data problem, the segmentation opportunity, and 3 keys for data and segmentation success."

Big-data-personalization-infographic

Alicia Fiorletta concludes, "As shoppers continue to leverage digital tools and channels to research, browse and buy products, they also are beginning to demand more relevant products and offers. With these heightened expectations, personalization is becoming an integral component of retailers' cross-channel marketing strategies." ["Retailers Across Verticals Personalize With Digital Solutions," Retail TouchPoints, 6 May 2013] Duperrin adds, "When business treat groups and not individuals, [i.e.,] trying to please everyone at the same time, [that strategy] often leads to pleas[ing] no one since the lowest common denominator is never satisfying for each person taken individually." The requirement for retail channels to become even more personalized is likely to continue. I agree with Duperrin who insists that the technology used to get know customers better must be complemented by knowledgeable and caring people who can really put the finishing touches on personalization.

October 24, 2013

Avoid Competitive Obsolescence Using Technology

Michael Fitzgerald, Nina Kruschwitz, Didier Bonnet, and Michael Welch, report, "A study by MIT Sloan Management Review and Capgemini Consulting finds that companies now face a digital imperative: adopt new technologies effectively or face competitive obsolescence." ["Embracing Digital Technology," MIT Sloan Management Review, October 2013] The term "digital technology" is pretty broad and, by itself, is probably not very useful. The authors define it as "social media, mobile, analytics or embedded devices" that "enable major business improvements (such as enhancing customer experience, streamlining operations or creating new business models)." The authors obviously believe that companies that fail to adopt these technologies and transform their operations will fail or, like old soldiers, just fade away. They report that the key findings from the survey are:

  • According to 78% of respondents, achieving digital transformation will become critical to their organizations within the next two years.

  • However, 63% said the pace of technology change in their organization is too slow.

  • The most frequently cited obstacle to digital transformation was “lack of urgency.”

  • Only 38% of respondents said that digital transformation was a permanent fixture on their CEO’s agenda.

  • Where CEOs have shared their vision for digital transformation, 93% of employees feel that it is the right thing for the organization. But, a mere 36% of CEOs have shared such a vision.

According to previous research, "digital transformation will require companies to draw from a core set of four digital capabilities: a unified digital platform; solution delivery; analytics capabilities; and business and IT integration." ["The Digital Capabilities Your Company Needs," by George Westerman, Didier Bonnet, and Andrew McAfee, MIT Sloan Management Review, 29 October 2012] Despite the fact that so many executives believe that achieving digital transformation for their companies is critical, the authors report that "many companies struggle to gain transformational effects from new digital technologies." This is problematic since the authors conclude: "Almost no organization is sheltered from the competitive disruption wrought by the widespread adoption of digital technologies."

Transformation
The challenge, of course, is that every business is unique in some way. That means that no single path to digital transformation is going to work for everyone. The path to digital transformation begins with understanding your business. The first case study that the authors present involves Starbucks. Although some coffee drinkers simply want to buy a cup of java on their way to work, many others want to sit and enjoy that cup of Joe. For consumers who want to enjoy their purchases on site, Starbucks offers "free Wi-Fi in Starbucks stores, along with a digital landing page with a variety of digital media choices, including free content from publications like The Economist." For those consumers who want to rush off to work (or elsewhere), Starbucks has managed to "cut 10 seconds from every card or mobile phone transaction, reducing time-in-line by 900,000 hours. Starbucks is adding mobile payment processing to its stores, and is processing 3 million mobile payments per week. Soon, customers will order directly from their mobile phones." Fitzgerald, Kruschwitz, Bonnet, and Welch continue:

"The world is going through a kind of digital transformation as everything — customers and equipment alike — becomes connected. The connected world creates a digital imperative for companies. They must succeed in creating transformation through technology, or they'll face destruction at the hands of their competitors that do."

There are likely going to be two networks at play: one that connects customers and the other that connects everything else. This second network is often referred to as the Internet of Things (IoT) or the Industrial Internet. To learn more about the IoT, read my posts entitled The Internet of Things Looks Like Big Business and Fellow Travelers: Big Data and the Internet of Things. Although the authors insist that undergoing a digital transformation is an imperative for companies, they don't pretend that such an effort will be easy. "Even in a connected world," they write, "it takes time, effort and willpower to get major transformative effects from new technology." The authors write with a sense of urgency on this subject. George Westerman, a research scientist at MIT's Center for Digital Business, told them, "The big thing is, technology change is happening so rapidly that every industry is being affected by this." The rapid pace of change is probably the main reason that companies are struggling to transform.

During the dot.com era, many companies were quick to purchase and employ IT systems that later proved unsustainable. Having been burnt in the past, they are hesitant to jump in again during a time of rapid change. Hesitancy, however, is not a winning strategy. The authors report that "previous research by Capgemini Consulting and MIT's Center for Digital Business found that companies that invest in important new technologies and manage them well are more profitable than their industry peers." The obvious answer to this conundrum is investing in technologies that are adaptable and easily updatable. This is much easier to do than in the past thanks to cloud computing and software-as-a-service offerings. The authors promise, "Business leaders who embrace the digital imperative will see boosts in their operations, customer relations and business models."

With the digital path to purchase becoming an increasingly important channel for commerce, it comes as no surprise that the study found that "customer experiences reflect the clearest impact of digital transformation. The survey found that improving customer relationships was the area where companies were having the most success with digital technology. Most prominent was improving the overall customer experience, followed closely by enhancing products and services in customer-friendly ways." To learn more about why enhancing customer experience is important read my post entitled Analytics 2.0: Big Data, Big Testing, and Big Experiences -- Part 2.

The authors admit that "there is no one factor that impedes digital transformation," but they do acknowledge that some companies "lack both the management temperament and relevant experience to know how to effectively drive transformation through technology." They conclude their article by offering "nine specific hurdles in the broad areas of leadership, institutional obstacles and execution that companies need to overcome to achieve digital transformation." They are:

  1. Lack of Urgency — "Complacency affects more companies than any other organizational barrier cited in our survey."

  2. The Vision Thing — "Digital transformation starts with a vision from top leadership."

  3. Picking a Direction — "Creating a road map towards digital transformation is challenging."

  4. Attitudes of Older Workers — "Responses to the survey suggest a deep-rooted perception that older people will have trouble reframing."

  5. Legacy Technology — "Problems arising from older systems are a legitimate issue."

  6. Innovation Fatigue — "For people of any age, there is also the possibility of technology fatigue."

  7. Corporate Politics — "Internal power centers, controlled by departments or individuals, can inhibit changes that dictate less power or different ways of working."

  8. Making a Case for Digital Transformation — "Only half of the companies surveyed said they create business cases for their digital initiatives."

  9. Incentives — "The companies that do best at digital transformation also do the best job of aligning incentives with digital transformation efforts."

If I were asked to prioritize those obstacles to transformation, lack of vision and legacy technologies would be high on my list followed closely by corporate politics. If you had any doubt about whether the industrial age is over and the information age has arrived, this survey should put your doubts to rest. If your company has yet to join the digital age in a meaningful way (i.e., aligned itself utilizing a unified digital platform), then it might just be a candidate for history's dustbin.

October 23, 2013

Globalization and the Supply Chain

Although globalization isn't quite the hot topic it used to be, the subject is still a vital one. Historically, discussions about globalization involved the movement of three things: capital, people, and resources. Nowadays, some pundits like to add a fourth item to that list: ideas. Recently, an article in The Economist stated, "'Globalisation' has become the buzzword of the last two decades. The sudden increase in the exchange of knowledge, trade and capital around the world, driven by technological innovation, from the internet to shipping containers, thrust the term into the limelight." I suspect that the article left out the movement of people either because so many countries have become xenophobic or because jobs now move to people rather than people moving to jobs (i.e., outsourcing) – or maybe the article omitted the movement of people for both reasons. ["When did globalisation start?" 23 September 2013] Globalization has both supporters and critics. The article explains:

Globalization"Some see globalisation as a good thing. According to Amartya Sen, a Nobel-Prize winning economist, globalisation 'has enriched the world scientifically and culturally, and benefited many people economically as well'. The United Nations has even predicted that the forces of globalisation may have the power to eradicate poverty in the 21st century. Others disagree. Globalisation has been attacked by critics of free market economics, like the economists Joseph Stiglitz and Ha-Joon Chang, for perpetuating inequality in the world rather than reducing it. Some agree that they may have a point. The International Monetary Fund admitted in 2007 that inequality levels may have been increased by the introduction of new technology and the investment of foreign capital in developing countries."

As with most debates, there is truth on both sides; but, there is no denying that the billions of new middle class consumers are better off thanks to globalization. The article, however, insists, "It is impossible to say how much of a 'good thing' a process is in history without first defining for how long it has been going on." So the staff at The Economist asks, "When did globalisation start?" Taking the long view, the article argues, globalization began when labor became divided between hunters and shepherds, which led to further labor specialization (e.g., merchants, armorers, etc.). Of course, the "world" in which these specialized laborers lived and interacted was fairly limited in size. It was traders and merchants who really spawned what we now think of globalization. The article concludes:

"It is clear that globalisation is not simply a process that started in the last two decades or even the last two centuries. It has a history that stretches thousands of years, starting with ... primitive hunter-gatherers trading with the next village, and eventually developing into the globally interconnected societies of today. Whether you think globalisation is a 'good thing' or not, it appears to be an essential element of the economic history of mankind."

Throughout most of history, the primary movements of goods, people, and capital have been fairly regionalized. I have argued in previous posts, that regionalization within the broader framework of globalization, is going to characterize much of the trading and other supply chain activities in the future. There is growing evidence of this. For example, Jonathan Webb reports, "The preliminary data from [Procurement Leaders'] CPO planning survey currently finds relatively little evidence for globalisation. In this study, we asked procurement leaders from where the goods and services for each region were sourced. As it turns out, most of the goods for each region were sourced internally." ["The world isn’t globalising – it’s regionalising," Procurement Leaders, 9 July 2013] There's nothing sinister about regionalization. It simply makes economic sense to reduce the length of supply chains.

Regionalization, however, isn't sounding the death knell for globalization. Most multi-national corporations understand that their best opportunities for growth are going to be found in emerging markets among new global middle class consumers. Robert J. Bowman, Managing Editor of SupplyChainBrain, cites an Ernst & Young study that concludes "the biggest opportunity for merchandisers in years to come is the emerging consumer in China, India, Brazil, Eastern Europe and other places far from U.S. shores." ["Forging the 21st-Century Supply Chain," 23 January 2013] Bowman also quotes Josh Green, Co-Founder and Chief Executive Officer of Panjiva, who stated: "To me, the defining economic event of the 20th Century was the rise of the American middle class. For the 21st Century, it's the rise of the global middle class." In other words, what regionalization means is that global corporations are going to have to learn to think globally but find a way to act locally (or regionally). Bowman states, "Manufacturers will still need to be in China – but to serve the Chinese market. The same goes for growing demand in those other emerging economies."

Let me state the obvious: Globalization and regionalization both depend on good supply chains. Getting products to new members of the global middle class or do those still struggling to get out of poverty (the so-called "bottom billion"), is a challenge with which all manufacturers and retailers are struggling. An organization called D-Prize, which "is dedicated toward expanding access to poverty-alleviation solutions in the developing world," also believes that "distribution equals development." Its website explains: "Many solutions to poverty already exist; the challenge is distributing these solutions to the people who need [them] most. We tackle this by challenging social entrepreneurs to develop better ways to distribute proven life-enhancing technologies, and funding early-stage startups that deliver the best results." The distribution challenges faced in getting poverty-reducing solutions to the bottom billion are the same challenges that manufacturers face in getting their products to the same group. Nicolas Fusso writes:

"A massive global toolbox, filled with highly effective tools for solving poverty, continues to expand. Inside you'll find relatively recent additions, such as portable solar lanterns. Other tools, like childhood immunizations, have been dependable for generations. Unfortunately, this toolbox is not open to everyone; it seems someone forgot to unlock it for those most in need of access. In fact there are many proven paths toward development. The past decades have observed a wide range of advancements – including new health and medical interventions, development-focused technologies, and proven financial services. Yet millions in the developing world still lack access to basic poverty solutions. Why is that? Today's greatest need is not for scientists and engineers to create new tools. The real need is for better distribution of solutions that already work." ["Distribution, the Key to Unlocking the Development Toolbox," Next Billion, 25 April 2013]

Fusso notes that D-Prize is offering a prize of up to $20,000 for good ideas about how best to distribute poverty-reducing solutions to those who need them. To large multi-national corporations, that sum is a pittance, but the solutions that could emerge from offering that sum could help everyone. Solving the distribution of goods and services challenge to poverty-stricken areas should be a win-win for both humanitarian and commercial ventures. One would assume that humanitarian efforts could piggy-back on commercial distribution systems serving the bottom billion. Certainly multi-national corporations could use the good public relations that would be created by such a venture. As I wrote in a previous post, "For years, people made the bad assumption that impoverished populations wanted nothing more than the very basics -- food, housing, and water. Yet business people clever enough to package goods in sizes that the poor could afford (like single-wash packages of detergent or a minute of cellphone time) found that the poor could be consumers and profits could be made. We shouldn't be surprised; 'Apple Marys' in the U.S. survived the great depression using this economic model."

The future of globalization and supply chains may very well be characterized by how well companies learn to overcome the "last mile" challenges associated with the bottom billion consumers. Solve that problem and other distribution problems will naturally be solved as well. For more about how globalization and supply chains can help solve poverty, see my post entitled Can Supply Chains Save the World?

October 22, 2013

Get Personal with Your Customers

"In a climate where companies send mass, generic emails to entire mailing lists on a regular basis," writes Malcolm Duckett, "consumers have become deadened by indiscriminate email campaigns." Duckett believes that "a targeted approach is the only real way to avoid damaging your company's relationship with customers and to build brand loyalty." ["Intelligent email marketing should be personalised and targeted," Fourth Source, 7 May 2013] Janet Kyle Altman, of Kaufman, Rossin & Co., basically says the same thing, but in a different way. She writes, "Your target is not 'everyone'." ["To Market Successfully, Your Customer Can't Be 'Everyone'," Business News Daily, 27 September 2013] It's obvious that you can't personalize your marketing efforts if you know little to nothing about the consumer you wish to reach. Richard Ting asserts that "brands are missing out by not fully understanding who their customers are. Let's face it: the signal-to-noise ratio is still fairly low among brands." ["The Customer Profile: Your Brand's Secret Weapon," HBR Blog Network, 11 March 2013]

Orangedudes-target-customer-600pxAngela Wells calls the "getting to know your customer" approach Business-to-People (B2P) marketing. "B2P Marketing," she writes, "is the recognition that businesses aren't actually buying what you're trying to sell. Individual decision makers — people — are making the decisions for their companies, not impersonal disengaged companies as a whole." ["Forget About B2B And B2C - Technology Enables B2P (Business To People) Marketing," Marketing Tools: CRM, 28 June 2013] Whether your desired customer is sitting behind a desk at a business or on the couch in their home, doesn't really matter. Wells is correct that individual decisions are what you are trying to influence. Duckett insists that "saying the right thing at the right time to the right person" is getting easier thanks to technology. He writes, "The new generation of cloud-based marketing automation tools out there can help make this quick, simple and effective." He recommends a four-step approach for getting to know customers better.

"Step 1 – Create a profile: Clearly identify and classify visitors by monitoring and remembering their behaviour. There are tools that let marketers automatically record visitors’ individual behaviours as part of a 'customer history' record.

"Step 2 – Target: The marketer can set up simple targeting 'rules' (one by one as needed) so, for example, a rule might say 'target people who have looked at brand A more than 15 times', 'target visitors who have been visiting for 2 months but have not purchased' or 'target visitors who have purchased but not for 3 months'. Then the marketer will communicate to the system what content they want to try on each segment (this might include a set of email variants or even content to show in the visitor’s web page or triggers to your telesales team).

'Step 3 – See what works: Gathering this data on which content delivers the best results from this target segment (and the control group) is useful to marketers that then need to look at conversion rates, number of sale and, basket size to make their decision.

"Step 4 – Repeat and love the engagement: Keep the process going, each time building into the targeting the additional behavioural information harvested from the visitors. Your system should also include functions to ensure customers aren't repeatedly contacted with the same message or offer. This is important; otherwise customers will get wise and exploit the brand. For example, they will come to understand that if they abandon a basket one day, they will receive a discount the next – or will get frustrated when continually offered a deal they are not interested in, for example, a product they already purchased elsewhere."

Duckett concludes, "By engaging the visitor at every stage, marketers can ensure that customers are not disappointed by their experience of the brand, either by confusing content or unnecessary adverts. The end goal is that the visitor's experience will be easy, engaging and ultimately provide the visitor and the brand with exactly what they want." As I've noted in previous posts, it's easy for online customers to jump on or off the path to purchase. That's why I agree with Duckett that consumers must encounter a good experience at every stage or touchpoint along their journey.

Ting believes that many companies don't get to know their customers better because the data they collect about them is siloed. "Combined," he writes, "this information would be enough to create the ultimate 360-degree customer profile, which would allow enhanced targeting and personalization." The different types of siloes into which data is gathered include:

  • "What they're saying — social CRM. What are your consumers saying about your products and services in social media? Are your consumers' brand sentiments shifting from positive to negative or vice versa?

  • "What they're buying — purchase history. What is the last product a consumer purchased from you? How often does he buy from you? What are her favorite products? Are people making more or fewer purchases?

  • "What they're doing — brand interaction history. Are they using your mobile apps? How often are they using them? Are they visiting your website? Are they spending more or less time with your brand?

  • "What they're liking — social interest graph. What interests do they share on social media channels, and who is in the network of people who share similar interests?"

He cautions, "It may seem simple to combine these discrete data sets into one holistic customer profile, but there are major technology obstacles brands need to get past." Integrating data is never as straight forward as people think it will be. Ting insists that a customer's lifetime value will increase "by better engaging them over the long term and with purpose. ... To surgically cut through the noise, advertisers need to develop richer customer profiles. It's not the sexiest of topics in advertising, but it's one that will ultimately allow brands to target and personalize the experiences and messages that consumers deserve." Altman concludes, "No matter what product you sell or service you deliver, more targeted marketing gives you a better return. Targeting a specific audience gets you in front of them more often, with messages that touch them emotionally. If you try to be everything to everyone, your message becomes vague and less impactful."

Wells agrees. "With the rise of social media and engagement," she writes, "it has become increasingly obvious that we are all targeting people – those people who make the decisions whether or not to purchase what you are trying to sell. These people we are targeting are consuming media like never before, across a range of social platforms such as Facebook, Twitter, LinkedIn, and so much more." It should be pretty obvious by now that none of the recommendations offered by these pundits can be achieved without the right kind of technology. The secret is to get personal with your customers without creeping them out. It's a fine line that companies must walk when making personalized offers. The right technology and a good marketing department or firm will help you walk that line.

October 21, 2013

Attracting Supply Chain Talent

One of the topics at the Supply Chain Insights Global Summit I attended in Scottsdale, AZ, last month was entitled "Supply Chain Talent – The Missing Link." It is a topic that Lora Cecere, founder of Supply Chain Insights, introduced in a post entitled "Supply Chain Talent: The Missing Link in Your Future?" [Supply Chain Shaman, 12 August 2013] She introduced that post by writing, "I even more firmly believe that supply chain talent is the missing link in the supply chain. In figure 1, I outline the company's biggest gaps. It is the sourcing and development of mid-management talent. YOWZA! It is large." The figure to which she refers is found below.

Supply-chain-talent11

The reason that Cecere believes this is an enormous problem is because most current "efforts are focused on new-hire recruitment or mentoring for high-performance development for executive level positions. There are few companies that understand and have addressed the mid-management talent issue." I suspect that Paul Teague, U.S. contributing editor of Procurement Leaders, would agree with Cecere. He believes that companies need to do a better job of talent management. "When it comes to 'talent management'," he writes, "the obvious question you have to ask is, 'what talent?' It's not a trivial question." Cecere's answer, of course, is middle management talent.

If you don't think that Cecere is correct, consider what Jake Barr, Principal and CEO of BlueWorld Supply Chain Consulting, told participants at the Supply Chain Insights Global Summit. He reported that between 25% and 33% of the supply chain workforce is at or beyond retirement age. Most of these people fill operational roles, including middle management. He also told participants that, for every graduate with supply chain skills, there are six holes to be filled and it could be as high as 9 to 1 in the future." Those are pretty sobering statistics. If you want to watch the full hour-long panel discussion held on this topic at the Supply Chain Insights Global Summit, click on this link. If you haven't the time to listen to the entire discussion, Robert J. Bowman, managing editor of SupplyChainBrain, provides a quick overview of what panel members discussed. I've included his comments later in this post. Here are some of the highlights from Cecere's research report on supply chain talent.

"Opportunity to improve. Overall, companies rate their capabilities to manage supply chain talent worse than their peers. In the study, when companies were asked to self-assess their capabilities to manage supply chain talent, 17% self-rated that they perform better than their peer group while 34% reported that they do worse than their peers. And, we all know that self-assessment scores tend to overstate capabilities. ... I think that it is worse than reported ...

"High turnover. Average turnover of supply chain managers is 15%. It is increasing. In the study, 46% of companies attempt to hire from within the company, and 17% fill roles primarily through recruiting talent from other companies. External recruiting is becoming less and less successful.

"Shortage of talent. The average company in the study has four positions open for five months. Companies are is feeling the pain of open positions. The most difficult positions to fill are in the areas of planning that require both a technical mastery of technology and an organizational understanding of the business drivers.

"Stiff competition for college graduates. Today, there is a 6:1 demand to supply ratio for new college graduates in supply chain management. Competition is intense and there is a lot of effort to attract the best and brightest from college recruiting; however, the larger issue is with the retention of mid-management talent.

"Working on the Right Stuff? In short, we need to broaden our scope. The current focus is on recruiting college graduates and high-performing talent with little attention being given to middle-management talent development. Only 23% of companies responding to the study have a planned cross-functional training program for existing employees. This study points out the need for skill development in the areas of training and career progression to give employees cross-functional breadth."

Cross-training appears to be a particularly important activity for the development of middle managers and C-level executives. Teague discusses "a McKinsey report on the ideal profile" for a Chief Financial Officer. He indicates that the study identifies four profiles, "finance expert, generalist, performance leader, and growth champion – and described in general how CFOs can plan their careers around each." Teague believes each of those profiles applies equally to Chief Procurement Officers and probably wouldn't quibble that other supply executives need those talents as well. Teague concludes, "The two talents that seem to be common throughout all profiles are the ability to be flexible and the ability to inspire."

As noted above, Robert J. Bowman is another observer who believes that there is a growing talent shortage. "The field of candidates who can tackle the challenges of global supply-chain management today remains alarmingly sparse," he writes. ["Bridging the Talent Gap in Supply-Chain Management," SupplyChainBrain, 30 september 2013] He then refers to Jake Barr's comments at the Supply Chain Insights Global Summit and labels the situation "a crisis." He continues:

"Barr said the roles that require the most brainpower and technical expertise are going begging. At the same time, the rate of turnover is increasing, and positions are remaining open longer. What’s so hard about finding the right people in supply chain these days? It has to do with the growing complexity of the job. Many older specialists came out of the armed forces, where the term 'logistics' was coined. Others fell into the job from former positions in marketing or operations. But modern-day supply chain management is about much more than coordinating the physical movement of goods from one point to another. It encompasses procurement expertise, supplier management, knowledge of international trade trends and regulations, information-technology prowess and customer-relationship management, to name but a few key aspects of the discipline. Making matters worse is the looming retirement of Baby Boomers and the lack of younger talent to replace them. A majority of organizations lack succession plans for critical roles, said Barr."

Bowman reports that "Barr urged companies to adopt a five-point plan." The highlights of that plan include:

"• Engage in cross-functional development, both for existing employees and new hires;

"• Work on leadership development, by identifying those individuals who have the ability to head up large-scale organizations;

"• Speed up the standardization of business processes, to make it easier to train, qualify and move people through the system;

"• Launch 'retain-and-train' efforts, in the form of educational seminars, simulations and various Web-based techniques, and

"• Challenge employees early. Deploy a 'risk-and-reward strategy,' with an emphasis on rotating people through short-term positions in developing nations."

While that plan may sound costly, Barr told Summit participants, "It takes 200 percent of fully loaded cost to bring someone in to fill after you lose them." Bowman goes on to highlight what other panel members discussed.

Joe Krkoska

"Joe Krkoska, director of global supply chain with Dow AgroSciences LLC, said the talent-gap dilemma is 'brewing' at his company, which requires a highly specialized level of knowledge. A first step, said Krkoska, is convincing imminent retirees to stick around a bit longer, and focus on mentoring incoming talent. He said companies are reaping the consequences of the downsizing that took place during the depth of the recession. As a result, there’s a 'void in the population. [New hires] are going to have to accelerate like crazy to get to the level you want them to perform at.' Seventy percent of an adult employee's training is acquired by actually doing the job, said Krkoska. Companies need to emphasize real-world experience, by bringing together seasoned managers and new talent to shadow them."

Cindy Urbaytis

"The average company spends only about $650 per person per year on training, said Cindy Urbaytis, vice president and managing director of the Institute for Supply Management. That's despite the dramatic increase in skills and responsibilities that are needed to do the job. She said individuals shouldn't be left alone to develop their abilities. 'If there's no support and encouragement, it's just not going to help.'"

Patrick Curry

"Patrick Curry oversees skills development and university relations for the Integrated Supply Chain organization of IBM. Emerging from a two-year hiring freeze, the company found itself 'late to the game' in recruiting, he said. The schools on which IBM normally relied for graduates were 'sold out,' said Curry. 'They had zero supply-chain talent for us. To meet the hiring target, we had to go to 35 universities.' In the past, much of IBM's talent pool had come from engineering backgrounds. Now the company had to ramp up hires that were skilled in finance and business management. In the process, it began working to shape curriculums, in some instances all the way back to high schools. At that level, the company found an alarming lack of awareness among counselors and students alike. 'No one's talking about supply chain as an option,' Curry said. IBM has launched six talent-development programs, aimed at various levels of management. A 'global buddy' initiative matches veterans and newcomers in a mentoring effort, frequently centered outside the U.S. Participants stress the value of having learned about the global aspect of business, Curry said."

Nick Little

"From the perspective of universities, the talent gap can be a plus. 'Our graduates are over-subscribed,' said Nick Little, assistant director of executive development programs at Michigan State University. 'They're able almost to dictate salaries.' These days, he said, holders of degrees in supply-chain management can command better starting deals than their counterparts in finance and marketing. Continuing education for older managers is equally important, Little said, adding that Web-based programs are growing in popularity. 'We're helping them to understand the new requirements,' he said. 'In the future, there's going to be a vast increase in online learnings for people with gaps in knowledge and experience.'"

Bowman concludes, "For those keen on pursuing a career in supply chain, the job market is wide open." The picture is not quite as rosy for companies looking for supply chain talent (especially, middle management talent). If your company hasn't already put in a place a plan like the one recommended by Jake Barr, it should establish one now.