Stay Focused, Shun the Quick Fix

With competitive pressures from all sides and the crushing need to make the quarterly forecasts or be punished by Wall Street, finding a competitive difference is harder than ever. More than ever, executives are looking for that difference inside a software package.

As we listen to companies that are searching the industry conferences and Web sites for software that will help them make that critical competitive difference, I almost always hear from those inside the enterprise, “If we knew who our customers were, we could market to them better.”

Yet most top executives are just looking for the quick fix. The difference between those who look for a genuine competitive edge and those who do not is obvious. The ones who want a superficial fix think they have all the answers and that they just need more sales. To them, badgering the sales force to produce more sales from a constantly diminishing market is the answer.

It is not. These quick-fix executives will find that their marketing days are numbered. They should prepare to be driven out of business.

On the other hand, the marketers who are working to discover the differences that are critical to the long-term health of their company can expect long, productive careers with strong companies.

The Internet provides a way to differentiate competitive benefits as e-business transformation gets under way. Many firms have embraced the Net as a new channel, and others have shaped new business models around it. However, these steps are just the beginning of a profound marketing transformation as the Net forces firms to rethink ingrained business practices.

A great site is not enough anymore. Firms need to link their core systems to the Web. In the process, companies will have to drive Net technology deep into their infrastructure, thus transforming every aspect of the company, from customer service and supplier management to product design.

The Net makes sense as a business channel. Extranet gives firms the same control over branding, pricing, positioning and bubble. These hubs transform fragmented industries into liquid markets, putting customer ownership, brand loyalty and partnerships at risk.

At the same time, the Net has created harsh performance standards. Already, more than 75 percent of people shopping for an automobile use the Net to gather information. Insurance, which was once a hidden complex of systems, is now accessible and understandable via the Net. Insurers are finding that consumers are determining what type of insurance products are best for them.

Investing in and tracking stocks are being done by about 35 percent of those who own or hold stocks and mutual funds.

In this open Net setting, firms have no place to hide. Firms that resist the Web will be forced to address their shortcomings and face high costs of manual processing compared with their online counterparts, who will enjoy the lower costs of Internet processing.

Web sites no longer can be designed by the chairman’s grandson or hip Web designers. They need to be addressed by strategists and experts in Net communications. Web site activity must include motivating site visitors into action, tracking them all the way through the system to a conclusion and putting metrics behind the observations to dynamically improve site performance.

During the Forrester Executive Strategy Forum last month in Boston, I was stunned by the younger executives who thought that the best metrics came from those who got to market first, regardless of the cost. “Don’t they read the same financial papers I do, with one dot-com going out of business faster than the next?” I wondered. “First to market is just insane without an eye on making a profit.”

Others thought customer satisfaction was the most important metric but without any thought to how this translates. Customer satisfaction without benchmarks or lifetime value scenarios means nothing.

One firm can enjoy an 85 percent satisfaction rate that seemingly is high, but if the industry is at 90 percent, then the differences are meaningless.

The Net has forced many firms to specialize. A firm that is great at product delivery may be weak at developing highly specialized information technology functions such as data warehousing or customer relationship management. For example, Cisco Systems offloads manufacturing to partners such as Celestica.

Companies also are discovering that they no longer can hoard information with the Net. As more firms merge and “divisionalize” in their attempts to become more horizontally organized, their digital data assets must be shared. Some companies have resisted bringing their offline digital data assets into an online environment. But the new economy demands more sharing and having truly distributed information.

Trying to keep all this information straight and in order has driven executives to find seemingly simple solutions to solve this dizzying array of complex technical problems. Coming to the rescue are half a dozen companies that sell CRM solutions. Executives are jumping on these software bandwagons to try to differentiate themselves from their competitors.

What should executives know in order to make a wise CRM software purchase? There are choices to make. Should they buy what appears to be a quick and seemingly easy prepackaged solution? Should they build the systems internally, which usually results in delays and is frequently outside their information technology capabilities? Should they have a system custom-built by outside professionals?

The first choice, on the surface, seems the most compelling. However, what if the competitor buys the same system? After investing, say, $1.5 million, then it is back to first-to-market and that crazy rationale.

The secret to selecting the right software is threefold. Consider the resources. Consider who will manage such a complicated endeavor. And consider what metrics are compelling the company to move forward. Meeting these e-business needs is essential to distinguishing between great management and roadkill on the Internet superhighway.

Staying focused on the core strengths of the company is essential. Sure, many companies have many internal assets to use to solve complex solutions, but if they spread their assets too thin, then they become unfocused.

This is not the time to try to be everything to everybody.

• Robert McKim is president of MS Database Marketing, Los Angeles.

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