3 Jul 2007

Business Case Logistics “The burden of legacy”

General Description

A distribution company in the automotive industry has a product catalogue of over ninety thousand products for 18 car brands and all types over the last 30 years or so. They limit them selves to what they call GPS (Glass, Plastics and Steel), body parts. All items have a specific code widely used in the automotive industry. The code has intrinsic coding like car-type, front – rear, left – right, etc.

In the automotive industry the shop floor is dominated by craftsmanship and automotive technology. Once a damaged car is entered an assessment of the damage is made and after the required insurance inspection all necessary parts are ordered based on a paper catalogue every supplier distributes. Shop floors have a variety of these catalogues. The items are entered on a paper form and than faxed. The GPS Company receives the fax, retypes all listed numbers in their ERP-system and orders are picked and distributed. The communication around incoming faxes is very labour intensive and new management planned to improve their ordering process.

The inbound sales force made to many mistakes re processing the incoming faxes and the competition worked in the same fashion.

The catalogue had a newly born digital sister, a CD-ROM. They were produced on a quarterly basis to maintain information. During the process analysis we did we found out that there were two point of improvement that would generate profit.
1. Stop faxing
2. Reduce delivery failures

A light unit requires clamps and screws to be installed. These items are not included in the product package. With the introduction of father-son-grandson relationships between items flawless delivery could be created

Facts and figures

Fast Moving consumer Goods will spend 9,8% on online advertising in 2008.

Traffic is becoming increasingly safe. As a result the spare parts market has seen a decline in turnover of 15% annually over the last 6 years. A fundamental shake-out is taking place and now only 50% of the original players remain.

Strategic challenges

1. Be the number one order portal
2. Link items together
3. Facilitate shop floor with adequate information to be able to calculate up front
4. Get your legacy systems out of the line of fire

Probable solutions

1. Create a relational order portal - circumventing the legacy systems - where shop floor personnel can order by clicking on constructions drawings. Relations between items can be made by GPS staff.
2. Allow shop floor staff to track their order digitally

Implementation

We implemented a single page web site on top of the car industries standard parts database, enriched with relational information. Synchronisation with lagacy systems was done overnight .

This lead to spectacular results

1. Implementation was cheaper than CD-ROM and catalogue production costs for one year.
2. Internal sales force was reduced by 80%
3. Delivery failures were reduced from 8% to 0,5%
4. Paper catalogues and CR ROMs were no longer produced
5. Competition was forced to follow or join the initiative
6. Processor load on legacy computers fell from a dangerous 70% to 20%. No terminal sessions were open.

Business Case Telecom "Converge or Diversify"

General Description

The telecom world is changing rapidly. In the 80’s the market was dominated mainly by telephone companies, in the 90’s became ISP’s delivering internet connectivity and mobile phone services. In the first years of the new century they have become so called triple play suppliers delivering Telephone, Internet access and TV.

The major players have even invested in content, which implies that the telecom industry dreams of a position where they do more than just distribute the message which was their main goal since the beginning of postal distribution.

Recent initiatives incorporate the acquisition of TV rights, Disclosure of historical archives etc. This will slowly move towards dedicated channels based on common interest subjects. A trend that is already evident in the satellite TV channels, but will extend towards normal TV distribution as well. Music, Sports, Fashion, Nature, Science.

Telco’s are stepping into a media battlefield that is traditionally occupied by Cable companies and TV broadcasters on one side and newly introduced VOD-services and personal TV-production and cast services.

At the same time the value of the fixed network with which they distribute seems to be coming to and end with the introduction of wireless broadband technologies like WIMAX (although WIMAX is just first generation technology).

So were will the telecom’s business model move?
1. Distribution of information (main driver is the network dominance). Income is network usage.
2. Distribution of content (must own content and programming). Income is advertising and content usage
3. In portal distribution (must have in context pushing capabilities). Main income is service delivery.

Facts and figures

Programmed moving images (TV channels) are still very dominant. Customer behaviour still fancies this type of broadcasting. The content profile has changed dramatically over the last decade or two. Production cost per minute of TV has been cut in half due to diminishing advertising income.

The rapid introduction and market penetration of YouTube shows that infotainment, entertainment and news gathering can work without expensive editorial staff and distributions system.

New introductions like “tribler”, “Kyte.tv” and “Joost” spell a totally new future. Anyone can produce at any time. Smart programmers like the early internet structure sites will out smart traditional distributions systems. Will they win the battle for the living room?

Since customer behaviour is moving towards individual consumption of media the role of the “social” family screen is fading, is it? Other uses of large living room screen will be found. They will be social and interactive. Passive horizontal programming is out.

Strategic challenges

1. Enhance ROI time for the fixed networks
2. Roll out of wireless networks at arms length control
3. Start influencing / facilitating individual customers in creating own productions, but in traditional distribution models

Probable solutions

1. Buy new initiatives and control technology replacement
2. Innovate distribution models and create multi label small span publishing units
3. Market new introductions to come top of mind with all customers.

Implementation

Innovate outside standing organisation and buy. A simple external growth and strategy department will do.

Business Case Marketing Agency “Cross media or integrated concepts”

General Description

In general a customer marketing agency can be seen as a publisher. The main difference is that marketeers think of one-off events or campaigns to boost sales. They have no intrinsic bond with paper publishing and are therefore not tied to the paper advertising channel.

The marketeer’s are confronted with a range of advertising possibilities but are still strongly focussed on branding. Off course branding is and will main important. But online in context advertising is gaining force rapidly. This mechanism leaves out traditional advertising agencies. Or at least their role will be minimized. In the 4-step approach their specialism will be used for drawing attention only.


Consumer behaviour is increasingly based on on-the-spot decisions and consequently, so will in context advertising be. Companies will want to do this themselves. Based on intensive logging and tracking mechanisms companies will adjust their adds and products on the spot with no agency intervention

In context search marketing techniques will grow rapidly over the next years and challenge the traditional agency’s ability to generate sales conversion with all types of media.

Facts and figures

Forrester predicts a growth ratio of an average 23% in online add spending over the next 5 to 8 years.

Philips Sense and Simplicity Campaign announced to spend 10% of total campaign budget in online advertising.

Search Marketing takes about 30% of total online advertising spending. And will remain growing with about 15% per year

Strategic challenges

1. To offer both traditional and online marketing specialisms to customers.
2. Acquire technology for E-mail Marketing, Mobile Marketing, Search Marketing, In Context Advertising, etc.
3. Define on-the-spot campaigns for their customers.
4. Acquire valuable search terms for their prime customers and optimize search engine activity and website presence.

Implementation

To offer an integrated media approach agencies should ask themselves how to incorporate the desired knowledge. Cooperation with other agencies with different knowledge profiles in order to be able to integrally service the 4-step media cascade seems necessary.
Contract external resources that service digital campaign techniques (outbound SMS, e-mail, video stream, etc) in an ASP model (external services) and build internal knowledge how to optimize these services.


Every marketing effort should contain all 4-steps of the media cascade.
Contract a site/search optimalisation company to realise search terms and relevant content tags. Be aware that constant measuring of conversion ratios is of utmost importance. Those who neglect the power of number will eventually run into a high cost profile.

Business Case Publishing “Find media synergy or a fine niche”

General Description

A publishing company is confronted with decreasing income from advertising activities and at the same time the costs of operations increases due to macro economic developments like cost of labour, but also the rising cost of its prime medium – paper – rises year after year due to environmental influences. The publisher still makes a fine profit, but turn over developments are not as they used to be due to increasing competition of newly introduced media.

The publishing company scans the market constantly for new initiative that enables them to resist the competition. Their former success has made the company cash rich, so they can afford to buy new initiatives, rather then develop them themselves. Aside these acquisitions the individuals publishers innovate them selves and experiment with various initiatives like real live events, digital streams etc, but every publisher in his /hers own right. There is no joint approach due to the fact that publishers must freedom of operation and profit and loss responsibility.

This results in a governance model that is very agile on one hand, but its down side is that new initiatives are seldom adopted through out the company. This makes it hard to cut costs on a general level and at the same time makes innovation very expensive. I have referred to this as the publisher’s dilemma.

This mechanism is not only found with news paper and magazine publishers, but with all broadcast publishers (TV, Radio).

Facts and figures

Although online news paper advertising spending are still less than 5% of the total news paper advertising spending the differences are becoming evident. In 2005 print spending was flat, while online advertising grew 35% over the same period. Mind you, this is only news paper income. Online spendings in the rest of the market show different figures. (Source; NAA - Newspaper association of America, June 2006)

The sectors FMG (Fast Moving Consumer Goods) and Entertainment in Europe are said to be fastest growing over the next years. Companies expect to expand their online advertising efforts to 9,8% of their total spending in 2008, showing a 75% growth. The entertainment industry is expected to grow even faster to 11,2%. (Source; Annalise.svp)

Strategic challenges

There are many challenges that lay ahead. The most urgent are;
. Mobilise readers
. Define vision on future publishing
. Organise independent content and rights management
. Use still existing power of brands and profits to innovate

Probable solutions

Mobilise readers; the trusted relationship paper publishers have with their audience is a strong one. They should invest in the continuation of this relationship in the online environment. Before they can begin to implement the relationship on content basis publishers have to organise their backbone ICT processes to get the most out of these relationship. If this is neglected the relationship will be damaged due to pour process quality, resulting in weakened market position and competitive strength.


Publishing is changing. The content bundles will change due to mobile consumer behaviour. This results in fundamental changes in content distribution and advertising placement. Media buyers/sellers should develop cross media advertising offers tuned to consumer behaviour.

Independent content management should result in one content factory for many publishers. The entire content generating process should be taken into account. The content management machine should incorporate content sensitive advertising mechanisms to allow on the spot management of advertising mechanisms.

The make or buy decision is a difficult one and should be made per possibility. Many publishers have a general approach for external growth. Most of them buy. Publishers should build innovation units.

Implementation

The nature of a business process is dictated by the behaviour of its users. Since technical solutions made it possible to connect customers directly to business processes. Attracting attention and building a relationship require agile processes and data structures that are well protected and secured against malignant users. The entire infrastructure should be reviewed, starting the analysis with customer behaviour. This implies centralised IT and telecom operations.

Commercial staff should be organised in one strong team dealing with the integrated advertising portfolio. This implies central governance of commercial propositions.

Implement a media / publisher independent content management system. Starting with intake portals, templates, commercial tags etc. Service the publisher with process logistics and advertising mechanisms. This implies one centrally managed system.

Pick your best minds and ask them to invest 20% of their time in innovation practices. Organise an independent innovation unit. Your make or buy decision can always come later.

Moving forward

Until now I have presented my observations in various fields and placed them in an historic perspective. I tried to simplify matters and structure them in such a way that makes it easy to compare developments.

At the same time I introduced analysis tools to place developments of ICT, media and marketing techniques in perspective to enable you to determine their true nature based on the life cycle theory. All these ingredients should help you to analyse your companies current status; the power of your company’s digital relationships.

It seems impossible to give one recipe for all situations in all types of industry. Instead I will give you a few reference cases for which I will give you a global description of their current status, their strategic challenges and the way to choose and implement the chosen direction.

The examples I choose are generic and come from the field of Publishing, Consumer Marketing, Telecom, Service institutions (Banking, insurance , etc.) and Logistics

It may seem a mission impossible to you to start changing the way your company works right now, but everything starts with awareness. Once you see the challenges that lay ahead just beginning is the next step.

Keep the focus on customer relations. They will give you direction. Spread the word.

At the same time I have prepared a series of interview with leading marketing, publishing, e-commerce and ICT professionals. I will publish these interviews in due time.