USING CUSTOMER INFORMATION

Seamlessly gathered information can be used to save costs, to provide a tailor-made service to individual clients, and to sell more—often using the internet.

The American online retailer Amazon.com has redefined book selling. Its culture appreciates the potential of technology, with the company using information in four key ways:

1. To minimize risks by analyzing information from millions of customers to see how and when they purchase, enabling Amazon.com to reduce the level of risk.
   
2. To reduce costs by using technology to control the way it manages its inventory and suppliers.
   
3. To add value and help customers by offering reviews of books and free downloadable information, and by treating its home page as an individual storefront for each customer—for example by tailoring lists of suggested titles that the customer may enjoy based on previous purchases.
   
4. To innovate. Amazon believes that, to rival its competitors, an innovative approach is essential in order to improve the value and service offered to consumers.
   

What matters is not simply what information exists, but how that information is used to build competitive advantage. Interestingly, many other retailing companies have now followed Amazon’s lead. For example, Apple’s iTunes and iStore have done for music retailing what Amazon did for book selling, using many of the same principles.

Practice

• Treat each customer as an individual. For example, music retailer iTunes tracks the purchases of individual clients and provides a customized webpage designed to introduce a client to new buying opportunities that appeal to his/her personal taste.
  
• Use the internet to provide information for the individual—even if your business does not carry out its primary operations online. By collecting customers’ email addresses, a business can develop a highly valuable and intimate marketing strategy.
  
• Smaller businesses and freelance workers may be able to research more in-depth information on each client. This can then be organized into an accessible database, with subheadings for each client covering all areas of relevant information.
  
• If your organization is unable to seamlessly track consumer trends, use incentives such as free products for customers who volunteer their information. Similarly, you should also provide rewards for customers who agree to receive information on your organization—the marketing should be entertaining, lively, appropriate, and relevant. 
  

MAKING YOUR EMPLOYEES PROUD

A company with a positive self-image and sense of pride will be more unified and efficient, with a stronger “employer brand.” When employees respect and appreciate the organization they work for, then their productivity, quality of work, and job satisfaction increase.

Are your employees proud of working for your business? This sense of pride may result from the organization’s purpose, success, ethics, the quality of its leadership, or the quality and impact of its products. An example of this is Taylor Nelson Sofres (TNS), a leading market information company, with over 14,000 full-time employees across the world. It collects, analyzes, and interprets information for clients, provides research on business and market issues, and conducts social and political polling.

The firm’s network spans 70 countries, and has been largely assembled through acquisition. Consequently, employees were often more loyal to their local “in-country” TNS business than to the group, which seemed remote or foreign. However, when one of its executives was caught in the tsunami in South Asia in December 2004, TNS donated $250,000 to UNICEF to aid relief operations. This altruism brought the company together, as employees were pleased to be working for an organization with values that they respected.

 As TNS illustrates, simple and positive gestures can achieve impressive results in terms of employee satisfaction, pride, and motivation.

Practice

• Carry out acts of corporate social responsibility—such as donation, fundraising, or simply enacting more compassionate business practices. These all serve to make current and potential employees feel proud to work with your organization.
  
• Ask employees what they value—what would they like their employer to do?
  
• Provide opportunities for employees to engage in fundraising and volunteering activities.
  
• Avoid negative business practices. Employees will be less motivated to work within an organization that is viewed negatively in society.
  
• Remind employees of the ways their services benefit society; how the everyday tasks they perform make a positive difference within society. 
  

SCENARIO PLANNING

Scenario planning enables organizations to rehearse the future, to walk the battlefield before battle commences so that they are better prepared. Scenarios are not about predicting future events. Their value lies in helping businesses understand the forces that are shaping the future. They challenge our assumptions.

In the 1960s, Pierre Wack, Royal Dutch/Shell’s head of group planning, asked executives to imagine tomorrow. This promoted sophisticated and responsive strategic thinking about the current situation, by enabling them to detect and understand changes. Pierre Wack wanted to know whether there were other factors in the supply of oil, besides technical availability, that might be uncertain in the future. He listed stakeholders and questioned the position of governments in oil-producing countries: would they continue increasing production year on year? By exploring the possible changes to government policy, it became apparent that these governments were unlikely to remain amenable to Shell’s activities. Many oil-producing countries did not need an increase in income. They had the upper hand, and the overwhelming logic for the oil- producing countries was to reduce supply, increase prices, and conserve their reserves.

When the 1973 Arab–Israeli War limited the supply of oil, prices rose fivefold. Fortunately for Shell, Wack’s scenario work meant Shell was better prepared than its competitors to adapt to the new situation—saving billions of dollars, it climbed from seventh to  second place in the industry’s profitability league table. It knew which governments to lobby, how to approach them, where to diversify, and what action to take with each OPEC member.

Scenario planning enables leaders to manage uncertainty and risk. Above all, scenarios help firms to understand the dynamics of the business environment, recognize new opportunities, assess strategic options, and take long-term decisions.

Practice

• Scenarios are not predictions: they are used to understand the forces shaping the future. What matters is not knowing exactly what the future will look like, but understanding the general direction in which it is moving—and why.
  
• Plan and structure the scenario process: for example,by agreeing who will be involved.
  
• Discuss possible futures (usually by working back from a possible view of the future).
  
• Develop the scenarios in greater detail.
  
• Analyse the scenarios: why they might occur, what you would do  if they did.
  
• Use the scenarios to shape decisions and priorities. 
  

SHARE THE WEALTH

Everybody wants to grow the business. Gaining more market share, winning more customers, and (ultimately) making bigger profits are all goals the directors eagerly aim for. 

For most firms, though, restraints on capital limit the rate at which the company is able to grow. Working capital quickly runs out, and in any case most small firms rely on borrowed money that has to be paid back on the nail—unlike major firms, which can sell shares and only have to pay out if the company is profitable. 

There is, however, a way to break the deadlock—franchise the business format.

In the early 1950s, Holiday Inns started in America. The company had a good business format, and developed a clear brand image that conveyed a mid-range, comfortable hotel for business users (during the week) and family users (at weekends).

The problem for the company is that new hotels are expensive items. Building a hotel is costly and time-consuming, but Holiday Inns did not want to go the route of buying up existing buildings since they wanted to retain their branding intact.

The answer was to franchise the format. Holiday Inns are almost all owned by the people who run them. The parent company helps prospective franchisees to find appropriate sites, build the right hotel, train the staff, create the appropriate decor, and market the hotel. For the franchisee, being given a complete business format.

dramatically reduces the business risk (and goes down well with the bank, too), and also allows the hotel to tap into Holiday Inns’ existing branding and reputation.

From the viewpoint of the parent company, franchising has allowed a much more rapid growth than would otherwise have been possible. Franchisees pay fees and royalties for being allowed to use the format, and although the overall profit per hotel might be lower than would be the case for directly owned hotels, Holiday Inns are able to open an average of one hotel per day somewhere in the world. 

There is no question that Holiday Inns could never have grown as rapidly as they have without franchising—being prepared to share the idea, and the wealth.

Practice:

• Your business model must be proven to work.
• You will need to allow early franchisers in at a lower rate than you would like to charge later ones—after all, you are still an unknown quantity.
• You must have a very clear manual, covering every possible circumstance: apart from the need for franchisees to know how to operate, this will ensure you keep your brand values intact.
• Accept that you will have to provide a lot of support in the early stages, but regard this as an investment in the future.