In-Depth

Data Warehousing Special Report: Let's share -- extending CRM with collaborative technology

At first glance, collaboration -- also referred to by research firm Gartner Inc. as collaborative commerce or c-commerce -- seems at odds with the Darwinian survival tactics normally associated with successful business strategy. However, when viewed as a natural progression in the evolution of the customer, the value of collaboration becomes strikingly evident.

Collaboration extends the concept of the customer and customer relationship management (CRM) by providing service and value to all of a company's value chain members. In business-to-business relationships, the concept of a customer is less clearly defined and there is tremendous value in treating all of a company's value chain members -- whether channel partners, suppliers, dealers or influencers -- as customers. By evolving the definition of customer to include the entire value chain, collaboration creates a solid consortium of businesses, each contributing to the mutual benefit and success of the entire group.

Awareness of the value of customers and customer relationships grew throughout the 1990s aided by the writings of Michael Hammer and James Champy, Don Peppers and Martha Rogers, and, later, Patricia Seybold. Today, few would question the importance of the customer, and the need to provide customers with value-added information and services for mutual benefit.

But much of the early writing and customer focus assumed customers were consumers. Consumers are perhaps the easiest customers for us to imagine; we can see ourselves filling the customer role. However, when considering business-to-business (B2B) markets and transactions, the customer is much more difficult to identify.

For example, who is the customer of an insurance company? Is it the broker who actually sells the policies, the business that purchases the group coverage, or is it the employee of that business who subscribes to the plan and receives the insurance coverage? Who is the customer of a textbook publisher? Is it the bookstore that orders the textbooks, the professor who selects which texts to use for a given course, or is it the student who buys the book and is ultimately up all night studying from it?

These examples demonstrate the demand side of a supply chain -- that is, the downstream customers of a company's product or service. In some cases this chain is linear, as when a consumer packaged-goods manufacturer sells a product to a supermarket chain that in turn sells to the consumer. In other cases, it can be more complex, like when a party outside the direct chain influences what will be sold down the chain (as the professor does in the text book example above). In either case, the customers, suppliers and partners with whom businesses deal are collectively referred to as their value chain -- those individuals or organizations that supply either quantitative or qualitative value to a business.

Old and new collaborative technologies
Collaborative applications can be categorized into three primary groups: product management and supply-chain management applications, Internet trading exchanges and marketplaces, and information exchange applications.

Product management and supply-chain management applications are probably the best known examples of collaborative technology because they have been around the longest, typically 10 to 15 years. These applications support the traditional supply-chain activities of product development, planning, sourcing, manufacturing and fulfillment.

Product management applications provide a rigorous change-control environment for the complex Bills of Material (BOM) associated with the production of large equipment and machinery.

The BOM specifies all of the raw materials and semi-finished parts used in the manufacturing of products, often identifying approved sources for these materials and parts. The management of BOMs can be Herculean, particularly when specifying something as complex as a jet aircraft or a nuclear power plant. Throughout the life of the product, as changes occur to the parts listed in the BOM, product management software ensures that those changes are controlled and communicated to the hundreds of engineers, suppliers and builders involved in the design, testing and manufacturing process. Agile Software, San Jose, Calif., is one of the leading vendors of product management applications.

Supply-chain management (SCM) functionality ranges from planning -- which in SCM-speak means understanding demand trends and consumption patterns, as well as supply lead times to optimize production scheduling -- to sourcing and the RFQ process, to manufacturing and ultimately fulfillment. Along the way, order status, partial fills, backorders and substituted products, warehousing, transportation and delivery scheduling all need to be managed and optimized.

While SCM products once specialized in a particular function within the supply chain, vendors are now broadening their functionality to provide SCM one-stop-shopping. Major SCM vendors include i2 Technologies, Dallas, Manugistics Inc., Rockville, Md., and MatrixOne Inc., Westford, Mass., but the ERP giants cannot be overlooked. SAP AG, Walldorf, Germany, PeopleSoft Inc., Pleasanton, Calif., and Oracle Corp., Redwood Shores, Calif., have been busily adding SCM functionality to their product suites, touting the need to feed SCM application platforms with enterprise data.

Internet trading exchanges and marketplaces are a relatively new phenomenon, having only developed during the past two to three years, but immediately capturing corporate mindshare with the Siren's lure of a new Web-based business model generating countless profits. Early vertical industry exchanges attracted big headlines and billions of dollars in backing in 1999 and 2000, with exchange names like Chemdex (chemicals), Covisint (automotive) and Transora (consumer packaged goods) leading spectacular IPOs. However, the exchanges drove down per-transaction margins to a hair's breadth, requiring huge transaction volumes for exchange viability. The failure to attract the critical mass of suppliers required to generate these transaction volumes has forced the vertical exchanges to explore alternate business models to maintain viability. Reality has once again shattered myth and dreams.

But while public industry exchanges have struggled, private exchanges are flourishing and may point to the future of online B2B exchanges. The leading exchange technology provider, Ariba Inc., Sunnyvale, Calif., is seeing strong growth in private exchanges. These private exchanges enable online procurement between a business and its supply-chain partners. Private exchanges are typically built on market platforms provided by vendors such as Ariba, Commerce One, Pleasanton, Calif., i2, Oracle and SAP. These platforms provide online procurement through a range of purchase-related functionality:

Commerce servers enable buy-side commerce (where a single buyer wants to purchase from multiple suppliers), sell-side commerce (for single sellers managing their transactions with multiple buyers) and market-making platforms (which match orders between multiple buyers and sellers). Additionally, auctions support the purchase of more specialized, less liquid items where prices can vary greatly.

Content management is often supported through acquired technology and third-party products; it provides the online catalogs through which products are sourced and selected.

Workflow technology is also often supported through acquisition technology or third-party products; it manages the routing and approval process required for orders.

Information exchange applications are the newest class of collaborative applications and are only just emerging. They can be difficult to identify based on the technologies they use because they sit directly in the middle of a convergence of business intelligence (BI), portal, content management, CRM and knowledge management technologies. While these information exchange applications often borrow from several of these technologies, and the technologies themselves do not readily distinguish this class of application, the business function that is provided clearly identifies them. Information exchange applications provide a Web-enabled platform through which value chain members can share critical business information with each other for mutual benefit.

Two early leaders in this collaborative space are InStranet Inc., New York City, and OpenText Corp., Waterloo, Ontario. InStranet's products hybridize business intelligence and content management technologies, while OpenText's have developed out of search engine and knowledge management technologies.

Three different industry-leading organizations provide good examples of how collaborative applications -- specifically, information exchange applications -- have helped these companies strengthen their value chain relationships and ultimately achieve greater customer loyalty and market dominance.

Penske Logistics: Penske Logistics, a subsidiary of Penske Truck Leasing (a joint venture of Penske Corp. and GE Capital), provides transportation and logistics services and is the one of the largest logistics providers in North America with a fleet of more than 3,000 trucks. In October 2000, Penske rolled out an extranet-based analytic application (built on Business Objects' WebIntelligence) to its value chain partners through which they could share Penske's internal performance and efficiency analysis with these partners. Penske determined that for its business to maintain market dominance, it had to partner with its customers and help them succeed in their businesses -- collaboratively they could develop ways to improve the transportation and logistics process for mutual benefit.

For example, customer ABC needs Penske to deliver a shipment to its distributor XYZ. XYZ tries to schedule all incoming shipments to arrive on a given day of the week, for convenience. But XYZ's loading dock gets congested, trucks back up and Penske cannot unload as soon as they arrive; they are now late for both this delivery and subsequent ones. By Penske's sharing this data with customer ABC, ABC can go back to distributor XYZ and work with them to correct the source of Penske's delay.

Penske is currently managing more than $300 million of business through its extranet application, which has become a strategic differentiator for Penske in the transportation and logistics services market. Penske's customers rely on the supply chain -- and Penske's management of it -- to move their goods to their customers as efficiently and cost-effectively as possible. Reliable, on-time performance with their own customers, faster inventory turns, fewer empty loads and improved load consolidation mean improved profitability for everyone. While harder to measure and quantify, the intangible benefits Penske has enjoyed are of even greater strategic importance. Penske is now seen as a technology leader within its market. Through its extranet application and the open sharing of performance data, customers see Penske partnering with them to best serve their interests. This sharing and open collaboration has fostered a deep trust among Penske's value chain that is unassailable by competitive attack. They have raised the bar for the competition and the extranet application has eased the sales cycle for prospective customers.

Heritage Environmental: Heritage Environmental is the largest privately held environmental company in North America, with more than 30 years experience applying technical innovation and sound business practices to waste disposal management. Wastes, in their business, are primarily liquid industrial wastes that can include corrosive oils, waste water and lab chemicals.

Waste management is a highly commoditized business where margins are tight and companies are constantly looking for a competitive edge. While exploring how to best serve its customers by leveraging Web-based technologies, Heritage evaluated Internet markets that would enable exchange-based bidding for requests for proposal (RFPs). Following a pilot study, the firm was not satisfied with the returns predicted for such an investment, but soon afterward it found how an extranet-based information exchange application could be a huge win-win for both itself and a major client.

A major U.S. automotive manufacturer -- a producer of vast amounts of liquid industrial waste -- had, in the past, handled its waste disposal across the country by outsourcing locally at each of its many sites. Waste disposal is a very paperwork-intensive industry where volumes of data must be maintained, and lengthy reports must be routinely submitted to the U.S. EPA on both disposal and recycling compliance. While this auto manufacturer was able to outsource its disposal, it was spending millions of dollars each year in compliance reporting, and lacked any centralized analysis or management of disposal and recycling activities across the enterprise.

Heritage saw this as an opportunity to differentiate itself from its environmental competitors -- and to offer a tremendous value-added service to this client -- and decided to team up with CRM strategy and technology experts, Braun Consulting. Together, Heritage and Braun designed and implemented an extranet-based information exchange application that centrally managed all disposal and recycling data, and generated the required compliance reports. With this application, the auto giant saved $40 million in the first year by reducing the manual processing necessary to maintain disposal data and produce compliance reports. Heritage now provides an important value-added service -- a shared information service -- to its customer that has greatly strengthened customer loyalty and retention.

Zurich North America: As one of the leading property and casualty insurers in the U.S., with more than $10 billion in premiums in 2001, Zurich North America embarked on a corporate directive in the fall of 2000 to offer exemplary value-added service to customers, in the hopes of deepening their loyalty to the company. After meeting with leading customers, the company identified a shared desire to better understand interactions and communications between itself and its customers.

In response, Zurich implemented an information exchange application using InStranet, a Web-based, collaborative application platform. This application takes advantage of InStranet's secure repository to store insurance policy documents and other unstructured data critical to Zurich's dealings with its value chain members -- customers, brokers and co-insurers. Because InStranet is built on a multidimensional engine that manages the classification taxonomy for documents and a fine-grained security model, users can easily roll-up to view an aggregate of their business with Zurich, or drill-down to view specific policy details. This enables multidirectional communications between all of Zurich's value chain members.

The early response from Zurich's customers has been very positive. According to Jackie Hair, director of global risk management at Cisco Systems (one of Zurich's corporate accounts), "We'll want to place more business with Zurich in response to their bringing us this information exchange application and its leading-edge technology and innovative concepts."

Zurich's use of collaborative technology and the deployment of its information exchange application to its value chain members serves not only as a best-practice example within the insurance industry, but also to other business sectors looking to strengthen their value chain relationships.

Best practice tips
Like most application development initiatives, a successful collaborative application development project will balance vision with practical, good sense. The following suggestions are some of the more common success factors among many of the industry-leading collaborative applications that have deployed so far.

Not all information is created equal. Before you begin designing an information exchange application, understand the needs and pain points, not just of your own organization, but also those of your different value chain members. You do not need to share all possible information to achieve benefit from a collaborative application. In fact, if you try to, you will probably design a behemoth that will likely fail to live up to its objectives.

Identify the subset of information that would most benefit specific value chain members, if they could share that data with your business. Strive for quality, not quantity. Well-contained scope with clearly defined business requirements and project objectives is the best way to ensure an application will deliver business benefit in your lifetime.

Initially design and test with a friend. Unlike most of the business applications we design and deploy, collaborative applications extend beyond the walls of our own organizations. That means that during the design, development and deployment stages, you will be working closely with your value chain members. Select the initial companies to team with carefully. You want to work with a partner with whom you already have a good relationship, and who will not mind the occasional bumps and glitches that occur in any development effort. The last thing you want is for the project to jeopardize your relationship with your value chain members.

Tie the business process into the solution. Shared information is ultimately meaningless if we do not learn from it and adjust and optimize the way we do business. Work closely with your value chain members to understand how each of you can use this shared information to improve both internal processes and interactions throughout the value chain for mutual benefit. Do not forget that the ultimate solution should offer value to everyone, not just your own organization.

If you want to thrive in today's punishing economy and fiercely competitive markets, the most important lesson to remember is to work and play well with others. Collaborative information exchange applications can provide mutual benefit to your business and your value chain members, and can create a solid consortium of companies working together for shared success.

Featured

Most   Popular
Upcoming Events

AppTrends

Sign up for our newsletter.

Terms and Privacy Policy consent

I agree to this site's Privacy Policy.