The reason for a customer-centric business strategy is strengthening and deepening customer relationships and increasing loyalty. To accomplish this, an organization must truly understand its existing customer base, paying attention to the customers’ needs and recording their interactions with the organization. The marketing model shifts from mass marketing to one-to-one marketing where the classic market segments become, theoretically, a one- person segment.
The growth of the customer-centric business strategy has led to an increasing emphasis on finding the overall profitability by customer and calculating a customer lifetime value. The analytics required to support such a strategy have required databases designed to enable querying of data across the various customer interactions with the company. This is a change from the classic approach of designing databases for efficient querying of account/relationship information about the customer. Such account-centric databases fall short when one has to find out about all of the interactions the customer has had with the company.
To understand the IT implications of implementing a customer-centric business strategy, one must also understand the organization’s broader business challenges. Consider these challenges faced by a diversified financial services firm as it implemented a customer relationship marketing program.
Challenge #1: Who Wants What?
Identifying the various stakeholders involved in the successful execution of the strategy is the first challenge faced on the road to making the strategy successful. Equally challenging is understanding each stakeholder’s role.
In the corporate organization, senior executives, such as the CEO and board of directors, are typically seeking a solution to a market problem. For example, “We have a customer base that’s highly likely to default. We need to reduce this risk.”
Then there are the individual operational business unit managers, who have different perspectives of the problem than senior management. A problem for one group may not impact another. For instance, a retail-lending unit could be affected more by the corporate problem than the insurance unit because of their different business models and differing target customer segments.
Finally, the IT organization is typically structured to serve the operational business units. As such, it is so focused on providing day-to-day solutions that it lacks the resources to implement the corporate vision.
These groups represent just some of the stakeholders in the customer-centric business strategy. It is important to note that each group has differing incentives for solving the same fundamental business problem.
Challenge #2: Explain It to Me Again
The second challenge faced is the effective communication between these stakeholders. By the time the corporate vision is passed down through the operational business units to the IT organization, the message might be totally lost – or worse, misinterpreted. As a further complication, the larger the organization grows, the more difficult it becomes for the business units to arrive at a consensus on how to translate the vision into action.
Even if operational or functional consensus is reached, the IT organization might find it extremely difficult to translate this to technical specs. In our example of a financial services firm, it would be simple to say that the customer payment defaults should be reduced. But what does this directive mean to the IT organization? The more time business units affected by the corporate directive take to clarify the problem to IT, the better the IT solution will match the customer-centric vision of the organization.
Challenge #3: Conventions, Consistency and ConsolidationData architecture is the way of organizing data so that it can be converted into information by simply asking the right questions. Defining a consistent data architecture strategy is an important challenge faced by the IT organization, and it must be built upon a clear vision of the strategy (Challenge #1) and a clearly communicated operational objective (Challenge #2).
As the IT organization creates the data architecture to support the passed-down functional specifications, it is typical to see the same data elements existing in the silos of the operational business units. These diverse elements might not be easy to consolidate, as they could have been used in a different ways in the different business units. For example, the common data element homeowner codecould be used inconsistently – an “O/R” in one business unit and a “0/1” in another.Even if IT can access and consolidate this data, the duplication in the various business units would make it difficult to get toward one version the truth. Figuring out the sourcing of data could further lead to a debate on how to store it. “Do I use the star schema data model or relational data model or something else?” Furthermore, decisions must be made on presenting the data to the users. “Do I use custom-built applications or off-the-shelf tools? Do I Web enable the reports or not?”
The hurdles that have to be overcome in implementing a customer-centric business strategy extend far beyond IT. However, the IT organization can take the lead role ensuring the success of such a strategy – overcoming challenges, reducing implementation times and preventing organizational frustrations.
IT Organizational Structure
To take a lead role, IT must organize itself along the lines of the strategic solution itself. Ideally, there must be a clear distinction between the operational and analytical areas of the IT organization. For example, the data capture area and data analysis area should be separated from each other due to their inherent differences. Operational systems development and maintenance could be aligned with the individual business units, but the analytical area needs to have a mandate that goes across business units. This will help IT to better address the needs of the stakeholders (Challenge #1).