Editor's Note: For this special issue, we asked our columnists to cover a variety of e-business topics. Their insightful commentary provides a well- rounded outlook as to the benefits and challenges of the e-world. Regular column format will return next month.
You may be concerned that the Internet has surpassed data warehousing in terms of strategic importance to your company, or that Internet development skills are more highly valued than those for data warehousing. The fact is, as we will explore in this article, data warehousing is e-business. Companies cannot successfully deploy an e-business strategy without a data warehouse (DW) to support it.
Further, e-business will create a demand for the next generation of data warehousing unlike anything we, the first generation of data warehousing practitioners, have ever seen.
The New Economy
It is evident that the Internet has changed the business world with an impact not seen since the Industrial Revolution. From start-ups to the oldest, most traditional manufacturing companies, the Internet has played a major role in molding the way business is conducted in today's new economy.
While there continues to be much change and complexity associated with emerging business models, one thing is becoming increasingly clear: the value of information. The winners in the new economy will be those firms that are most effective at leveraging their information to:
- Attract and retain profitable customers;
- Optimize the supply chain;
- Identify and manage vendor/supplier relationships;
- Provide more comprehensive and timely management reporting;
- Attract, motivate, develop and retain the best employees;
- Enable globalization; and
- Support product customization and specialization.
You may be asking yourself how this is any different than before. Perhaps you have been supporting these functions with information for years. In fact, maybe you have the invoices and merit badges from your enterprise resource planning (ERP), customer relationship management (CRM) and data warehousing projects to prove it.
The truth is that we have made tremendous progress in addressing the informational needs of many segments of our businesses. However, this is no longer sufficient in today's economy. To be successful in this fiercely competitive, global marketplace requires integrated, granular information enhanced through advanced analytics, whose results must be delivered to decision-makers in real time through multiple channels. These channels will use the information to execute transactions that generate more information which must then flow back through this closed-loop process.
It is also necessary to share some of the information with third-party stakeholders (such as customers, suppliers and strategic partners) who play an important role in helping optimize performance across the entire value chain.
The New Generation of Data Warehousing
As the current business environment continues to shift and change, we can anticipate specific trends and demands for the new generation of data warehousing and business intelligence. For instance, global companies across various industries will improve their competitiveness by relying on data warehouses and data marts as the enabling foundation for their Internet-enabled initiatives. These initiatives include customer relationship management, supply chain management, performance management and human resources management.
During the past few years, two important trends have made CRM a top priority for most firms:
Companies must move from a product-centric to customer-centric model. There has been a paradigm shift in every major industry as companies realize that the "we make it and you take it" approach to customer acquisition and service is no longer effective. This change has led to significant investments in front-end CRM solutions such as sales force automation, call centers, customer service and, more recently, marketing automation. Most companies have successfully implemented at least one CRM solution. However, to get full value from these disparate solutions requires an integrated CRM design that incorporates a sophisticated, comprehensive closed-loop decision support capability. In other words, a company can only truly integrate its CRM if there is a customer data warehouse (CDW) at its core. A CDW aggregates relevant customer data from each customer-facing system and provides a single, integrated view of each customer or household. At PricewaterhouseCoopers, we refer to this integrated CRM model as the Market Intelligent Enterprise (MIE) (see Figure 1).
The CDW must also contain the information needed to support advanced analytical capabilities. Having an integrated CDW is a critical part of successful CRM, but by itself is not enough. The CDW must incorporate a closed-loop analytical/decision support capability that delivers timely, relevant information to all customer touchpoints. These touchpoints include sales personnel, customer service representatives, e-mail, marketing personnel, company Web site, kiosks, fax, personal digital assistants (PDAs) and others as reflected in the MIE architecture. This architecture is ideal for supporting CRM analytics that may include: customer profitability, target marketing, channel analysis, customer retention and "win back," promotion and pricing, and loyalty programs.
Each of these contributes to increased profits and happier and more loyal customers.
Figure 1: The Market Intelligent Enterprise
The advent of the Internet has altered customer priorities. The Internet/business-to-customer (B2C) model may be viewed as yet another channel for selling to and servicing prospective and existing customers. However, the dynamics surrounding the Internet have changed everything. This channel has empowered today's customers to make their own business decisions with just the click of a button. As a result, they are more demanding, expecting sales and service whenever it is most convenient for them (24x7). They also expect their B2C experience to be personalized, quick and easy to use. In the new economy, your fiercest competitor is only seconds away from your most valuable customer. This has tremendous implications for data warehousing since the Internet enables companies to capture the most detailed information about customers and their buying preferences. It also allows those companies to use this information to proactively service and market to customers in a targeted and noninvasive manner. Figure 2 provides an example of a Web-enabled marketing campaign process. We refer to it as the Customer Adaptive Learning Cycle (e-CALC).
The most important business imperative driving the demand for CRM, and thus a data warehousing solution, is profitability. The e-business marketplace has quickly advanced beyond the earlier stages when the primary focus was acquiring new customers and market share. During the past six months, the investment community has begun to focus on profitability as well as revenue. In response, executives have attempted to gain a better understanding of the short-term and longer-term economic value of customers and are acting accordingly.
Figure 2: The Web-Enabled Customer Adaptive Learning Cycle Process
Herein lies the value of integrated CRM and DW. The information necessary to support the short- and long-term analysis of customers is sourced from multiple customer and firm-wide systems, stored in the customer data warehouse and analyzed using lifetime economic value analytics. The result is customer segmentation based on a more comprehensive view of each customer or household.
The next major process segment where e-business drives the demand for more and better information is in the area of supply chain optimization which includes e-procurement, demand forecasting, manufacturing, inventory management and product quality.
The Internet has impacted these fairly traditional processes in two ways:
A company must have a tightly integrated supply chain to successfully deploy a retail (B2C) Web site. Many e-retailers learned this painful lesson at the end of 1999, when they enthusiastically took orders via the Internet for toys, gifts and other items. Unfortunately, their Web-based ordering systems were not integrated with their inventory management and sourcing systems, and they were unable to source, produce and deliver these goods in time for the holidays. Today, there is a much greater emphasis on the importance of integrating front-office and back-office solutions. Most companies are addressing this issue by implementing a data warehouse. Many vendors of back-office and front-office solutions have attempted to develop integrated applications across the enterprise; however, data warehouses are still the best place for integrating this information across the entire value chain and will remain so for the next several years.
The Internet enables supply chain optimization and cost reduction. The best evidence of this is the proliferation of business-to-business (B2B) trade exchanges, auctions, etc. These exchanges and auctions electronically match buyers with sellers. The result is direct cost reduction through lower purchasing prices and the elimination of several manually intensive and costly processes. As with the B2C market, the initial thrust for B2B was the market share "grab." Minimal attention was paid to anything other than lining up a large number of buyers with a large number of sellers. As the B2B market matures, the emphasis will shift from a pure market-share/lowest-cost model to one that also considers information about quality, timeliness of delivery, and other important qualitative and quantitative measures. To achieve this model, companies and technology providers building these exchanges are incorporating data warehouses and supply chain management analytical applications as an integral part of their B2B solutions.
Integrated Performance Management
During the 1970s and 1980s, decision-makers relied almost entirely on their company's accounting/financial organizations to supply the information required to manage their business. Ironically, the CFO and his staff spent most of their time and attention generating external reports to satisfy regulators and other compliance-driven objectives.
In the 1990s, however, many of these financial reporting systems could no longer keep pace with the needs of the business. Decision-makers then sponsored the development of their own standalone reporting systems, which delivered the information required for their respective business or department. This is how the first generation of data warehousing emerged.
However, the creation of these standalone reporting systems has resulted in the environments we so often see today: those that contain nonintegrated, redundant data that is neither consistent nor accurate and, furthermore, does not reconcile with the company's official book of record (i.e., the accounting system).
Now enter the Internet and management's inherent demand to see results reported accurately, consistently and at e-speed. Financial results alone are not enough today. Executives must have access to a balanced set of the quantitative and qualitative measures required to truly measure and manage a company's performance (e.g., balanced scorecard).
Meeting a company's statutory and regulatory requirements is also important and valuable. However, companies do not gain a competitive advantage simply by satisfying these requirements. This was reinforced in a recent Conference Board/PricewaterhouseCoopers CFO Survey, which reported that the top priority for CFOs in the next three years is to "enhance their decision support skills and systems to become more effective in assisting line managers to make optimal decisions."
Herein lies the intrinsic value of the Internet and data warehousing for IPM. Enabled by these technologies and when integrated with a company's legacy systems, the finance organization is capable of providing up-to-the-minute analysis and operational results. This allows management to make adjustments in minutes instead of weeks or months.
The Internet has enabled these financial data warehouses (FDWs) to collect information, including competitive data and external benchmarks, while providing an excellent vehicle for disseminating information throughout a global organization quickly and cost-effectively. This greatly improves weekly, monthly and quarterly reporting in terms of content, accuracy, consistency, relevance and delivery.
Human Resource Management
The last major area where the Internet is causing a dramatic increase in the demand for data warehousing is in human resources. This convergence is being referred to as the business-to-employee (B2E) model.
Similar to the situation with customer data, most companies have numerous, disparate human resource information systems (HRISs). In general, these HRISs are both technically and organizationally diverse. At the same time, globalization, the introduction of many diverse employee benefit options/plans and a tight labor market have caused executives to place a very high priority on serving and protecting their employees through more effective recruitment, development, deployment and retention programs.
The employees, on the other hand, are insisting on better and more timely information about their employee benefits, salary and bonuses, retirement plans and job opportunities. This need is met by combining traditional payroll and benefits systems with all employee-related information being aggregated in a human resources data warehouse. The information is then distributed via self-service kiosks and the Internet directly to the employee through a portal as depicted in Figure 3.
Figure 3: B2E Model Human Resources Data Warehouse
This solution can only be effectively accomplished when using a data warehouse to provide a single, global view of each employee. A data warehouse truly leverages the technical advantages of the Internet to enable more informed HR decision making.
Data warehousing practitioners may feel that the Internet and e-business have captured the hearts and minds of business executives, relegating data warehousing to "second class citizen" status. However, the opposite is true, and this truth is becoming increasingly clear to successful small and large companies (both traditional brick- and-mortar and Internet start-ups). You cannot implement an effective Internet strategy without using the best aggregated, analyzed and delivered information available. In today's environment, this is only possible through data warehousing.
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