Reinventing Customer Value

By Pellet, Jennifer | Chief Executive (U.S.), October 2001 | Go to article overview

Reinventing Customer Value


Pellet, Jennifer, Chief Executive (U.S.)


LOOKING BEYOND the bottom line, companies are seeking our new business models-and inspiring] customer loyalty-with a careful mix of technology, outsourcing, and collaboration.

You've come along way in the last decade. You've halved development time, implemented new technologies, integrated far-flung suppliers into a semaless chain, and introduced automated customer service.

But it's not enough. Thriving in a time when only the agile survive requires continual reinvention. To build customer value today, CEOs must look tangible goal-creating and nurturing a corporate culture that seeks out flexible new business models, structures, and relationships.

That's no easy feat. And achieving it, agreed CEO's at a recent roundtable held in partnership with Accenture, often demands jettisoning protectionism in favor of collaboration. "Clearly the world is now too complex, changing too fast, and far too competitive for any firm to do all of the functions within their business on their own," said K. Blake Darcy, CEO of CSFBdirect. "Value wins out overall, and the only way you can provide that value on a consistent basis is to be cost effective by using outsourcing and partnerships."

These days, of course, both are stock items in the standard CEO toolbox. In outsourcing relationships involving everything from back-end accounting tasks to front-end customer service, companies are entrusting one another with sensitive data and enormous responsibility. Similarly, partnerships are evolving to encompass joint development of intellectual property and capital investment.

But as relationships deepen and firms become more intertwined with their partners, the prospect of finding, forming, managing, and expanding appropriate relationships grows ever more daunting. After all, risks are inherent in any partnership effort-and the deeper the partnership, the messier its demise. Yet the consequences of missing out on a collaborative opportunity and potential payoff can be just as dire.

Clearly, the ability to both forge relationships and skirt the dangers intrinsic to them has become an invaluable CEO skill. As Benchmark Electronics CEO Don Nigbor noted, "It's a very scary thing for most companies, and it takes the CEO to make those decisions."

It's not easy, and it's not without risk, but neither is it optional.

- Jennifer Pellet

Taking a Fresh Look

Martin Cole (Accenture): Historically, outsourcing has been all about cost reduction. How can I take a business component and have somebody else provide it at a lower cost? But we've been looking deeper, saying, "Are there ways to improve speed to market, return on capital, and overall market position, and deliver top-line growth and overall profitability growth in addition to just achieving cost reductions?"

Our focus is on how to use outsourcing as an enabling tool to transform a business. The UK-based grocery retailer Sainsbury is perhaps the premier example of this type of business transformation occurring through outsourcing.

About two years ago, Sainsbury brought in a new CEO, Sir Peter Davis, who was charged with developing a new business model. The company had lost market position, profit margins were under pressure, the cost structure was out of line, and its share price had dropped.

We partnered with him to deliver significant cost reductions -including 30 percent to 50 percent reductions in IT operations-and to enable him to launch a more efficient Web presence where customers could shop for groceries online. By looking at these multiple areas and outsourcing some components, Sainsbury significantly improved its position over the 12 months this program has been under way.

The question is how do we engage business transformation using technology, outsourcing, and collaborative arrangements as enablers to a much broader program than just focusing on cost reduction? Transforming an organization starts with vision and aggressive leadership. …

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