Customers Turn the TidesSoftware applications must keep pace with a sea change developing in IT requirementsSummer solstice is behind us. The sun is bright, the air thick, the sand hot, and the ice cream bars from the snack stand melt quickly and stick to the pages of a trashy novel. A soundscape curls around the eardrum: breaking waves, laughing children, baseball on the radio, the occasional barking dog. Behind sunglasses, the brain drifts in and out of sleep: that is, until a sandstorm whips through the late afternoon. Rising and rushing in, the cold ocean tide drenches that most prized possession, a dry beach towel. Time to dive in or drive home. Amid the lazy distractions of summer, recent news has given us much to ponder. The economy is the little engine that couldn't. Despite some startlingly robust economic indicators, wait and see continues to be the pervasive wisdom. Or perhaps it's "Who's next?" The Enron Corp./Arthur Andersen LLP debacle barely slipped from the front pages before WorldCom crashed the scene, threatening to become the black hole that sucked in whatever remained of the New Economy. Xerox Corp. and others joined the sorry lineup of companies forced to massively restate earnings. As if the extended telecommunications industry slump weren't enough, technology companies that thrived during the boom are going to have to sort through a summer of more bad news and bankruptcies. Given WorldCom's sizeable role in supporting Internet communication, as of this writing it's unlikely that the company will be allowed to vanish; however, the problems have spread unease about the financial health of an array of WorldCom's suppliers and collaborators. Now that all the bubbly has gone flat, the complex sales, investment, and financial reporting relationships that came to symbolize the New Economy's collaborative vision have become so many avenues for legal and fiscal vulnerability. Risk exposure is now a primary concern in many boardrooms. Meanwhile, the network effect seems to be extending the reach of terrorists. On June 27, The Washington Post reported that a "suspicious pattern of surveillance against Silicon Valley computers" led police and FBI detectives to suspect that Al Qaeda was casing the networks of San Francisco Bay area utilities and government offices in preparation for a "multichannel" attack. The Post quoted John Tritak, director of the U.S. Commerce Department's Critical Infrastructure Assurance Office: "There's this view that the problems of cyberspace originate, reside, and remain in cyberspace. Bad ones and zeros hurt good ones and zeros, and it sort of stays there.... The point we're making is that we're relying on 21st century technology and information networks to run physical assets." As the Post reports, the fear is that terrorists will use Internet-based networks to reach embedded digital controls for various infrastructure systems that manage dams, electricity grids, emergency dispatch systems, and more. In other words, terrorists are also following the "click and mortar" evolution of the New Economy. "Customers Are Our Priority"I'm hoping that you've been spared the latest telemarketing disturbance that's been visited upon my home during the dinner hour and on Sunday mornings. The phone rings, I pick it up, and an automated voice assures me that "customers are our priority." A few seconds later, a real human voice comes out of the ether and asks to speak to someone named "Tanya." I tell the caller that no one by that name lives here. The callers refuse to identify themselves, but do ask for my phone number. I've never given out the information that these callers seek so I don't know what happens next, although I do know that whoever is doing this has no problem with continuing the harassment. In fact, the caller warned me that calls would continue if I didn't cooperate. And they have. Surely, an isolated example: but I couldn't help thinking of this odd method of interacting with prospective customers as I prepared to speak at DCI's Customer Relationship Management event in Boston (June 18-22). Perhaps absorbed by other concerns, some companies are ignoring the critical, value-generating engine of their business: current and potential customers. I'm sure that most companies don't try to woo or retain customers with techniques as simultaneously passive and hostile as the telemarketing scheme that I endured. However, as I read market research reports describing how companies have been pulling back from CRM software due to cost and implementation problems, I wondered if they're not more broadly pulling back from engaging customers in a serious way at all. Focused on security, risk, and controlling their exposure to various potential legal and financial implosions, companies are instead expending their energies buttressing the fortress. Customers or whoever those people are out there — belong on the other side of the moat. As competitive products become commodities and price margins grow thinner, the customer's value relationship to the business becomes critical in sustaining price points, profits, and growth. The immediate effect of the Internet on most businesses has been to accelerate steps toward greater efficiency and cost reduction. But to build momentum for growth, companies will have to exploit the Internet's other great promise: interactivity, which supports the variety of multilevel and multichannel activities that make up a customer relationship. Outside the Moment"The relationship-based enterprise engages its customers in conversations," writes Ray McKenzie in The Relationship-Based Enterprise (McGraw-Hill, 2001). "Unlike a transaction-centered enterprise, the relationship-based enterprise knows that it must do more than focus on each 'moment of truth' or each individual transaction. It knows that its customers are constantly changing. And it knows that conversation is the only way that it will be able to discover who its customers are, what they want, and what they expect. Instead of delivering a monologue to its customers, it engages its customers in conversations that are true dialogues." To my mind, McKenzie expresses well the sea change that organizations must undergo to employ the Internet's benefits and drive higher-value customer relationships. Traditional enterprise information systems begin — and often end — with that "moment of truth." Aided by Web analysis, business intelligence (BI), and data warehousing systems, companies have begun to add customer behavior data to the terabytes of point of sale and other transaction data they're amassing. All of this integrated data richness will prove essential for building the "360-degree" view of customers and their interactions with the organization. One wonders if these are just the early, awkward steps in an evolution toward information systems that can truly support the relationship-based enterprise McKenzie envisions. Of course, McKenzie is interested not only in customer relationships but also in the development and interaction of these with employee and partner relationships. Many organizations now recognize balanced scorecard and other business performance metrics frameworks as critical in highlighting the incentives employees and partners require to work toward strategic goals. But customers are the loadstone for all of these steps toward reorienting information systems. Gaining knowledge about what they value is the essence of demand planning and should be the focus of a more balanced evaluation of whether a company can sustain profitability. Lately in this column, I've been discussing how verticalization is sweeping the software applications business, BI included, as providers seek higher-value, more services-oriented relationships with their partners and stronger competitive differentiation. Another way of looking at this trend is that software providers are evolving their products to support the increasing customer relationship requirements of their clients. This is a massive change, which will require the influx of a lot of new technology and different approaches toward building applications. As long as we're at the beach, I might as well use a surf analogy. It's like the rumble of water sweeping across the wet rocks and sand out to sea: A new wave is forming, and it will definitely break soon. Best not to be asleep when it comes. David Stodder [dstodder@cmp.com] is editorial director of Intelligent Enterprise.
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