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Information Masters
Secrets of the Customer Race
John McKean, Center for Information Based Competition


This month, Strategy100 talks to John McKean about his book Information Masters: Secrets of the Customer Race and his approach to Customer Relationship Management (CRM).

Q. John, can I ask you to start by explaining briefly your particular approach to Customer Relationship Management (CRM)?

A. Customer Relationship Management is a two-sided coin. One side cannot exist without the other. On one side you have the process of creating customer value. On the other side you have the process of creating shareholder value. If a firm focuses on one side without balancing a focus on the other side, both the creation of customer and shareholder value will suffer. A firm could create tremendous customer value but not do it profitably and ultimately go out of business. Another firm could create tremendous shareholder value making tremendous profits for the firm yet if the customer value side is neglected, the long-term profits of the firm will ultimately dwindle. This creation of customer and shareholder value must be done simultaneously requiring a very sophisticated information competency. Our research has shown that 90% of the creation of both customer and shareholder value is determined by a firm's ability to apply its information. Within that 90%, most of what determines a firm's information competency is non-technological in nature.




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Q. In your book, it becomes very clear early on that you see companies over-investing resources and money in technology in order to get closer to their customers? Do you think businesses have come to see technology almost as a 'comfort blanket' and what are some of the fatal assumptions they make?

A. Firms don't necessarily over invest in technology; they just tend to invest in technology without balancing the investments in the non-technological aspects of creating customer competencies. The danger is that the investment in technology does become a comfort blanket, and they honestly believe that technological investments alone will create the type of competencies which they are truly after. In fact, most firms should probably invest more money in technology, but do it in a balanced fashion with the non-technological determinants, which are people, process, organizational structure, leadership, culture, and information itself. As I have already mentioned, the non-technological determinants represent roughly 90% of a firm's information competency. What can actually happen is that companies who want to get closer to their customers, but are unsure of the best way to go about it, end up perpetuating their underlying customer weakness by cycling through the following processes:

  1. Competitive realization that firms need to get closer to their customers
  2. Expose themselves to all the latest marketing, loyalty and service approaches
  3. Attempt to implement those ideas and find that they all require a higher information competency
  4. They make major IT investments believing that this will create the required information competency
  5. The marketing, loyalty and services initiatives make small gains but remain relatively anaemic because IT is less than 10% of the information competency equation
  6. Because the major determinants of their information competency are non-technological and are the more difficult ones to address (people, processes, organizational structure, leadership, culture and information itself), they remain 'in the closet' and under invested.
  7. The firms cycle back to #2 and #4, i.e. pouring water into a leaky bucket.

Q. Can you explain in more detail those 'non-technological determinants' or what you also call the 'seven principles' for information competency. What bottom-line benefits for getting these principles right might this lead to?

A. The seven principles were created as a result of many firms assessment of what really drove their ability to apply information in very sophisticated ways. They can be broken down into the following:

  • The "people" aspect is investing in the skills of the people who are not only interfacing with the customers but investing in their skills to use the information which they rely on to better understand their customers.
  • The "processes" aspect deals with the investment in changing the types of processes that must now be used to utilize a higher degree of detail of a firm's customer information. This could include doing away with the time-tested processes, which were functional in the "Old World", but are no longer valid in today's information economy.
  • The "organizational structure" aspect is investing in the organizational alignment of a firm to actually utilize its information effectively and efficiently to serve customers. Many firms can have brilliant customer information but not to have the structure within the firm to actually apply it effectively.
  • The "leadership" aspect of information competency is an investment in the leadership's culture and understanding of the power and strategic nature of applying information for competitive advantage. In many cases the leadership in some of the largest firms in the world still views the investment in information as technologically oriented.
  • The "cultural" aspects are an investment in how the firm thinks about its information and how that information is applied to serving customers. Many firms have built brilliant information infrastructures but do not have the culture or aptitude to actually apply the customer information to differentiate and satisfy customers.
  • Investing in the "information" itself is critical when in fact most firms need more information than they currently have about customers. Many firms have complained that they are currently in a state of "information overload" when it is only the amount of information they currently have that in fact exceeds their current competency to apply it effectively.
  • The "technological" aspects are a critical component of a firm's customer information competency because it is the enabler of the competency. It determines how "good" a firm can be. A critical component of this "technological" aspect is a firm's ability and willingness to "pull the plug" on the older technology that in fact holds a firm back in working for and with its customers.
This balance between the seven aspects of information competency produce incredible bottom-line benefits in terms of serving customers effectively and efficiently which ultimately produces shareholder value over the long-term.


Q. If I were to attend your talk 'Secrets of the Customer Race', what would be the one overriding thing that you would want me to take away and think about in the context of my own particular business environment (whatever that environment might be)?

A. The most surprising thing that people generally take away from my talks is that customer satisfaction and the perception of customer value is mostly driven by interactions between a customer and a firm, and not necessarily the product features. In fact, 70% of customer satisfaction is driven during interactions and only 30% is driven by product features and functions. Of that 70%, the majority is dependent on a firm's ability to apply its information at the right place in the right time during every interaction of the firm and its customer.


Q. As global competition increases in all industries, do you see a customer-intensive approach key to survival in the 21st century business environment?

A. A customer intensive approach will not be a key to survival in the 21st century, it will be the only way to survive.


Q. Can you give us some real examples of the kinds of problems companies traditionally face with regards to their customers and an indication of what such firms can do to remedy the situation?

A. Some or all of the following inabilities will strike a all too familiar chord with a lot of firms, who:

  • cannot accurately identify their exact number of customers;
  • cannot accurately identify profit contributions by customer;
  • engage in mass mail solicitations expecting a 97% failure rate;
  • engage in personal phone contacts with little more than a name and address;
  • cannot identify which promotions work on which customers;
  • cannot identify their top customers across product groups;
  • cannot tell whether a customer has been a customer previously;
  • don't know what transpired during the last customer contact;
  • cannot identify interrelationships between customers;
  • apply less than 5% of their total information in making decisions;
  • have a dangerously small 20% of customers generating 80% of their profit.
Addressing some of these key issues will greatly help redress the balance so those firms become more customer-centric. In every initiative where there is technology involved always step back and look at the balance between the technological aspects of the initiative and the people issues, who will actually implement and use the technology. If every firm can strike some sense of balance between technology and the other aspects of information competency, solid progress we made toward becoming an information master.