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Customer relationship management and supply chain management


CRM & The Enterprise Value Chain

CRM impacts the entire value chain from marketing & sales to inventory management and the supply chain, to human resources and finance. In the customer ecosystem, the EVC needs to run seamlessly for a customer to be happy. Check this out to find out how that works.

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CRM & The Enterprise Value Chain

  1. 1. Touch ‘Em All – Customer Impact & The Enterprise Value Chain By Paul Greenberg President, The 56 Group, LLC BPT Partners Chief Customer Officer Co-Chairman, Rutgers University CRM Research Center Author: CRM at the Speed of Light, 3 rd Edition
  2. 2. <ul><li>“ CRM is a philosophy and a business strategy supported by a system and a technology, designed to improve human interactions in a business environment ” </li></ul><ul><ul><li>Paul Greenberg, “Reality Check” CRM Magazine 2003 </li></ul></ul>The Business Ecosystem Changed
  3. 3. <ul><li>“ People have changed more than the business organizations upon which they depend. The last 50 years have seen the rise of a new breed of individuals, yet corporations continue to operate according to a logic invented at the time of their origin, a century ago. The chasm that now separates individuals and organizations is marked by frustration, mistrust, disappointment, and even rage. It also harbors the possibility of a new capitalism and a new era of wealth creation.” – Dr. Shoshanna Zuboff, The Support Economy </li></ul>The Business Ecosystem Changed
  4. 4. <ul><li>Pre 90s </li></ul><ul><ul><li>Product/Demand driven corporate ecosystem </li></ul></ul><ul><ul><ul><li>Separate demand and supply chains </li></ul></ul></ul><ul><li>Late 90s to nearly present </li></ul><ul><ul><li>Customer driven corporate ecosystem </li></ul></ul><ul><ul><ul><li>The enterprise value chain </li></ul></ul></ul><ul><li>Present </li></ul><ul><ul><li>Customer ecosystem </li></ul></ul><ul><ul><ul><li>2006 - the “Era of the Social Customer” </li></ul></ul></ul><ul><ul><ul><li>Personal value chain </li></ul></ul></ul>The Business Ecosystem Changed
  5. 5. <ul><li>Definition of a customer has changed </li></ul><ul><ul><li>Traditional: Someone or a group that paid you for goods and services </li></ul></ul><ul><ul><ul><li>Paying client a.k.a. end client </li></ul></ul></ul><ul><ul><li>Contemporary: Anyone or any group that you exchange value with </li></ul></ul><ul><ul><ul><li>Paying client </li></ul></ul></ul><ul><ul><ul><li>Employee </li></ul></ul></ul><ul><ul><ul><li>Channel/Partner </li></ul></ul></ul><ul><ul><ul><li>Vendor/Supplier </li></ul></ul></ul><ul><ul><li>NOTE: Every B2B relationship has a “C” at the end of it somewhere </li></ul></ul><ul><ul><li>NOTE 2: Though the sales process and location are different – the interactions are still AMONG HUMANS – just like B2C </li></ul></ul>The Customer: Not Just Your End Client
  6. 6. <ul><li>Enterprise value chain </li></ul><ul><ul><li>Corporate ecosystem’s greatest achievement </li></ul></ul><ul><ul><li>Seamless one works to please single customer </li></ul></ul><ul><ul><li>Didn’t care what part of the chain had issues, brandholder responsibility </li></ul></ul><ul><li>Personal value chain </li></ul><ul><ul><li>Customer ecosystem’s paradigmatic transition </li></ul></ul><ul><ul><li>Competitive Expectation Level (CEL) (e.g. FedEx v. UPS) </li></ul></ul><ul><ul><li>The customer demands a personalized experience that can draw from multiple value chains if need be </li></ul></ul><ul><ul><li>Your business can’t control the personal value chain </li></ul></ul>The Business Ecosystem Changed
  7. 7. <ul><li>The Enterprise value chain you DO control must work flawlessly </li></ul><ul><ul><li>Seamless interactions between your back & front offices </li></ul></ul><ul><ul><li>Cooperation between partners, suppliers, vendor </li></ul></ul><ul><ul><ul><li>Croatian food companies </li></ul></ul></ul><ul><ul><li>All processes value must be determined by how much customer value is identified and embedded </li></ul></ul>The Business Ecosystem Changed
  8. 8. <ul><li>Demand Chain </li></ul><ul><ul><li>Customer-facing: sales, marketing, support </li></ul></ul><ul><li>Supply Chain </li></ul><ul><ul><li>Inventory management, parts planning, logistics, delivery </li></ul></ul><ul><li>Support Chain </li></ul><ul><ul><li>Channel support services – complex </li></ul></ul><ul><li>Personal Value Chain </li></ul><ul><ul><li>Each person has multiple value chains that are enterprise value chains they call on for each set of interactions/transactions </li></ul></ul>All The Pretty Value Chains Laid Out In A Row
  9. 9. <ul><li>Traditional demand chain </li></ul><ul><ul><li>Customer-facing functions at company </li></ul></ul><ul><ul><ul><li>Sales </li></ul></ul></ul><ul><ul><ul><li>Marketing </li></ul></ul></ul><ul><ul><ul><li>Customer service </li></ul></ul></ul><ul><li>Contemporary demand chain </li></ul><ul><ul><li>Incorporates customer collaboration along with traditional functions </li></ul></ul><ul><ul><ul><li>Customer as an advocate if the experience is optimal – extended sales & marketing team </li></ul></ul></ul><ul><ul><ul><li>E.g. Proctor & Gamble social networks – Innovation Network, Vocalpoint, Tremor </li></ul></ul></ul>The Demand Chain
  10. 10. <ul><li>Differentiators are no longer products & services </li></ul><ul><ul><li>Pretty much the same from company to company </li></ul></ul><ul><li>Key differentiator is the customer’s experience with the company </li></ul><ul><ul><li>Provides a business value for the experience with the products/services </li></ul></ul><ul><ul><li>Comfort </li></ul></ul><ul><ul><li>Convenience </li></ul></ul><ul><ul><li>Simplicity </li></ul></ul><ul><ul><li>Ubiquity </li></ul></ul><ul><ul><li>Timeliness </li></ul></ul><ul><ul><li>Contemporary technology use (e.g. mobile technologies, not Oracle) </li></ul></ul><ul><ul><li>Wow factor </li></ul></ul><ul><ul><li>Customer feels sense of importance, self-control, ownership </li></ul></ul>The Demand Chain
  11. 11. <ul><li>Creating a community of self-interest </li></ul><ul><ul><li>Personal value has to be mapped to business objectives </li></ul></ul><ul><li>Incentives need to be designed to make improvement in customer experience “worth it” to other customer groups </li></ul><ul><ul><li>Changes in compensation for employees that focus on customer satisfaction </li></ul></ul><ul><ul><li>Supplier premiums for beating the baseline guarantees of SLAs </li></ul></ul><ul><ul><li>Partner rewards for customer satisfaction to be applied for benefits </li></ul></ul>The Demand Chain
  12. 12. <ul><li>But there is a BIG potential problem in how effective that experience will be </li></ul><ul><ul><li>Disconnect between: </li></ul></ul><ul><ul><ul><li>Satisfying customer requirements </li></ul></ul></ul><ul><ul><ul><ul><ul><li>versus </li></ul></ul></ul></ul></ul><ul><ul><ul><li>Available product </li></ul></ul></ul><ul><ul><ul><ul><li>Concerns over forecasted production </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Inventory availability </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Delivery </li></ul></ul></ul></ul><ul><ul><ul><ul><li>versus </li></ul></ul></ul></ul><ul><ul><ul><li>Internal operations </li></ul></ul></ul><ul><ul><ul><ul><li>Financial processes </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Day-to-day activity </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Human resources planning </li></ul></ul></ul></ul>The Demand Chain
  13. 13. <ul><li>The disconnect is dangerous because it decreases the customer experience’s value & chances for success </li></ul>Supply Chain (SCM) Back Office (ERP) Demand Chain (CRM) Support Chain The Delinked Chain No transparency
  14. 14. <ul><li>Traditional supply chain management (SCM) </li></ul><ul><ul><li>Came from a product-driven world </li></ul></ul><ul><ul><ul><li>Originally the planning, execution and measurement of a product from production to marketplace </li></ul></ul></ul><ul><ul><ul><li>SCM was aimed at cost reduction & improving efficiency </li></ul></ul></ul><ul><ul><li>Planning </li></ul></ul><ul><ul><li>Execution </li></ul></ul><ul><ul><li>Not seemingly impacted directly by customers, though had an impact on customers </li></ul></ul><ul><ul><li>Collaboration not seen as a necessity </li></ul></ul>The Supply Chain
  15. 15. <ul><li>Contemporary supply chain management </li></ul><ul><ul><li>Components of SCM from procurement through delivery have evolved from back office functions to customer-facing need </li></ul></ul><ul><ul><li>Customers continue to be affected by the supply chain, but more importantly directly impact it </li></ul></ul><ul><ul><li>No longer just efficiency of automated processes but directly affect the customer’s experience </li></ul></ul><ul><ul><li>Customer desire directly affects the success or failure of the supply chain </li></ul></ul><ul><ul><li>Collaboration with suppliers, vendors and customers a part of the new value chain </li></ul></ul>The Supply Chain
  16. 16. <ul><li>Collaborative Planning, Forecasting & Replenishment (CPFR) </li></ul><ul><ul><li>Cooperative planning between all suppliers and brand holder to improve inventory management and delivery time to customer </li></ul></ul><ul><ul><ul><li>In corporate ecosystem, unthinkable due to revealed competitive information </li></ul></ul></ul><ul><ul><ul><li>In customer ecosystem, collaboration & forecast sharing to fill customer need at reduced cost </li></ul></ul></ul>The Supply Chain
  17. 17. “ If you can’t drive sales and deliver product at the point of purchase, you lose.” – Jake Barr, GM, Supply Chain Innovation The Supply Chain: Proctor & Gamble
  18. 18. <ul><li>Streamlined supply chain because of understanding of the “enterprise value chain” and its relationship to customers (2002) </li></ul><ul><ul><li>Sixty percent of P&G sales due to “events” (organized experiences) – can be promotions (e.g. Max the Stack – decoder cards for teens at theme parks or concerts) </li></ul></ul><ul><ul><li>“ Pull” events meant “pull” supply chain – i.e. produce only what the customers are buying – cut out excess inventory </li></ul></ul><ul><ul><ul><li>Scary due to out of stock means 41% of the time the sale is lost and 28% of the time a competitor is chosen. </li></ul></ul></ul><ul><ul><ul><li>Also scary because 5000 key retailers & 30,000 key suppliers had to buy into the changes </li></ul></ul></ul>The Supply Chain: Proctor & Gamble
  19. 19. <ul><li>Key Performance Indicators </li></ul><ul><ul><li>Out of stock rates </li></ul></ul><ul><ul><li>Total supply chain response time – from purchase at register to purchase of raw materials to replace product </li></ul></ul><ul><ul><li>Shelf level quality – damaged or unappealing packages on store shelves – reduction to zero </li></ul></ul><ul><ul><li>Pricing design from the shelf back – what price is appealing to customer and then reverse engineer to see if product can be produced to make that price point </li></ul></ul><ul><li>Results? </li></ul><ul><ul><li>7.6% out of stock rates rather than 16.3% from 2003 to 2004 </li></ul></ul><ul><ul><li>Earnings growth went from 15% in 2002 to 20% in 2004 </li></ul></ul><ul><ul><li>Annual savings between $50 and $100 million </li></ul></ul><ul><ul><li>Increased sales from $40 billion in 2002 to $43.4 billion in 2003 </li></ul></ul>The Supply Chain: Proctor & Gamble
  20. 20. <ul><li>Traditional Enterprise Resource Planning (ERP) </li></ul><ul><ul><li>The back office </li></ul></ul><ul><ul><ul><li>Financial systems </li></ul></ul></ul><ul><ul><ul><li>Human resources </li></ul></ul></ul><ul><ul><ul><li>Operational </li></ul></ul></ul><ul><ul><ul><li>Tactical </li></ul></ul></ul><ul><li>Contemporary ERP </li></ul><ul><ul><li>All processes that govern the back office are impacted by customers </li></ul></ul><ul><ul><li>Intimately tied to the overall EVC – through the employees and their interactions with customers </li></ul></ul><ul><ul><li>Technologically, through service-oriented architectures – web services tied to business rules/processes that are available on whatever medium they need to be </li></ul></ul><ul><ul><li>Financial processes & demand forecasts </li></ul></ul>ERP: Internal & Operational
  21. 21. <ul><li>When channel partners are seen as competitive they have no visibility into the supply chain or internal operations of the brand holder </li></ul><ul><li>When they are seen as collaborators in an extended enterprise value chain </li></ul><ul><ul><li>Collaborative forecasting and planning </li></ul></ul><ul><ul><li>Product distribution and availability </li></ul></ul><ul><ul><li>Scheduling optimization and improved delivery </li></ul></ul>The Support Chain
  22. 22. <ul><li>EVC demands transparency between supply, demand and support chain </li></ul><ul><ul><li>Between back and front offices </li></ul></ul><ul><ul><li>All processes need to have customer value </li></ul></ul><ul><ul><ul><li>Even if this makes them apparently less efficient , it makes them more effective </li></ul></ul></ul><ul><li>All of this is in collaboration for and with the customer </li></ul>Enterprise Value Chain: 21 st Century
  23. 23. <ul><li>With an enterprise value chain, “capable to promise” becomes the 21 st century asset management paradigm replacing “available to promise” as the new mantra </li></ul><ul><ul><li>“ Available to promise” meant the product was assumed to be available in inventory or being manufactured and delivery was based on that but the supply chain was siloed from asset management </li></ul></ul><ul><ul><li>“ Capable to promise” identifies not only the accurate delivery date but also the manufacturing and inventory constraints through a “collaborative” effort between the supply chain and asset management systems. </li></ul></ul>Enterprise Value Chain: 21 st Century
  24. 24. <ul><li>“ Capable-to-promise” is an example of an EVC-centered best practice . </li></ul><ul><ul><li>For you, it involves processes like: </li></ul></ul><ul><ul><ul><li>Manufacture to order </li></ul></ul></ul><ul><ul><ul><li>Maintenance, repair and operations scheduling/planning </li></ul></ul></ul><ul><ul><ul><li>Resource allocation and planning </li></ul></ul></ul><ul><ul><ul><li>Order management </li></ul></ul></ul><ul><ul><ul><li>Sourcing scenarios/planning </li></ul></ul></ul><ul><ul><ul><li>Order simulation for the sourcing scenarios </li></ul></ul></ul><ul><ul><ul><li>Date and quantity controls </li></ul></ul></ul><ul><ul><ul><li>Alternative supply models </li></ul></ul></ul><ul><ul><ul><li>Partnership/Distribution channels and processes associated </li></ul></ul></ul><ul><ul><ul><li>Scheduling, delivery and logistics planning </li></ul></ul></ul>Enterprise Value Chain: 21 st Century
  25. 25. <ul><li>To the customer, it involves: </li></ul><ul><ul><li>Order item/service </li></ul></ul><ul><ul><li>Deliver item/service </li></ul></ul>That’s It! Enterprise Value Chain: 21 st Century
  26. 26. <ul><li>What changes? </li></ul><ul><ul><li>Keep in mind, to go from a siloed set of chains to an EVC, demands major culture change </li></ul></ul><ul><ul><ul><li>Not only the employees relationships to customers </li></ul></ul></ul><ul><ul><ul><ul><li>Right now only 38% of the supply chain managers have financial incentives linked to supply chain performance (Bain, 2002) </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Worse, 78% of the 38% who do have incentives don’t account for consumer feedback or vendor results </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Percentage is higher for CRM customer satisfaction incentives </li></ul></ul></ul></ul>Enterprise Value Chain: 21 st Century
  27. 27. <ul><li>RFID </li></ul><ul><ul><li>Tagging along gets a whole new meaning </li></ul></ul><ul><ul><ul><li>“ Microchipped” tag for tracking how, what, when and where in real time using radio frequencies </li></ul></ul></ul><ul><ul><ul><ul><li>Passive – powered by tag reader </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Active – internal battery power </li></ul></ul></ul></ul><ul><ul><ul><li>Tags can be read through substances </li></ul></ul></ul><ul><ul><ul><li>Developed for missile tracking originally </li></ul></ul></ul><ul><ul><ul><li>Used in Europe for animal tagging among other things in the early stages </li></ul></ul></ul>Enterprise Value Chain: 21 st Century
  28. 28. Designing the Customer Experience Enterprise Value Chain: 21 st Century
  29. 29. Enterprise Value Chain: 21 st Century
  30. 30. <ul><li>Benefits </li></ul><ul><ul><li>Data sharing between suppliers, brand holders, and customers using open data models </li></ul></ul><ul><ul><li>Time to market improved </li></ul></ul><ul><ul><li>Customer expectations accurate (delivery issues) </li></ul></ul><ul><ul><li>Costs reduced through increase in effectiveness of inventory/supplies management </li></ul></ul>Enterprise Value Chain: 21 st Century
  31. 31. <ul><li>Benefits </li></ul><ul><ul><li>The value of functional integration? </li></ul></ul><ul><ul><ul><li>Forecasting demand leads to adjusting marketing programs </li></ul></ul></ul><ul><ul><ul><li>Customer demand drives supply allocations </li></ul></ul></ul><ul><ul><ul><li>Product configuration constrained to available inventory </li></ul></ul></ul><ul><ul><ul><li>Price & revenue optimization possible </li></ul></ul></ul><ul><ul><ul><li>Supplies brokered to appropriate channel partners </li></ul></ul></ul><ul><ul><ul><li>Order fulfillment across an “extraprise” </li></ul></ul></ul><ul><ul><ul><li>Optimized scheduling to handle customer complaints according to criteria such as SLA requirements or customer lifetime value </li></ul></ul></ul>Enterprise Value Chain: 21 st Century
  32. 32. <ul><li>ROI </li></ul><ul><ul><li>More accurate forecasting </li></ul></ul><ul><ul><li>Increased customer retention </li></ul></ul><ul><ul><li>Increased revenues </li></ul></ul><ul><ul><li>Self-service configuration for customers via web reduces costs of order to cash </li></ul></ul><ul><ul><li>Much more effective targeted marketing </li></ul></ul><ul><ul><li>Improved profitability </li></ul></ul>Enterprise Value Chain: 21 st Century
  33. 33. THANK YOU For further information: Paul Greenberg The 56 Group, LLC [email_address] 703-551-2337
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CRM impacts the entire value chain from marketing & sales to inventory management and the supply chain, to human resources and finance. In the customer ecosystem, the EVC needs to run seamlessly for a customer to be happy. Check this out to find out how that works.


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