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					      Key Strategies
Winning in the New Economy
                 Vance Williams LaVelle
                 Senior Vice President, Chase
                 One Chase Plaza, 14th Floor
                 New York, NY 10081
                 May 1, 2000                    1
Topics for Discussion

      Emerging Trends
      New Customer-centric Business Models
      Customer Experience and Brand
      Implications to the Organization
      Key Strategies to Win

  2000 Market Observations

      The B2B market opportunity is rapidly expanding

      Getting the infrastructure up to speed will cost
       billions ($600 million   $4 billion)

      Content will continue to proliferate: broadband,
       wireless and satellite

      Cost savings will be promoted all down the line

Source: Bear Stearns & Co.
2000 Market Observations

 Consolidation is in the cards - real and virtual

 Products and services ripe for digital distribution win

 Many companies will win through turbo charged
  databases and data mining intelligence

 Reliable, quality products - once a differentiator - are
  now merely the point-of-entry

2000 Market Observations

 Branding and, especially, service have become the key
  drivers in purchase behavior

 Gaps between service quality and service expectations
  are widening

 Consumers have easier access to information

 Consumers are vastly more empowered than ever

  Consumer demand is causing change….

   • Decreasing available time               • Simplify daily life
   • Increasing information and              • End-to-end convenience and
     choice                                    speed
   • Increasing responsibility               • Reliable customer service
                                             • 29% of on-line users and >50% of
Source: Andersen, Yankelovich, McKinsey
                                               all on-line transactions
And the Internet Changes Everything

Sellers     Before Net             After Net          Buyers
  in                                                    in
control   Price complexity       Price transparency   control

          Limited alternatives   Choice

          Broad Segmentation     Customer Personalization

          Physical Speed         Virtual Speed

          Meaningful entry       Low entry
          barriers               barriers
          Geographic             Virtual
          communities            communities                7
New business models have emerged making it possible
to earn higher returns by delivering more broadly on
customer intentions.

                       Customer            Customer         Value Based
   Product                                                   Alliances
                       Relationship        Managed
   Management                                               focused on
                       Management          Relationship
                                                          Customer Needs

• Product       • Customer is King    • Similar to CRM    • Evolved form In-
  Focus                                                     depth
                • P&L by              • Customer
                                                            understanding of
• P&L Product     Customer &            Empowerment
                                                            customer drives
• Sales Focus                                               offers
                • Customer
• Volume                                                  • Speed to market
                  Lifetime Value
                                                            and “Best of Breed”
                • Maximize                                  define partner
                  Customer                                  alliances
                  Interactions to
                                                          • Revenue sources
                  Enhance Bond
                                                            expand                8
In migrating from a product-driven to a customer relationship
management business model, superior customer insight
capability is imperative to deliver relevant offers.

  Business Model       Customer Relationship Management
  Nature of Customer   Business decides experience of customer
  Business                Insight capability
  Implications            Interaction management
                          Continuous learning and feedback
                          Personalized offerings
                          Push/pull marketing
                          P&L customer and product
                          Lifetime value measurements

The Customer Relationship Management model is quickly
giving way to a new model where the customer is in the
driver’s seat.

  Business Model       Customer Managed Relationship
  Nature of Customer   Customer more involved in selecting
  Experience           experience with business
  Business              Pull marketing (opt-in)
  Implications          Superior insight to anticipate interests in a
                         “permission marketing” model
                        Interaction management in real-time

Innovative players are forging a new business model by
forming strategic alliances to better meet customer needs.

Business Model       Value Based Alliances focused on Customer Needs
Nature of Customer   Customer assembles experience/products based on awareness of
Experience           needs
Business              Customer leads business to satisfy next related need through
Implications           expressing expectations
                      Anticipate needs across related categories
                      Alliance Management
                      Dynamic and Static Content Management and Merchandising
                      Channel Integration
                      Support new business model analytics and tracking
                      Effective value exchange communications
                      Communities
                            Chat
                            Destination sites
                     Examples of Alliances:
                      - Vacation/travel planning
                      - New home location and furnishing
                      - Managing daily lives                        11
These value based alliances can generate new
sources of revenue and superior customer insights
for those who integrate.

   Revenue                     Costs
     Sponsor Fees 52%              Personnel                  66%
     Advertising     17%           Services                   18%
     Transactions     1%           Facilities & Equipment      8%
     Other Income * 30%            Professional Fees           2%
                    100%           Travel & Administrative     6%
  * includes development, bounty         = New revenue sources
    fees & royalties

Source: Andersen
   Increasingly, the customer experience is the brand.

“The difference between products and services blurs to the point that the
distinction is a trap.
Winners provide an offer that is both product and service simultaneously.”   1

                         Requires a branding strategy that can:

                        •   deliver the experience with credibility
                        •   create loyalty and trust
                        •   attract the best alliance partners
                        •   support the evolving business model

 1 Source:   Blur, Stan Davis and Christopher Meyer
To measure the customer experience and continually build the brand,
determine the most important events for high value customers and take
appropriate actions.

                 Acting on Opportunity
Event                    Opportunity              Tailored
Tracking                 Stream                   Communication
            “Imbedded Customer Intelligence”

  Opportunity driven, not campaign focused
  Many parallel communication strategies, across multiple
   channels with diverse, yet, coordinated messages.....
  Relevance and timing are critical.....
The advanced business models create “stickiness”
through personalizing the customer experience…

 Put service in every product
 Personalize and customize the interactions to deepen
  relationships and create repeat purchases
 Anticipate customer desire or intention
 Get smarter with each use - both customer and the offer
 Let customers do anything at any time

… And challenge traditional businesses to build new
capabilities for information intensive marketing.

    Put emotions and personality into every offer and all
     aspects of business
    Cultivate communities to extend relevance
    Extract information from each exchange
    Learn to partner… learn to split

  Traditional businesses have similar goals to the emerging
  business systems, yet their reliance on customer
  information may vary.

                Increase market basket and customer value
            while optimizing the cost to serve and service quality
         More frequently the right offer is delivered in near real time
                       through the preferred channel


      Translating customer information into insights that are actionable
              Creating rules-based decisions to action learning
  Integrating business processes and systems to deploy tailored offers and
Measuring effectiveness in rapid cycle to quickly learn and deploy new insight
   Traditional businesses use three main organizational
   structures for eBusiness.

                     eBusiness Organizational Structures
  Integrated                          Separate LOB                  Separate Entity
  eBusiness contained                 eBusiness as a separate       eBusiness as a separate
  within existing lines of            unit or stand-alone line of   entity (i.e., spin-off, carve-
  business (LOB)                      business (LOB)                out, tracking stock)

    •Charles Schwab                    •Citibank                     •Lucent from AT&T
    •American Express                  •                     • from
    •Bank of America                   •Dell                          CBS
                                                                     •Macy’ from Macy’s

                                               Company                          Company

     LOB                LOB
  (eBusiness         (eBusiness
                                          LOB         eBusiness               LOB      LOB
and Traditional)   and Traditional)
Source: Andersen
 Organizations must be more nimble to effectively
 operate in a rapidly changing environment.

 Organization is part of the economy, same rules, organic
       - source funds from external vs. internal
       - virtual teams and free agents
 Strong employment brand - promise and deliver the employee
       - mass customization to meet individual needs and interests
       - create commitment
 Effective knowledge facilitation to generate and share ideas with
 Streamlined decision processes to respond quickly to opportunities
  and work at internet speed
 Seek diversity and variety                                      19
The organizational competencies needed to be
successful are changing...

 effective technical skills to integrate software and
 strong analytical skills with acute learning abilities
 passionate focus on the customer and their potential
  value and needs
 ability to find comfort and generate confidence in high
 develop mastery in emotional intelligence to manage
  self and relationships effectively (e.g. teamwork,
  collaboration, empathy, influence, adaptability)
… And will continue to evolve with the digital age

 Show a deep understanding of traditional marketing elements -
  product, price, promotion, positioning and distribution
 Embrace the simple to highly complex data analysis methods to
  formulate decisions for prescribing customer interactions
       -   data mining for customer insights
       -   decision rules to tailor experiences
       -   infrastructure deployment for implementation
       -   dynamic merchandising to deliver fresh content with
           frequent assortment changes
 Recognize and rely on teamwork to deliver the brand promise

As the Chief Information Officer and Chief
Technology Officer roles morph to meet the needs of
the new business systems...

   Rising status of CIO role(s) - stronger support from top
    management regarding IT standards, enterprise systems &
    centralized IT policy
 Engaging actively in strategy development
    - strategic direction               - culture
    - organizational structure          - marketing and financial
 Maintaining operational responsibilities (outsourced or direct)
       - data center operations         - help desk service
       - network uptime                 - systems development
   Harnessing new roles of “change master” and “strategy maker”
      - begin with reengineering      - people changes
        projects                      - business acumen
      - process changes               - leadership skills           22
…the challenge increases to attract and develop
expert talent.

 Suggests background in technology with general
  management perspective
      - business executive first, technologists second
 Increasing complexity in the environment - open
  architectures integrated well with proprietary systems
  (data, voice, video)
 One school of thought suggests two roles may emerge
    - CIO for strategy, change and information resources
    - CTO for technology policy, infrastructure planning
       and operations
Assume business model adoption is organic. Facets of
organizations will be quicker to migrate.

  This may lead to information and infrastructure challenges due to
  lack of parity in a multi-business enterprise as new standards and
  supporting architecture continuously evolve.
  Focus on:
    a specific set of capabilities (e.g. web collaboration, data warehousing, etc.)
    in a specific channel(s)
    for a limited number of customers
    and a targeted set of customer transactions to produce early economic
    limit scope to specific product/service offers
    consider outsourcing functions for speed and scale

  Build simply and quickly — Identify the projects that require the least
  effort to implement and provide the greatest payback
        Assess difficulty to implement
        Greenfield space (i.e. Internet, Web enabled projects)
Summary Points

 Assess the challenges in your industry or newly
  redefined industry
 Determine the business model(s) most likely to succeed
  and a practical pace to guide a transformation
 Position your brand for success through customer
  experience management
 Evolve the organizational structure, infrastructure and
  competencies to support the strategy
 Focus on what can get done vs. aspirationally what is
 Build environment to create a rapid learning cycle        25

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