Transforming IT
This month, Steve Rosenstock sits down with Jesse Deol, director of Manufacturing, Distribution & Retail Industry Marketing at HP, who - over his 20-year career as a high-tech professional - has been hand-picked to lead several cross-functional transformation projects. Deol shares his recommendations as to how consumer good companies can glean better business outcomes - brand differentiation and preference, customer loyalty, market share gains, among others - by tackling his three dimensions of IT transformation. Plus, Deol offers recommendations on how consumer goods companies can leverage multi-channel marketing to deliver consistent, relevant and lifestyle-oriented content and messages.
How can transforming IT create better business outcomes for consumer goods companies?
DEOL: There are three dimensions to my perspective on IT transformation creating better business outcomes. The first is driving down the cost of IT services by improving operational efficiency through IT standardization, adoption of shared services, taking advantage of virtualization technologies, SOA-based application development and governance, and ultimately building a 24/7, lights-out data center environment that is a rock-solid foundation for IT operational excellence. The capital freed up from this transformation is (by our estimation) in the range of 1 percent of revenue for most large, global companies. HP has a blueprint for this approach and we are in the process of transformation ourselves in this respect. It is hard work and requires business and IT alignment every step of the way, and starts at the CEO level for sustained investment and global "enforcement".
The second is redeploying the capital from IT services and infrastructure to investments in innovation as measured by business process improvements and/or the introduction of new disruptive technologies to gain competitive advantage. As an example, in the age of the "digital consumer experience" it is likely that IT will have to get more involved in the delivery of services that are consumer-ready or accessible via mobile devices at home, where they shop or wherever the consumer chooses. The business outcome is to create brand differentiation and preference.
The third is using technology to transform the value chain or ecosystem of partners, suppliers and customers in a way that creates more transparency in demand, less latency in responsiveness, and ultimately, more opportunities for customer insights and market share growth. This is a clever marriage of business intelligence (a single version of the truth) as well as supply chain optimization based on demand-driven principles. The business outcome is better customer loyalty and market share gains.
Specifically, how can this transformation lead to better customer insights and supply chain visibility?
DEOL: Building on my last point, we have seen significant improvements in customer insights and supply chain visibility when our customers create a collaborative, demand-driven supply chain that is actively managed as a complete value chain with transparency of demand signals, quicker and more frequent access to customer trends, integration with traditional ERP and CRM systems, and governed by a balanced scorecard of efficiency, responsiveness and profitability. The technology is already here, the challenge has always been the balance of power between consumer goods companies and retailers and the protection of "customer IP". High performance value chains using these principles can gain as much as 5 percent to 10 percent market share -- especially when product life-cycles are short and demand patterns are volatile.
In your opinion, are consumer goods companies doing a good job leveraging these insights to better serve consumers?
DEOL: In general I think that they do, but the bar is being raised all the time by market forces. For example, globalization of demand, different buying trends in different markets, multi-channel buying preferences and retail house brands are affecting how consumer goods companies package, promote and differentiate themselves from a branding and ease of purchase perspective. There is still quite a bit of inefficiency in the use of trade promotion dollars when you look at "line of sight" to actual demand creation/share shift between competing brands.
How big of a role do retailers play in allowing consumer goods companies to connect with the consumer?
DEOL: It's probably bigger than most would want to admit, especially in certain product categories where the buying preference is still the store and 90 percent of the decision is made in the store.
How can consumer goods companies better leverage multi-channel messaging?
DEOL: Work with your content, analytics and technology partners now to assess your capabilities to deliver consistent, relevant and lifestyle-oriented content and messages via multi-channels. Generating value for the digital consumers, and competitive differentiation for the consumer goods manufacturer, will require collaborative and sustained innovation by consumer goods marketers and technology partners at the intersection of consumer/social networks. Sustainable innovation will require ongoing communication and alignment of consumer trends, emerging technology and customer analytics.
Key questions for the consumer goods marketer include:
How can we best leverage digital technology to:
How can we provide a rich, digital-driven experience to consumers that:
HP is both a consumer goods company and an IT service and solutions provider? Does this enable HP to better serve the needs of the consumer goods industry?
DEOL: In general, we have a global knowledge base of consumer preferences, online and retail channels for our PCs and printing and imaging systems. Our perspective is deep on supply chain optimization, multi-channel management, creating pull across categories, retailer incentives, lifestyle shifts in the population, and the use of technology in the store and online to create brand preference and influence purchase behavior. Our extensive use of value-added partners in our demand-creation on a global and local scale is substantial, especially in BRIC and emerging economies. It is an exciting place to be the No. 1 PC and printing and imaging brand and still have opportunities for growth.