• Strategy
  • CFO Europe Magazine

Connecting the Dots

Companies have done a good job figuring out how technology can help them capture and crunch data. Now comes the hard part.

At the moment, van der Eems says there’s a lot of data — such as details of recent promotional campaigns — that remain stuck inside some parts of the commercial units. “It’s always going to be a bit of a challenge because you don’t want a sales guy who spends all his time running to the database rather than sitting in front of [a customer like] Tesco,” he says. “But on the other hand, you have to get these guys smarter about how they promote and how they structure the terms, and balance that with sitting in front of the customer, because they’ll get a lot more from their visit if they’re smart when they go into it.”

There’s no quick fix, yet van der Eems looks on the bright side. “It can be frustrating when I think we’ve got all this data and I don’t feel like we’re harnessing it. But if I look back at where we once were, BI has come along in leaps and bounds.”

Centre of Attention

Jim Muehlbauer agrees. For the past three years, the vice president of Best Buy has been on the front line of a daring plan to change the business model of the $27 billion Minneapolis-based consumer electronics retail chain. The main thrust of the change centers around shifting sales efforts to the customers themselves, rather than just moving computers and TVs off its shelves. In what Best Buy parlance calls “customer centricity,” BI is pivotal.

With the help of applications from Business Objects and Teradata (and, again, plenty of in-house customization), nearly half of Best Buy’s 700 stores are now customer centric — that is, they’ve aligned their businesses to cater to the five types of Best Buy’s most profitable customers, from suburban mothers to affluent techno geeks. Weekly P&Ls on each customer segment and other intelligence show both head office and shop managers not only which customers are buying what product, but also whether any accessories or complementary products and services are bought at the time, and whether the customer returns to make additional purchases related to the original sale. Rather than being banished to spreadsheets stored at head office, all this data ends up back on the shop floor in order to arm shop assistants with better knowledge about customer buying habits.

Customer centricity is also benefiting Best Buy’s relationships with suppliers, says Muehlbauer. “We now have the ability to give our vendor partners macro trends so they can understand how to best promote their product in our channel. If our customers are happy our entire business model works,” he explains.

According to Muehlbauer, one of the keys is training, and one part of that training requires all staff at the customer-centric stores to participate in a short finance course. The aim is to provide staff with an overview of the key drivers of profitability at each store and general performance indicators such as return on invested capital.

Different Lenses

But like other companies embarking on ambitious BI projects, Best Buy staff could easily end up being overloaded with too much data; or worse, with data that’s useless for their jobs. Therefore, another important component of customer centricity has been to sort out what data needs to be harnessed and turned into scorecards that shop managers can “action.” As Muehlbauer explains, that’s done through regular working groups from all parts of Best Buy — including store managers — “who each look at the data with different lenses.” As he sees it, “When you are building data warehouse capabilities, as we are, you need a lot of dialogue with the constituents.”

But how much data is too much? Muehlbauer concedes that some data now needs to be reined in. “Our stores get ranked on well over 150 metrics on a daily basis,” he says. “That is too much information to absorb and take action on, and they can’t all be driving the same level of value. How can we get more focus on the top 20 metrics, and then provide the insights that go along with it?”

While he searches for that answer, Muehlbauer is also working on organizational resistance. Getting the various parts of the company to use BI isn’t an issue at Best Buy-”we’ve always had a data-driven culture,” he says. The hard part is getting functions within Best Buy that already have their own BI tools to give them up and use the new standardized applications. “Breaking down those organizational barriers and showing each part of the business how they can benefit from a different look at the data with different insights has been our biggest challenge,” he concedes. But there’s no turning back, he says — as more and more standardized BI tools are rolled out under the customer-centric model, scrapping the old “silo” perspective of the business “is now a non-negotiable.”

With additional reporting by Stephen Pritchard.


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