CXOs are being tasked with sustaining profitability and mitigating risk, all while preparing the business for the upturn. Yet as businesses begin to operate 24/7 through a growing number of divisional channels, their volume of strategic business information is rising exponentially in both size and complexity. This, in turn, is making it increasingly difficult to shore up the business and put it back on solid ground. Leading companies are turning to strategic information management platforms as the solution.
The influx of strategic information must be managed proactively as it flows across the enterprise from procurement to distribution, marketing, ecommerce and all the way to service and support. That’s because, in this environment, the ability to use business operational knowledge as a performance success tool is the key to increasing profitability, mitigating risks, enhancing agility and enabling better decision making.
Unfortunately, in most enterprises, strategic operational information is siloed — residing and evolving independently in multiple applications, point solutions and spreadsheets, where it cannot flow efficiently. Much of this information is also inaccurate or incomplete; yet it is still being used to make an alarming number of critical business decisions.
In fact, a Gartner report estimates that more than 25 percent of critical information within Fortune 1000 businesses is inaccurate or incomplete. And when a company’s divisions and business units fail to share accurate information when it’s most needed, operational efficiencies break down, costs increase and the entire business suffers.
Traditional efforts to combat the challenge
Not surprisingly, many companies turn to their ERP system vendors, hoping for a quick and cost-effective solution to this ever-growing information management problem. Yet many find that the major ERP suite vendors lack a comprehensive approach to managing every business unit’s strategic information as it flows across the enterprise.
Organizations that are looking to develop the necessary agility to survive in the current environment and emerge as stronger competitors when the economy recovers must look beyond a Band-Aid approach to their strategic multichannel information challenges. They must find a more holistic, full-cycle approach that enables senior management teams to continually receive and use accurate strategic information about their products, customers and suppliers to develop sustainable competitive advantage. After all, that’s what strategic information management is all about.
It’s not just about technology. Strategic information management is a mindset, a philosophy, a new strategy. It is about using a full-cycle approach to integrating all operating and multichannel unit divisions, linking vendors, product and employee information together into one management platform. Done correctly, adopting this strategic mindset to information management across their organizations can result in seven critical benefits for the organization:
1. Drive revenue
When all operational product information is integrated across channels and divisions, then sales, marketing and customer support teams can have all the accurate information they need at the right time to make the sale and retain the customer. Timely and more relevant information at the point of sale can also help improve cross-sell and up-sell conversions while enabling fast, accurate and relevant responses to product information queries by customers.
2. Reduce operating costs
Studies have found that merchants generally have accurate inventory information on only 35 percent of their items. This results in lost sales, unacceptable levels of obsolete inventory and high carrying costs.
Product returns are another challenge for most merchants as the value of product returns now exceeds $100 billion annually according to one report. Yet a number of studies including one from Accenture shows that most returned products have nothing technically wrong with them. In an overwhelming number of cases, a product is returned simply because of incorrect, insufficient or inconsistent product information, which leads to customer confusion, dissatisfaction or frustration.
A full-cycle information management strategy and process can help drastically reduce product returns while improving inventory accuracy, optimizing inventory levels and reducing carrying costs. It can also reduce product on-boarding costs by helping companies avoid errors and inconsistencies in product and vendor data.
3. Improve and maintain healthy cash flow
Improving and maintaining healthy cash-flow levels continue to be top concerns for senior management. Many financial executives have done just about all they can to boost cash flow via reduced payrolls and capex. They’re now turning their eyes to hidden opportunities within their operations.
By holistically integrating all operating information together into one management platform, CXOs are reducing IT infrastructure, inventory and product on-boarding costs. In fact, a major global retailer used this full-cycle approach to bring down its average on-boarding costs from more than $200 per item to less than $3 per item. Considering the tens of thousands of SKUs this retailer introduces every year, this cost savings alone can have a significant impact on business performance and competitive advantage.
4. Mitigate risk
The need to keep a tight rein on global risk exposure has never been greater. Companies today must ensure that every department, division and decision maker has fast access to accurate operational information.
For instance, businesses must be ready to handle product recalls if and when they occur. Yet without accurate and centralized product information, announcing and managing a product recall can turn into a risky, costly and labor-intensive effort. Updating critical product safety information across all print and online channels can also be extremely challenging, exposing the company to unnecessary risks.
In the event of a product recall, having the right strategy in place can help the business better track affected products by all necessary attributes, drastically improving reaction time, increasing customer loyalty and lowering risk exposure.
5. Accelerate time to market
Studies have shown that high-performing companies generate, on average, 61 percent of their sales from successful introductions of new products and services. And companies that enjoy 80 percent of their revenue growth from new products typically double their market capitalization in a five-year period. But according to a survey by the IBM Institute for Business Value, 48 percent of products are launched late, and 35 percent of them are over budget.
Quite simply, the process of developing and introducing a new product is inherently complex. Even the simplest products today can have hundreds of attributes, all derived from multiple systems that reside both within and outside the organization. Introducing a new product also requires the coordinated efforts of dozens of internal and external individuals.
Strategic information management platforms can help businesses overcome this challenge by integrating all operational information across all business units, divisions and systems into one central repository. This helps eliminate traditional barriers to launching new products and services on time, reducing time to revenue and helping establish an early-mover advantage.
6. Enhance agility
Organizations are starting to take a greater interest in ensuring that operational information is managed and governed in a more systematic and strategic fashion. In fact, in a survey conducted by CFO Research Services, finance executives placed a high priority on improving business information over the next two years.
The fact is that having timely access to accurate business information impacts every facet of the business. Recently, a large national electronics retailer found itself with a new model of flat-screen TVs across its stores and warehouses nationwide. Yet the retailer struggled to sell those TVs because it lacked the information it needed to market, sell and support the product. The product was in stock. But sales-floor personnel had no training information to help customers buy the TVs. Shelf tags lacked relevant details, and the POS system had incomplete information on the TVs.
7. Improve employee productivity
By simplifying and automating the process of bringing in vast amounts of operational information into one management platform, businesses eliminate many of the problems that come with having duplicate and conflicting information across the enterprise. Collaboration among business units and departments improves and employee productivity gets a noticeable boost.
In fact, an Aberdeen Group research study found that organizations that have not adopted such a centralized approach to their information management spend five times longer searching for information than those that have a strategy in place.
Furthermore, AMR Research concluded that companies could potentially reduce their supplier management costs by nearly 85 percent just by improving information visibility with suppliers. For a merchant managing hundreds of vendors and tens of thousands of products, the efficiency costs alone — not to mention the improvements in data accuracy — are staggering.
Operational knowledge as a performance improvement tool
Over the last two decades, businesses have worked feverishly to optimize their physical supply chains. Virtually every discussion about improving the supply chain has been centered on the physical movement of goods — the flow of products from raw materials to consumption.
However, a growing number of companies are now taking a similar interest in optimizing the flow and management of the information related to these products. In a highly competitive global economy where operational information is now a core enabler, using business operational knowledge as a performance success tool is paramount.
Organizations that have brought this information together into one management platform are completely changing the playing field in their respective industries and breathing new life into businesses caught in a downward spiral of declining markets.
Mikael Lyngsø is CEO of Stibo Systems, a worldwide market leader in strategic information management technology and solutions. For more information contact the author at StiboSystemsCEO@Stibo.com.