All businesses operating in today’s service-based economy share a common interest in evaluating the effort, cost and bill-ability of human resources.
Until recently, however, extending the operational efficiency of an organisation beyond its gates has been a challenge. People don’t necessarily work the way timesheets and Gaant charts do. Pen and paper-based systems often dominated in smaller enterprises, and untraceable profit leakage has just been the cost of doing business. Today, though, innovative new solutions to these age-old problems have arrived, they work, and they’re available at a fraction of the cost of yesterday’s enterprise management systems. “We have never seen a revolution in technology like we’re seeing today,” says GeoOP CEO Leanne Graham. “Business processes are moving into the cloud and onto mobile and that transition is delivering sophisticated business technology right down to micro-business at a commodity price.” Want your mobile staff to be able to quote, do the job, create an invoice and be paid – all during a single client visit? Do-able. Want to know the inventory levels in all your technician’s vans real-time (and where they are)? Just log in and check. Want alerts for critical business processes sent to relevant team members automatically? Create the job and it will happen… but first you’ll have to pick your system.
So what types of solutions are out there? Of course the fully integrated in-house ERP system always remains a strong contender for a medium-sized business wanting to move on from Excel spreadsheets and Access databases. And most ERPs today have expanded their touch-points to mobile teams and clients via portable devices and self-service internet portals. Full ERP functionality has now also been extended to the cloud, delivering the backend and business process benefits of an in-house system over the internet, without the on-site maintenance overhead. Best-of-breed solutions are still commonplace for industries with unique market-niche requirements, and more recently a number of cloud/on-site hybrid solutions have emerged that deliver sophisticated cloudbased process management and business transparency tools, while simultaneously integrating with an organisation’s existing in-house financial management solution.
Timely comparisons
While critics of best-of-breed solutions still point to the potential expense and performance challenges of connecting disparate systems, in some cases the specific requirements of an industry make best of breed a logical choice. Zavanti, for example, was founded to address the needs of businesses operating in the construction, real estate and professional services sectors. “We built a system to fit in with the specific processes they’re dealing with,” says founder Ian Plater. “How they do their billing, how they manage multiple projects in different combinations, how they manage their sub-contractors. It hasn’t been a case of us saying ‘we should do this or that’, it’s been developed in response to what the industry actually requires.” So if your business is unique, then best of breed could be your answer. And then there are cloud solutions – what about them? A fully fledged cloud solution means you essentially rent your ERP – which is housed in a box somewhere off-site – alongside many other company’s solutions all in the same box (a scenario described as multi-tenanting). Your system is configurable to your business within the parameters of the master solution and backups, maintenance, data storage, security and upgrades are all the responsibility of the cloud provider, which significantly decreases your spend on IT staff. In the past critics of cloud solutions have pointed to risks relating to downtime and data security, but today, given you’re operating in a region with a generally stable internet service, there’s actually likely to be less downtime in the cloud than you could expect running your own server stacks in-house.
The question of uptime is always two pronged anyway says cloud ERP provider NetSuite‘s Dean Stockwell. Firstly you have to ask if your provider is ‘up’ and secondly if you are ‘up’. It takes two to tango and both sides need to be sure they have applied the appropriate resource to their connection. “Our uptime guarantee is 99.5%,” he says, “and our current standing is 99.85%.” For a client operating in Outer Mongolia (yes, there are businesses there) Stockwell says for service redundancy he recently recommended that they maintain an internet pipe with two different providers. Although this might seem unnecessary in Australasia, it’s not unheard of, as Navman recently had to deploy two pipes (via WorldxChange) to their Auckland head office, given the repeated failure of another provider’s solo connection (due to ongoing roadworks).
Not surprisingly, Peter Dickinson recommends a fully integrated in-house ERP solution, and says organisations need to be aware of the risks of moving all their data to the cloud (you might not be able to get it all back, he says, should you wish to change providers). Dickinson notes Greentree will soon be releasing a report designed to help businesses comparing cloud and in-house solutions to evaluate the efficiency of providers in the field. Interestingly, a recent survey in the US found that some A-list cloud providers like Dell vCloud and Microsoft Azure, for example, were delivering overall performance slower than that provided by dedicated in-house server racks.
“Businesses need to understand there may be performance issues,” Dickinson says. “If you’re moving your core business software online, you need to know how to measure whether you’re getting what you signed up for.”
Alternatively, if you want to maintain your existing financial system or supplier, but want enhanced operational functions, hybrid solutions like GeoOP and SimPro can deliver the professional services automation tools your company desires (scheduling, service management, sales management, invoicing etc), without requiring a complete swap out of unrelated business systems. “If you’re already entrenched with MYOB or QuickBooks,” says SimPro CEO Brad Couper, “to switch a financial package and implement a new operational software solution at the same time would be a tall order. So we just allow the operations guys to configure our system how they want it while the finance people still have their familiar solution and absolute control over their domain.”
Why automate
Once organisations expand beyond a couple of staff and particularly when a workforce is mobile, many companies begin to leak profits like a sieve. The reasons might be geographic, relating to poor route management through traffic congestion, for example. With GPS integration, a solution like GeoOP easily removes the hassle of poring over a street map for directions to the next job says Graham. “In big cities if you don’t optimise getting your people from job to job they can waste half a day just sitting in traffic. And it improves customer service. People are busy and they want to know when you’re arriving – they don’t want to be sitting around all day waiting.”
Alternatively, profits could be leaking due to task-avoidance. Perhaps it’s a job variation on-site not being billed because a technician can’t be bothered with the paperwork. “With a mobility app you can easily create a variation on the job,” says Couper. “We have around 40,000 field engineers on the road using SimPro and typically they’ll be asked to do two or three variations a day. So if they can easily create a variation on their device and get the customer to sign on glass, it’s an extra $50 or $100 a day per technician and it makes a massive difference to your business.”
Occasionally, though, the reasons behind the profit leakage might be more malevolent – staff doing cash jobs on the side using company vehicles and inventory for example. Integrated fleet tracking means you know where your vehicles are at all times, and if on-board inventory is being billed to jobs, integrated stock management software will quickly identify variations and any staff members who are running their own business on the side at your expense.
Devices with built in cameras are also great when you need to prove you’ve actually done the work, says Greentree’s Dickinson. “We had a client doing landscaping for councils. They put in shrubs in the afternoon and they’d turn up the next day and the locals had stolen them. It sounds ridiculous but now they can take a photo and attach it to the job so the council can see they actually did the planting.”
Getting your money’s worth
Some aspects of return on investment are easy to calculate. For example, if you have a team of 30 mobile plumbers that you’re billing out at $50 an hour, and your route planning solution or automated job allocation tool gives them as little as an additional 30 productive minutes a day – that’s a potential $3750 a week added to the bottom line. If a company like this had deployed GeoOP, says Graham, the system would have paid for itself on day one. “Our pricing is free for administrators and $20 a month for mobile workers,” she says, “so you’re literally talking about a ROI in less than half an hour of an individual’s time a month.”
While this type of ‘dollars divided by time’ ROI equation is simple enough to calculate, many other payoffs aren’t as easy to quantify, but deliver substantial intangible benefits nonetheless. Dickinson points to one managing director who credits his new Greentree ERP with winning his company a multi-million dollar contract. “They went in for a presentation,” he says, “and showed the client their new system and how the client was going to be able to self-service and connect with them online and the client was so impressed with how seamless it was going to be that it basically sealed the deal there and then.”
Other benefits not recognised in a typical ROI calculation include the ability to retain and attract talented staff (service staff actually do want to give good service and become discouraged when system shortfalls let them down), and of course the all-important cash flow. With invoices being processed on-site (and sometimes paid there too) job books aren’t being lost in tool boxes and work is being accurately tracked and billed (and if it’s not, the boss will get an automated alert).
Asked to summarise the benefits of his product, Zavanti’s Plater seems to speak for all the vendors in the services automation sector. “What we’re delivering is a consolidated, single view of the truth, able to be accessed from a wide variety of touch-points, devices and locations. That gives managers enhanced real-time knowledge of what’s going on in their business, and that in itself becomes an integral part of their business process.”
Tougher than the restWhile there are those who will say extending your business systems to your mobile workforce is as simple as down-loading an app to their iPad or iPhone, Mobico’s Aldas Palubinskas says many early adopters of that approach are already retiring their multi-functional consumer-centric smartphones and tablets in favour of ‘dumber’, but more dedicated, task-specific mobile devices. There’s a long list of reasons, he says, but probably the overriding theme is that consumer tech just isn’t built to take the sort of punishment that work situations inflict. “Our enterprise-level devices are engineered completely differently,” he says. “They’re drop-proof and they’re designed to be used 24/7, seven-days a week for five years in a row.” Contrast that, he observes, with smartphones that can’t get wet, won’t survive a drop from great height, and aren’t easy to see in bright sunlight. They also need more frequent charging, their OS upgrades aren’t guaranteed to be compatible with your business apps and if they’re lost or damaged they’re not easily swapped out, meaning workers are unproductive until their device is repaired or replaced. “I’m not saying nothing can go wrong with an enterprise mobile device,” he says, “but if one is damaged, you just plug another one in and the data comes back down and you’re off again.” While a bespoke enterprise mobile device can be up to three times the price of a consumer one, Palubinskas says ultimately the numbers on consumer-tech don’t add up. “People are abandoning the smartphone approach and moving back to workspecific devices,” he says, “because it’s just cost them so much money.” |
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You haven’t actually made a sale until you’ve been paid. It’s as simple as that, but, as blunt as it sounds, it doesn’t actually come close to detailing the true ramifications of not being paid on time. No, the mob is not going to come a-knocking, but the fact is that if you haven’t been paid then your outstanding invoices are costing you money – so much that you may as well be paying interest on a loan from a loan shark.
At business software experts GlobalBizPro, sales director Grant Harwood drills down to the real cost of late payment. “The biggest thing is the cost of debt collection,” he says. “People underestimate the time and eFfort it takes to do that and they’d be blown away by what it actually costs. Maybe you have to get a new admin person because one of them is spending so much time on debt collection – so there’s another $45,000 salary. Plus there’s the overdraft interest rates at 13 percent – 16 percent and the opportunity cost of a person not working on processing already successfully paid for orders.”
Putting all the other aspects of invoicing and collection efficiency aside, executive manager of product at accounting solutions provider BankLink, Dan Carpenter, says that addressing two important parts of the process would pay big dividends for many businesses. “One is around the billing term,” he says. “So many small businesses are still billing on the twentieth of the month, but they could bring that in and have a seven-day turnaround. The second problem is the delay the small business owner has in getting the invoices out. They are a couple of key elements that are so easily fixed for a business.”
And this does not just apply to small business.
“From our perspective,” says Aaron Baker, at revenue assurance developers Gentrack, “if a large business like a utility can’t get their bills out, they don’t get paid, it’s as simple as that, and that obviously has an impact on what they can reinvest into the business to expand and develop their whole customer relationship.”
So, with the downside of slow invoicing and payment now clear, what are the technology options that businesses in the small, medium and enterprise sectors can use to address these issues?
Automate the easy stuff
According to a business demographics survey released by Statistics NZ in February 2012, of New Zealand’s 469,118 businesses, 69 percent had zero employees (sole traders) and a further 21 percent had only one to five employees (a plumber with an assistant for example). At BankLink, Carpenter says two methods dominate how businesses in this sector have typically managed their accounts, and neither is particularly good for monitoring cash flow.
“One is really manual,” he says describing a combination of a manual-based cash book – probably a spreadsheet – that business managers download their bank statements into and reconcile (often leading to a bit of a mess) and then hand off to their accountant to tidy up. “At the other end, there’s the small business owner who has bought a genuinely sophisticated accounting system that is far too complex for their needs,” he says.
Logic dictates that small business owners should focus on running their businesses and let their accountants handle the accounting. With this in mind BankLink electronically supplies accountants with their client’s transaction data securely from banks, building societies and co-ops. This means accountants no longer have to manually re-key their client’s transactions on the couple of occasions a year when the client gets their paperwork together. Further to this, accountants can also keep a closer eye on their client’s cash flows.
“Accountants usually know their client’s businesses really well,” says Carpenter, “so if they see some important transactions haven’t appeared, all they have to do is pick up the phone or fire off an email saying ‘hey I’m concerned about that number’ or ‘this doesn’t look right’. They can be more proactive about assisting clients in managing their cash flow.”
Carpenter points out that there is a difference between a small business like a plumber or a lawn mower man, who have relatively consistent income and expenses and aren’t planning to expand, and entrepreneurs, who are more likely to want their business to grow. “As they start out, BankLink is really useful and relevant to them, but they may get to a stage where they want a more complex solution. We also support solutions in that space, supplying data to products like MYOB Live Accounts and AccountRight.”
In terms of workload reduction for the small business operator who wants to ease their bookkeeping burden, Carpenter points to Auckland vet Alex Melrose as a good case in point. Prior to BankLink, Melrose says he was spending hours every month on bookwork, sending his accountant paper bank statements and searching through records for receipts. With BankLink, however, he says his accountant is now able to provide a monthly profit and loss report that he uses to compare against his operating budgets, and his manual bookwork has decreased dramatically. “It now only takes me 30 minutes a month,” he says. “By using BankLink my time spent on bookwork has been reduced by 90 percent.”
Carpenter says BankLink currently processes transactions on behalf of more than 210,000 bank accounts in New Zealand and more than 280,000 in Australia, servicing more than 5000 accounting practises. For clients who want to get some added value out of their invoicing, he says many install BankLink’s InvoicePlus, which, in addition to creating professional-looking invoices, enables users to issue quotes, produce statements and run reports.
Another company offering a new take on invoicing is Xero. Although the launch of its Online Invoicing service last October met with something of a user backlash due to a perception that Xero was encroaching on the supplier/customer relationship, the foundation principle is solid. With Online Invoicing, a business can email its customers a link to a live invoice, which features a ‘pay now’ button through which clients can choose to pay immediately. Invoices can be automatically loaded into Xero and matched against bank receipts, eliminating manual file uploads and saving data entry time.
Facilitate, integrate and automate
For the small-ish to medium-sized enterprise, especially those with the potential to sell via a website, GlobalBizPro’s Harwood says the set-up costs for e-tailing have plummeted in recent years and clients that previously couldn’t justify a spend of $40,000 – $50,000 on a bespoke e-commerce platform, can now purchase similar functionality for as little as $1000 and a monthly charge of $99.
Asked for advice as to whether a company should sell online or not, Harwood says if you can Google your product type and find someone else is selling it online, then you should seriously consider doing the same. And, from a cash flow perspective, an online sale has immediate benefits over a sale where invoices are mailed out and you wait patiently for payment sometime over the next couple of months. “It addresses a hidden trap in the sales process,” he says, explaining that when somebody makes a buying decision online “they are at the peak of acceptance for their decision”. In an online scenario the payment is processed there and then but when invoices are dispatched and payment is delayed buyer’s remorse can set in. “As time goes by they start to question the money out of their pocket versus the benefits they had in mind when they were making that purchase decision online. So the longer we leave the money in their pocket, the greater the percentage of them that will bail on the sale,” he explains.
Adding an online payment system can have a dramatic effect. Harwood points to the example of a wholesaler client who is now expanding its footprint and improving its cash flows with the addition of a web-store “They can now retail direct to the public at full retail price and a higher margin, plus they can still supply their wholesale customers through a login.”
Interestingly, perhaps the biggest surprise for the wholesaler was the speed at which consumers and existing clients alike embraced the system. “They did $500-worth of sales within the first day, before they had even launched out to their database,” says Harwood. “They thought they would have to educate each customer on how to use the website but when the launch went out people didn’t ring up and ask how to use it, they just logged on, purchased and got on with their business. They were surprised about the lack of support and education required by users.”
In terms of lowering the cost of sale, the ability to easily integrate e-commerce solutions and accounting packages has also been a game changer in recent years. GlobalBizPro specialises in integrating the open source Magento web-store with MYOB’s EXO enterprise resource management solution – an integration that by its very nature delivers automation and what Harwood describes as the “one touch” promise.
“We see it every day where a company has been sold a nice website with an e-commerce portal and they have a totally disparate accounting system with another set of human beings running that part of the business, and yet they are exactly the same thing really.” He also adds that you shouldn’t ignore the role the accounting system plays in the purchasing, stocking, merchandising and warehousing of your product. All you need do is enter a product into your accounting system once and let the integration between that and your e-commerce solution handle the rest.
“The reason it’s so affordable is it’s basically just mapping the fields in a particular way. So the price from your accounting system matches the price from your website and the quantity in your accounting system matches the quantity in your website. That’s the beauty of having a computer do it. Let automation do the repetitive tasks for you for the cost of your processing power, which is minimal.”
Integration of the accounting system and the web-store can also reduce customer churn as it easily enables client-specific pricing. “In the accounting system you set up a new customer,” says Harwood, “with A-grade pricing, so maybe 10 percent off this range and 50 percent off that range.
Once they’re set up like that they can log into the website and see pricing that is specific to them.”
The net result, he says, is clients aren’t calling up sales reps asking ‘what’s my price?’ and are also less likely to shop around for a product because they know they’re always seeing their best price when they interact with your company.
Know where your customers play – and how they want to pay
Although we might imagine large energy retailers like Genesis in New Zealand or Red Energy in Australia as the definition of the phrase ‘cash cow’, the fact is that when you have hundreds of thousands of customers, it’s harder to get paid than you think. One logjam to payment, says Gentrack’s Baker, is actually the traditional mailed bill.
“Printed bills get lost,” he says. “There was a survey in Australia a while ago where they said 25 percent of households don’t pay their bills simply because they’ve lost them.” Utilities are hurrying to move to e-billing as a result, he says, as an emailed bill is much less likely to get misplaced in a paper shuffle. Interestingly, Baker notes that probably the main driver of efficiencies in large-scale billing scenarios at utilities is the arrival of ‘big data’ and the ability that has given suppliers to understand their customers better.
“Utilities are starting to deal with ‘real’ customers,” he says, “whereas traditionally they have dealt with meters or properties. Now that the CRM tools are in place these utilities have an opportunity to understand Mr & Mrs Smith rather than property 18 Johnson St, which is key to ensuring you can bill them correctly and that you get paid on time – it’s all interrelated.
Another potential spanner in the works for efficient collection is customers not understanding their bills or seasonal price fluctuations – something Red Energy has addressed with its Even Pay service, which averages out the customer’s bills so they pay the same amount every billing round, and can choose their payment dates to match their pay cycle. Again, Baker points out, big data and the capacity of modern CRM systems to store many layers of customer information has empowered this type of client customisation.
“We’ve seen a real evolution of the processing power of data management tools in the last four or five years,” he says. “Best-of-breed billing systems are integrating with CRM and metadata management. They’re talking to each other and they’re also talking with new payment gateways and self-service portals.” One result of this automation and the move to faster processing is that customers are now being invoiced in ‘real time’, instead of being batched processed at night or the end of the week. “The customers end up getting their bills more quickly,” says Baker, “and they’re also given access to tools to pay those bills more rapidly as well. So the whole streamlining of the data and provisioning across all of those core components has definitely improved the whole meter-to-cash process.”
With cheques having gone the way of the dinosaur Baker says in order to get paid promptly, businesses must play where their customers play. Thus, online payment portals, traditional mail, smart applications on mobile devices and standard telephone interaction are all options. And additionally he says many businesses are also using social media-esque channels to interact with customers, with web chat facilities in call centres enabling customer service reps to engage with several customers at once, lowering the all-important ‘cost to serve’.
“Businesses are leveraging more automated tools for getting data and information services out to customers and dollars through the door,” he says, “and the more they can streamline that, and lower the overall cost to serve, the more they can focus on other areas of their business.”
There have never been more ways to get the dollars in the door as there are today, but without integration and automation we may as well revert to shoebox accounting.…
How many times has this happened to you? You go into a store ready to buy.
You want a blue shirt, but they’ve only got your size in green, or maybe you’re looking at the latest 3D TV, but the floor model is out of stock. You ask the sales assistant if and when they’ll be getting more in. They don’t know, so they head out the back to check and finally return to say there’s one at another branch if you want to drive over there. You’re not sure if you should, because last time this happened the other store had, in the meantime, sold out. You decide to flag it and try somewhere else – after all, there’s four other shops in the mall selling menswear.
Are you the only one? Far from it, in fact, according to a 2011 US survey by Research Now, 33 percent of shoppers will leave a store without buying what they wanted – resulting in an average loss of US$125 per customer walkout.
According to David Fenner, general manager for enterprise solutions at Motorola ANZ, this $125 loss of business can usually be attributed to out-of-stocks or lack of selection, but can also be due to the “customer interaction” with shop assistants falling short of expectations (61 percent of shoppers said they were personally better informed about consumer information than in-store staff).
“Essentially it’s a dissatisfied customer,” says Fenner, “who’s not spending that money for a number of reasons.”
At mobile solutions provider Mobico, GM Aldas Palubinskas sums the walkout situation up nicely. “It always results in a sub-optimal experience for the customer,” he says, “and a sub-optimal profitability experience for the retailer.”
So what can be done to turn this story around, prevent walkouts and retain the $125? At Leopard Systems, managing director Alex Koumaras says mobile point-of-sale (MPOS) systems are at least part of the solution. “For a store manager this can mean real-time mobile access to back office systems,” he says.
“They can be walking around with a tablet and a reasonable amount of information in a manageable, ergonomic fashion providing up-to-the-second sales analysis.” MPOS delivers perhaps bigger bang-for-buck for sales staff, and in addition to product and promotional information, MPOS also enables them to transact a sale anywhere in the store.
“JB Hi-Fi would be one of a few that is pushing the envelope in that respect,” Koumaras says. “For a store associate to be able to stand there with a customer and negotiate a final deal price at the point of activity – right next to a big screen TV or whatever – and close the sale, I think that’s extremely valuable.”
And of course it makes for shorter queues at the check outs. By now most people who’ve stood in line at a busy McDonalds will have seen queue busting in action. A staff member will walk up the line of customers with a handheld MPOS system, make a sale transaction on the spot and issue a receipt, while simultaneously beaming the order back to counter staff to prepare. Once they’ve ordered, customers leave the queue and collect their meal when it’s ready.
The same concept can easily be applied in most big box retail environments says Fenner. “Part of the standard functionality that’s on MPOS systems today is called suspend/resume and what that allows you to do is essentially scan ahead, suspend the transaction and then provide a docket with a barcode on it. When the customer gets to the till, staff just scan that docket – everything is already scanned in and they pay and they’re out the door. That’s a very quick win from a queue busting perspective.”
To take MPOS even further, says Fenner, retailers can move away from a fixed till environment and make transactions in an aisle, which can be very beneficial when you’re talking about bulky items. “Say you’re standing in aisle three. You’ve seen a barbecue you like but you don’t want to put it on a trolley, wheel it to the front of the store, pay for it and go through the rigmarole because that will be slow, you want to put that on a trolley scan it, pay for it and take it out the door – that’s MPOS in its true sense.”
Self-service?
Interestingly, the experts all point to a growing enthusiasm on behalf of retailers in letting customers serve themselves. This is not the self service supermarket checkouts most are familiar with now (which are designed for customers with a small number of items) but instead, means allowing customers to scan their own items as they move through the store using a smartphone app.
“This is one of the things that’s going to hit us,” says Motorola’s Fenner, “and for some people it will be a collision. Whether it’s using Apple Passbook or Google Wallet or using your phone for scanning. As the smartphone has become prevalent, retailers are looking at it and saying ‘well people are already used to using their phones, why not let them do it themselves?’”
Certainly, anecdotal evidence suggests that for people who have grown up with smartphones, this will be seen as a natural event. Fenner observes that from the perspective of in-store staff, it’s already happening. “There are plenty of examples where staff are actually using their own mobile device and going on the retailer’s website to help a customer, even though there are no ‘official’ systems in place.
They’re doing it because they’re used to working that way.”
Although he understands the rationale, Palubinskas cautions that there’s more to a handheld solution than an app on an iPhone – ergonomics is important too he says. “The problem with having your staff use their personal smartphones is that it forgets all the human factor stuff. Motorola has spent decades sorting out all the human factors involved in having a barcode scanner. It’s a single handed function, whereas a smartphone is double-handed.”
Obviously aware of the impact of the smartphone interface, Fenner says the software operating on Motorola’s handhelds will likely have the look and feel that the smartphone generation is comfortable with. “It will give them an app with the functionality they need to do their job,” he says, “but it’s going to be simple. Large icons, so you press a button to jump to a price lookup, press another button to jump to the inventory management system. It will be easy, especially for people who are used to working with apps.”
Palubinskas notes that one of the simplest ways to empower customers and boost sales is installing information kiosks – particularly pricing kiosks. “A lot of the big stores have so many promotions and offers going it’s hard for people to be sure what an item is going to cost them.
We’ve found retailers will significantly increase sales as soon as they put price kiosks in. It’s a great example of empowering a customer to make a tactical purchase decision – once they know what something costs, they can buy it.”
Do we have the stock?
But even with MPOS and other technologies enhancing and empowering staff and customers, problems of stock-outs will not be addressed unless store personnel can be confident about the accuracy of stock information. Palubinskas says the root cause of these inaccuracies is usually not occurring somewhere further up the supply chain, like in a factory or a warehouse, but is actually happening in-store, with many retailers not being able to efficiently answer three simple questions: How much is it, do we have it in stock and where is it? The reason, he says, is while a SKU’s journey from the factory to inwards goods is tightly monitored, once it arrives on a store’s loading dock, things can go awry.
“There are a million processes that don’t go into the system. Somebody might have just returned a TV for example, or one might have come back from repair and been shipped to the wrong store. There may have been an extra delivery that no one has noticed and it’s been sitting there for a week.”
Nonetheless, the holy grail of stock accuracy can be achieved relatively easily he says. “Stores need to be using hand-held scanners so everything that comes in (deliveries, returns, repairs etc) gets scanned in and everything that goes out (sales, damaged goods, incorrect deliveries) gets scanned out. They also need to be doing high-frequency stock takes. You see them doing this in supermarkets with a handheld scanner at the start or the end of the day. It’s not a full stock take – maybe just a category or an aisle or a fixture count – but the point here is to make sure that the data in the computer matches what is physically in store.”
“Stores need to be using handheld scanners so everything that comes in gets scanned in and everything that goes out gets scanned out. They also need to be doing high-frequency stock takes.”
Aldas Palubinskas – General manager, Mobico
What is it really costing you?
Although the concept of an efficient supply chain is nothing new, the ANZ managing director for supply chain optimisation specialist Manhattan Associates, Raghav Sibal, says many organisations are now looking beyond mere efficiency, to true optimisation. Software apps like Manhattan’s ‘Total Cost To Serve’ give supply chain managers the ability to never be selling at a loss (by mistake anyway).
Sibal says in a typical supply chain ‘1.0’ scenario, around 20 percent of SKUs actually lose money at retail because supply chain costs per SKU are calculated on an average. “The idea is ‘what is the total cost to serve an individual item rather than all the items’ through the supply chain with the total cost applied as an average,” he says. “A pre-fabricated furniture set has a very different supply chain cost to a laptop, so getting the integration complete and having the ability to truly evaluate the total cost of servicing an item through the supply chain and then applying that to the pricing is a big opportunity for companies to gain an edge.”
“ the total cost of servicing an item through the supply chain and then applying that to the pricing is a big opportunity for companies to gain an edge.”
Raghav Sibal – Managing director ANZ, Manhattan Associates
At Motorola, Fenner says the theme of item-level tracking is also applicable in retail stores, with many forward thinking retailers in the US now tagging each item with an RFID chip. “One benefit is you do a real-time inventory view so as soon as that item is taken from the shelf an alert can be sent so you can return the same shape, size and colour to the shelves. So you’re minimising the shelf space you’re taking up, but at the same time you’re maximising the opportunity to make a sale because you’ve got all the sizes, colours and variants available all the time.”
System integration
In terms of integration with legacy ERP, warehousing, logistics and transport solutions, all the implementers say a supply chain optimisation solution can be layered on top of an existing installation, delivering similar efficiencies to implementing a bespoke application.
“Either way is a valid alternative,” says Leopard System’s Koumaras, “but if for whatever reason an organisation wants to stick with their legacy solution we are quite capable of coming in and layering a front end on top to enable that sophistication and then integrate that with a system that might already be there.” There may be some compromises, however. “You might not be able to achieve 100 percent of what you would if you built from the ground up, but you should get to 95 percent, and that could be fine for many organisations. I’d stress that we’d be upfront and honest in relation to any benefits or potential shortcomings of that solution as opposed to starting afresh.”
Of course, supply chain adjustments can be targeted at specific inefficiencies. For example ‘voice picking’ is a simple solution for warehouse operators who need their staff to to have their hand free (for picking up items) and operate efficiently in terms of picking route optimisation. “It depends on the sophistication of your warehouse management system,” says Palubinskas, “but it can direct pickers to a row and a shelf. They will be wearing a headset and it tells them where to go next after each item. A simulated voice reads the next location into their ear and when they get there they can say ‘confirmed’ or scan it. It’s not hard to do.”
Discussing the entire supply chain, Manhattan’s Sibel says a one- to three-year ROI is achievable, depending on the scale of an initiative – and some specific elements can deliver an impressive return. “In transport, the ROI can be significant, depending on how one optimises it, especially for retailers with their own fleet of trucks. With optimisation modules and transport planning done correctly, we can get a 15 to 20 percent payback from some of these solutions.”
Of course, economies of scale apply say the experts. “If you’re starting from a low baseline there are definitely huge leaps that can be made,” says Koumaras, “and if an operation is quite large then even small gains can amount to significant dollar savings, because when you’re doing so many line items per day, by X amount of stock, by X amount of locations, it can add up quite quickly.”
At Motorola, Fenner sums up the essence of supply chain optimisation. “It’s all about information,” he says.
“Irrespective of whether it’s retail, transport, warehousing or manufacturing, the principle is the same. You’re using different devices for collecting data from either a process you’re doing or a movement of goods, then you work out how to achieve the optimal result for the data that you have. So everything we do is directed at the collection and dissemination of data to make people’s jobs more efficient.
It doesn’t matter which part of the supply chain it’s in, the more data you gain the better decisions you can make. In today’s world most organisations have data collection systems in place, but what we’re working towards is ensuring that they’re gathering the right data — data that’s going to give them an edge on their competitors.”
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THE MORE YOU KNOW 83% of associates surveyed agreed that “shoppers can easily find a better deal, so customer service is more important than ever.” 68% of shoppers are likely to buy before they leave the store if store staff have an out-of-stock item delivered to a shopper’s home. 61% of shoppers surveyed said they were better connected to consumer information – coupons, competitive pricing, and product availability – than were shop assistants. 60% of in-store shoppers don’t purchase before they have done online research. 50% of shoppers who switched shopping channels (in-store to online for example) also switched brands. |
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For many who studied marketing early in their careers, there’s a timeless adage credited variously to Lord Lever, Henry Ford and John Wannamaker (and others), that goes something like this; “I know half the money I spend on advertising is wasted, I just don’t know which half.” While this attitude may have prevailed in the days before computers and sophisticated data analysis, today no marketer in their right mind can afford to blow half their promotional dollars – and nor should they – as the technology and expertise are readily available to relegate guesswork to the trash can of bad ideas. What’s relatively new about data analysis, though, is outcome orientation. Whereas number crunching has typically had an ‘historic’ focus – providing answers to rearward facing ‘what happened’ type questions – today’s marketers are looking forward, asking ‘what’s going to happen next’, and getting answers they can bank on. Predictive analytics has arrived and is being used by organisations large and small. Some recent examples include;
– Hire A Hubby originally had a ‘one size fits all’ flat fee approach to selling its franchises. No matter the neighbour-hood, the franchise fee was the same. But when the company began using demographic & census data to determine franchise value – and geo-location to determine franchise boundaries – it was able to offer high value franchises at a higher cost to the franchisee – but also guarantee higher returns.
– Weight Watchers Australia identified the location of its member meetings as being critical in the decision process of prospective clients in joining the organisation or not. Hold them too far away and people wouldn’t join. With 1500 meetings a week and constant membership churn Weight Watchers turned to locational intelligence to plan optimum meeting sites around the country – and maximised its membership potential.
– In the UK the Royal Shakespeare theatre company analysed its audience’s addresses, shows attended and ticket prices paid to develop a marketing plan that boosted signups to its membership program by 40 per cent – and average attendance by more than 70 per cent.
– The US Internal Revenue Service uses predictive analytics to detect tax evasion. When a return doesn’t stack up in terms of its average models the filer is selected for auditing.
– At Pitney Bowes Asia Pacific, solutions group GM Chris Lowther says analytics tools can deliver useable intelligence across a broad range of entities. “Pretty much any organisation that has an interest in relatively large populations of customers can benefit,” he says. “In the commercial space, it’s basically anyone in the business to consumer world. We do a lot of work with franchises and retailers, financial service institutions, telcos – all of which have a geographic interest in where their customers and prospects might be and how they might find them. Then there’s a lot of public sector & government organisations which have the responsibility for provision of services into their communities – so there’s a very broad range of applications.”
The decision to seek out an analytical solution can be triggered in a number of ways. For example an organisation may have hit a wall when it comes to understanding disappointing results or is embarking on an ambitious growth strategy and wants to define its objectives and resource allocation based on real-world analytics rather than gut feel.
“Businesses need to plan what they want to achieve,” says Lowther, “uncovering opportunities and converting those into business objectives. One of the things businesses need to cover off in preparation is to fundamentally understand how their business works right now – from a core processes perspective – and then understand what data the business needs to support those core processes.” Identifying where that data is and what condition it’s in is fundamental to preparation he says. “From there they can identify gaps in their knowledge of customers that will enable them to improve their overall business performance.” Once data gaps are revealed, businesses (in conjunction with their analytics partner) can decide where to source additional data from (census information or list brokers for example) and then how to combine that new data with their existing data sets to enable informed decision making. Predictive solutions can be delivered on a case by case basis if businesses are only looking for occasional one-off insights, says Lowther, or for organisations adopting analytics as an integrated part of their business planning there are now a range of software solutions that can be implemented and managed internally.
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GETTING STARTED |
| Before they can create a new future based on predictive analytics, however, businesses need to make a start. Technology is certainly part of the solution, but like any other business solution, technology is only an enabler and what’s more important is to understand that analytics is a process – one that any organisation can adopt. Asked to summarize an effective approach, the experts recommend the following steps.
1) KNOW YOUR BUSINESS & DEFINE YOUR GOALS 2) KNOW YOUR DATA |
3) START MODELLING
With objectives defined and data sets organised it’s time to start modelling for the insights your business requires. You may wish to develop an internal analytics resource, or work on an ad-hoc project by project basis, but whichever option you choose, experience tells at this stage, so engage an expert and go to work.
4) DEPLOY & EVALUATE
With predictive recom-mendations in hand, deploy your resources and test your strategies. Evaluate your success against your objectives and tweak your modelling accordingly – remembering that analytics isn’t a ‘set and forget’ solution, it’s an ongoing process.
So where to from here for predictive analytics? At Pitney Bowes, Lowther, perhaps somewhat predictably, says the technology and potential productivity gains are available now, inexpensive and here for the asking.
“These solutions are easy to use and very affordable,” he says. “It certainly won’t hurt for businesses to have a look because the results that are achievable and the rapid return on investment means the business opportunities are within the grasp of pretty much any organisation that chooses to take it on.”
Implementation and ROI
So what’s a likely timeframe for the implementation of a predictive analytics solution? Whereas installing a new ERP, CRM or telephony system can often take months and in some cases years, Lowther says analytics solutions can take a fraction of the time in comparison. “It can be very much quicker than that,” he says. “Perhaps as quick as a matter of weeks depending on the scope of the project.” A good case in point he says is a recent project to help a large Australian retailer decide on the best locations to position new stores. “From broadly discussing an idea of what they wanted to do to engagement was a couple of weeks – and then it was a services project which took 20 working days at which point we presented our recommendations.” In terms of return on investment Lowther says predictive analytics delivers one of the quickest returns of any technology solution. “We’ve had customers say that the acquisition of this tool has paid for itself within a week,” he says, “or we have other customers say the original purchase of services was paid for by the returns from their first campaign.” Overall Lowther says organisations should expect to double their effectiveness and points to a recent example of an Australian market research company hired by a major bank to conduct face-to-face surveys. Prior to engaging Pitney Bowes the researchers were achieving seven to eight interviews a day he says. “But after applying a geospatial analytics solution they were able to plan the visits of their agents – taking into account travel times, geography & density of population targets – and double that to more than 15 a day.”
“When you reach a certain level of deals you do have to be presenting people with the most relevant deals to them”
Geospatial explained
For an industry that is trying to simplify its message to clients, the predictive analytics sector is occasionally burdened with complicated sounding terminology for what are actually quite basic concepts. Although it sounds like a cross between brain surgery & intergalactic navigation, geospatial analytics, for example, isn’t a complicated idea at all. “Geospatial basically means information about location,” says Lowther, “it’s as simple as that.” And almost all businesses have already gathered geospatial data on their customers or prospects, he says, probably without realising its value. “In the business world around 80 per cent of customer information contains a geospatial element. It could be an address, a postcode, or even a country but at whatever level you’ve usually collected some way of identifying where a person or an asset is. Identifying where people and things actually are in the physical world – that’s geospatial.” Applied to decision making, the application of geospatial techniques enables organisations to apply the appropriate resource to different scenarios. Crisis response in government is a good example he says. “In Australia many city councils use geospatial solutions as the basis of an emergency management system. An earthquake, a bushfire or a chemical spill all have a geo-locational impact, so using geospatial analysis allows councils to quickly know who is affected, and in asset terms what is affected in a particular area. They then clearly understand what the implications are of different types of emergencies and can mobilise an appropriate response.”
Churn analytics to stop loss
For most businesses, though, a crisis is nothing as dramatic as a bushfire – but the results of things like poor customer retention can be no less destructive. All marketers agree that it costs many times more to acquire a new customer than it does to retain an existing one. Despite this, however, most businesses are clueless as to why their customers have left – and which ones are going to leave next. Predictive analytics can be illuminating in this regard says Datamine managing director Mike Parsons. “We’re not talking about stopping the people who have left,” he says, “because they’re gone already. But we can analyse their behaviour and look at the triggers, the things that happened that caused them to leave. Then we model that and apply it to the remaining customer base and can say ‘based on that modelling, these are the people who are likely to churn if you don’t do something about it’,” says Parsons.
“we can analyse their behaviour and look at the triggers, the things that happened that caused them to leave. Then we model that and apply it to the remaining customer base and can say ‘based on that modelling, these are the people who are likely to churn if you don’t do something about it’.”
This insight then allows management to allocate resources more efficiently. For example, if a company only has the capacity to make a courtesy call to 10 per cent of its customers, then ensuring that 10 per cent includes the customers identified as most likely to leave will be much more effective at reducing churn than any other metric for deciding who to call. The key here is relevancy. A call made to a client who is happy with your company is essentially wasted effort, but if that call arrives when a customer has some pressing issue with your business – suddenly its relevant, and the relationship will likely be saved.
Stay relevant
This concept of relevancy also applies to the goods and services you’re supplying. At ‘daily deals’ website GrabOne, marketing manager Campbell Brown says creating offers with increased customer ‘relevancy’ has become critically important for boosting the success of advertiser’s campaigns. Brown describes GrabOne “as a local commerce platform” where a range of businesses (often small to medium enterprises) offer deals on products and services to their local community and beyond. Building customer rapport and repeat business is important to organisations like this, he says, and GrabOne is keenly focused on predictive analytics as a tool to grow the business. Interestingly, the predictive aspect of GrabOne’s relevancy initiatives is not solely based on customer purchase history.
“What we do is based on broader user behaviour,” says Brown. “So we bought 75 million email clicks from our email provider ExactTarget. We can see what our users were clicking on – what they were interested in. We then match that with what they’ve been liking on Facebook, their purchase history and demographics. We pull it all into line with an algorithm that has a weighting for each data stream and that shows us what they might have a higher propensity towards purchasing. When you reach a certain level of deals you do have to be presenting people with the most relevant deals to them,” he says.
While the bulk of GrabOne’s current customer interactions are still occurring via the internet, Brown says transactions via mobile are increasing at a phenomenal pace. “About nine months ago,” he says, “our mobile transactions made up 1.5 per cent of total monthly transactions whereas now they make up anything from 14 to 18 per cent. We’re working really hard to capture that first mobile purchase.”
“You will be able to redeem your coupons, earn your Flybuy points and pay for your purchase via near-field communication – all with a single tap of your phone. That’s the future.”
And why is mobile so important? Because it allows customer targeting by both geographic region and by device says mobile marketing experts InMobi’s general manager Francisco Cordero. “Think about telcos, he says. “If Telecom wants to buy up all the mobile advertising inventory on Vodafone handsets they can. Or if Vodafone wants to use the phone as a CRM tool to cross sell their own customers they can advertise only to Vodafone customers.” Rather than randomly placing mobile advertisements with all smartphone users, marketers can narrow their targeting specifically. Device ID technology permits Nokia to run mobile ads only on Samsung handsets, for example, or app developers to advertise only on handsets running a chosen operating system. At Vodafone, m-Commerce manager Bridget Gallen says location based services can already deliver relevant retailer coupons direct to the handsets of phone users looking for deals in their immediate vicinity – and adoption of this type of marketing will only increase as smartphones become more m-Commerce capable. “You will be able to redeem your coupons, earn your Flybuy points and pay for your purchase via near-field communication – all with a single tap of your phone. That’s the future.”
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Perhaps one of the first things to make clear in any story about business intelligence (BI) is that data, and information, are not the same thing. To wit, the dictionary defines ‘data’ as; ‘individual facts, statistics, or items’, whereas ‘information’ is described as; ‘the meaning given to data by the way in which it is interpreted’. Apply some thought to your data, says Datamine managing director Mike Parsons, and you will get information. “Any time data is collected – and it’s collected more than you think – there’s a way to leverage that into understanding.” The problem is, however, that for years, deciding to actually do that has been a big ask for many companies. “Most businesses,” he says, “especially large ones, spend a zillion dollars building these IT systems and collecting huge repositories of data that they don’t do anything with. If they just spent one per cent of the money they spend on IT trying to figure out what to do with all that data – the benefits could be huge.”
So what might some of those benefits be?…
Read the full article as seen in the Q3 2011 iStart – Technology in Business Magazine by clicking on the image below:
Full PDF version:
Stop your data going rogue
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Published on the | Written by
Steve Maharey doesn’t seem thrilled about his journey to visit Ngati Porou scheduled for after our interview – nothing to do with the people or agenda, he says, merely the tyranny of distance he’ll have to deal with to do it. The North Island’s east coast might well be the ‘first to see the sun’ – but it’s not an easy trip.
“Gisborne is impossible to get to,” he says, “It’s two flights in and out, all afternoon, all night and most of tomorrow morning to go to a two hour meeting. It’s exhausting. It takes up far too much of my time. There’s only one solution if you’re going to engage heavily through a country like this and around the world – you have to do it through good IT.”
As Maharey and the heads of universities around the world know, society’s demands of its tertiary education system are changing. The idea that a teenager will graduate from secondary, attend university for an undergraduate degree and be done with their education doesn’t fly any more.
“Those one-shot deals are over with,” he says. “The life-long learning model is clearly the big driver now.” But to accommodate that life-long learning he says the delivery model will have to be more flexible than it has ever been.
“Let’s say someone’s 40 years old, living in Taupo with two children and a mortgage, and their accountancy firm wants them to get their financial qualification back in shape.
They’re not going to have time for a three year BA or leave the family to study in Hamilton.
They’re maybe going to have time for a 16 week commitment, where we haul them in for a one week block course, or we go to them for a block course. And they have to be able to do this while they’re engaged at work.”
The challenge for Massey, he says, is to be able to deliver a learning environment in a scenario like this, that isn’t second rate. The ‘online learning’ model typically associated with modern day off-site education doesn’t really cut it he says.
“I am not a big fan. Online learning is just the old style of learning taking place online. You get sent some text.
You read the text. You write an essay back. This was never a good model of learning and it’s given the whole online learning environment a bad name.” Worse yet, Maharey says some countries won’t accept a qualification achieved this way – even in part.
“A lot of governments won’t accept a degree that has anything to do with online learning,” he says. “The Chinese, for example, won’t accept it if you have even one paper that was online – out of 21 – they’ll say no.”
But could this really just be a case of how you define ‘online’? At Open Polytechnic NZ (which has been educating extramurally since it started life as the Technical Correspondence School in 1946) communications director Doug Standish agrees that accreditation of qualifications between nations can be difficult at times – but this happens regardless of the mode of delivery. The dominant concern, he says, is really with “shonky non-accredited online ‘diploma mills’,” rather than legitimate institutions.
“High quality distance and online learning from reputable, accredited providers is very well accepted and growing around the world as a key driver of life-long learning – especially for adult learners in the workforce.”
Like Maharey, Standish sees ‘online’ today as moving towards a new model.
“Increasingly it’s being used to support classroom and campus-based teaching and it’s being used to enrich distance learning mainly based on other media.”
2020 Vision
So if it’s not traditional online, what exactly is Massey’s vision? Maharey describes it as ‘anywhere, anytime, anything’, an idea he’s adapting from TVNZ. “We have three campuses (Auckland, Wellington & Palmerston North), we operate in two countries (NZ and Singapore), there are lots of engagements we want to have – from Fonterra, to a local engineering firm, we’ve got students studying at a distance – basically we’re all over the place. So how do you control all that in an environment that is becoming increasingly disparate and disaggregated? The answer is a technological solution.”
He says the solution will include (but is no way limited to) enhanced service delivery via the web – enrollments, lecturer interaction, a teaching model that’s a blend of face to face and digital, the upheaval of the traditional semester system, high quality video conferencing, mobile solutions and super fast data. “Our researchers want to be able to exchange lots of data,” says Maharey. “They want to be able to move it around the world. They want to be in the field talking to business people, having access to the technology, not having to return to the office to work.
You should be able to do anything you want, at anytime on anything. That’s our vision.”
Whereas many business people tend to underestimate how long things are going to take, Maharey is refreshingly conservative when asked about timelines to achievement. “I don’t think we’ll get there in about 10 years,” he says, “but we have begun a robust investment package that will step us up to get a real platform for all that.” And why so long?
“It is overwhelmingly money,” he says, “but also just being cautious around not getting caught up. We could easily get besotted with the technology and forget that we don’t actually need it.
We need to know the purpose of it before we do it.”
And it’s on the subject of money that the idea of partnerships with business comes into sharp focus, but the exact nature of those alliances is something that business leaders will need to put considerable thought into – specifically around how they can add value to what Massey sees as its role in society – as opposed to simply what might be in it for the business. When examining the relationship between universities and business the world over, what’s clear is that universities don’t view the world like a business does – despite many hard-right economists thinking that they should.
In fact, when you boil it right down, universities actually do two things; 1) they instruct skills and produce graduates that society accepts as being verifiably competent at the types of work society needs done – lawyering, engineering, doctoring and so forth – and they do research.
Put more eloquently, as stated in the 1963 Robbins Report, universities ‘maintain research in balance with teaching, since teaching should not be separated from the advancement of learning and the search for truth.’
And interestingly, universities know (as it has been thoroughly researched by MIT and many others) that there is, in fact, a negative correlation between incentives (ie: being paid more) and producing good ideas (Google ‘the candle experiment’ for more information on that). According to the research, incentives such as money or other rewards work well when the process being incentivised is essentially mechanical ie: ‘the faster you attach these widgets the more we’ll pay you’. But cognitive skill improvement cannot be incentivised that way. Instead, cognitive improvements are best motivated intrinsically. So any company wishing to engage a university will need to present with an issue ‘that matters’ – something really important, both to the university and often to society at large.
Defining Value
Massey’s relationship with Fonterra is an excellent example of that concept in action. Maharey doesn’t describe Massey as ‘contracted to’, ‘hired by’ or ‘working for’ Fonterra.
Instead he talks about a “partnership” and a desire for a “formal relationship” – kind of like a marriage. And you don’t pay someone to marry you do you? That’s prostitution. Go too far down that track, he says, and you’re not a university anymore. Massey’s view of its purpose in engaging the business world is to create value, says Maharey, but he differs with primary funders the government on exactly what value is. “The government says it wants us to talk about ‘creating value’,” he says, “but when you ask them what they mean by value, they don’t know – they mean ‘more for less’ basically.
The government says it wants us to talk about ‘creating value’, but when you ask them what they mean by value, they don’t know – they mean ‘more for less’ basically.
Our model is certainly to create value and the way to do that is to engage with people so that they tell you – and hopefully the government – that there’s value here.” So what does that ‘engagement’ look like for Massey and Fonterra?
Maharey says the value in an agri-food based university and a dairying giant pairing up to work on “issues” is obvious and points to a work-in-progress in China triggered by the recent Sanlu (part Fonterra owned) baby food disaster. The issue there was illegally contaminated raw materials and an insecure supply chain and in essence what Massey is being tasked to do is secure a Chinese dairy production logistics chain “so when the product arrives on the shelf the buyer knows it’s okay and no one has fiddled with it.” To do this successfully is going to take a big IT investment, Maharey says, beyond what Massey can manage on its own. “There’s no way we could physically handle all that. This is big ticket stuff and we won’t pay for it out of our own money, but if it comes off it will be a real engagement with a real problem that would require us to have a lot of IT to be able to resolve the issue.”
Flying staff all over Asia isn’t possible he says, so the solution will have to be highly IT geared. “We’ll be connected to Hong Kong and there’ll be very good technology that will allow us to have control of the companies in the logistics line – from Hong Kong through to wherever the supermarkets are.”
And the partnership bottom line? Fonterra’s resources enable Massey to expand its agri-food bio security expertise, in turn delivering Fonterra a secure supply chain. “The way forward is to form partnerships,” says Maharey, “and we’re doing that with everybody we can lay our hands on now.”
The way forward is to form partnerships, and we’re doing that with everybody we can lay our hands on now.
It’s a philosophy that he’s keen to extend to Massey’s suppliers as well. Feel like pitching your wares to the organisation rated No.11 on the MIS list of New Zealand’s top 100 ICT users? If so, talk less, listen more and be prepared to bring plenty of IP to the table.
Maharey refers to a presentation he attended recently with a Motorola executive visiting from the US, as a perfect illustration of how many technology vendors just aren’t getting where universities are trying to take education delivery. “Motorola have an ancient notion of what a classroom is,” he says.
“They talked about the classroom as being the focus of their technology because ‘the classroom is where learning takes place’. Our vision is anytime, anywhere because that’s actually how learning takes place.”
Although he says he was impressed with the demoed Motorola kit, that’s probably as far as the relationship will go.
“He’s arrived from America, lovely guy, very good presentation but I wouldn’t even bother ringing him. You could tell he just wanted to sell you the order book.
That’s no use. We want somebody who will spend time with us and we’ll know them in 10 years. Motorola really needs to sit down with some people who actually teach and ask them how they do it – rather than driving from the technology which is what they’re doing now.”
You Get What You Need
So what sort of skills are possessed by the 20,000 or so students who graduate with bachelor degrees from Massey and NZ’s other universities every year? And are they the skills the country needs? With an annual budget of around $3 billion allocated to tertiary education (plus another billion in loans and allowances), does the government get to decide what gets taught? The answer is not exactly, but.. yes.
Established in 2003, the Tertiary Education Commission actually allocates the funding. It’s a Crown entity and responsible to the Minister For Tertiary Education – that said, however, it does have independent statutory powers relating to the approval of government funding for universities.
Guidance for how this money gets spent comes via the Tertiary Education Strategy. Labour put one of these five year plans out in 2007, and after getting off to a warm fuzzy start it soon made it very clear what funding allocation would be tied to.
“The tertiary education sector’s role is to understand the needs of employers,” it states, “and seek to meet these. To achieve this it will be important that labour market information is taken into account at all levels of the tertiary education sector, both regionally and nationally.” At the Business Roundtable, executive director Roger Kerr says he wouldn’t argue that universities be exclusively focused on the needs of industry (he was on the council of Victoria University in the 90s), but he does agree with the needs assessment set out in the government’s strategy plan.
“I’d see the main mechanism of communication for vocational purposes,” he says, “as being the price signals of the employment market reflecting scarcity or abundance of graduate skills.” Translation? Skills that are scarce will be more in demand and therefore paid well, and so there will be demand from students for institutions to deliver the relevant courses. University chancellors are probably checking the situations vacant pages to see who and what employers are looking for.
Interestingly, National’s Tertiary Education Strategy revoked Labour’s in 2010. It basically carries the same message, although far less wordy and with plenty of belt tightening recommended.
So with business partnerships potentially underwriting research and government funding being directed strategically, are Massey and other NZ universities now equipped to successfully compete in the global tertiary education market? And more to the point, should they?
| MASSEY UNIVERSITY ICT PROFILE | |
| Desktop PCs | 5500+ |
| Laptops | 1000+ |
| Handhelds | 789+ |
| BUDGET FOR 2011 | |
| Computer Labs / Desktop Replacement | $2.9M |
| Disaster Recovery | $2.3M |
| IT Communications Infrastructure | $1M |
| Data Storage | $800,000 |
| Security Framework | $600,000 |
| IT Infrastructure Between Buildings | $600,000 |
Part of the answer depends on how you value the positive externalities of having an international footprint says Maharey. “I think this is one of the things that NZ probably hasn’t come to grips with yet. If we’re largely publicly funded institutions but we’re moving into becoming value creators around the world – either directly or indirectly – then a lot of our value to the country is simply that we are in China doing a good job and have done so for 30 years. That leads the Chinese to think ‘oh these New Zealanders are good people, a free trade agreement is a good idea’, partly because they’ve had contact with us for a long time and they think we’re alright.” In prestige terms, however, we’re up against big players when we head offshore Maharey admits.
Foreign governments clamour to be associated with ‘brand’ universities like Stanford and Oxford he says and “no NZ university has a name that’s anything like that.” The trick is to pick a niche and be world-beating at it. Massey has built an excellent name for itself in aviation, but it’s in the field of food technology that it has few equals. “We know we’re as good as anybody in that area,” Maharey says, “but we have to be able to back it. We have to be able to deliver on that promise and again, we’re going to have to do that with technology because we physically can’t be having staff going on a plane back and forth to Singapore all the time.” So will Maharey still be at the helm to see whether Massey delivers on the vision it’s outlined in its ‘Road To 2020’ strategy document? The answer… well, that depends. “The fashion in NZ seems to be that if you’re somewhere too long you must be boring and worn out so you should move off somewhere else and wear yourself out there. I am not sure that’s a great thing. That said, though, I think CEOs and their employers have to be hyper sensitive about when is the moment you have added your value to the organisation.
That may be five years, it may be 20 years – but you always have to be keeping your eye on it.”
Founded in 1969 by Torquay surfers Doug Warbrick and Brian Singer, the Rip Curl journey began with the garden shed manufacture of surf boards.
Although they were successful at this, within a year Warbrick and Singer recognised that there were already too many players making surf boards – but almost none operating in the apparel side of the surf business – specifically in the manufacture of ‘surfer friendly’ wetsuits.
For, while wetsuits were available at the time, they were designed for the limited mobility needs of divers, as opposed to the flexibility and range of motion required by surfers.
Sensing a niche, the partners secured a pre-World War II era sewing machine, took over an old house in Torquay and went into production, cutting out the rubber on the floor and handing the pieces to an over-worked machinist.
By today’s standards these prototype Rip Curl wetsuits were primitive, but they differed from others on the market in that they evolved through interaction with surfers. The people who ran the company actually used the products in the field, and whether its surf gear or sunglasses, the ‘we test it so you don’t have to’ ethos is a philosophy that remains with Rip Curl today.
Fast forward 39 years and Rip Curl remains in private ownership (unlike other Australia founded labels Billabong and Quiksilver) and is managed by former action sports publisher Stephen Kay.
Annual turnover is north of $400 million (as the company is privately owned, Kay won’t put an exact figure on it) and nine corporate licensees make and sell Rip Curl products (which include surf boards, shoes, eye-wear, clothing, bags and accessories) in Australia, Argentina, Brazil, Canada, Chile, France, Israel, Indonesia, Mauritius, Japan, New Zealand, Peru, South Africa and the US.
Explaining the company structure, CEO Kay says Rip Curl operates a central company called Rip Curl International, and all the major regions and licensees are fully owned subsidiaries of that company.
“So Australia is a fully owned subsidiary of Rip Curl international,” he says, “as is America, NZ, Indonesia and Europe. 90 percent of our global revenues comes from companies that are fully owned subsidiaries of Rip Curl.”
Interestingly, this ownership philosophy does not extend through to the manufacture of Rip Curl product, although this is not an unusual situation in the apparel business.
“Very few of our licensees or subsidiaries actually manufacture,” says Kay.
“Most of our goods are made by third parties – manufacturers from Morocco through to China. We own a very large wet suit manufacturing facility in Chiang Mai in Thailand which is the largest single employer in the Rip Curl world (650 employees). And we maintain a very small wet suit factory in Australia that produces maybe half of one percent of our total requirements. Other than that, it’s pretty much all made overseas with China as our No.1 supplier.”
Although Rip Curl does operate around 170 branded retail stores Kay says the company is first and foremost a wholesaler – albeit with a retail arm.
What’s the big idea?
So if Rip Curl isn’t really in the manufacturing business, what business are they in? “We think of ourselves differently these days,” says Kay.
“For example, our Australian head office we think of as an exporter of intellectual property in that probably 60 percent of the goods that are sold in the Rip Curl world are designed here in Torquay.”
And it’s here that Kay’s media background has played an important part in the growth of Rip Curl since he joined the company nine years ago. Whereas most company heads come from an accounting or economics background, his experience in publishing (essentially a business of ideas, imagery and presentation) is closely aligned to Rip Curl’s vision of itself.
“That’s why this company isn’t run by accountants,” he says.
“We have some great financial people here but if you looked at our company values, creativity and innovation is right at the top of the list. Number one, we see Rip Curl as a marketing company. We’re very focused on our brand, the projection and presentation of our brand and we’re just obsessed by our products.”
So focused, in fact, that when Kay arrived he set about creating an internal design and media arm that would rival many advertising agencies for size, scope and project capability.
“Whilst we were spending some pretty significant amounts of money on marketing,” he says, “the structure within the company was rudimentary and I was given a very broad license to develop the fabric of advertising and promotions.”
Media staff went from three to about 25 in two years. “We believe in doing things in-house,” says Kay.
“We have our own edit suites, internet specialists, film editors & photographers. We have the full box of tricks in Torquay and we see those skills as essential competencies that the company must have and keep in house.”
Although the value of IP has always been understood at Rip Curl, when Kay first joined the company (as the global head of advertising and promotions) branding consistency was an area that needed his attention.
“Trying to be a global brand with regional sensitivities can be a real challenge,” he says.
“We set about standardising formats and the use of brand and logo around the world and having more of a global team of athletes, a global events platform and things like that. When I arrived there was very little globalisation in that area and nine years later we have quite a high level of globalisation and a lot more guidelines in place as the company has got bigger as to how people can use our brand.”
Evolving ERP
With its branding standardised & globalised in the early years of Kay’s tenure, more recently Rip Curl have looked to doing the same with its core business systems. High on the list was a new ERP solution to replace Rip Curl’s ageing GABS solution.
“We are in the final stages now of specifying a new ERP platform,” he says, “that will give us standardised reporting processes, policies and hardware from every fully owned Rip Curl subsidiary in the world.”
Rip Curl IT manager Steve Westmoreland says the company went through a comprehensive evaluation process to find the right ERP fit.
“We prepared a request for tender document,” he says, “based on our required functionality and went out to the market. The obvious people who responded were SAP, Microsoft, Intentia (now swallowed up by Lawson) and a few others. We then went through an elimination process around things like the complexity of the software, time to install and so on.”
Ultimately Rip Curl opted for M3 from Lawson – a speciality ERP package for the apparel and fashion industry. “M3 is based on the Movex system. Movex was owned by Intentia and was a very solid apparel ERP system that many of the global apparel companies were using.”
Westmoreland says although SAP was considered, he found it more suited to a larger organisation than Rip Curl.
“It’s great for the globalisation of big companies,” he says, “whereas the M3 system wasn’t quite as difficult in terms of implementation, maintenance and training. Basically the software and the size of the company was a better fit for Rip Curl.”
The M3 implementation began in August and Kay says the first roll out of the system is expected in early 2009 in Australia and New Zealand with a subsequent global roll out over the ensuing 12 to 18 months. Westmoreland says the introduction of M3 will also impact the profile of Rip Curl’s in-house IT team.
“At this time our IT team is made up of about seven people in Australia predominantly supporting our Lotus Notes and our OsiPOS system. But what we’re doing with our ERP implementation is starting to build a global IT team that will be involved in every roll out around the world so that we get consistency in the application of the system and the processes to support it.”
Speed to market
Around the same time as it went looking for a new ERP system, Rip Curl also sought to further strengthen its IP systems by implementing a Product Lifecycle Management (PLM) solution.
The Infor/Geac Run Time application incorporates proactive process workflow capabilities in its Quest Workflow Engine, a tool Kay says has dramatically impacted Rip Curl’s range development time frames.
“We use Quest as our product development system,” he says.
“It’s the format within which we design and manage our intellectual property – our designs – and it’s of immense importance to us as we go forward.”
Previous to the deployment of Quest, Kay says when Rip Curl had finished a new range it had to burn disks of the range and Fed Ex them to its licensees around the world.
“It was cumbersome and time consuming,” he says.
“Then we moved to intranets which were poorly disciplined and inconsistent for transferring information. But Quest is a highly refined system that allows our licensees to tap into it at any time during the development phase.
They don’t have to wait until the end of the process to get the information that they usually require urgently. It delivers massive improvements in apparel product time to market while significantly reducing operational costs and licensees can watch the range being developed on their computers wherever they may be.”
Measuring success
As with any company shifting large quantities of stock around the world, warehousing and efficient SKU management is critical to Rip Curl, something the company has directed considerable attention to recently with the deployment of RFID technology, integrated into Rip Curl’s proprietary warehouse management solution.
Standing for ‘Radio-Frequency Identification’ the significant advantage of RFID as a tracking tool over other methods (like barcode scanning for example) is that RFID tags do not need to be positioned precisely relative to the scanner. Explained another way, if items in your supermarket trolley had RFID tags embedded, you would be able to simply wheel the whole trolley through the checkout for a total price instead of scanning each item individually.
“All our processes from receiving, through to inventory control, through to pick & pack are all performed now using RFID,” says Westmoreland.
“That gives us great control over our inventory and the accuracy of our picking process. We have implemented that in Australia, NZ and the US over the last 18 months and that will be upgraded in January to the new M3.” Kay says RFID has certainly lived up to its promise.
“It’s been extremely successful,” he says. “It’s when you do your stock take that you see the true accuracy of your inventory and at our last stock take in June it was a very impressive result in terms of accuracy at the line level. And that accuracy is a great driver of sales because if a customer orders based on what they think is in inventory and it happens to be there, then we can deliver what they require. It’s really been an outstanding success from where we came from two or three years ago, to where we are today.”
At the other end of the supply chain, Rip Curl’s interaction with its suppliers is managed via the Belhara supplier tracking system.
“We connect via a web portal,” says Westmoreland.
“They log into the system and confirm their production orders and ex-factory dates. When the goods are about to be handed over to a freight forwarder they create a packing list in this system, and the freight forwarder does the tracking of our product from handover until it arrives at its destination.”
Putting the logic into logistics
Both Kay and Westmoreland say that the last five years for Rip Curl has certainly been focused on improving efficiencies and standardising systems and reporting. And in the unforgiving global fashion business, quality of product aside, success often boils down to who’s got the most efficient logistics.
“For us what’s important is what it costs to get our products from our factories to our customers around the world,” says Westmoreland.
“So international logistics is a big part of the measure of success. Being more efficient in the way that we consolidate product into bigger containers so we don’t trans-ship, we don’t hand over to multiple freight forwarders, we don’t go through too many regions. We need to make it very easy for every country in the world to be able to purchase product that’s developed at Rip Curl so we increase our production volumes and reduce our FOB price.”
Kay acknowledges that there’s still a long road ahead. “Rolling out a globally consistent process and adopting best practices as we move through that process has very much been our focus,” he says.
“Our new ERP system will give us the tools and the visibility. We have a set of KPIs that we’ve established globally that we’re measuring against now. We are moving progressively through the implementation and our objective is to achieve our targets in two years.”…
Who would want to be in the airline business? I remember reading a “how I made it” book years ago written by a multi-millionaire businessman whose name escapes me now, in which he said the two business types that he would never consider owning were hotels … and airlines.
But why? From the layman’s perspective airlines look pretty cool – glamorous business lounges, international presence & branding, the aircraft themselves a unique blend of raw power and gee-whiz technology. And if you’ve ever had the good fortune to walk across a tarmac to a waiting jumbo, the smell of jet fuel and cabin crew perfume is an enticing mixture.
But scratch the surface a bit and you realise that airlines around the world face an array of challenges unlike those presented to any other business type I’ve ever investigated. For a start, the aircraft are insanely expensive – around US$320 million for the new double-decker Airbus A380 for example.
Running costs are staggering. It takes 216,000 litres to fill up a typical 747-400, which, if you pulled up to a standard gas pump in Sydney, would mean a bill of around $330,000 dollars just to gas up a plane.
Divide that number by 400 passengers on a Qantas flight from Sydney to Los Angeles and it’s $825 per passenger just to cover the cost of fuel.
Then there’s dealing with the world’s airports. Typically they’re monopolies with a total lock-down on their city or region. If you can’t get a decent landing rights price from Sydney, Brisbane or most airports in the world for that matter, you have nowhere else to go.
In terms of competition, the airline business is highly protectionist. Non US carriers cannot fly internal routes in the US and similar laws exist in most other countries (including here).
Underline that with the fact that a large percentage of the world’s international airlines are actually majority owned by their governments (how much do you think Saudi Arabian Airlines pays for fuel?), and you realise that this is nothing like an even playing field.
Finally there are the powerful unions, the terrorists who would like nothing better than to blow your planes out of the sky, the fact that your service must be delivered on time all the time, and the weather – which can cancel flights and shut airports causing complete chaos pretty much anytime it likes.
Within this maelstrom of uncertainty, Qantas CFO Peter Gregg’s job description is fairly succinct. “Peter is responsible for monitoring the financial performance of the company,” was how it was outlined in a recent press release.
Within his portfolio of responsibility is Qantas’s IT infrastructure and I asked him if these challenging issues – apparent in a quick journalistic “once over” of the public facing side of the airline business – are just as prevalent in the behind-the-scenes IT area.
“Yes,” he says, “particularly with what we call ‘legacy airlines’ (airlines with long histories like KLM, Qantas and British Airways, as opposed to newer cut-price carriers like Ryanair and easyJet). A legacy airline is incredibly complex. At Qantas we’ve got holiday businesses, we’ve got business travel businesses, freight businesses, catering businesses. You name it, we’ve got it. The problem in part is that everything has to interlink back to the reservation systems, and then they have to have linkages into your finance systems. So you have a huge number of interfaces.”
Gregg says Qantas has for many years been overhauling its ERP system in an attempt to provide clarity.
“Our ongoing ERP program is to simplify and remove a lot of those interfaces and make the system more efficient.”
If we build it …
What’s also rather unique about the legacy airlines and their IT infrastructure is how proprietary it has been up until relatively recently, as Gregg explains.
“There has been a long, long history of development at Qantas that has really hung off the reservation systems. In my earlier days here the two reservation systems were written in house – a domestic system for Australia and an international system for Qantas,” he says.
“Then when we put the two together we had to actually build a bridge between them to have them talk. And then British Airways bought into Qantas and it had a similar issue. So everyone sat down and saw the cost of continuing to run proprietary reservation systems and that’s when we effectively decided to move to Amadeus.”
Based in Madrid, Spain, Amadeus was founded by airlines Air France, Lufthansa, Iberia, and SAS in 1987 as a Global Distribution System company. Since then it has grown to become one of the world’s leading IT solutions providers for the travel industry – serving airlines, travel agencies, airports, cruise lines and many other travel-centric organisations with booking, freight, baggage handling and business intelligence solutions.
Qantas uses Amadeus’s Altéa customer management solution for reservations, inventory and departure control. In fact, in 2007 Qantas was the first airline to roll-out Amadeus’s next generation load control system which receives data direct from the airline’s load planning, freight, fuelling and airport information systems – removing existing manual processes.
Another impressive feature of the Altéa departure control system is its Autoload function, which ensures items to be loaded onto aircraft are automatically designated to weight and balance positions that will optimise fuel efficiency and streamline loading and unloading. Every litre counts – Qantas’s fuel bill in the 2005/2006 financial year was $2.8 billion – at a time when oil was around US$70 a barrel.
With oil prices now doubled, it’s likely Qantas’s annual fuel bill is in the region of $5 billion or more. Gregg says Qantas is also currently rolling out a new Amadeus check-in, boarding and baggage management solution. “We’re actually the launch customer of Amadeus globally for a new departure control solution which is how we get people away at the airports. It’s going to significantly improve the speed at which passengers can be checked in and give a lot more detail to the customer as well as the check in agent.”
Gregg says passengers will be able to see what seats are spare on their aircraft, pre-allocate their seats and check in by telephone. “All sorts of things you can’t do with the existing technology.”
He says Qantas adopted a “best of suite” approach to its IT solutions about five years ago to avoid the cost of bespoke systems development and the expanding relationship with Amadeus is a testament to that philosophy. (Qantas has confirmed its relationship with Amadeus through to 2017.)
It can also make things easier at airports. Although Gregg says many airports are still running proprietary systems, Amadeus also provides airport software and the fact that over 35 carriers internationally are using its products (including British Airways, Lufthansa and United) means that interfacing with airport systems is much easier than it used to be.
Managing the load
Despite this, however, with over 80 years of history, Qantas has a daunting number of proprietary IT systems and interfaces in operation.
Keeping all these solutions operational involves an IT team of mammoth proportions. Although Gregg says Qantas has downsized its IT staff considerably in the last 10 years, it still employs over 700 in this area. One reason for the big IT team is that many of the company’s legacy applications are written in old programming languages like COBOL (which first appeared in 1960).
“Systems analysts that are skilled in that ilk of programming are few and far between,” says Gregg.
The upshot of this was that Qantas moved much of its IT applications support and maintenance to India-based global service providers Satyam Computer Services & Tata Consulting Services in 2006.
Commenting at the time, Qantas CEO Geoff Dixon said the support and maintenance work related to “over 300 applications that use a wide range of computer languages and technologies,” and in order to deliver a “best practice” IT service similar to that which Satyam and Tata could offer, Qantas would have had to invest $100 million in-house – an investment it could not support.
“In India the issue is to rewrite those older programmes over time into later generation languages,” says Gregg, “and move to a more efficient platform than what we’ve got. Clearly we couldn’t do that in Australia as the resources weren’t here.”
Similarly Qantas has outsourced its data centre operations to IBM in 2004 and has had a customer data facility in Germany since 2002.
A new broom
Although the idea of scrapping Qantas’s entire IT system and starting from scratch must have held a certain appeal at times, it was never really an option and an ‘incremental improvements’ approach has driven the airline’s IT evolution.
“From an IT investment perspective we don’t want to spend money on an IT project unless it delivers returns quickly,” says Gregg. “We look for about a three year ROI. But it’s a constant cycle. We’d love to be further ahead in some areas than what we are but sometimes the technology hasn’t been there or we haven’t been able to change the business to do it a different way.”
But with its wholly owned subsidiary Jetstar, however, there was the opportunity to start with a clean slate. Qantas had already experimented with a “low cost” airline, when it launched Australian Airlines in October 2002. Australian Airlines did not compete directly with Qantas, instead flying routes (into Asia for example) that Qantas had either withdrawn from altogether or could not deliver a profit on with a full service airline.
Soon after launching Australian Airlines, however, Qantas faced domestic pressure from Virgin Blue and responded by launching Jetstar – a true low cost airline – to operate domestic routes and compete directly with the Richard Branson upstart (Australian Airlines ceased to exist in July 2006 and Jetstar has expanded internationally to fill the void).
As Gregg explains, in terms of its IT systems, JetStar gave Qantas the opportunity to start an airline from scratch with standalone solutions. “It uses a different reservation system,” he says.
“Whereas Qantas uses Amadeus, Jetstar uses a much simpler scheme called Open Skies by Navitaire (also deployed by many of the world’s low cost airlines including Southwest, Virgin Blue, Ryanair & JetBlue). It doesn’t have all the inter-linkages, fare classes and baggage connectivity that you need in a full service airline so it is a simpler scheme.”
Cost cutting technology has been at the fore with Jetstar from day one says Gregg. “Jetstar bookings are over 80 percent online,” he says. “It has kiosk check-ins at the airport and SMS check-ins are coming too – it’s highly IT intensive.” Customer use of Qantas’s website is also growing says Gregg – with 70 percent of frequent flyer redemptions, and 40 percent of domestic tickets sales transacting via Qantas.com. International online sales remain lower, however, at 20 percent.
“International has been slower to grow,” says Gregg, “because you need to have a relationship with carriers at the other end who will respect the ‘e-ticket’ philosophy. There’s nothing worse than for a customer to turn up in the middle of Timbuktu with an e-ticket and the partner airline to say ‘we don’t know what you’re talking about’.”
He says the International Air Transport Association (the body that represents airlines) has global e-ticketing as a priority, however.
Driving efficiency
Airport check-in is one area where new “efficiency” technology is clearly visible to customers. In terms of the check-in process Gregg says the problem for the airlines was that all the airline terminals in Australia were built before the privatisation of the airports – back in the days when passenger numbers were much lower.
With deregulation the customer volumes have increased significantly, but in terms of the physical space available at the airports, the airlines are in a strange limbo, as for the most part they are at the mercy of the airport owners. If the airport owners decide to extend the terminals, great, but if not, the airlines have had to find a way to maximise available space and avoid passenger congestion.
With this in mind, Gregg says Qantas wanted to give its passengers multiple access points to have their bags checked & tickets issued and introduced its first QuickCheck kiosks in 2002 at Sydney and Melbourne airports. But the first crack didn’t go very well, says Gregg, with software issues, physical positioning and the fact that only passengers with no checked baggage could use the kiosks, all combining to deliver a less than stellar result.
A second attempt in 2005 serving domestic passengers with or without bags has fared better he says, but it could still be better. “Even now on a bad day the queues can be very long and the airport infrastructure doesn’t cope well with a lot of people queuing. That said, the new kiosks work substantially better – especially in the airports where there’s a lot of congestion in the check-in area and we don’t have the ability to expand the terminals.”
In terms of its overall IT evolution, and non-airline specific business solutions like CRM and VoIP, Gregg says Qantas “has been pretty successful but not as successful as we would have liked. It’s taken longer than we thought. We are in the throes of putting in the finance system now which is going quite well. We’ve had to replatform the ERP as we started out using open source software but we’ve now moved back to an IBM platform.”
Qantas’s foundation suite is Oracle, says Gregg, and the company has dabbled with Oracle CRM.
“But they’ve had some developmental issues there so we’re doing a few other things at the moment. We use Hyperion for some of our additional business tools on the CRM side and we are still doing some work with Oracle to see where we can get with that but we might go a different way, we haven’t made a final decision yet.”
Also still in the ‘maybe’ tray is a company-wide VoIP solution. “We are evaluating it,” says Gregg. “There are a number of areas like reservations and those sorts of things that are do-able in that area, but nothings confirmed at this point.”
So what about “gee-whiz” technology? I ask Gregg if there are any technology solutions deployed by Qantas that the flying public might be surprised to find out about?
“There’s a few things,” he says. “For instance because of the technology we’ve put on our planes our engineers are able to monitor the performance of the engines in-flight back at our home base. So if there’s a problem they can actually link into the on-board systems back at base, monitor what the engine is doing and give advice to the cabin or the technical crew onboard.” Staying on the topic of engines, Gregg says that Qantas is currently in the process of spending $250 million on a new IT solution tracking its engine inventory.
“There’s a huge inventory of spare parts that our engineering business runs on,” he says, “and regulatory authorities require you be able to tell them about every piece and part in a plane. Where it is, how long it has been there, where it came from and where it’s gone to. Tracking the life of parts is something behind the scenes in the airline business passengers would probably never think about.”
Aircraft entertainment systems are another where technical innovations are cutting costs. Talking about preparing Qantas systems for the arrival of the A380 Gregg says that rather than manually loading new movies, music and TV shows into the aircraft’s entertainment centre, the A380 will be able to do this wirelessly.
“With the next generation of in-flight entertainment we’ll update the entertainment systems as the aircraft touches down by radio connectivity – so you don’t have to go through the hassle of downloading and running the risk of the system collapsing on you which it has done from time to time.”
One question I’d always wanted the answer to, is whether or not today’s planes can actually take off and land themselves – look ma, no hands as it were.
“Yes,” Gregg laughs, “but trust me we have guys with their hands on the wheel. You would use that technology in different circumstances obviously. Different airports around the world have beacon guidance systems if there’s very dense fog and the pilots have poor visibility. In those situations you can guide the plane in on that and you’d want the plane doing the flying not necessarily the pilot.”
In the weeks I spent researching and writing this feature, airlines made the news almost every day. And while the story about the emergency landing in Manila of a Qantas 747 certainly captured the most attention, it was, nonetheless, an aberration.
Other stories, however, signalled something much more significant, with Qantas CEO Geoff Dixon telling a Sydney audience that the cost challenges facing the airline industry today would likely result in nothing short of an aviation new world order.
“Right now the global aviation industry faces not just a shock or indeed a blip or indeed a crisis really – but a permanent transformation,” he said.
While Dixon said that he believed the efforts that Qantas had made thus far would ensure the airline could avoid the “dark destiny” of being driven to bankruptcy or swallowed up in a mega takeover, it’s likely the CEOs of the 24 other airlines that have disappeared in the last six months thought the same thing.
As CFO Gregg prepares to step down from the post, the race for Qantas to stay in front of this economic curve is never-ending.
“It’s important that Qantas stays at the forefront driving any competitive efficiencies that it can get,” he says, “and it will continue to do that with aircraft technology, IT technology and human technology.”
| TECHNOLOGY TIMELINEFEBRUARY 2002 Qantas CityFlyer passengers in Brisbane, Sydney and Melbourne able to use mobile phones while boarding aircraft via aerobridges and inside aircraft until doors are closed.FEBRUARY 2002 $50 million investment announced in Qantas airport lounges. More business facilities using the latest technology. Communications capability throughout the lounge allowing customers to plug in lap tops, charge mobile phones or access email from an armchair. |
FEBRUARY 2002
New e-business initiative, Project eQ, launches – aimed at reducing complexity and increasing productivity:
- streamlining corporate HR, Payroll and Financial systems, providing a single web-based interface;
- creating an internet-based e-procurement and inventory management system;
- developing new customer and loyalty based applications;
- delivering web-based e-mail for all employees and an enterprise-wide employee portal allowing access via the internet from any location worldwide.
AUGUST 2003
Self-service QuickCheck kiosks in place at Sydney, Melbourne, Brisbane and Canberra domestic airports.
AUGUST 2003
Qantas Voice trial using speech recognition to manage Frequent Flyer phone enquiries and reduce call waiting times. Qantas Voice software developed by Unisys Australia, Avaya Communications and Scansoft.
SEPTEMBER 2003
In-flight SMS launched. Customers in all seats can send messages using their inseat telephone handset, and also to receive replies.
DECEMBER 2004
Qantas offers interline e-ticketing (IET) with all Oneworld alliance partner airlines.
OCTOBER 2005
New QuickCheck domestic kiosk rollout begins (for passengers both with and without checked bags).
AUGUST 2006
Qantas announces 2007 trial of new technology enabling customers to send and receive emails and text messages via their own GSM mobile phones and email via GPRS BlackBerrys and laptops.
MARCH 2007
Qantas.com introduces online check-in enabling domestic passengers to choose their preferred seat and print their boarding passes before going to the airport.
JULY 2007
Qantas.com announces new online payment feature allowing customers to book flights and defer payment until closer to their departure date.
…
Could there be any aspect of your business evolving faster than the technology it uses? Think about it for a moment. Are you using the same mobile phone you were three years ago?
Are you still on a dial-up internet plan at home? Are you recording television on a hard drive? Are you still walking into a travel agency to book a flight or taking photos with a film camera?
When somebody says ‘WiFi’ or ‘Bluetooth’ now, do you know what they’re talking about? At a personal level we are being presented with a host of new technology choices everyday. A decision to buy an HD TV or a new iPod might dent our wallets for a week or maybe a month, but being charged with the technology purchases of a multi-billion dollar company.
Well, that’s a different league entirely. So what qualifies someone to be a CIO? At Lion Nathan, Darryl Warren has been ‘through the university of Lion Nathan’ as he puts it, starting out as a branch accountant back in the days when IT was typically called ‘data processing’.
And like CBA head Ralph Norris, Warren was also a computer enthusiast from an early age, in an era he describes as “pre-PC” (his first computer, an Ohio Scientific C4P actually had a wooden case!). “In those days,” he says, “IT sat under the auspices of finance. It existed primarily to bill people and to produce the monthly accounts. So having a systems ‘bent’ it was a fairly natural progression in the early days for someone to come from a finance background and move into an IT role. Even today that isn’t unheard of as they’ve been exposed to a lot of the business and bring a breadth of skill that’s beyond pure technology.”
While acknowledging a finance and technology background is often the route to a CIO position, Warren says other skills are equally valued now. “From my perspective because I do understand technology, I think is a benefit, although I know many CIOs who don’t have a technical background. Today it’s very different to what it was then and you’d typically be looking for someone with a broad set of business skills. Strategic, management and people skills especially, are extremely important.”
Exploring the notion of ‘strategic’ skills, Warren says far from supervising the plugging in of server stacks, a CIO’s role today is to identify technologies which are able to drive competitive advantage for the organisation.
Future gazing if you like, just far enough ahead to add value, without being so far in front that they’re out of touch. “I think there’s an infrastructure role that IT perform,” he says, “which is about preparing for things and being ahead of the game, rather than waiting for the project to come along that requires it. It’s quite possible for Lion Nathan to make a decision and want to execute it more quickly than our business partners can deliver it. So we sometimes need to make educated guesses about where we think things are going to go – and act accordingly. Most of the CIOs these days I talk to buy that principle as well.”
By way of a ‘for instance’ Warren points to Lion Nathan’s bandwidth requirements as a case in point. “We’ve just negotiated an increase on our trans-Tasman bandwidth in preparation for things we think are going to happen – building infrastructure ahead of demand.”
Other good examples, he says , have been Lion Nathan’s adoption of IP telephony, and more recently, the work the company is doing around virtualisation. “Almost all our development and quality assurance environments now are virtualised,” he says, “and that teaches us a lot about what virtualisation could mean in a production environment, without actually risking the production environment.”
Best of Breed or Suite?
In terms of its IT infrastructure, Lion Nathan would have to have one of the most diverse array of solutions around. The company’s core ERP is QAD 2007 (formally known as MFG/PRO) which handles core manufacturing, receivables, payables, General Ledger, fixed assets and more. CRM is Siebel (now a part of Oracle). Procure-to-pay is Ariba. Business intelligence is via a Business Objects solution (Business Objects was bought by SAP late last year) and Lion Nathan’s data warehouse sits on an Oracle back-end.
Warren says the company is a major Microsoft shop in terms of desktops, exchange and unified messaging and has a Cisco networking & VoIP solution in place. “And then there are some peripherals on the side,” he says, “like a payroll solution and things like that.”
So why so many different vendor solutions? Warren is certainly not in two minds about which way he’d vote in a ‘Best Of Breed’ or ‘Application Suite’ argument. “Lion Nathan is a best of breed IT shop,” he says without a pause. “Because it gives us a lot more flexibility. And it allows us to find the most appropriate product to meet our strategic business needs as opposed to ‘shoe horning’ a one-size-fits-all approach.” So does he hold any stock in the vendor argument that everything in a suite is configurable and the suite approach is much less hassle? “No I don’t believe that,” he says.
“And the reason is because if that was the case then Oracle wouldn’t have bought Siebel and SAP wouldn’t have bought Business Objects. They bought them because they were ‘best in class’ and they finally admitted to themselves that they couldn’t be everything to everybody.”
In terms of other ‘non IT’ technology, Lion Nathan’s water usage per litre of beer produced has dropped every year for the last 13 years as the company’s long term forecasts show water shortages will continue to negatively impact the Australian economy.
Waste water recycling innovations in the Queensland XXXX brewery will save 1.1 million litres a day when re-used in non product applications such as cleaning packaging lines and lubricating conveyors. At the same time efficiency has been increased in warehousing, with the installation of state-of-the-art Robotic palletisers.
Growth by acquisition
So what exactly is Lion Nathan? Running second to Fosters in beer market-share (it’s No.1 in NZ) Lion Nathan turns over around $2 billion a year and returned an operating profit of $267.2 million in 2007. Trading on both the Australian and NZ sharemarkets, the company employs around 3000 staff with 75 employed in IT.
Its brands (Tooheys, XXXX and Hahn) are iconic in Australia where the company operates 6 breweries, seven wineries and a distillery, along with six breweries and a winery in New Zealand. Its growth has been propelled by frequent acquisitions (most of its Australian brands were at one time owned by Alan Bond) with the company’s most recent purchase being Tasmanian based J.Boag & Son last November for $325 million.
Technically the integration of Boags has been relatively straightforward,” says Warren.
“Changing all businesses systems requires a well executed change management program and timelines are often challenging. We completed the mainland business which was previously done by Fosters within two weeks of taking it over. And we did Boags in Tasmania, both Launceston and Hobart – including replacing all the networks – in a period of about 10 weeks, delivering on the first of April.”
The acquisition of Boags means more new sites to communicate with, and like many organisations with staff located in a range of diverse locations, Lion Nathan has deployed a VoIP solution. In fact, the company was a very early adopter, with its first VoIP installation going live in March 2002. With five years of experience to evaluate it on, Warren says VoIP has delivered on all its early promise of toll savings and other efficiencies.
“Yes in the beginning there was toll bypass savings to be had,” he says, “but they diminished over time (as the phone networks dropped their toll charges to compete). The big advantage is the flexibility it gives you. For example we answer calls in NZ at a single site for about 12 of our offices there. So there’s no inbound receptionist in those locations. Or if there is they don’t answer the telephone. In Sydney, we are moving out of our George St and Hunter St offices to a single location soon and essentially we will have people pack up their phones, take them with them and when they get there they’ll plug them in and they’ll work. There’s a single phone network between 19 of our sites today with five 5 digit dialing between them. It’s a complete plug and play environment.”
A picture’s worth…
While video conferencing and the savings it can potentially generate is creating a genuine ‘buzz’ with many corporate accountants, Warren is more considered in his approach to it. “We do a lot of audio conferencing,” he says.
“I think if you know the parties involved, then audio conferencing can work very satisfactorily without the necessity to use the bandwidth that’s required to support video.” That said, Warren says Lion Nathan was a unified messaging rapid deployment partner of Microsoft during its Communicator 2007 beta and is currently deploying six Microsoft Roundtables (see sidebar & associated case study on page 14). “It’s an incredible device,” he says, “though we’re very conscious of watching bandwidth with it.”
Mobility remains an area in which many organisations can improve their efficiency, and it’s one Lion Nathan will be investing in during 2008 Warren says. “There’ll be quite a big mobility play with in-field automation. The sales execs in Australia have currently got PDAs and they’ll be moving to tablets and Siebel in-field this year. It will be the same as in NZ where we’ve got 120 or so people in the field with tablets. They’re running Siebel mobile client and synchronising back to the corporate Siebel database so people in the field can see exactly what people in the office can see.”
He says network enhancements like Telstra’s Next G will ultimately change the nature of communications billing. “I do foresee a time when all you will do is buy a mobile data plan and everything, even conventional voice calls, will be data. So you’ll be on a plan and just pay for X amount of data and use it however you want to.”
Asked if he still gets a ‘buzz’ from new technology, Warren says he does – but as a CIO there are important caveats to that. “A buzz? Sure, I do but I think the buzz is from understanding what the business value is going to be from it. Having a strong financial background, I’ve easily been able to relate systems to the business processes they’re trying to support. In the early days those processes were largely financial. That has changed enormously over the years and to be quite honest with you people just take the financial ones almost for granted. Because it’s much more sophisticated today than it ever was. But if you look at the birth of computing, most of the systems existed to replace the accounting sheets. So it’s not about technology for technology’s sake, it’s about technology which is driven by a business rational.”
| What is Virtualisation? |
In very simple terms, virtualisation is a way to drastically improve the utilisation of hardware resources. In the old model, Intel x86 hardware (the server box) was designed to run a single application on a single operating system.
This meant for every additional application and operating system in place, another server box was required. Given the immense processing power of these servers, they are massively under utilised running just one OS and application.
In fact, surveys show most servers are only operating at 5-10% of their capacity. Add to that the energy, housing and maintenance requirements of all these ‘one job’ servers and obviously there are a lot of resources going to waste. With Virtualisation, however, a host of applications (databases, ecommerce apps, CRM systems and web servers for example) can all run on a single server.
A virtualisation layer fi guratively ‘sits’ a top a server’s hardware layer and a range of operating systems (isolated from each other) can sit on that layer (Windows, Linux or Solaris for example) running their various applications. The bottom line is then a much more effi cient application of hardware & energy/maintenance resources.…
It’s not often you talk to a CEO that actually knows how to write a computer program. But ask Ralph Norris about his earliest experiences with computing and he’ll probably tell you the story of his first IBM XT PC – fully loaded with 256KBs of RAM and two 5 1/4” floppy disk drives.
It was the early 1980s and Norris was working at the Auckland Savings Bank (ASB) – but even then he knew how to ‘sell’ somebody on the sizzle of what computing could do. “The first program I wrote on it was actually a little maths programme for my son to teach him multiplication tables,” he says. “It would fire a multiplication question at him – say 4×4 – and he would have to key in the right answer.”
Norris could have left it at that, but he coded in a sweetener for his son. “When he put in the right answer it would come and go WOW! with some pretty ordinary graphics (laughs) and it really got him interested in doing his times tables.” Over the years Norris’s enthusiasm for all that IT could offer continued to drive his business rationale. As head of the ASB Bank, he’d been instrumental in the launch of virtual bank ‘BankDirect’ (for the most part an internet only offering with no physical branches) and he fully appreciated the power of the internet in terms of slashing a business’s transactional overhead.
Satisfied customers?
Fast forward to 2005 and after several tough years at Air NZ (more on that later), Norris was ready for a new challenge. Returning to the banking industry the incoming CEO at the CBA was faced – not with averting imminent catastrophe, as he had been at Air NZ, but instead continuing to lead a massive IT initiative (called Which new Bank?) that had begun prior to his tenure.
Nonetheless, as soon as he got his feet under the desk at the CBA, Norris wanted to know what wasn’t right with the bank – specifically from its customers’ perspective. Whereas ASB Bank had consistently been at the top of customer satisfaction surveys in New Zealand, at the CBA the story was almost exactly the reverse.
“We have been the worst rated bank ,” he says. “So when I arrived here one of the first things I did was get a clear understanding of what were the drivers of customer complaints.” As it happens the customer dissatisfaction was spread across almost every customer touchpoint the bank had. “The drivers were things like queues,” says Norris, “product competitiveness, staff knowledge and training, follow up, people taking ownership, issues around levels of error rates.” At Air NZ, IT had been used to great effect in turning around the company’s customer’s perceptions. Could the same thing be done for the CBA? Before he’d know, Norris first had to find out what was right with the company’s IT infrastructure, and what was wrong with it. Or as he puts it “poor and good”.
So how are poor and good defined in an organisation like the Commonwealth Bank? For Norris it’s all about the coalface. “Well first and foremost,” he says, “it’s how do you interact with your customers? So you need to ask ‘what’s our technology utilisation and deployment in regard to the ability of customers to interact with us?’. If I go back to Air NZ for example, when I arrived there I found our internet offering for booking direct was very poor indeed. The system wasn’t intuitive, it hadn’t been well thought through. It didn’t have the range of capability that it should have and so it was very easy to quickly identify that there was some pretty basic problems in the way that IT was being used within the business.”
Although the breadth of the CBAs business operations meant the ‘what business are we in?’ question wasn’t as easily answered as it was at Air NZ, Norris says it still boiled down to customer service. “The Bank is a service industry,” he says, “and so we have a number of different customer groupings that we’re servicing. We are servicing individuals, we’re servicing businesses. There are small businesses, there are mid-sized businesses, there are large businesses and there are government businesses. So there’s a range of different customer groupings that we interface with.” And the bank itself is in a lot of different businesses he says. “We obviously have banking as a business, but we’re also the largest life insurer in Australia. We are the largest retail funds manager in Australia and we’re also the largest retail stock broker.”
Norris says the CBA’s management deciding to launch the ‘Which new Bank’ project prior to his arrival was a brave one. “That was largely built in house and I have to say that the decision by the board and the senior management team at the time [2003] was a gutsy call.” It was also expensive (see the Which new Bank: Explained sidebar).
“When you’ve got 900 people involved in developing a system like that interfacing with a number of banking and legacy systems and getting something that’s actually going to work, able to be developed within budget, inside the deadline, was a pretty significant accomplishment, almost Guiness Book of Records stuff.” As Norris explains it, Which new Bank was dealing with significant deficiencies in front end systems and the way the bank interacted with its banking customers (as opposed to insurance or stocks). “Those systems were very poor,” he says, “and that was due to the fact that like many banks of this type the CBA had a range of legacy systems which were discrete – that is, they were not integrated, they had grown like topsy and so the program had to bring all those systems together through a middleware approach so that we could create a view at the front-end of the business of the total customer relationship.”
Ultimately Norris says the CBA has developed “probably one of the most sophisticated customer relationship systems that I’ve seen. At ASB we had a pretty good one but this one takes it probably a generation ahead in quality and sophistication.”
The new CRM system is being used across a range of the bank’s important customer touch points. “Branch staff and call center staff are using it,” he says, “and it also interfaces into internet banking services. We have internet banking services that are aimed at our individual customers and then we have a broader capability in what we call CommBiz, which is our corporate and small business internet service. All of those systems interact off the same front end platform. And that has given us the ability to start to make sense, from a customer’s perspective – that we actually understand the scope and breadth of their relationship.”
So has it worked? Quiet phones in the complaints department are a good sign apparently. “I was delighted to see that in the first 12 months we reduced customer complaints by some 50% by understanding those drivers and doing something about it – and likewise in the 12 months ending June complaints have come down another 40%. So customer complaints are now only 20% of what they were two years ago.” A good result, but not good enough says Norris. “Customer satisfaction is now at a 10 year high and we have had the fastest improving rate of customer satisfaction of any financial institution in Australia for the last 12 months – so it’s starting to work but there’s still got a long way to go.”
Flirting with disasters
Beyond issues of CRM Norris says a range of other IT initiatives are being undertaken at the CBA. “In the time I have been here there were areas that gave me cause for concern in disaster recovery and business continuity – those processes were not of the level of capability that they needed to be.” And disaster recovery is something Norris knows a little about. While many CEOs have never had to deal with a genuine disaster, Norris was at the helm at the ASB Bank in February 1998 when the power went out in central Auckland for over a month. Years of infrastructure neglect meant Auckland’s entire CBD was dependent on only four underground power cables for its electricity.
After a prolonged period of hot dry weather, all four cables failed in under a month and downtown Auckland was plunged into darkness for nearly five weeks. But the ASB was ready Norris says. “We were very fortunate the head office that we’d recently built in Albert Street had full standby generator capacity and even though our primary computer centre was inside the area where power was lost we had multiple diesel generators and diesel tanks which saw us able to operate almost seamlessly in that time.”
The wisdom an experience like this imparts to a CEO is something that can’t be taught at business school. “As often is the case,” he says, “you learn from your experiences and it’s usually the things that go wrong that teach you the most – and that certainly was quite an educational experience.” Back to the CBA and 18 months of concentrated effort later Norris says the bank’s disaster recovery capability is world-class. “We now have a brand new state of the art ‘hot-site’ out in the north west of Sydney which has just been commissioned which provides us with a very very good back up capability that we haven’t had up till now of that quality.”
Perhaps the biggest disaster that Norris has had to deal with, however, was Air NZ, as it was here that his IT know-how became fundamental to the very survival of the organisation he led.
It was shortly after 9/11 & the Ansett collapse when Norris was tapped to drag the airline out of a hole (after the New Zealand government had injected $800 million to keep the national flag carrier flying). Looking at the books it was clear the company was teetering on the edge of total collapse. In Norris’s words Air New Zealand had “racked up the biggest loss in New Zealand corporate history”. Things had to change – and change fast. “When you have an organisation that has stood on the verge of bankruptcy it really concentrates the minds of the people who work in that organisation,” he says. Garth Biggs, CEO of Gen-i (then Air NZ’s strategic IT partner) recalls it as a challenging time. “The airline certainly had a mindset that it was in survival mode,” he says.
“In a typical scenario companies are really focused on their robustness and quality and so on and obviously in their operational areas Air New Zealand continued to do that but overlaying it all was much more urgency around costs – examining why they were doing everything they were doing. It was questioning, questioning, questioning. It was very challenging but absolutely essential for their survival.”
Priority one for Norris was to stay in business, but to do that he had to make it clear to staff and customers alike, exactly what business Air New Zealand was in. “If I have any real criticisms of the company when I joined it,” he says, “it would be a view that the business was all about flying ‘planes’– rather than about flying ‘people’ – so its systems, processes and logistics were designed around flying planes. We could have been flying freight, we could have been flying bombers, but the fact of the matter was our business was about flying people – so getting staff in the organisation to identify with what was the real role of the business I think started a strong trend towards customer focus.”
A shift to the web
Driving the whole initiative was the impetus to drastically cut operating costs, and pivotal to this was the airline’s website – as getting passengers to make their bookings online would cut processing costs and help Air NZ further reduce its dependency on third parties like travel agents (who could offer fares from a range of carriers).
Although its site had been offering tickets since 1999, airnz.co.nz was not a successful retail channel, he says. “It was interesting when we finalised the strategy for Domestic Express (a no frills/low cost domestic service designed to quickly boost passenger numbers). I said to the team ‘Okay, how are we going to sell this?’ and they said ‘well we’ve got our website’. And I asked them ‘have any of you actually booked a flight on our site?’ – and they hadn’t. So I said this particular initiative is going to fall flat on its face because there’s no way our current website technology will satisfy our customer’s requirements. The website was too difficult for customers to use – so it was all hands to the pump to endeavour to do something about it.”
Twelve months later and any concerns about the success of the strategy had long since evaporated. Some key statistics – online sales volumes had increased from less than 4% of total domestic bookings with the old system, to 44%. The look-to-book ratio (the number of people who look at the site then buy a fare) had dropped from approximately 25:1 to 8-1.
The Air New Zealand site had risen from being in the top 50 most visited websites in New Zealand to the top 10. Visitor volumes numbered around one million a month and by the time he left Air NZ in 2005, its website had become one of New Zealand’s most successful e-commerce websites, with daily sales in excess of $1 million.
Has it all been done?
So is an in-depth understanding of IT a prerequisite skill set for today’s CEOs? Norris isn’t convinced, but says to some extent it’s happening by immersion. “Even today I don’t think there are too many chief executives that have much more than a basic understanding of IT,” he says. “Obviously chief executives come up through the commercial side of the business and to have an extensive IT background you need to come up through the IT stream, but I think what has happened, though, is that just by the very pervasiveness of IT – CEOs with PCs on their desks and BlackBerry’s and the like, they’re using IT a lot more, personally, and therefore are becoming conversant with what IT can do and also the pervasiveness of the internet as well has created a significantly broader knowledge of IT capability I think.”
At a media presentation just prior to his appointment to the CBA, a newbie tech-journalist leapt to his feet and asked Norris in excited tones. “Ralph, what is the future of technology?” The room was quiet for a moment, Norris looked taken aback and then the gathered crowd roared with laughter. He’s talented, after all, but he’s not the Oracle from The Matrix. At the time his answer was “constantly evolving” and that’s the answer he sticks with today. So where exactly are banking services on the technology evolutionary scale? Norris uses the evolution of air travel to make his point. “I think we’re only scratching the surface with the use of IT,” he says. “The evolution of aircraft is quite a good analogy and I think that we’re probably running at the moment somewhere around the 707 (the first mass production commercial jet that made its debut passenger flight in 1958) and if you look out to the Boeing 787 Dreamliner and the Airbus A380s, that’s where the potential is at this point, so there’s a great opportunity gap to be filled.”
Being able to seamlessly carry out transactions globally is one area where Norris sees opportunity. “We’ve done a lot in being able to use credit cards and debit cards internationally. And in terms of transferring of funds we now have the ability to transfer funds through the internet to other banks internationally as long as you’ve got the swift access numbers. As far as the ability for loans – could you borrow in another currency? Yes you can do that. You can’t do that live online currently but I can see the time that you will.” But, Norris warns, dealing with global finance markets is not a game for novices.
“The question is do you want to take the foreign currency risk? If you borrow in US dollars the interest rate might be 5.5 percent, but if you are earning in Australian dollars and the dollar depreciates, then a 10% change in the currency is effectively a 10% addition in your interest cost. Banks got into a lot of trouble especially here in Australia in the late 80s with foreign currency loans. A lot of people just didn’t understand the inherent currency risk and while they looked as though they were getting a really cheap interest rate when the Australian dollar depreciated 25-30% against the Swiss franc, they got into really significant difficulties.”
So how does a CEO keep his company out of technological difficulties? Once again for Norris it’s identifying deficiencies and constant evolution. Careful planning, integration, the right people in the right roles (he works very closely with his CIO for example) – and always with a focus on the customer experience. Closing the interview I recall my first interview with Norris in late 1999 – a quick phone call to see how confident he was that the ASB’s systems would handle the much hyped ‘Y2K’. When I asked him where he would be at 11.59pm on the 31st of December 1999 I expected him to say he’d be hunkered down in an ASB command and control centre barking orders to tech staff like a shift supervisor at Chernobyl. No, he said, he’d be at a family barbecue probably letting of some fireworks. Such is the confidence of a CEO who knows the job’s been done right.…
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