Customer Profitability Management in The Value HUB and electronic Value Added (eVA)

1
Customer Profitability Management in The Value
HUB and electronic Value Added (eVA)

• Professor Bala V. Balachandran
• J.L. Kellogg Graduate School of Management
• Northwestern University
• Evanston, IL 60208

2
The Current Business Environment
Manufacturing Excellence

• New Products

Demanding Customers
Changing Workforce
Changing Technology
New Competitors
Global Competition
Decreasing Margins
3
Levers to Maximize Profit
4
Levers to Maximize Profit
5
Balas 4Ms

• Measure Both Revenues Costs Correctly (ABC)
• Monitor Movement of Both Revenues Costs
• To Apply 50 Rule
• For Benchmarking
• Manage For Action Plan
• Yield Management
• Thru-put Management
• Activity-Based Management
• Process Value Analysis So That We Can
• Maximize Profitability

6
Strategic Process Management
7
Strategic Process Management
8
Strategic Process Management

• Product Innovation/Excellence
• Nike
• Merck
• Sony

Latest Products

• Operational Excellence
• FedEx
• Wal-Mart
• Costco

Operational Excellence
Personal Touch and Feel
9
Strategic Profitability Management

• Constancy of Purpose

10
Revenue Management
Revenue management is the art and science of
predicting real-time consumer demand at the
micromarket level and optimizing the price and
availability of products." R. G. Cross

• Keenly Observe Buying Behavior of Customers
• Objective of RM is to Sell
• The Right Product to the Right Customer at the
  Right Time for the Right Price

11

• C.M. The relentless pursuit to eliminate
  Non-value added activities and optimize
  resource utilization effectively
• and efficiently."
• RM - CM Ensures that companies will sell the
  right product to the right customer at the
  right time for the right price with the right
  cost.
• An integrated set of business processes and
  activities that bring together people, systems,
  knowledge and information with the goal of
  understand-ing the market, anticipating customer
  behavior, responding quickly to exploit
  opportunities effectively and efficiently with
  company's resources, products and services.

12
Value Chain Perspective of Business Functions
13
Cost Management

• KANTHAL

Bala
14
Cost Management
15
Value Chain Perspective

• The End Buyer Pays for Margins Throughout the
  System

16
Strategic Cost Management

• Balanced Scorecard

17
Performance Improvement Linkage Example
18
The Four Sides of Electronic Value Addition with
e-Commerce
Novelty

• New Architectural Configurations
• New Components and Options
• New Customer Value
• CRM

• Efficiency
• Search costs
• Selection Range
• Symmetric Information
• Simplicity
• Speed
• Scale Economies, etc.
• SRM

eVA eValue Added

• Lock-In
• Switching costs
• Bundling
• Loyalty Programs
• Customization, etc.
• Positive Network Externalities
• Direct
• Indirect
• Revenue Drivers

• Complementarities
• Complementary Products and Services for Customers
• Leveraging Excess Capacity

19
Building Blocks of the e-Corporation
Supply Chain Management Applications
ERP Backbone
Intranet Applications
eProcurement Applications
Data Mining, Knowledge Mgmt. Apps.
Enterprise Applications Integration
Customer Relationship Management Applications
20
Business Excellence Corporate Value
Measured, Monitored Managed by Balas 4-5-6

• The 4 Cs
• Customer
• Change
• Competition
• Cost

The 5 Es Economy Environment Education Empowerme
nt Equity
The 6 Ps Profitability Products
Services Productivity of People Processes Performa
nce Measures Preferred Partnerships
21
Strategy Aligned, Integrated, Linked Scoring
System (SAILS)

• Identify strategy by SBU
• Link strategy to mission critical business
  processes
• Explore critical business issues
• Integrate the organization (link top floor to
  shop floor)
• Identify, integrate and link appropriate
  performance scores (SAILS)
• Determine vale/revenue/cost drivers
• Measure, monitor, manage and maximize