CDL: " The future of the firm"

The Casa del Libro case study is a great example of the types of decisions we might face in the future as possible managers and owners of businesses. CDL's decision to change ERP's was a complicated one by itself and was made more like a nightmare with the economic atmosphere that the company faced in 2001. However, the decision of whether to switch ERP's relied more heavily on the company's longterm plans or as the case mentions, "the future of the firm" than present economic conditions. As the new CEO of the firm I would have taken the following into consideration:

- Tendencies of the book market: it was clear to the CEO that the book market was transitioning to online retailing. To be a major contender and to assure future growth for the company it would be vital to have presence in this arena.

- Costs: the company had already assumed sunk costs related to the initial legacy system and the consultant fees that never went anywhere. This would be a deterrent for the company to move ahead with the project, however, the fact was the after finding the Microsoft solution the maintenance cost would be lower with the new ERP system. Taking this into consideration, why would it be better to stay with the old system if you know for a fact it is more expensive.

-Slow business activity: analyst expected business activity and thus revenues to decrease considerably in the future which might make the investment less attractive because the ROI would not be favorable. However, this could be viewed as an opportunity because employees would not be as busy as usual and would have more time to train for the new ERP and help with its development. Slow business activity could provide a smooth transition to the new system.

The movement to the online retailing is inevitable therefore do not find it useful to prolong the assimilation of the new system. I would switch to the new Microsoft ERP and take advantage of slow business activity to assure a solid implementation of the system and move the company where the growth is. The essence of businesses is to stay in the cutting edge of market trends, since this ERP is essential and brings a considerable added value to CDL, this should be the most important criterion when taking the decision of whether to implement the ERP or not. If the added value was not fundamental then maybe this type of project could be put on hold or discarded but I do no believe this is the case.

Information is the most valuable asset

TESCO

Tesco is essentially the european example of Walmart. Their strategy was simple and was best described by the company's motto, "Pile it high, sell it cheap". This statement can actually give you a picture of how a Tesco store might look like without even stepping into a store. The company focused on high turnover and economies of scale as the way to turn profits.

Tesco was ambitious from the get-go expanding in the UK as fast as they could and aggressively trying to increase their market share by taking away customers from the industry leaders like Sainsbury and others in the market. Initially this competition took the form of price wars and trying to provide added value features to customers. Some stores would fare better than others in quality and variety of food and others would focus on price.

Tesco's Competitive Advantage

By the late 90s Tesco had past its competitors and crowned itself the market leader in the industry. The clear differentiator between Tesco and the competition was its Clubcard or its loyalty program as the case refers to it.

I disagree with the case in this point of view because the customer loyalty is not a consequence of pampering customers through more discounts, but of leveraging information. The clubcard was essentially Google's business model in its most rudimentary form. Provide attractive discounts(free service in Google's case) to clients in exchange for their purchasing information. Before the clubcard Tesco and the rest of the market participants based their strategies on assumptions of customer behavior or surveys which are not always the most reliable sources of information.

The clubcard was an IT generated competitive advantage. It provided a huge amount of data to Tesco which allowed them to make accurate business decisions such as identifying price sensitive products. They realized that there was no need to slash prices on certain products because they were not price sensitive and reduce other products that were. The number of items with discounts was reduced from 700 to a merely 350. They also received data on customer demographics and their specific buying patterns which allowed them to provide the customers the products they wanted and the discounts that would actually bring them to the store. This invaluable data allowed Tesco to be always one step ahead of the competition identifying trends and changes in consumption much faster than the rest. The information was so large that in no time they were investing in a NCR Teradata data warehouse to increase or refine customer profiles.

Tesco's success was driven by the fact that they were able to give customer's the products they wanted and the discounts in the products they most bought. Though substantial at the time, the IT investment platform for the clubcard proved to be a tremendous success.

ERP's

Enterprise Resource Planning softwares are, simply defined, software systems that try to integrate all of the company's departments in order to make certain processes and information more efficient and available. The need for ERP's comes from the idea of streamlining business processes. So instead of employees in the sales department calling the warehouse in order to check the inventory of a certain product, they can find this information readily available in the ERP. ERP's can be implemented in many different types of companies from financial services to human resources companies.

At first glance, every business owner and CEO would think that having ERP is the best decision a firm can make, however, this software integration platforms are very expensive and often times don't meet the expectations of the firms. It is critically important for managers to analyze whether their business is adaptable to an ERP. This poses the question of whether businesses have to adapt to ERP's or vice versa?

In my opinion, businesses are clearly the ones who have to adapt to these ERP's. Even though consultants claim that they can personalize ERP's to businesses this usually leads to glitches in the system and unforeseen scenarios which can be more costly in the first place. Ideally, it should be ERP's who have to adapt to business but realistically if a firm decides to implement this type of system they should be willing to modify and adapt their current procedures to the ERP.

The Dell Hell Case Study

Jeff Jarvis's Dell Hell blog can serve as a Harvard Case study for many reasons but the most important of all are to demonstrate the power and influence of blogs in todays media and how CEO's should address these new powerful critics. If Dell would have approached this media frenzy in a different way, the negative publicity would have never affected the company as it did in 2005.

Why are blogs so powerful? Blogs started out as online diaries where people would write things that interest them or things that are on their minds. Today, blogs serve as an unfiltered tool where journalist and people express their ideas to the world. Since most newspapers are restricted from publishing certain subjects or comments due to interest of the board or repercussions to the paper, many have now turned to blogs as a way of expressing their ideas without any filtering from a third party. This virtue is the essence of a blog and it is why they are so powerful. Bloggers write the truth (their version and opinion of the truth) and people who share their opinions or experience relate to them and engage with the writer through comments, something no one was able to do with a newspaper in the past.

In the case of Dell Hell, it wasn't that Jeff Jarvis wrote a poetic blog or an award wining novel, the reason for its popularity was because it expressed the general sentiment and experience of many Americans. Each blog of the Dell Hell series had upwards of 200 comments. He wasn't the only one, he was one of many.

The Snowball Effect. It is very hard to stop an avalanche from happening once it is coming down the mountain so the best way to avoid an avalanche is to take preventive measures. Ski resorts actually use explosives to break away staked snow before it becomes a threat of a huge avalanche.

Dell's mistake was that it did not respond to the blog. Maybe they thought that a small blog would not impact the company in any way. I am positive that if Jeff Jarvis's experience would have been televised in CBS'S 60 minutes, they would have addressed the issue right away. My belief is that they underestimated the influence and attention this blog would get. Once it got to the New York Times and other well known media outlets the damage was already done, the avalanche was already on its way down. The lesson: pay attention to blogs and activity generated by their articles.

What should have Dell done?Dell should have done what it eventually ended up doing. As Mei Ling Fung posted on her blog (http://www.customerthink.com/article/you_can_learn_dell_hell_dell_did), Dell eventually addressed customer complaints and Jarvis by creating a dedicated corporate blogger. Michael Dell assigned a 14 year Dell veteran Lionel Menchaca to head a Dell blog to address issues customers were posting in blogs. His approach was to be honest and to communicate valid problems and issues to Dell headquarters. He connected Dell to its customers base and addressed customer issues before they were put on the New York Times.

Hindsight everything is 20/20. In all honesty, I did not know the influence bloggers had until very recently. If I would have been the Dell's CEO I am not so sure I would have paid so much attention to a little blog.

The fact is that today bloggers are a force to reckon with, they can either build you or destroy you. Twitter became so popular because of bloggers and most companies now a days use bloggers to promote their products assuming bloggers think well of them.

Don't Google it, Facebook it!!

What started as a simple way for college friends to stay in touch has transformed the way we people communicate in the 21^st century. Who could have imagined that there would be more traffic in Facebook than Google? My guess is, not many people, and it seems as though this is not a trend of the moment but something that is here to stay.

So how will a company that’s growing so fast look like 2 years from now? I am going to pose a crazy idea but maybe, just maybe, Facebook will be the next Google for casual information. I see a future where searches are going to be divided in two criteria’s: professional and casual/social inquiries.

· Want to know technical and research type information, Google it.

· Want to know a good restaurant for vegetarians in Madrid, Facebook it.

Does it sound farfetched? Well, if I told you five years ago that Google would compete with Microsoft in the Office and OS business you probably would not have agreed either. People tend to value information from people they know much more than random suggestions. For now, Facebook and Google are working together in this social search venture through their Facebook/Aardvark collaboration. Aardvark is a Google owned social search site that finds information you are looking for through people you know. It is currently being offered through your Facebook or Google accounts. This collaboration reminds me of the one Yahoo had with Google before Google became what it is today. I think this is the next logical step for Facebook being that it has the ideal platform to make it succeed. ( See Facebook aardvark: http://www.facebook.com/aardvark)

Mark Zuckerberg recently said that, “Things are going to be designed around people” (source: http://technology.timesonline.co.uk/tol/news/tech_and_web/the_web/article7143117.ece). Websites, businesses, events, restaurants and activities will revolve around what people are searching for and if I understood Mr. Zuckerberg correctly this information sharing is what is going to make this happen. Being that Facebook and Google have the exact same business model, (free services in return for information) I do not see how they will not be colliding in the future. For now, they seem to be playing nice.