In today's rapidly changing society, consumers lose patience with slow product turnover, and apparel and other retailers must speed their supply chain to keep up interest, said retail analysts Tuesday at the National Retail Federation's annual conference in New York. Michael Barrett, retail research director at AMR Research, noted that more than half of companies surveyed by AMR said their lead time for a new product from inception to shelf is greater than six months.
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Unlike in previous years, the big attraction for holiday shoppers in 2006 was neither advertising nor special offers, according to KPMG's newly released annual National Shopping Behavior survey. Rather, 81 percent of consumers surveyed said they shopped at stores that carried the items they were looking for, and a whopping 75 percent said a simple return policy was a deciding factor. Price, according to the survey, was secondary, cited by just 19 percent of respondents as influencing their choice of a retailer.
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Walmart has come-up with an innovative worker shift system. Shifts will be based on customer flows and employees will know it 3 weeks before!
I think this is an interesting evolution where shoppers, customer service and optimization of costs are at the central focus of this decision. As we move from a "mass manufacturing" era to "mass customization" era, new management principles and methods have to be invented for the companies of the future. We are yet to see some innovations in this area. If Alfred Sloan changed the auto manufacturing thinking for GM or if Henry Ford brought-in the mass manufacturing methods during early 1920s, the new service economy will have to dump the old economy rules and transition to new ones. Because, 24x7 businesses need to find innovative ways of developing superior customer service while balancing it with fair HR policies.
MSNBC reports:
Wal-Mart said the new system ensures that stores are fully staffed at peak shopping times and it takes into account the hours employees prefer to work.
“It is much friendlier and more predictable than the previous system in that it actually asks for our associates preferences of when they prefer to work,” Clark said.
She said under the old system, store managers drew up schedules based on the level of sales in a store. Now, increased staffing will coincide with times when customer traffic surges, she said.
Towards the end of last year I asked various people to make some predictions for 2007. Here, in no particular order, is what they said. Interestingly pricing and customer-centricity both came up more than once.
Bruce Richardson, Chief Research Officer of AMR Research sent me this one (though I am not sure he is serious)
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EDM will revolutionize professional sports, particularly baseball and football. Take football, especially this week’s Wild Card match up between the Patriots and the Jets.
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As the Pats coach breaks down game film, he enters data on how the quarterback responded to the defense (or vice versa) depending upon which down, yardage needed to first down, field position, score, time left in the half or game, field conditions, etc.
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All of this gets coded and entered into a computer.
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All of the data is stored and analyzed, and rules are generated - If 3rd and 15 with plenty of time and only one blocker in the backfield, the defense should...
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Rather than consult those plastic-coated charts with plays on them, the coaches watching from the skybox enter the formations into a handheld or laptop.
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The computer responds with a series of probabilities based on the best historical matches as well as input from the team’s head coach.
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These results in the new rules.
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Eventually, self-learning robots replace players...
Mike Schoeffler, President of Profitdesk Software had this to say:
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A nomination for the next big decision automation in an industry: bank loan and deposit pricing. Behind the scenes, one industry after another has automated pricing of their products - airlines, clothing stores, supermarkets. Bank pricing is equally broken. It is often guided by C-level executives, who rely upon their intuition and art because the tools have not been available. The changes this year will be invisible to customers if implemented properly, but will noticeably expand bank profits, even in an inverted
yield curve.
David Raab of Client X Client had a couple of hot trends:
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Complex event processing: the notion of linking and finding patterns in multiple customer activities and using these to guide customer treatments. No different from normal customer management, except that it requires more sophisticated technology and richer data, including customer activities, customer profiles, environmental inputs (location, competitor behavior, weather, economic news, etc.) and business situation (products, inventory, etc.) Yes, it's yet another perfect application for EDM.
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Marketing mix modeling: part of underlying marketing ROI and optimizing marketing investments as a result. It's becoming a feature of marketing resource management systems, which are a logical home because they have all the information on marketing programs to begin with. But you need to add more information on results and more sophisticated analytics to make it the mix modeling possible.
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Both trends build on the wider accessibility of customer data, both as captured in enterprise warehouses and as visible in place through service oriented architecture, and on customer data integration technologies that make it easier to assemble the data from different sources and relate it to individual customers. Both also point to a need for over-arching management of the customer experience across all interactions (their specialty at Client X Client).
Barb von Halle and Larry Goldberg of KPI had a couple:
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There will be at least one, maybe two, new business-friendly software products available by 2Q2007 through which business-focused (not technology-focused) rule authors can write rules independent of a BRMS. Possibly with generation into 1 or 2 BRMS products
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There will emerge a business rule formalism that we believe will enable business rules and Enterprise Decision Management to integrate well in an SOA world by 3Q2007.
Henry Morris of IDC said
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In 2007, we will see delivery of more industry-specific composite applications that combine transactional, analytic, and collaborative decision-making tasks. Pricing decisions (which have a distinct vertical flavor) will be a popular subject area for these applications -- monitor changes to demand, analyze new trends, adjust the price in the transactional system, monitor, etc. Some will be packaged; many will be custom-built. The packaged applications will require extensive on-site customization. Providing an
interface for model-based configuration and customization (at a level of abstraction suitable for business analysts) will be a differentiator for the packaged composite applications.
Sandy Kemsley, my fellow blogger over on ebizQ, had a piece on 2007 trends here and highlighted this one:
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There are two more Web 2.0 characteristics that I think we're going to start seeing in BPM in 2007: tagging and process syndication. Tagging would allow anyone to add free form keywords to a process instance (for example, one that required special handling) to make it easier to find that instance in the future by searching on the keywords. Process event syndication would allow internal and external process participants to "subscribe" to a process, and feed that process' events into a standard feed reader in order
to monitor the process, thereby improving visibility into the process through the use of existing feed technologies such as RSS (Really Simple Syndication).
Ian Turvill, the other regular blogger on this blog, had a couple too:
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Increasingly, retailers will see Enterprise Decision Management as a key way in which they can drive customer centricity across the organization. A "Customer Centric" enterprise is one that delivers marketing, sales, and service to strategically distinct segments in very different ways so as to maximize the overall customer portfolio value. Customer Centricity is an approach which has been used by leading retailers, such as Best Buy and Tesco, as well as other recognized consumer service organizations, such as
Harrah’s and Royal Bank of Canada, to achieve substantially superior financial performance. Customer Centricity involves five key steps:
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Understanding the current and potential lifetime value of customer relationships
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Explicitly choosing and focusing on a select set of customer segments
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Understand those customers in depth, including how to build larger relationships with them
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Engineering a "winning" value proposition across these customers’ entire shopping experience, including marketing, sales, and service
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Aligning the enterprise around delivering that proposition
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Insurance companies will adopt Decision Services to get better Decision-Making across the board. Insurers are recognizing that the benefits of predictive analytics and decision automation that they have seen in personal lines underwriting can also be realized in other functions and in other lines of business. They will respond by creating a separate decision-making capability an inherent part of their overall information technology architecture through the creation of "decision services". A similar prediction
has been made before. In a July 2005 report, Karen Pauli, a Senior Analyst at TowerGroup, stated that: "The insurers that will survive this competitive environment are those that leverage technology to advance their business and operations. . . . One of the primary ways insurers are transforming their infrastructure is by supporting the insurance value chain in a modular way, such that applications are not all in one and can decouple and share some core components. . . .". What makes 2007 different is the rapid
and widespread adoption of Service Oriented Architectures, which make it now possible to deploy the applications which exploit the SOA approach.
Craig Dillon, who heads up our ScoreNet business here at Fair Isaac, had another (he and I presented on Decision Service Providers recently).
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Technologies that control business rules will enable companies to increasingly move key decision points outside their four walls, enabling new classes of business process outsourcing. This will enable a new class of business – BPO networks with embedded business rules running at the hub.
As for yours truly, I have a couple:
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Every BI vendor will talk about having predictive analytics as a core component of their technology. Few of them will actually manage this.
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Every BPM vendor with long term prospects will partner with a major BRMS vendor and multiple integrated solutions will start to emerge.
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The idea of decisioning and decision services as a class of development will become mainstream or at least more mainstream.
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BRMS vendors will devote much of 2007 to improving the ability of business users to test, check and manage business rules
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Predictive Analytic workbench vendors will focus more and more on deployment of the models, not just development of them
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Some useful standards will be published and increasingly adopted in business rules and analytics, increasing the speed of adoption
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A really great book will get published on EDM and all the readers of this blog will buy multiple copies for their friends and family enabling the authors to take well-earned vacations in paradise.
One more thing. There was a nice 2007 Trends article over on Intelligent Enterprise about which I blogged here.
Technorati Tags: AMR, analytics, BI, BPMS, BRMS, EDM, Enterprise Decision Management, IDC, insurance, KPI, Marketing, predictive analytics, ScoreNet, SOA, standards, customer centricity
There are more than 500 retailers worldwide with revenues in excess of $1 billion. Their use of predictive analytics, business rules, and decision automation varies widely. Some of them - such as Best Buy - make extensive use of advanced decision making capabilities as the foundation for successful "Customer Centricity" initiatives which have driven significant same store sales growth. Others are equipped with large amounts of data about their customers, their products, and millions of transactions, but are yet to grapple with the implications of using that information to its fullest within their businesses.
Even leading commentators on the retail industry predict that predictive analytics will come to the fore during 2007, so it seems that the time is right for James and I to start blogging formally about the many applications of EDM in stores, in online outlets, and anywhere goods are sold.
To this end, we have added a new "Retail" category to the list of existing categories in use on this blog, and we have even gone back and reclassified a number of our old posts that are relevant to this industry. Some of our recent entries that fit the bill include:
As ever, we invite your comments and insights on our postings. If you have any particular observations of note to the retail industry, please bring them to our attention.
(Posted by Guest Blogger, and ardent shopaholic, Ian Turvill.)
It's that time of year again, when we're supposed to make predictions about what the New Year will bring us. And apparently, I'm not alone in that belief, since Susan Reda, Executive Editor of The National Retail Federation's "Stores" magazine has compiled a list of seven things she predicts 2007 has "in store" for us.
Alongside greater use of mobile marketing technology, "fast fashion" (you'll have to read the article to see what that is - it's just too much to explain), greater emphasis on green issues, a difficult economy, and pressure on supermarket formats, she highlights two specific trends that appear to have direct relevance to our EDM blog.
First, Susan Reda says that demographics will assume greater power
"Immigration, aging Boomers and a host of other demographic shifts will be shaping and reshaping the retail landscape for years to come. Retailers who set their sights on micro-merchandising and micro-marketing will triumph; those who run with the herd may find themselves getting trampled."
Another win for Enterprise Decision Management, then! EDM's capability to find trends and to apply them at a highly granular level makes it ideally suited to address this particular challenge. If you know of any retailers who are not regular readers of this blog, I recommend pointing them here so that they are best equipped to deal with the challenges of 2007.
Separately, Susan emphasizes the impact of numerous new technologies on the retail industry, including business intelligence, RFID, contactless payment, and biometrics, as well as predictive analytics. I'm very surprised that Susan did not make more of an explicit link between between the issue of the demographics and the application of predictive analytics. However, she does quite aptly state:
"Retail success is about finding the sweet spot. Doing so requires business intelligence -- predictive analytics that allow you to distill key customer information from a sea of data, capture missed opportunities and smooth out sales anomalies."
Of course, I think James and I would probably extend that further and say that what is required is "actionable business intelligence" and the capacity to apply those insights as a core part of all transaction streams and customer interactions. Susan seems to conflate the ideas of BI and predictive analytics, and as regular readers of this blog all know, there are many reasons why BI and EDM are not the same thing. But we'll certainly accept
Susan's point, nevertheless.
I predict that James and I will be blogging a whole lot more about the applications of Enterprise Decision Management in the retail industry the New Year. It seems to be an area that is ripe for some good ol' decision automation!
If you don't like it, just return it. This holiday season that might be easier said than done, especially if the present you receive doesn't come with a gift receipt. According to a recent study by the National Retail Federation, one in four retailers will tighten their policy this year. Many stores are getting stricter about returning items without a proof of purchase and are narrowing the time frame customers have to bring something back.
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Selling products and services through multiple channels offers a number of "touch points" where information can be gathered from customers or potential customers. Most people in marketing clearly understand the importance of using this information to personalize communications with customers and perhaps even to customize products and offerings for them. The challenge retailers continually face is how to glean all the valuable information from shoppers successfully without their feeling stalked or needlessly bothered.
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It's about that time of year when we see all the predictions and forecasts of how much online sales will increase, by product, for this holiday season. From cautiously to wildly optimistic, these forecasts are things that e-commerce managers' dreams are made of. There's something missing in this year's forecasts, though, and the inflated performance everyone expects from online sales this season needs a reality check. Don't expect any corrections to these forecasts, however.