Does Tesco enjoy an IT generated competitive advantage? Where does it come from?

The answer to the first question is a big ‘YES, THEY DO!’ It’s just a matter of logic. Otherwise, can anybody think about how can the UK’s largest supermarket chain manage a retail data infrastructure operates in near real-time in its 1,200-plus stores and still being successful? But let’s start by the very beginning.

What’s Tesco? In a very simple way, Tesco is a giant basically focused into developing new products (food and non-food business) and services (financial and telecommunications) in order to ”create value for customers and earn their lifetime loyalty”, according to Sir Terry Leahy, CEO of Tesco since 1997. Tesco is also the world’s largest internet based grocery retailer with operations on three continents and the second largest e-retailer after Amazon.

We could be going and on explaining in more detail all of Tesco’s activities, but let me jump this part and allow me to focus into its core business, that is, supermarket retailing where it is recognized as a role model globally for its stragegy (see steering wheel) and simple goal: ‘bringing prices down’.

In this case, innovation is very different from other industries, such as biotechnology, software development or pharmaceutical. If in these industries innovations are protected through long-lasting patents, here the focus is to highlight innovation in the delivery of goods and services from manufacturer to the customer all day long during the whole year in a dozen different countries. In this process IT generates a competitive advantage.

Particularly important in this process is the contribution of Clubcard, a loyalty program with over 12 million regular UK customers which is used to analyze their shopping patterns. Maybe it sound a bit abstract but let me shed some light with a real example. Tesco realized that  just before the summer holidays each year, sales of flowers, chocolates and wine were suddenly going up. After the initial surprise, and thanks to the club card data, Tesco found out that it was families with children who were doing the buying. They were buying end of year presents for their teachers! Conclusion: Tesco is able to target specific service offers to customers with specific profiles which, simultaneously, allow them to collaborate with suppliers to develop more of the products and services that customers want.

And here we go back to the very heart of the process. What do customer want? Given that they have limited budgets and/or limited  time, the services need to be delivered as simply and cheaply as possible and it is here where access to communications and information technologies is a key issue and there is a competitive advantage. Getting into more technical details, all this is possible thanks to Sysrepublic Real Time Integrator™ (RTI) along with Microsoft® BizTalk® Server and Microsoft SQL Server™ which has given Tesco head office staff and systems a single, near real-time view of supermarket sales data from all its stores, which was previously unavailable in such detail or in such a timely manner.

A final consideration just I didn’t make my point clear enough. In March 2011 a new CEO is taking over leadership of the company, if you feel curious about who is going to receive the baton, please click here.

Casa del Libro: unique development vs. Microsoft implementation

Hi again from Greenlighthouse!

At the Risk of  making this blog less and less green today we will focus on the ERP’s world… Again!  First of all, let me admit that a few days ago I was a layman on the subject. Not that I have become an expert in a few days but it’s time for the next step: let’s start taking decisions.

Legacy systems are the platforms operating previously to the introduction of a new ERP. In most of the cases, and this is not an exception, maintenance is costly and difficult (you need to be in touch with the developer of the system). Apart from this, usually there is no software integration and  you have to figure out how to assemble technology components which were not designed to work together. In this case, the design of the first architecture was complex and involved based on Sun machines, four different servers running in a Solaris (Unix) operating system and  various software:  Oracle 8.i, Vignette 5.6 and Excalibur v5.3.

The alternative solution meant using Microsoft technology on HP servers, powered by Windows NT, with SQL Server as the database engine, and Microsoft Commerce Server 2000. The maintenance cost expected was much lower, and the development cost was also considerably less. So… What to do?

First of all, the goals must be clear. In this case, CdL was trying to convert Internet into a tool which allows  communication with its customers all around the world. Casadellibro.com should live up to the expectations and history of the company. Otherwise, its reputation could be seriously damaged.  Secondly, we must set the scene  where the decision is going to be taken. In this case we have a new management team facing a huge downsizing and cost reduction scenario.

In my opinion, this is an strategy decision which should be considered according to  long term criteria and counting on  customer satisfaction. In this sense, I would try to undermine the initial costs in order to highlight the increasing the costs of the old platform vs. the medium and long-term  savings of the new platform.

Secondly, I would try to put in practice a ‘user test’ in order to know how the current system is working (purchasing times, obstacles, failures, etc.). This is a very useful tool which allows the company interaction with real customers and  draw important conclusions. If properly implemented it helps to reduce costs and increase the ROI.

In the third place, I would try to involve beforehand the people in charge of implementing the change. A big percentage of the success of the project depends on that and we should never undermine the implementation and training costs associated to this phase. A final argument could be based on the fact that ERPs are becoming the common language companies talk among them (best practices) and  customization is becoming more difficult.

Let me finish with a final remark. If the case had taken place today instead of almost ten years ago, I would also have taken into consideration Salesforce as an alternative. Apart from avoiding the acquisition phase, common to other ERP lifecycle scheme, other reasons to go for it are:

– Corporate data centers are not competitive anymore. They are expensive to maintain. The main concern is trust & confidentiality BUT there’s no way to be more secure than with a big provider.

– Virtualization: applications run independently of the place where they are. You can balance the activity of data centers depending on costs of electricity, labour or weather conditions (no need for AC) plus the IT manager is not responsible orf those costs anymore.

We could keep on going with this but…There’s more work to do!

C U!

Should companies adapt to ERP’s or the other way round?

“Enterprise Resource Planning” was  born from a previous tool: Manufacturing Resource Planning that followed Material Requirements Planning. ERP had their boom in the 1990’s when many companies used the Y2K problem to  replace their information systems.

An ERP is a tool to integrate the data and processes of an organization into one single system to ensure proper communication and efficiency. It is cross-functional and enterprise-wide (typically including manufacturing, warehousing, logistics, accounting, human resources, marketing and strategic management) and neither customers nor general public are involved in this process (it is a back office system).

After this brief introduction, for  me it is beyond any doubt that for any company of a certain size and a relatively complex organization an ERP is a must and the advantages regarding the implementation of an ERP far outweigh  the cons And that’s why most companies enjoy having one and SAP, Oracle Applications, The Sage Group and Microsoft Dynamics are making millions out of it.

However, here we have a first issue to be addressed: the basic hell(?) about ERP implementations is that most companies are not real enterprises, not really mature enough for it. As the software puts pressure on individuals to make change happen, company culture changes into a more mature one. Thus, ERP really can make a company grow up

The problem with ERP software is that takes years to write the code that runs it and then the ERP companies take that same code and sell it to all their customers. Customizing the tool means rewriting the code, that is, months of work (even years!) and more money. It’s never possible to have really everything in one software package!

So… Should the big guys abovementioned  change their way of doing business or should companies adapt to them?

So far companies have been the ones bearing the bulk of the cost but business changes and software must move with it . If any small change in an ERP can take weeks or months (rolled out, tested, integrated and recompiled) why should users of the systems suffer all this? Is it not enough that they do their jobs? And this is without including the bugs!

My conclusion would be that, in the short term, you must only take the steps if the pros clearly outweigh  the cons, otherwise your software will be more similar to a ball and a chain. However, in the long term, the big ERP providers should add more value by creating platforms and tools which adapt to customers´ needs and not the other way round. My question is… Can this be done ? Let’s go and ask Qrimp!

David and Goliath or… From ‘Dell Hell’ to ‘IdeaStorm’

Let’s start from the very beginning… What is’ Dell Hell’? Is it a movie? A new game for the Play Station? What do David and Goliath have to do with it? I must admit that this morning I had no idea about what is the subject of today’s post so… Let me start by introducing you Jeff Jarvis, the man who, as he himself puts it, “unwittingly unleashing a blog storm around Dell”.

And it is where both David and Goliath come in, the main difference being that in this case he didn’t need to use slingshot to hit him at the forehead but just the headline ‘Dell sucks’ in his blog in June 2005. What actually happened is that Jarvis, “frustrated with a lemony laptop and torturous service”, got to get another frustrated consumers together and they made Dell to kneel down. From that time on, it was like hell for Dell, the computer retailer.

The case demonstrated that bloggers have certain power to affect corporate reputation and companies’ brand image. So today’s post is about measuring bloggers’ influence vs. conventional media and the role for business or rephrasing it… What to do if you happen to be in Dell’s shoes at some stage?

According to Dick Hunter, former head of manufacturing and now Dell’s head of customer service, Dell’s DNA of cost-cutting “got in the way. In order to become very efficient, we became ineffective”. For Jarvis things were a bit easier: “after returning the Dell and buying a Mac, he blogged an open letter to Michael Dell suggesting his company read blogs, write blogs, ask customers for guidance, and “join the conversation your customers are having without you.”

And that’s exactly what they did! Even if they were not exactly ‘fast’, Dell realized that something had to be done and created the blog Direct2Dell in July 2006. However, Dell didn’t stop there and in February 2007, Michael Dell launched IdeaStorm.com, an online community forum the company uses to get ideas from its customers.  And, as Jarvis writes: “Dell is following their advice, selling Linux computers and reducing the promotional “bloatware” that clogs machines”.

It is at this point where the Biblical tale and our story differs because instead of a death giant we have a huge company which got to move from taking orders from its customers to listening and learning from them. Or, as Jarvis, put it: “Dell realized that engaging in the conversation wasn’t just a way to stop blogging customers like me from harming the brand. We, the customers, bring them great value besides our money: we share our knowledge about their products. We help fellow customers solve problems. We will sell their products. But this happens only if you have a decent product and service and only if you listen to us”.

Without a shadow of any doubt my recommendation is that not having a community manager and/or a blog-strategy is something that a company cannot afford, and not the other way round. Actually, every major company should be aware of what’s happening in the world of blogs and what they can get from it: relationship and customer collaboration. If you still think that this is not enough and you have any doubt about why to blog for business, just click in here.

And last but not the least, please spend some minutes with this amazing video: Michael Dell interviewed by Jeff Jarvis!

So… This is it!!!

C U soon!

Facebook ’12

So after our last posts we keep on running on numbers and today we’ll choose 2012. No, it’s not about the Olympic Games to be celebrated in London but rather about a more complex question: Where do you think Facebook will be in two years time? My answer is: ‘not a clue’. However, and leaving apart crazy futuristic hypotheses I will try to mention some issues that I consider important for Facebook’s evolution.

First of all… What’s Facebook? Is Facebook a fun startup, or a large successful company? Geeks or business people? Is it about connecting or sharing information? Is it just a social network or is it something bigger? In his first interview with TIME, July 17, 2007, Facebook CEO Mark Zuckerberg declared: “What we’re trying to do is just make it really efficient for people to communicate, get information and share information”. From my point of view Facebook seems more like a communications platform that doesn’t know where it is heading and the next couple of years will be crucial for Facebook to shape its identity and redefine its culture, focus, and value proposition.

The next question… Could Facebook’s strong points also be the cause of its problems? I am talking about transparency, too much for some people, and the challenge of trying to manage its confusing privacy settings. The other point I’d like to highlight is its size. It’s too big and crowded. So much so that its own strength, one-size-fits-all, could be also its downfall. More targeted social networking sites will eat into its popularity (Ning allows anyone to create their own free social networking site, based on their interests) so…  Does Facebook understand the value proposition it offers to each of these segments? What about the growing base of 35-49-year-olds who are now flocking to social networks?

Thirdly, does Facebook make money? I wasn’t sure about the answer and the thing is that Facebook revenues reached $500 million in 2009, up from $300 million in 2008, according to Fortune editor David Kirkpatrick. Facebook expects revenues to reach $800 million in 2010. As in the case of Google the main source of income is advertising. Just click  here in order to meet Facebook’s (soon-to-be) billionaires.

There are a lot of other issues that could be brought to the (discussion) table such as social networking as a way to market your business or Facebook’s constant innovation which becomes a real burden on brands who have a difficult time understanding which tools to use. But (a cutting) to cut a long story short, I think it’s too late for people and companies to abandon their social media plans. They make interaction with consumers easier and (that way) therefore facilitate building a better brand.

The key factor for success is that Facebook should clearly distinguish between pursuing business objectives and meeting user needs and should thus communicate the true intent of its actions. Facebook should really make much more of an effort to understand its own users. But even if they fail to do it and its high valuation shrinks, it will ultimately become just one more site but its survival is certain.

Numbers

After the last posts related to technology I wanted to go back to the ‘green world’ but… How to do it seamlessly? As in many other aspects of life, the answer is in the numbers! Today the game will consist of going from 70+20+10 to 20-20-20. Don’t worry… It’s not complicated but only one of the many ways of linking both worlds: technology and environment/renewables.

According to many, the first combination of numbers equals Google. The underlying explanation is given by Google’s CEO, Eric Schmidt, who is the main person responsible for the labour policy in the company. If you are still lost, let me introduce you to how Google wants its employees to distribute their working time according to Schmidt’s own words:

“Here’s how it works for management: We spend 70% of our time on core search and ads. We spend 20% on adjacent businesses, ones related to the core businesses in some interesting way. Examples of that would be Google News, Google Earth, and Google Local. And then 10% of our time should be on things that are truly new”.

And it seems that even Larry and Sergey are now operating under 70/20/10 too! Smart, isn’t it? And now that both Mr. Page and Mr. Brin are already in our post, let me tell you about what has been considered as an eccentric move by  these fierce advocates of the ‘green energy’. Google, a company that generates most of its revenues from online advertising, is spending tens of millions of dollars on renewables under the project ‘Renewable Energy Cheaper Than Coal’, and plans to spend much more  on R&D alone, beginning with the hiring of scientists and engineers who can lead the effort.

In order to make you understand the underlying philosophy of both founders, please share this short video with me:

And now let me introduce you to the European Union (EU) and its climate targets based on three areas: a 20% cut in emissions of greenhouse gases (GHG) by 2020, compared with 1990 levels; a 20% increase in the share of renewables in the energy mix; and a 20% cut in energy consumption. Do the numbers now make sense?

It seems that at least for once  the EU is leading the way after the  last-minute Copenhagen deal, which did not explain in detail how the target of limiting global warming to 2ºC this century could be achieved. Due to the lack of binding targets in that summit, EU governments want other major polluters worldwide to adopt targets similar to the EU’s, especially the US, the biggest polluter.

Even if the change in the US Administration has put green targets on the agenda in a way that the Bush administration never did and Obama has pledged a 17% cut in emissions from 2005 levels by 2020, the facts are that US emissions have risen by about 15% since 1990. Moreover, there are signs that the US Congress will not go as far as backing a 17% cut.

However, and going back to previous posts (see ‘drill, baby, drill’) Obama has already stopped further drilling in the Gulf of Mexico and has taken a step back from his ideas of exploring Alaska. Not only that but he is committed to pushing renewables and a change on the grid (from the  current technologies to a new so called ‘smart-grid’ that allows the integration of renewables).

So… Will the examples of Google and the EU be enough to foster renewables, a more responsible consumption and a cut in emissions of GHG in the US?

Time will tell…

C U soon!

Google’s priorities

So… What’s next? After our last post about Microsoft and its future, it’s Google’s turn. First of all, a bit of history.

Sergey Brin and Larry Page, two Stanford University doctorate students, came from academic families and  were set on technology careers. In 1997, after some brainstorming, they gave the nam Google to the search engine that they were developing, then called BackRub. The funny thing being that their first underwriter, Andy Bechtolsheim, wrote a check for $100,000 to an entity that doesn’t exist yet: a company called Google Inc.

According to David A. Vise and Mark Malseed , authors of the book ‘The Google Story’: “Brin and Page had no interest in building a standard company. Their offices resembled student dorm rooms more than corporate headquarters. But licensing their technology did not bring in the expected revenues and they struggled with the decision to sell advertising. They tried, but failed, to get companies to pay fees to search. Next, they wrestled with how ads might affect their core service: free Internet searches. After studying advertising services, they chose to sell highly targeted advertising, showing “sponsored links” (paid ads) on the right-hand side of the search response page.

They developed a new way to rank ads based on how much advertisers offered to pay and how often users clicked on the ads, breaking with the tradition of giving top-paying ads the best billing. The ads ranking highest on both metrics rose in presentation order and the others fell. Google charged advertisers only when someone clicked on an ad, giving advertisers an innovative way to measure their return on investment.

So… Enough with that… What are Larry Page and Sergey Brin thinking for the near  future? What are the priorities of the Mountain View based company?

In order to establish a list of priorities, let’s listen to the main actors of the company. Eric Schmidt, CEO of Google and a former member of the Board of Directors of Apple, said in an interview for CNBC: “Our number one priority is (end-user–end-user) happiness. Literally, are people happy with the results that they get using Google search? So it’s literally (search) (…) That’s our number-one priority, even more important, for example, than advertising”.

So here we have two of the main guidelines: gaining market share by means of a great product and advertising. All this is linked to a much shorter term goal: figuring out how to make money out of Youtube. In this sense, Schmidt added in the same interview: “Google believes that advertising itself has value. The ads literally are valuable to consumers. Not just to the advertisers, but the consumers”.

Taking a look to Google’s main acquisitions in the last years will confirm that they are on the right path. Out of the 70 companies acquired by Google between February, 2001 and May, 2010, the ones involving the largest amounts of money were a video sharing company (Youtube; October, 2006), an online advertising company (Double click; April, 2007, $3,100,000,000) and a mobile advertising company (AdMob; November 2009, $750,000,000). So it’s pretty logical that Google tried to make some money out of it.

So the statement repeated time and again in the computer industry seems to be true: the future of computing is mobile and that’s the reason why Google is creating mobile applications that will be interoperable and secure, another big issue for the near future.

Finally, and in order to get another clue about Google’s priority, let’s see what Stephanie Tilenius, former head of eBay’s Marketplaces business and now Google Vice President of Ecommerce, has to say about it. According to her “the company has adopted a “Mobile First” strategy, emphasizing the growth of Android, and Google’s presence in the app market. Other priorities for growth include Social, Personalization and Local” (6 May 2010).

According to Google, one-half of new Internet connections are on mobile devices, while one of every six minutes spent on the web is on social interactions. Small business is clearly a big part of Google’s ecommerce strategy.

Microsoft: present and future

Where do I see Microsoft now? This is the question of today’s post.

From my point view Microsoft is on top of the world. How many companies would like to be like Microsoft today? I’m sure there are a couple of them out there that would change places inmediately!

According to NetApplications, Microsoft’s share of the operating system market is dropping, while Apple computers and handhelds have topped 10% for the first time. Bad picture for Microsoft? Let’s take a closer look:

So Microsoft couldn’t be better. However, the only problem is that when you are on the top the next movement can only be… Downhill! And that’s also what I think is going to happen based on all kind of new developments based on open languages and systems vs. Microsoft secrecy.

Or at least, that was what I thought before watching the following video (it was released on March 1st, 2009 at the Wharton Business Technology Conference by Microsoft Office Labs called “2019″.). Please, spend some minutes watching it… You are not going to believe the next steps!!!

Wordless!!!

On our way!

A new beacon of light for all the supporters of a greener world appeared a week ago. Let me use this humble lighthouse to spread the good news related to… Telephone boxes! What the hell have telephone boxes to do with renewable energies or a cleaner environment?

C’mon! Give it a try!

Nothing?

OK.

Then let me introduce you to one of the brightest and easiest solutions to break the vicious circle of ‘no electric car because of no electric recharge network and vice versa’.

Telephone boxes, something of the past since the widespread emergence of cell phones all over the world (some countries have more cell phones than traditional lines!), will not disappear but will be converted in recharge locations (the equivalent to the twenty century gas stations) for electric cars. A plug and a special card to make the payment are all the elements needed for this big leap forward.

I will explain  more details about it but, firstly, let be proud of my country and my town. Madrid will be the place where this new initiative is to take place. Actually, if you want to see how it works in real life one of these new ‘electric stations’ is already working in Las Tablas, a new neighborhood in the North of Madrid.

Leading the project  are two of the biggest companies in Spain: Endesa and Telefónica, who have signed a contract in order to make this possible. The time frame for the implementation of this initiative is 2800 recharge points before the end of the year in the City of Madrid which will become “the town with a biggest recharge network in the world in 2011”, according to Borja Prado, president of the utility company.

The investment needed to make this dream come true is not that high: €3,000-6,000/phone-box which will be divided between both companies. In Spain there are 15,000 phone boxes available for adaptation to this new use out of a total of 60,000, according to Guillermo Ansaldo, president of the telecommunications company.

The work will take place according to  the requests of the City Councils and the owners of an electric car, who will only have to plug in their vehicle to the ‘phone-boxes’ and insert the payment card. Doing that they will specify  how long they  want  their vehicles to be charged for (one hour fractions and limit of eight hours) which can be interrupted if the user needs  to do so. Just in case someone is wondering, the answer is no. It’s not necessary to remain with your car during the charging process because a gadget guarantees the process.

Alberto Ruiz-Gallardón, Mayor of Madrid (nothing to do with Foursquare. It’s not the name of a bar!), has highlighted that together with the recharge points being installed by the City Council in underground car parks, “Madrid will have a total network of 500 recharge locations”. Apart from this, he will make a suggestion to the ’Spanish Federation of Provinces and Cities’ in order to tax  vehicles, not based on their power but on their levels of pollution. This way, electric vehicles will get the maximum rebate on the ‘traffic tax’ (currently up to 75%) and this could be increased to the point of not having to pay any tax at all.

Finally, let me finish with the words of the Mayor of Madrid: “in a few months electric vehicles will be used on a daily basis and in a few years the City Councils in the European Union will forbid  access to city centres of fossil fuel vehicles”. Definitely, we are on our way for a better future.

Not bad for a Monday morning, is it?

Foursquare: comments on its business model

What makes a business model successful? The answer depends on four main groups: revenue sources, key expenses, investment size and critical success factor. Examples of this last element in, let’s say, blogging would be a good news research and comment moderation. So let’s try not to forget this point when going through our today’s post: What’s the business model behind Foursquare and its 300.000 users?

But before that, let’s settle our background first. Companies such as Google are working fast today to bring location services to the forefront of many of its products (such as maps and search). Why? What’s so important as to invest their resources in such a way? Well.. The answer is actually in the hands of startups such as Foursquare, which is based on a new software application for cell phones (iPhone, Android, Blackberry and Windows Mobile) which uses location as its critical success factor.

Foursquare allows the user to share with his contacts in the social networks his tips and suggestions on certain locations (restaurants, museums, pubs, theaters, etc) which are mapped in their phones through GPS location. The process also allows you to know where your friends are hanging around and give you access to special offers in some of those places. On top of that, “mayorships” (which you get when you check into a venue the most times compared to others in the city) give you the right to special deals, like free drinks or discounts.

Created by Dennis Crowley and Naveen Salvaduri in 2009, the company is located in NYC (no messing with California this time!) and it seems their idea is working very well because plenty of others (including Google) are working on similar ideas, and not only in the US. An example of this is Plyce (http://www.plyce.com/), a small Parisian startup founded by Martin Destagnol which has recently raised $400.000 from two French funds, Jaina Capital and Kima Ventures, with the goal of becoming the leading European mobile social network within 3 years.

So what’s behind it? How these people make their revenue? Before digging into it, I admit I didn’t see the business idea behind it when I discovered it (one week ago!), but now that I am beginning to see the light let me give you a few clues (that’s what lighthouse does anyway, doesn’t it?):

• Customer loyalty cards in your wallet? Not anymore!
• Online social networks make their way into the real world. What a better advice about a certain venue than a friend’s one?
• Location based advertising as a way of generating sales revenue for the advertisers.

So… Where are the revenue generation opportunities? Here you have some hints:

ü  Companies could launched loyalty programs linked to Foursquare, so customers earn points for making purchases and for checking in toward free drink, discount or whatever.

ü  For bigger brands, businesses could track who’s coming into their stores. Deals could be sold against web ads, clicks such as search ads, or a completely new model: cost per check-in.

ü  Foursquare could charge businesses for the dashboard if gets big enough to do it. They could also charge for advertising and promotions later (local advertising is a $10 billion market and even Google has failed at grabbing it).

And now.. Time to make your own decision: is Foursquare just a game and there’s no business model or could the owners of the business in the dashboard get a ‘mayor’ a free coffee and run ads on Foursquare? Will this revenue model based on location marketing services survive? Only time will tell but much of it will depend on its ability to make the social support grow.

C U next week!