October 2000

BY ERIK LOUNSBURY, C@LL CENTER CRM SOLUTIONS

[ Go Right To Part II ]

Castle Combe is now empty save for tourists, no bustle around the market cross. Walk the picturesque streets of Castle Combe (admittedly it is beautiful, the honey-colored limestone buildings typical of Cotswold villages(1) were used as a backdrop for the 1966 film version of "Dr. Dolittle"), and it is hard to realize that it was once a thriving market town (many of the houses still lining its three streets are former weavers' cottages where the red-and-white woolen cloth named after the town was woven) and home to a renowned sheep fair. Near the market cross in the center of the marketplace a group of houses "once formed a sort of open market-house, or shambles (2), the upper story being raised on stout timber posts, so as to afford shelter from the weather for the frequenters of the market. This upper story of the building was formerly called the Church-house, and was employed as a sort of guild-hall, or common meeting-place, to which the principal inhabitants resorted to consult for objects of general interest, such as the support of the poor, and where they occasionally feasted together, or distributed alms to the indigent, before the institution of the poor-laws."(3) So, community was built and served around the market. All over England, from the Tudor period onward, court houses and town halls grew up over the arcaded markets, this close association of the market as a meeting place and a place of civil functions becoming a permanent fixture through architecture.

But by the nineteenth century, Castle Combe's thriving market had fallen on hard times, most of the wool trade having moved to other towns more convenient to the newer modes of transportation that were springing up all over England, i.e., canals and, later, railroads. The houses that formed the shambles were torn down in the 1840s. As G. Poulett Scrope was to lament, "Of late, the superior advantages of the vale of Avon and the Gloucestershire clothing districts have carried off the trade, and for some years past not a shuttle had been thrown in the parish."(4) Perhaps significant, the market cross, the place where buyer and seller came together to finalize a deal with a handshake, where the abstract became humanized, still remains. It was here that the beauty of the village market was realized: neighbor talking with, building relationships with, and trusting, neighbor.

All commerce was, of course, local at first. Trade grew up with surpluses brought on by agriculture. People developed their local resources and slowly branched out by foot, beast of burden or boat. Surely, there was international commerce, from Phoenician trading ships plying the Mediterranean to commerce moving in a caravansary at the pace of camels' stately shuffling on the sands of a Sahara night. But the silks from China, the gold from the New World, were trade goods for the few, for the rich. It had to be, for all the dangers that could befall a cargo, ships sinking, pirates, storms, wars, greedy customs officials and local guides (it's no wonder Lloyds of London was formed), drove prices up. (The iceman discovered high in the Alps, tracking slowly, freezing alone, was walking a trade route.) For the common man, the overwhelming majority of the population, most goods to be found in the local markets were local, and so remained throughout most of man's time here on Earth, tied to the land, tethered to a region.

Of course, growing up in America, we had no ancient village markets. When I was a young boy (at a time in the South when women still wore hats and gloves to church), we would often ride the few blocks over to my grandparents to spend the day. We lived in an area of town where most of the houses were built in the teens and twenties, a mile or two from downtown, made feasible then because of the new availability of cars and buses. Many times my grandmother would escort my brothers and me to the other side of Elizabeth Avenue (as she used to do for my mother) so we could walk the block down to Rogers Grocery on the corner of Elizabeth and Irving, passing under high-summer greens of maples and watermelon pinks of crepe myrtles, and go into the small grocery store on the first floor of their house, where Mrs. Rogers would greet us with a cheery, "How's Mary's boys doing today? My, you're growing like weeds. I'll bet your grandma's making you cookies and needs butter again." After inquiring about our health and the main purpose of our mission -- the short list grasped tightly in my little hand, she would comment on how hot it was today and we would run over to cool off, leaning over the open, coffin-size red Coca-Cola cooler and swirling around the glass bottles among the ice and water, looking over the colorful bottle caps: a few NeHies, Cheerwines, Brownies, Orange Crushes and RCs could be found standing among Cokes, Pepsies and Dr. Peppers. She would bag up whatever grandma had wanted and never seemed to fail to ask if we needed candy bars or to tell my brother she had some new Topps chewing gum, which meant a new crop of baseball cards inside.

Like all towns, Winston-Salem was changed by time, too. When Eisenhower pushed through the Interstate Highway plan and I-40 was built through town, the town started spreading farther out. Thruway Shopping Center was built next to the interstate and then Parkway Plaza and other shopping centers started springing up in spreading subdivisions. In 1975 came the great mall and businesses downtown started closing or moving out. They even imploded the Robert E. Lee Hotel and tore down the Winston Theater. And of course, Rogers Grocery closed and we moved farther out from the center of town, out Silas Creek Parkway to a subdivision newly scraped out of the pine woods.

I recently spoke with (actually, that is not the correct verb: in keeping with the theme of this article, I recently exchanged a series of e-mail with) Al Baker, director, Customer Interaction and CRM Solutions, Siemens Information and Communication Networks, Inc.; Eli Borodow, CEO, Telephony@Work, Inc.; Tom Hennings, president and CEO, OrderFusion, Inc.; Beatriz Infante, president and CEO, Aspect Communications; and Anthony Lye, president and CEO, ePeople, Inc. Following are their insights into how the Internet is changing business and how businesses will have to change to survive, or risk becoming Internet Castle Combs: pretty, but no longer thriving marketplaces.

EL: The Industrial Revolution saw great changes in the way business was transacted and the way our lives were led. People moved out of small communities, where they knew and depended upon their neighbors, and headed to cities and factories. After World War II, the Eisenhower highway program and booming U.S. economy made possible the creation of and mass exodus to the suburbs. This led to the rise of malls (usurping the department stores and businesses "downtown") and their mind-numbing anonymity and blandness (basically, all of them look the same and have the same stores and suffer from an incredible lack of architectural beauty). The whole exodus to the cities and subsequent rise of suburbs led to a loss of the sense of community that once provided comfort and a sense of local identity. The Internet provides a means to create new communities and also provide vendors with detailed information about their customers. Do you see this as being akin to the old village market, where the merchants knew their customers' wants and needs because they were their neighbors and had known them for years?

Al Baker: Yes and no. The Internet and its outcropping of relationship management tools allow merchants to develop lasting bonds that grow over time, simulating a village market experience for both individual customers and vendors. Unfortunately, the Internet provides a poor substitute for the collective sense of community arising from customers and merchants who truly are neighbors -- who interact with one another beyond the one-to-one business transaction.

Tom Hennings: Geographic proximity gave the old village market two business advantages: knowledge of the customer and built-in loyalty. The Internet has helped suppliers increase their knowledge of the customer, but does nothing to ensure loyalty. Suppliers can now increase their knowledge of the customer by targeting specific offers to them and evaluating the response along with the profitability of the offer. And, using the Internet, savvy suppliers can apply classic direct marketing techniques (targeted offers, upsell/cross-sell, special pricing, bundling) to customers and prospects they have never met. But suppliers are hard-pressed to prevent the customer from shopping elsewhere. Loyalty, which was once gained by being the only store in town, now must be gained by providing a clear value proposition and recognized brand. Loyalty must be reinforced through strategic use of human selling channels and corporate branding. In the Internet economy, loyalty will be gained by those suppliers who are easiest to do business with.

Anthony Lye: While communities within the Internet do enable merchants to know more about their customers' needs, the old village market is probably not the right analogy. Unlike the general intimate knowledge created by years of living and working in close proximity, Internet markets facilitate knowledge and experience regarding customer needs in a more targeted way. In a way, it's less a personal relationship, and more of a very effective business relationship.

Ultimately, it's a merger between the best efficiencies of mall-type markets and the personalization and sharing of common interests found in close communities. The merchants benefit by being able to create a more personal and directed experience for a much larger customer base, while the individuals benefit by being able to have close interactions with many more communities, each of which meets some specific set of needs or interests of the individual. Thus, your grocer can do a better job of supplying your specific grocery needs, but doesn't have to be the same person as the one with whom you share your personal interests. The Internet brings back together for the individual all those previously separated, specialized communities. No longer is there a need to trade off more services versus close-knit connections; with the Internet, you can have both.

Eli Borodow: I think that the analogy to the old village market is an interesting one because the answer to the question of whether we are moving closer or further away from the old village market depends on whether your primary value is knowledge about each customer's unique needs and wants or the personal relationships with 'neighbors you have known for years.'

Up until very recently, one could safely assume that a merchant with a small customer base that provided personalized service to their customers would have a better understanding of those customers' needs and wants than the mega-corporation burdened with multiple, impersonal points of contact for the various services they provide. This is no longer necessarily the case.

Web-enabled CRM, call center and e-contact technology are bridging the 'personalized service' gap that has historically differentiated large and small enterprises -- and in this sense is empowering larger enterprises with the ability to create the illusion of community while improving customer service and satisfaction. At the same time, the Internet also provides a sense of virtual community for people with common interests -- who might well be groups of customers who may in fact have a sense of community with other customers of similar products.

In the best contact centers, customer service agents have access to a unified 'interaction history' for each customer: a comprehensive record of their company's entire relationship with each customer in chronological order across all media. This interaction history can document the entire history of the company's relationship with the customer in one place and provide records of all communications with the customer in one place, regardless of whether such communications originated on the telephone, fax, voice mail, e-mail, chat, voice-over-Web or a Web callback. This comprehensive record can give an agent all the information necessary to provide each customer with personalized, differentiated service: perhaps better service than the smaller merchant who relies on memory to service the customer's needs.

Contact center and CRM technology therefore deliver an improved sense of community with the customer and a richer understanding of the customer's unique requirements and preferences, while at the same time eliminating the need for actual personal relationships between the service provider and their constituents.

I think the technology empowers our evolution away from the old village market while at the same time introducing, and perhaps improving upon, the service-related benefits the old village market provided. So whether this represents a step forward or a step backward ultimately comes down to whether you value the benefits or the relationships themselves.

While it is probably disturbing for some academics that this technology further decreases our reliance on personal relationships for differentiated service and likely represents the next step in our commercial evolution in terms of the commoditization of the merchant/customer relationship, what can't be disputed is the fact that it provides the customer with a better level of service. If, in fact, that is the whole point, then the customer is the ultimate winner, because they can now benefit from the cost efficiencies associated with larger merchant enterprises while at the same time retaining the personal level of care that used to be the domain of the smaller merchant.

Beatriz Infante: Internet technology has brought us full circle back to the days of the "village market" personalization of transactions. The Internet provides the ability for companies to move from mass production and mass marketing with little differentiation to personalized 1x1 marketing and sales, much like the old merchants of the past. In addition, this allows companies to build a level of trust in their business and brand that will result in better customer retention and repeat business -- a 5 percent increase in customer retention can result in 25 percent to 95 percent increase in profits (HBR July-August 2000). Each merchant can now form their own community and provide targeted and personalized delivery depending on the customers' wants and needs.

EL: How do you think the Internet is changing not only the way business is conducted, but also the social fabric?

Beatriz Infante: The loss of individuality in the sea of mass marketing and production can now be replaced by personalization and "communities" of like individuals being able to rally around products and services -- virtual communities of end users. For companies, these communities become a great source of marketing and product information.

The Internet changed the social fabric of how people live, interact and communicate -- it changed the standards of social communication by developing new etiquette and also facilitated different kinds of social relationships not possible through other means of communication. For example, instead of traveling thousands of miles, you can now form individual communities to interact with families and friends. In the Internet economy, 'word of mouth' has become 'word of mouse.'

For businesses, the Internet changed everything: It is not just taking existing operations and migrating them to the Internet. Business processes have to be reengineered to meet new customer demands by becoming more customer-centric, providing end-to-end processing of information that exposes and integrates the whole value chain.

Eli Borodow: There are obviously sociological implications associated with eliminating actual personal relationships in favor of virtual ones. The counter-argument is that increases in efficiency result in increased revenue and time-savings that can free up customers to spend more time on the personal relationships that likely mean more to them than the ones they might have developed with individual merchants.

Tom Hennings: The Internet, e-mail and chat are bringing together people who have common interests. Years ago, it may have been difficult to find someone you knew who had an interest in restoring old motorcycles, but now you can find a group of people throughout the world to help you restore your old Triumph bike. It is the emergence of these communities of interest both in the business-to-business and business-to-consumer markets that successful Internet initiatives must target. In the past, marketers were challenged with segmenting their total available market. Now, customers are segmenting themselves by which communities they join. The challenge is to determine which of these communities are potential markets and what specific value proposition can be offered.

Al Baker: There is tremendous irony in the Internet. While it brings people together from the opposite ends of the earth -- people who would never otherwise benefit from contact -- it also implicitly condones communication once removed by fostering distance among those who have the luxury to interact face-to-face, but because of the convenience of the Web, choose not to. For example, how many times have we invited colleagues to lunch via an e-mail, instead of walking 10 feet to invite them in person and in the process, miss that irreplaceable 20-second exchange about someone's honor-roll student?

EL: How are companies having to change their business models to adjust to the technology and increasing use of the Internet? Is it a business driver or simply an expense that has to be incurred to keep up with the competition?

Anthony Lye: Many business decisions and processes evolved to manage the voluminous flow of information. Even such simple concepts as the long lines at the Motor Vehicle Department are a result of attempts to make the huge flow of transactions manageable. One of the things the Internet does really well is provide much better tools for managing transactions and information.

Companies today need to evaluate all of their business processes and policies in the light of the Internet and decide which ones still make sense and which ones should be replaced or eliminated. Information that was previously too costly to provide can now be made available. One common example is order processing and shipping status. Many times, it wasn't cost effective to provide human assistance to answer basic status questions to a vendor's general customer population. Now, you're falling behind if you don't have automated order tracking available via the Web.

Companies that view these changes as pure costs to be expended to meet the competitive standard are missing the bigger picture and ultimately won't be the most successful. Those that embrace Internet-based transactions and information dissemination will find powerful business efficiencies in addition to greater customer satisfaction and loyalty. Empowering the customer is one of the most significant ways a merchant can provide value, especially in an environment where the switching cost to the consumer is close to zero.

Tom Hennings: The value a company actually offers, apart from its product, must be recognizable. As Internet usage increases, customers will demand the ability to understand what value-add a company provides beyond product. Is it response time to customer inquiries? Is it the formation of a community of interest around the product? Is it the safety of brand, effectively viewed as product insurance? Is it the ability to tailor product? Is it the ability to provide multiple levels of priced services? Suppliers will be expected to clearly define differentiation.

Since the Internet has been around for a relatively short period of time, businesses cannot create an electronic channel strategy based upon past successes of other companies. These are still the pioneering days, and case studies are few. Yet, almost all businesses feel the pressure to do something on the Internet. Many suppliers are worried more about losing market share than gaining it. And, as of the last several months, online buying communities and large company implementations of e-procurement systems are forcing suppliers to get online. Nearly every major supplier is now contacted several times each week by major buyers running e-procurement systems. The questions are always the same: In how many days can we have our specific pricing and configurations of your catalog online? In how many days can we start to do online quotations? In how many days can we check order status online? For many suppliers, the pressure from e-procurement systems and e-marketplaces is becoming intense.

Eli Borodow: Companies have to adjust to the reality that a "call" is simply a request for service and that today it can come in many forms: via phone, fax, voice mail, e-mail, voice-over-Web, chat sessions and Web callback requests -- and companies need to provide the same level of excellent service over all of these media. Part of that equation is putting cross-media interaction histories for each customer at the fingertips of every agent. This is what creates the illusion of community and the reality of personalized, differentiated service. Failure to incorporate these innovations will inevitably result in increasing numbers of customers choosing to exercise their right to click over to a competitor that does understand this new service paradigm.

The Internet is both a business driver and an expense. It starts out as a business driver to increase transactional efficiency and customer satisfaction -- but in the end, competitive pressures will force everyone to adopt these efficiencies or lose customers to more efficient competitors offering more personalized and effective service.

Al Baker: In the bricks-and-mortar era, barriers to market entry were high -- location, logistics and capital slowed potential entry to market for competitors. In the e-business environment, where competitors are only one click away, businesses now vie for position in the marketplace based solely on loyal and profitable relationships with customers. Business models must accommodate this shift toward the value of customers.

Beatriz Infante: It's a matter of survival for companies in the 21st century: leveraging every relationship to drive sustained economic value. This means that companies must build, sustain and improve e-business relationships, both existing and potential, through digital media. They must also expand market reach and penetration by buying and selling over digital media. Participating in the Internet economy means maximizing the quantity and quality of all your economic relationships -- with your partners, suppliers, customers and employees.

In Part II of this article, the panel of experts will discuss how companies will have to change to keep up with the creation of new levels of personalization in customer/business interactions brought about by Internet technology and which has led to new expectations of service from customers. They will also speculate on what new products and services they see developing on the horizon.

(1) The apogee of the use of the local honey-colored limestone as a building material is of course to be found in nearby Bath, a city of Georgian splendor designed by John Wood, father and son.

(2) Typical of a medieval market town, a shambles was a close collection of houses with stalls on the street from which meat was sold. A street or lane named "Shambles" can still be found near the old marketplaces in many English towns.

(3) History of the Manor and Ancient Barony of Castle Combe in the County of Wilts, G. Poulett Scrope Esq. MP, 1852. Excerpts can be found at: http://www.ccombe.fsnet.co.uk/scrope.htm

(4) Ibid.

For further information on towns in medieval England, a good source is Stephen Alsford's Web page. 

Interestingly enough for a former market town, the entire village of Castle Combe was on the market twice: it was auctioned in 1947, divided into 42 lots; the first time, 80 years previous, it was sold as one lot.

[ Go Right To Part II ]
[ Return To The October 2000 Table Of Contents ]

BY ERIK LOUNSBURY, C@LL CENTER CRM SOLUTIONS

In May of this year, I had the opportunity to attend the Andersen Consulting Global Communications Forum in Berlin. One of the speakers, Tom Pike, global managing partner-Strategy at Andersen Consulting, spoke on the topic "Communications Provider of the Future: Managing for Value Creation." He spoke eloquently on what to expect in emerging opportunities for creating value and three value shifts for communications providers: to the edge of the network, to digital content services and to software for wireless phones. His talk got me to wondering what's in store not only from communications providers, but also what he foresees for directory networks and location-sensitive devices.

EL: Mr. Pike, you mentioned in your address in Berlin that the new communications provider not only provides carrier service, but also manages data, and that communications providers have to focus on value creation. What types of services do you see communications providers developing in the next year?

TP: The cycles of change in communications are increasing rapidly, so we can expect significant activity over the next 12 months. Access players will be busy rolling out or extending their broadband (BB) services and building in parallel the IT infrastructure to service BB content and services.

Network players will continue to build and migrate over to IP networks and expand bandwidth to the central office to cope with BB traffic.

European mobile operators will roll out and commercialize 2.5 G GPRS service and in parallel invest in mobile portals; U.S. operators will be doing the same with either GPRS or CDMA.

We will see much activity across the board as providers invest, acquire and jointly develop products and services higher up the digital value chain in four broad categories and with variable levels of success. For example:

• Network-centric services: VoIP/ FoIP, streaming, traffic management, unified messaging;
• Server-centric services: caching, content management, ASP, disaster recovery and backup, outsourced application management;
• Application-centric: e-commerce including packaged and custom applications development, implementation and services (including trading hubs, etc.), systems integration, design and user interface development and business/marketing consultancy;
• Media-centric: original content development and aggregation (e.g., portals).

EL: The Industrial Revolution changed lives and communities by bringing an end to agrarian communities by forcing people to abandon their farms in droves and head to the cities to find work. In that same presentation, you also mentioned that the development of the transportation infrastructure led to the transition from department stores, which were established in the cities (where customers had to come into the city), to the development of communities with their own stores outside the cities.

How is the development of the Internet and global e-commerce analogous to this physical transformation that is to be seen across America and, indeed, all industrialized nations? Is it paralleling the sociological and geographical changes we had in the 20th century that were brought about by the advent of the automobile and roads-building programs, and the "suburbanization" of America?

TP: In part, yes, although the drivers of accessibility are now less physical (as in proximity or ability to travel to). In the near term, our congestion and lack of technology diversity are driving data and services to the edge of the network. This will be particularly true as we get to media-rich content. Higher, consistent bandwidth networks may allow greater optimization over the long term as we get a high percentage of optical infrastructure into the network.

In addition, closeness is now defined by the "share of mind" any particular e-commerce site or service has with the individual -- it's more about marketing. The barriers also are new and defined by the ergonomic nature of the "shop" and its products. It's a well-publicized problem, but it's easy to buy a highly tangible product like a CD or book on the Internet; much less so if many of the values of the product are highly intangible online, e.g., clothes -- the color in daylight rather than on a VDU, the fit, the texture. These create barriers to easy accessibility and must be overcome.

EL: Will the Internet create isolationism or better communication?

TP: The Internet is only about communication. The ability to communicate in many different integrated and complementary ways with (in a few years it has to be said) no physical limits and to anyone without incremental cost due to distance.

The online community is not in itself the problem. The problem is the relative isolation of the "rich" Internet community with the vast majority of the "poor," globally. This is the biggest issue the Internet will engender -- how do we ensure that the gap between them does not extend and become a real issue permanently? As the technology evolves, to allow us to communicate better, we must ensure that broader access becomes a reality and that this ability to communicate is shared by all. At Andersen Consulting, we are about to undertake an effort to look more closely at this "Digital Divide."

EL: What role do CDSPs (content delivery service providers) play in the new economy?

TP: To extend your automotive analogy, the CDSP guys are the mechanics and engineers who ensure that what we do collectively over these new communication networks and services gets more efficient, can carry more, and keeps evolving in the same way as cars today are faster, cleaner, more efficient than they were 10 years ago.

EL: With the increasing use of location-sensitive devices leading to new services, do you believe privacy issues may stifle new services? Will they be exploited by advertisers?

TP: Over time, a balance is always achieved between technologies and the culture they serve. Technology can deliver an almost infinite variety of services. What is limiting is society and the speed with which they can change and how well the technology fits society's changing needs. Economics is the function of consumer power. If they don't like it, they won't buy it and the technology will not become a product. These effects take time, though, and we are in a permanent state of dynamic equilibrium. Yes, privacy will be a problem and yes, other people will develop tools to control it if the consumer demand is there. Sometimes the companies responsible for these two things are the same ones. Take for example NomadIQ, mentioned recently at Redherring.com. This company is creating mobile applications and service to exploit location specificity and also to control it.

EL: How will directory-enabled networks affect our lives?

TP: Rather than concentrate on the method (e.g., directory-enabled networks) this question can be answered by using a little future visioning:

An Andersen Consultant flies into a new city and switches on his mobile hand device: automatically the device searches for the nearest available network and hooks him into the Andersen Consulting Local Area Network in that city. His secretary is alerted, as well as the local help menu, and a taxi is ordered and waiting for him as he listens to and sends his e-mail or maybe reviews documents on his personal database.

The Consultant is given the address of the hotel where he has been booked and as he arrives he is automatically checked in and given a room to his specification (no smoking and quiet) -- all to which he is alerted by his device.

All this is enabled by two things:

1. A personal configured set of (security) keys and information (no smoking room),

2. That is accessible and read across all networks and applications.

It's the future, to be sure. The technology is undoubtedly available to do this now. What will be different is its ubiquity.

EL: How will companies have to change to cope with personalization?

TP: The evolution from mass marketing to one-to-one marketing has been predicted for almost 10 years and millions if not billions of dollars have been invested into it. The problem for many companies (aside from the amount of data produced and the complexity in managing it properly) is that they just aren't true service-driven, customer-centric organizations. Further- more, consumers don't want "relationships" with every company they buy something from. For a good analogy take friendships. We all interact with a vast number of people every day: some are one-off contacts, some acquaintances or colleagues and some true friends.

As true one-to-one interaction becomes possible, consumers will seek simplicity -- this is the driver of one of the major trends for communications providers today, the increasing bifurcation of the market between service-centric companies and those supplying products and services. Thus, a company or piece of software will aggregate across a wide variety of products and services and present me a single integrated offering, e.g., AOL/Yahoo! being the best known today. Companies must determine their true ability to create value, and what the best strategy might be to achieve this. This is the question all companies, not just communications providers, are grappling with today.

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