Tesco and the competitive advantage of using IT

Tesco looks to me a very smart company. Even before technology was available, they have showed a great capacity of thinking out of the box. This has allowed them to be the first in adopting new unexplored solutions (eg the Green Shield stamps trading scheme, the ancestor of loyalty programs, Tesco metro and Tesco superstores concept, Check out operation) which have allowed them to be closer to their customers, hence, to create a strong brand image. I have no hesitation in considering Tesco;s main characteristic that of being a first mover inside and outside their traditional markets. The advent of the technology has simply magnified their ability of listening to the voice of customer and identifying new business opportunities. One clear example is the Tesco Clubcard, the UK's first supermarket loyalty program, launched in 1995. Thanks to it the customers may collect points and redeem prizes but, most important, Tesco has now the opportunity to access to key data identifying purchasing patterns. This has allowed, in turn, to design ad hoc promotions, discounts and offers strengthening once more the relationship with their customers. From this moment on Tesco has kept on taking advantages of the power of new technologies: first the on-line shop Tesco.com, then the launch of a Tesco debit card in association with the Royal bank of Scotland, partnerships with strategic actors such as travel agencies which are included in the loyalty program, development of the online retail website to support blind and deaf people, development of a recruiting website with a highly specialised actor.

Tesco peculiarity is also its deep engagement within the community, be this customers, employees or society at large as proven by initiatives such as participation in charity programs, staff involment in the company future, support to their suppliers...

Ovreall Tesco knows that by involving and engaging people they will be able to stay ahead of changes, somehow anticipating them and being ready to continuously evolve. This is their competitive advantage and, at the same time, the secret of their success. The adoption and exploitation of the potential of the new technologies is consistent with this mindset and neverending search for new and unexplored opportunities.

Should I stay or should I go - Casa del Libro case, an analysis

Here the situation faced by the management team of Casa del Libro in 2002.

They run some numbers which lead to the conclusion that they will grow exponentially if they move to the on-line channel, they implement a super platform with the bestinbreed solutions, they partner with a key ISP, AOL, and what happens? 6 months after the launch a combination of internal (severe flaw in the design phase of the ambitious platform which thus cannot perform as expected) and external factors (the explosion of the Internet bubble, 9/11 and AOL poor performance) create the worst economic scenario ever!

Forced to undergo a severe company restructuring, the dilemma is: should they keep and maybe redesign the non performant and expensive super platform (combination of Sun Machines, 4 servers with 2 CPUs each, Unix OS, Oracle database, Vignette for content and e-commerce, search engine Excalibur, plus firewall) or switch to a new, simple and less expensive one (MSFT on HP servers, Windows NT, SQL Server as database engine, MSFT Commerce Server 2000 as electronic commerce application)?

The answer seems implicit in the question, however it is not straightforwad.

So, as a famous song goes, Should I stay or should I go?

1. Should I stay?

STRENGHTS --> All solutions used in the platform are the best in breed and are characterised by their flexibility; UNIX OS allows higher flexibility in comparison to Windows and it is cheaper (no license to be paid, maintenance cost almost zero because of the open source nature); Oracle allows interoperability in comparison to SQL Server; Vignette provides top quality in enterprise content management.
WEAKNESSES --> Too many different solutions lead to high maintenance cost; integration and communication among them is a continuous challenge; huge redundancy; complexity; servers are very big and expensive.
OPPORTUNITIES --> such a platform may successfully support a company in a fast growing market; customers data can be easily used to identify trends, propose ad hoc services and promotions, such a platform can offer a unique shopping experience.
THREATS --> the integration of the various solutions is a daily challenge, chances of failure, it requires a lot of people specialised in each of them, if the market size is below a certain level breakeven might not be easily achieved.

2. Should I go?

STRENGHTS--> MSFT offers one package containing all the different solutions the company needs (database, server, e-content management, search engine); lower maintenance cost; easy integration among solutions; quick and ad hoc customer service.
WEAKNESSES--> Microsoft OS and database are not as flexible as Unix and Oracle; security issues as MSFT is more widespread;
OPPORTUNITIES --> given the difficult market conditions, a simpler and better integrated solution might be the best solution in the short period.
THREATS--> should the market start to grow again, this platform maybe over-simplified and too rigid to properly support the company changed needs (longer period approach) and would lead to a need for updates and new batches, hence new costs and enhanced complexity.

RECOMMENDATIONS

Taking into account what highlighted above, I would recommend keeping the current platform and redesigning it for the following reasons:

1.COST Sunk costs cannot be recovered. The company would incur into new expenses should it go for a new platform and would not recover the ones arising from the first project. The amount of money used to purchase a new system can be utilised to redesign the existing platform making it leaner and smaller. Furthermore, given the financially critical moment the company may not afford to undergo a totally new IS project. The new supplier and related consultants would fly in claiming for a need for redefining the business case, undergoing new RFI and RFQ, basically they would recommend to start from scratch. This is expensive and time consuming. Furthermore, should the business scenario improve, the MSFT platform may require too some redesigning and updating, leading to further costs.

2.QUALITY OF THE PLATFORM Because of the unique combination of solutions, the current platform is much more powerful , flexible and really tailor made. This is without any doubt a competitive advantage in the long term. Despite the need for redesigning it so as to overcome the integration issues and cope with the current poor economic moment, switching to a new platform is not the most appropriate move. This is rather a panic reaction mode and short sighted approach which could lead to the need for updating/changing again platform in the future which would imply further pain and costs.

Confessions of an SAP Super User

Maybe not anyone knows (and why should they? I wonder) that I am an SAP super user. Are you impressed, aren't you? I mean, it does not happen every day to meet somebody who can actually make wonders out of this amazing German ERP. You're still not impressed? Come on guys! My company had to pick among a few people when deciding whom was the lucky winner of this kind of super powers and they chose ME. Ok, I see, you're not impressed at all, maybe because you don't know what an ERP is. Or maybe because you know it. Or maybe because you thought I knew nothing of new technologies and now it turns up I am a geek and you feel rather deceived. It was not really my intention to hide this truth from you, I had kind of forgotten so, well, to make up, let me tell you my ERP story.

I have been working the last 6 years with the probably most known ERP system which is SAP, earning a pretty deep knowledge of the Sales&Distribution and Inventory modules.
My direct experience as user has been quite enjoyable, maybe because for the first time I was knowledgeable in something which looked cryptic to most of people. When I joined the company SAP had been used for a couple of years with great satisfaction of everyone, apparently.
This was my impression until when, one day, talking to a marketing colleague, I realised that the company was not so well integrated as I had imagined. As a matter of fact the CRM module had not been purchased because the company did not find it flexible enough to satisfy the marketing department needs. Later on I realised that our HR department was not using SAP either, better they were considering buying another solution called PeopleSoft, by Oracle, as, apparently, SAP HR module is not considered the best fitted to support the everyday challenge of the Human Resources guys.
Eventually, this year, while deploying the same project into different sales Companies around Europe, I have realised that SAP was not able to cope with some of the needs of our procurement and forecasting process. As a matter of fact we had developed an in-house software which was retrieving data from the very same SAP, reworking them and uploading them back into SAP. This in-house tool was requiring the continuous work of at least 4 developers which were making sure that the data flow was not corrupted. I can tell you that, from time to time, funny forecasting figures were popping up. Eventually Sales Companies started to complain asking why they could not use our ERP to place their orders as they did for other busuness group within the company - a similar functionality does exist in SAP. Point is that our forecasting process is very different and SAP was not really capable of satisfying the business need. So we had developed this in-house tool which was quite complex to use and, apparently, not reliable any longer.

Luckily I escaped to Madrid just in time to avoid the storm, leaving my boss handling the frustrated Salescos.

Point of the story is that ERP's are without any doubt a very helpful tool for companies improving efficiency and economic performance by facilitating the flow of information between all business functions inside the boundaries of the organization.

However they are not always offering tailor-made solutions to their customers, or, let's put it in another way, companies should be ready to pay an awful amount of money to have a customised service. In the case of my company the choice made was to buy certain modules in the key areas, ask for some customisation and leave out what was not considered vital. This could be a wise approach, however the result has been having different systems running in parallel creating cost duplication and operational inefficiency.

So should we have adapted to SAP in order to have all the modules and, therefore, departments integrated? Overall I think that ERP's should be capable of adapting to companies, understanding their processes and providing ad hoc solutions for a reasonable price. On the other hand, if, for instance, the company is very young when acquiring an ERP system, maybe it could stick to the standard modules offered and develop its processes starting from there.

As in many situations, there is not just one solution, it rather depends on the objectives of the company. The ideal option would be that the company creates its own ERP system, however this implies huge costs as well as lot of time and going to a specialist on the market is a more viable solution.

Spicy lemon chicken wings

Thinking about Mr Javis and his lemon experience, here the appropriate recipe 'stolen' to my friend Marta from our recipes blog.

Ingredients
6 chicken wings (free range)
2 teaspoons of honey
2 garlic cloves
2 very ripe lemons
2 small red chillies
Oil
Salt


For the wings: wash the wings under running cold water and get rind of any feather that may still be found on them. Get rid of the excess water and put them in an oven tray sprinkled with a generous spoonful of olive oil. Season and set aside until the sauce is ready.


For the sauce: in a bowl, mix together the honey, the juice of the 2 lemons (don't thow away the shells of the lemons you use, as you will nedd them to finish the dish), the garlic cloves thinly sliced and a teaspoon of olive oil. Mix everything very well until all is perfectly amalgamated. Set aside.


Take the two chillies and cut them lenghtwise in about 4 strips each. Cut one of them in very small dices and add them to your sauce, so that tehy can give it a lovely spicy twist. Mix well and let it rest for about 20 minutes.
Note: the recipe suggests that you get rid of the chilly seeds but if you like a slightly stronger spicy punch, you can add them to the sauce


Once the sauce is ready, mix it again so that the honey doesn't stick to the bottom of the bowl and pour it over your wings. Add the shells of the used lemons and the strips of the secodn chilli as guarnish and put everything in a hot oven (about 200 degrees) for abuot 20 minutes or until the wings turn golden.


Serve hot as perfect finger food.

The rise of the fifth estate

In 1787 a Mr Burke, referring to the French Parliament, said that there were Three Estates; but, in the Reporters' Gallery yonder, there sat a Fourth Estate more important far than they all. This fourth estate was the press and, since then, many writers, first among them Thomas Carlyle in his book 'On heroes and hero worship', started to use the expression 'fourth estate' to refer to the ability of the press to influence the electorate and, more in general, the public opinion.

Making a parallelism, we might say that today we assist at the rise of the Fifth Estate, Internet and, within its universe, a particular channel of communication: the social media. I am not saying this because I am a blogger - as a matter of fact defining myself a blogger would be too presumptuos. Nonetheless, without any doubt, in the last years bloggers have proved to have an unprecedented capacity of influencing the series of events in everyday's life and changing the course of history, at least for some individuals and companies. This last statement could look too extreme until we consider Mr Jeff Javis's blog buzzmachine and his Dell Hell's saga.

Mr Javis was the super unlucky purchaser of a Dell Pc back in 2005. Super unlucky because not only the machine was a DOA (defective on arrival), but proved to be a persistent DOA case as, each time Dell's customer service fixed the issue and returned the machine to Javis, a new problem popped up driving crazy the poor owner. Javis started to share his painful experience on his blog and at this point something unexpected, at least by Dell, happened: the victim became the executioner and the other way round.

Well, the word of mouth about Dell's poor performance spreaded all around the web massively and brought together other- until that moment-unlistened Dell's customers,. The snowball effect was such that the stock price of the PC manufacturer sunk miserably and Michael Dell returned to run the company after 3 years trying to implement recovery actions.

But what has happened here exactly?

In the example of Dell, its late response to what was going on the web created huge damages in term of reputation and, therefore, economic performance.
Eventually Dell has learnt its lessons as it is proved by its deep social media engagement (eg in 2006 they created an official customer service blog, in 2007 they launched IdeaStorm and StudioDell. IdeaStorm allows Dell users to feedback valuable insights about the company and its products and vote for those they find most relevant. StudioDell is a place where Dell users could share videos about Dell- related topics). This type of actions proved that not only they have understood how much power the consumers/bloggers have, they have also seized another more important concept: if you can't beat them, join them.

By involving and engaging their customers, opening to them and being ready to share issues and accepting honest feedback, Dell has been capable of re-building its reputation.

Overall, the take away of this episode is that social media have proved to be not simply a 'way of killing spare time', they are much powerful means of expression which cannot be any longer ignored by whom has a public image, be those companies, institutions, organisations, political leaders and so on.

Some thoughts on the future of Facebook

Facebook is the most successful social networking site in the Internet. The website was launched in 2004 by a group of Harvard students led by Mark Zuckerberg and today it has 400 million registered with an average of 130 friends . Facebook has been very successful in getting users to put personal data online and of linking their data with those of other people (friends and acquaintances) – all of this voluntarily! However, its growth into a global leader of social networks has also created a number of challenges for Facebook that are likely to become critical to its success in the future.

Two important ones are:

• The challenge of successfully managing users privacy: a lot of the success of Facebook is because users freely put and share their personal information and data online with other users. In the last months Facebook has been criticised for not been clear about how the information and data we give to it is used to develop Facebook and for not providing a more easy way to change users privacy settings. If Facebook wants to continue being successful it will probably have to explain better how it works to protect the information we give it and also give it users more control and power over the information and data.

• The challenge of “making money”: Facebook has direct access to its 400 million registered users. This is an enormous potential market which, interestingly, is the result of users freely registering their information and preferences with this company. Moreover, by linking individual users who are friends or acquaintances, users have helped Facebook identify potential sub-markets (communities) of people interested in the same things. However, Facebook is estimated to make ‘only’ $300 million . If Facebook wants to be a money-making business it will have to find ways of successfully using its access to all these users as a platform to sell products and services. Maybe in the coming years Facebook will create its own branded online services (like Internet telephony, more developed social networking, etc) or it may let other companies exploit the information it has to market their products to Facebook users.

The way that Facebook deals with these challenges is likely to be critical for its future success.

On the one hand, if Facebook can find a way of guaranteeing that the information we give it is used responsibly and allows us to protect it in an easy way, then users will continue providing the data Facebook needs to further develop the social network. If, however, it does not take action then users will lose trust in Facebook with the result that users will not give it correct information or simply unregister from the website, undermining the very reason of the success of Facebook.

On the other hand, if Facebook can find ways of “monetising” the information it has of its users to generate income it can probably become a powerful player in the online services market because of the quantity and quality of the information users have given it. If, however, it is not capable of doing this, then in a few years time Facebook might not be able to continue financing the development of its successful social networking site and be overtaken by other new start-ups with a more clear business strategy.

Let's Google it!

Google, a company which was founded by two Stanford University PhD students in 1998, is one the most recognised brands in the world and probably the company most associated with the Internet. Its main product is its search engine called as we all know....Google (that I extensively use to check out recipes and find restaurants), which is the global market leader (90%market share, see figure 1). In the last years it has had a business development strategy of going into other Internet services like e-mail (Gmail), document and spreadsheet software (Google Docs), and location-based services (Google Maps and Google Earth), and also of investing in other companies to develop and integrate with Google products, like YouTube - bought for $1.65bn in 2006 for online videos, operating systems (Android) and online advertising (DoubleClick, bought for $3.1bn in 2008, and recently AdMob, bought for $750m in 2009).


Figure 1 - Google search engine market share:
















However, Google is now a company of nearly 20,000 employees, $23,651bn in revenues in 2009 and a market capitalisation of $155bn, and it is beginning to face a number of problems…


Privacy issues

Every time we use Google search engine we provide individual data about our choices and preferences simply by putting in words, pressing “search” and using the results of the search. Google monitors these searches and uses this information not only to improve its products but as well, importantly, to sell online advertising (97% of Google’s 2009 revenues!) to other companies . Most users have probably not been aware of this and, even though most data we provide might not be “private”, it is “personal”, and people may not be happy that this is being used for commercial uses like advertising (indeed, each time i google a restaurant where to go or a recipe, on the right side banners start popping up suggesting me things about food I might be interested in). Indeed, Google (alike Facebook which is also having troubles in this area) may be pressured in the future to explain better how it uses the data we provide it with and give us more control over what it does with this data .

Providing global Internet services

Even though Google comes from a country with a strong tradition of free enterprise, the global scale of the Internet means that Google has to respect the laws of other countries in which its services are used. Examples of recent problems that Google has had with different laws are:
•Google’s decision to step-back from China, possibly the most promising Internet market in the world, because it did not want to continue censoring search engine results;
•Google’s problem with the YouTube service in Italy: where three of its employees have been legally condemned for not eliminating an abusive video from YouTube.

Dominance of Internet markets

Google is the dominant company in Internet search engines and it is using this strength to enter other Internet markets. This can be problematic from an antitrust perspective if Google uses its power to reduce the competition in other markets where it has a strong presence like the online advertising market . Like the problems that Microsoft has had in recent years with antitrust authorities over its practice of bundling other products( eg Internet Explorer with its Windows operating system) Google may be pressured in the future to adopt business practices that stop it from hurting competition in the markets it is dominant.

Google is today a household name across the world and its company motto, “Don´t be evil”, summarises for many people what the Internet is and should be about. However as Google matures it will face many challenges similar to ‘normal’ companies and how it responds is likely to determine a lot of its future success