CIOs urged to embrace “consumer relevancy”

TORONTO — Fred Crawford thought his bachelor’s degree in psychology had taught him a few things about human nature. Then he started studying the retail market.

After three years of research that included thousands of interviews with consumers and executives at some of North America’s most well-known companies, Crawford says many of our assumptions about what makes retailers succeed are wrong. He also says his findings offer some important lessons for CIOs trying to tie IT investments into their employer’s core competencies.

Crawford was in town Thursday to launch The Myth of Excellence: Why Great Companies Never Try To Be The Best At Everything, co-authored with consultant Ryan Matthews. An executive vice-president and global sector leader of Cap Gemini Ernst & Young’s consumer products, retail, distribution and consulting practice, Crawford says the book began as a simple survey into consumer behavior patterns in retail stores. Before long, however, the scope of the project expanded considerably. Crawford says he and Matthews interviewed more than 10,000 people, including 100 executives from Global 100 firms.

The Myth of Excellence, which presents their results, outlines a corporate philosophy of “Consumer Relevancy.” It’s a doctrine that tries to prove through case studies how great companies need only dominate in one of five competitive attributes — product, price, service, access and experience — while differentiating themselves in another.

For CIOs in particular, Crawford says consumer relevancy represents a critical rule-of-thumb for making intelligent investment decisions. “You could be doing a world-class job creating a technology infrastructure,” he says, “but if it’s not properly tied in to the corporate strategy, the investment just adds cost burdens to the organization.”

Though it may sound obvious, Crawford says many CIOs are only appreciating this point now as they play a more strategic role in corporate enterprises. “You wouldn’t believe the fist-fights I’ve refereed when IT, HR and the management team are trying to align themselves,” he said.

The Myth of Excellence was launched at a local Canadian Tire, which Crawford and Matthews use as an example of one of the few large retailers who have mastered customer relevancy. Mark Foote, president of Canadian Tire Retail, says the company had decided in the mid-1990s to dominate on access while differentiating on its product mix. “Our strength is the size of our store network,” he said, adding that the company’s Web site launch last year was an attempt to expand its access. Though it amounted to a $22 million investment, Foote says the size and the number of Canadian Tire stores complement the diversification of its product line.

Though he says companies that try raise the bar uniformly on all attributes usually fail, Crawford points out that many retailers could develop an more effective IT strategy by spending less if their efforts were more focused. As an example, The Myth of Excellence profiles Dollar General, a Nashville, Ten.-based chain store giant that uses a simple WAN infrastructure connecting a data processing facility at its corporate headquarters to six distribution centres. “They don’t even allow credit cards to be used at the store, because they want to demonstrate their prices are so low you wouldn’t need a credit card to buy anything there,” he said. “It’s all old applications and legacy equipment, but it matches their strategy to dominate on price.”

Foote applauds the low-cost approach. “Sometimes what might seem Spartan in terms of IT is still tightly woven into the business,” he said. “They’ve got a mandate, and they’re not going to let technology get in the way of that.”

Crawford says his research revealed most consumers seek old-fashioned human values from retailers like honesty and integrity. They don’t value low prices so much as consistent pricing, he says. “You can’t build value-added services if you’re baseline of fundamental services that you’re failing to offer customers,” he says. This includes product returns, for example. “Even product quality itself wasn’t extremely important. They were okay as long as they were ‘good enough.'”

Foote says that while Canadian Tire focuses on access and products, the company is watchful of the other three attributes. “I think any retailer that told you they were satisfied with service would be lying,” he said. “That’s why we’re making investments in e-learning product knowledge and skills training programs now.”

Cap Gemini has followed up the publication of The Myth of Excellence with a consumer relevancy position paper for CEOs, available on its Web site.

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