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Step inside the corporate headquarters of Palm in Santa Clara, California, and the first thing you're likely to notice is a large poster of the defining feature of the company's handheld computers: the HotSync button. If you're a Palm user, you know that dropping the handheld into its docking cradle and pressing the HotSync button allows you to effortlessly and seamlessly synchronize it with your desktop computer. In a matter of seconds, the boundaries between the two data silos disappear. The poster underscores one of Palm's key innovations and biggest selling points. But it also speaks volumes about the promise of business technology in general. Ask yourself this: "Does my company have a HotSync button?"
Every decent-sized enterprise has many organizational and technological silos. Product lines, business units, channels, geographies, and IT systems are separated by welldefined and often rigid walls, which diminish the company's ability to build strong, broad customer relationships. Because the walls tend to obstruct the flow of information, different parts of the company can end up selling to the same customers, sometimes competing for the same business without even knowing it. Just think of how your own relationships with companies are fragmented. If you're an AT&T customer, for instance, you may have several different relationships with the company: as a long-distance subscriber, a wireless user, a cable TV watcher, a cable modem customer, and a credit card holder. Tracked in five different databases, you appear to the company as five different customers. The more decentralized the business, the greater the costs of such fragmentation. As the number and rigidity of walls increase, a company will tend to miss more and more market opportunities.
Executives understand this problem well—they see and feel its consequences every day. But they often assume it's a people problem. "If we could just get our employees to reach out to one another across organizational boundaries," the thinking goes, "we could be much more responsive to customers and much more productive in our operations." Though understandable, this reaction often leads to superficial solutions that create more problems than they solve. CEOs start to urge—even force—people from different units to work together, setting up all manner of cross-functional and cross-business task forces and teams. They seek to establish companywide processes, to create a single "customer-focused" culture, and to impose uniform performance-measurement and compensation systems. Such moves sound rational—in theory. But in reality, attempts to erase organizational boundaries can be destructive. Different business units have different strategic and product imperatives, and different functions rely on different kinds of employees with different skills and ways of working. Imposing uniformity can blur the organization's focus on product and functional excellence. By trying to optimize cooperation across units, executives end up lowering the performance of each unit.
There's a better way. Rather than tear down organizational walls, you can make them permeable to information. You can synchronize all your company's data on products, filtering it through linked databases and applications and delivering it in a coordinated, meaningful form to customers. As a result, you can present a single, unified face to the customer—a face that can change as market conditions warrant—without imposing organizational homogeneity on your people. Such synchronization can lead not just to stronger customer relationships and hence more sales but also to greater operational efficiency. It allows a company, for example, to avoid the high costs of maintaining many different information systems with redundant data. By creating the equivalent of a HotSync button for your company, you can enhance your market responsiveness while at the same time reducing your costs.
Synchronizing 3M
Consider the recent experience of 3M, a 99-year-old, $15 billion company with an unsurpassed record of innovation. 3M is a study in product diversity, selling more than 50,000 products in 200 countries. If you brought together all the company's branded products that begin with the letter "A" alone, you'd see everything from wallpaper remover and antacid tablets to fiber-optic cable and fire-fighting foam. Much of 3M's success as an innovator can be attributed to its highly decentralized structure: it develops and markets its products through more than 40 different divisions, each of which functions as a separate company, with its own processes, systems, and brands. The organizational diversity has been great for the company, enabling its employees to maintain the deep focus required for breakthrough thinking.
But the fragmentation has been bad for the company's customers. Sales reps from each division traditionally called on customers independently, and each business unit collected its own sales and product information in its own database. As a result, it was impossible for the company to answer a simple but crucial question: How much business do we do with a specific customer? Without knowing the answer, 3M was hamstrung in the market. It could not uncover cross-selling opportunities by comparing samecustomer purchase information or by analyzing buying patterns across product categories. It could not even assess how important each customer was to the company as a whole. There was also a huge cost penalty. Each business unit had to maintain and update its customer database separately—a mammoth, duplicative task that was not only expensive but also highly prone to error. In fact, 40% of the customer records in 3M's various U.S. databases had invalid addresses.
The same problems arose when the company moved onto the Internet. Decentralized and poorly coordinated, 3M's Web sites mirrored the structure of the company itself, with customers having to visit several different sites to get information on related products. A health care professional, for instance, might buy products and services from 3M's pharmaceutical division, skin health division, medical-surgical division, medical specialties division, and office supplies division. To get information about these products, she would have to register separately with each of these divisions' Web sites, receiving a different password and user ID, and she would have to familiarize herself with the sites' different designs and navigation schemes. When she bought something from one unit, moreover, no record of that transaction would be available to any other unit, which made it impossible for her to receive fast, consistent customer service from the company. In short, 3M was out of synch. It presented many different and often contradictory faces to its markets, all of them reflecting its internal silos rather than its customers' needs.
In 1997, the company decided to fix the problem—not by imposing uniformity on its organization but through a $20 million initiative to create a global data warehouse to store customer, product, sales, inventory, and financial information across all product divisions and geographies. Now up and running, the integrated database tracks 250,000 customer relationships and 500,000 product configurations. It is accessible through an easy-to-use Web interface, featuring a single registration procedure and password, powerful search and product-recommendation engines, and a consistent look and feel. Employees and partners can tap into the system from their desktop computers and quickly find up-to-date information on product prices, availability, and specifications as well as detailed summaries of each customer account. Customer profitability, product profitability, and partner performance can now be analyzed across the entire company, helping 3M allocate its corporate resources more adroitly.
Synchronization has allowed 3M to present a unified face to its customers. Equally important, though, it has enabled the company to present new faces to its customers, quickly and seamlessly. With customer relationships and product configurations now stored in a single database, the company can redesign, reaggregate, and reconfigure its offerings to better fulfill the needs of groups of customers or to capitalize on market opportunities. On the Web, for example, the company now offers ten "customer centers" aimed at particular segments of buyers. These customer centers, which include Health Care, Home & Leisure, Graphic Arts, Architecture & Construction, and Office, pull together all relevant products and services from across the entire 3M organization. The centers are often further subdivided to focus on even narrower market segments. Customers visiting the Health Care center, for instance, can choose from an area for health care professionals, which offers products and services for doctors, dentists, nurses, and information managers; an area for consumers, which offers information on products and services for personal health care; and an area for manufacturers, which showcases technologies and products that 3M offers to producers of cosmetics, pharmaceuticals, and baby products.
3M's wares are no longer presented silo by silo—even though the goods are still developed by discrete product units with the focus and autonomy required to be highly innovative. Through synchronization, 3M has tapped into what I call the eBay effect, after the dominant on-line auction house. By manipulating information stored in its databases, eBay has long been able to rapidly redesign the way it appears to customers. Think for a moment about what happened on the eBay site on January 14, 1999, the day after Michael Jordan announced his retirement from the Chicago Bulls. That morning, eBay announced the opening of a brand new storefront devoted entirely to Michael Jordan memorabilia. The products on display ranged from Jordan's 1986 Fleer rookie card to autographed game jerseys to Upper Deck's famous "Last Shot," a photograph showing Jordan sinking the final basket in a Bulls victory. By rolling out a new bundle of products, eBay created, in effect, a new version of itself, tailored especially for Jordan's myriad fans. And that was not an isolated event—the company sets up new storefronts nearly every day as market opportunities arise.
As 3M's experience shows, the eBay effect is not limited to Internet outfits. It can be replicated by any company. Whether you're selling through the Web, a sales force, a phone center, or almost any other channel, you can use synchronized product and customer data to tailor product sets and marketing pitches to individual customers or customer segments. You can slice and dice your product lines to create targeted bundles that you've never offered—or even thought about offering—before.
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