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SSA Notebook | April 2013

Five Ideas That Made Us Think

1. How Brooks Brothers Uses Technology to Get the ‘Science of Customer Personalization’ Right

This National Retail Federation interview with Brooks Brothers CEO Claudio Del Vecchio and EVP for Direct and Omnichannel Ken Seiff illustrates how a 194-year-old retailer took its customer-driven reputation to the digital realm. “If a customer has purchased a custom suit, we have a pretty good idea which shirt fit and size makes the most sense for them, even if it is their first visit online,” says Seiff. For customers who replenish their clothes seasonally, algorithms “predict their preferences for colors, styles and much more.” The organization also utilizes technology to ensure that customers always get and see what they want. Recognizing that its patrons use multiple devices to shop and search, Brooks Brothers built its website with responsive design, creating an experience that’s optimized for customers using any screen (computers, phones and iPads).

2. Will Customers Sacrifice Service for a Good Deal? An Inside Look at Southwest and Spirit.

This National Geographic Traveler article provides a thought-provoking comparison of Southwest and Spirit. Both carriers have few amenities and low fares, and both enjoy economic success. However, Southwest has a customer-focused reputation; whereas Spirit has a “take-it-or-leave-it” attitude toward customer service. For example, Southwest made an exception on its non-refundable ticket when a customer explained that his wife received a lung cancer diagnosis and was advised by her doctor to not fly. Conversely, Spirit initially refused to refund a Vietnam veteran who needed to cancel a flight after receiving a diagnosis of terminal esophageal cancer. Spirit only grudgingly gave in after veterans’ groups interceded. In order to not set a precedent, Spirit CEO Ben Baldanza said he “personally would pay for the refund, not his airline.” Spirit believes that customers will always return to snag an impressively low fare — but will travelers eventually catch on, and choose the flexible, customer-oriented carrier?

3. What Baseball and Politics Have to Do with Your Business — Big Data Lessons from Nate Silver

Nate Silver, a baseball statistician, became famous for his perfect state-by-state prediction in the 2012 US Presidential Election. This Inc. article captures learnings that enterprises using big data can draw from Silver’s work. That author notes that whether you use data to predict elections, forecast the performance of MLB players or run a business, it’s easy to “make fundamental mistakes about how to add up the distribution of risk and spot legitimate opportunities.” The author points to the book Moneyball (which chronicles one baseball club’s success in using statistics to cost-effectively run a team) as a great example of this. In this case, teams had put premiums on talents/characteristics that satisfied managerial assumptions, but these didn’t necessarily translate into results. Simultaneously, “capabilities that showed a statistical impact on the game over time were undervalued.” The key lesson here: hidden patterns likely exist in your industry or business too — that’s what big data is all about.

4. Six Sigma Meets Animation

DreamWorks uses cutting edge technology and creates movie magic (e.g., a digital product comprised of 250 billion pixels, with high-definition sound, images, etc.). However, in the face of escalating costs and complex processes, DreamWorks now focuses on producing an enchanting experience more efficiently. This New York Times article discusses how the company achieves this. For example, DreamWorks “keeps a digital catalog of every table, flame and character,” so parts might be modified for a future film. Another source of savings came through using “mathematical instructions about how different parts of an image should affect the neighbors once motion commences.” This allows a detailed action like the “destruction of a spaceship” to be made without requiring more data. The author aptly notes that when viewing the digital process as a manufacturing process, what DreamWorks is doing is akin to Six Sigma, where “problems are most easily fixed when they are approached as early as possible.”

5. The Changing Shape of Today’s IT Departments

Ed Steinike, Vice President and CIO of The Coca-Cola Company, is set on being a “revenue generator CIO.” This featured Coca-Cola story, discusses how Steinike’s department transitioned from a back-office function to a real business partner. For example, to support growing digital marketing efforts, IT now runs a complete ecosystem to manage content from thousands of sources. The department also has experimented with radio-frequency identification and electronic tagging methods to make it possible to visualize the movement of products through the supply chain. Finally, the IT group built Coca-Cola Freestyle, a touch screen soda fountain that allows consumers to experiment with over 100 beverage brands. This product led to increased same-store sales, as customers return to these fountains for a particular drink they favor. With limitless applications of technology for innovations in sales, marketing and operations, IT must focus on more than “keeping the lights on.”