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Maximize Cost Savings with Increased Efficiency

"The first rule of any technology used in a business is that automation applied to an efficient
operation will magnify the efficiency. The second is that automation applied to an inefficient
operation will magnify the inefficiency."
- BILL GATES

Hi Friends,

2003 is upon us! New visions, new goals, and new anticipation for what lies ahead accompany our
minds and daily activities. In the midst of this muddling economy, many companies are turning towards
cutting costs and becoming more internally efficient.

In our last two newsletters, we have seen how customer retention can not only increase revenue
but also reduce costs significantly as when contrasted with new customer acquisition. Published
studies generally show that new customer acquisition can cost between 5-10 x's as the cost to
retain existing customers.

If you can also be the low cost producer in your industry, your growth will advance when the
economy is moving forward, and most likely when the economy is struggling as well.

Reducing your costs in good times will make you a lot of money. And when business slows down,
you still make money while your competitors - who aren't as efficient as you - struggle to keep
up with increased pricing pressures.

Let's take a look at Southwest Airlines, which has had nearly 30 straight years of profitability
vs. United Airlines - a recently bankrupt company. According to Jeff Mayer's "Succeeding in
Business" Newsletter http://www.SucceedingInBusiness.com, here are their respective cost structures:

~~~~~~~~~~~~~~~~~~~~~~~~~~~
Total Cost for Available Seat Mile

United Southwest
$11.00 $7.38

Labor Cost for Available Seat Mile

United Southwest
$4.60 $2.90
~~~~~~~~~~~~~~~~~~~~~~~~~~~~

I will agree that there is a slight difference in the flight experience between the two. I prefer
knowing where I am going to sit ahead of time, and being able to arrive at the airport only an
hour before departure time. However, would I ever pay 50% more for the same exact flight on
United? No way! Neither would you, and that is why United is bankrupt and Southwest is a perennial
leader in the Airline industry despite its low frills approach.

"A decade ago, a company could aim to be the market leader in its industry in the high-end
customer service driven segment and achieve that position. Another company in the same industry
could aim to become the low-cost producer and dominate that segment. Today's companies realize
they must be leaders in BOTH customer service and as the low cost producer. This reality poses
new challenges for CEOs, CFOs, CIOs and operating managers for linking strategy, productivity
and competitive advantage.

Two imaginative and under-exploited routes to increased productivity can contribute to achieving
these goals. First, linking technology strategy to corporate strategy by searching out ventures
that offer increased productivity, lower cost and a return on investment (ROI) payback of less
than one year." says Donald Laurie, in the October, 2002 edition of Financial Executive International
magazine.

Laurie continues, "Linking technology strategy to corporate strategy is central to boosting
productivity.... Wal-Mart has understood that it must be a leader in customer service AND a
low-cost producer to win in the marketplace. Its business and technology strategies are
inter-connected. During the month when Wal-Mart became the number one revenue-generating
company in the U.S., K-Mart Corp. declared Chapter 11 protection. The difference was a 13
percent SG&A (selling, general and administrative) advantage, gained by linking business and
technology strategies - with which Wal-Mart crushed K-Mart through its pricing.

Dell Computer Corp.'s "go-to-market" and manufacturing strategy was supported by technology
strategy ...that achieved an overpowering competitive advantage against Hewlett-Packard Co.,
Compaq Computer Corp. and others."

A couple of points that I would like to expand on:

1. LINKING TECHNOLOGY STRATEGY TO CORPORATE STRATEGY IS CENTRAL TO BOOSTING PRODUCTIVITY

It is important to note that corporate strategy is the central starting point. Once a corporate
strategy is established, then streamlined processes can be designed and re- engineered to
execute upon the defined strategy. The proper technology becomes a critical and necessary tool
in enabling new efficiencies to cut costs and boost internal productivity. Properly implemented,
CRM and ERP systems can significantly increase efficiencies while providing benefits only
previously dreamed of.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Initium Technology specializes in helping you define your corporate goals



and aligning your corporate strategy with the proper technology. By doing this,
our clients save costs and increase efficiencies. To learn more, please call us
today at 1-800-250-5732 or email us at info@initiumtech.com
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

2. SEARCH OUT VENTURES THAT INCREASE PRODUCTIVITY, LOWER COST, AND PROVIDE A ROI PAYBACK IN A
YEAR OR LESS

In today's economy, it is important that companies find technology solutions that will enable
an ROI payback in less than a year. Implementing technology solutions that will realize gains
in a year or less will help these companies gain competitive advantage, and build the framework
for moving forward into the future. Once the technology is in place and paid for, enhancements
in business intelligence and analytics help the company to have greater visibility into their
customers. Enhanced collaboration between internal departments and customers provides more
information, and allows more efficient interaction(s) and transaction(s).

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
"We saw a one-time payback of our SalesLogix investment in our first year. But,
that payback is now TENFOLD after three or four years with the system." says
Doug Levin of Prophet21. To read more about the ROI and cost savings that
SalesLogix has provided to several companies, please download "Fast ROI in
Mid-Market Customer Relationship Management Solutions" at
http://www.initiumtech.com/downloads.htm
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Some of the more common cost savings associated with implementing CRM systems include::

1. Reduction in redundant data entry - Centralized Customer Database
2. Reduction of time spent in regular business processes - Automation of normal repetitive tasks
3. Reduction in time to access critical information - Increased visibility into Sales Pipeline,
and other analytics
4. Increased response rates on marketing campaigns - Due to Increased data quality
5. Decreased Customer Service and Technical Support Call Times - Due to Increased access to
real-time information and knowledge base
6. Decrease in direct support required for custom sales - Through leading configuration
technology integrated with front and back end systems

Are you the low cost producer in your industry?
Are the people in your organization still dependent on phone calls, emails, spreadsheets, word
documents for their day to day processes?
How many of your regular processes are automated?
How much time do your employees spend doing the same thing they did last week?
Do managers and executives have access to real-time information through a digital dashboard
providing the metrics they use for their critical decision making?

Let us help you save time and money in 2003 by streamlining your processes and showing you how
to put the "best of breed" technology products to work for you!

Please visit us at www.initiumtech.com or call us Toll Free
at 1.800.250.5732 to learn more.

Wishing you much prosperity, joy, and success in 2003,

Brian Vellmure
Initium Technology
bvellmure@initiumtech.com

Copyright 2002 Initium, LLC. All Rights Reserved

Do you know anyone else that might be interested in reducing costs and increasing efficiencies within their organization? To subscribe to this newsletter, or sign up a friend, please click on the link below: http://www.initiumtech.com/newsletter.htm

Are you interested in learning about a topic that we have not covered yet? Please let us know at
newsletter@initiumtech.com !

To purchase "The Loyalty Effect: The Hidden Force behind Growth, Profits, and Lasting Value",
an excellent resource on customer and employee retention,
Click Here

To purchase "Swim With the Sharks: Without Being Eaten Alive: Outsell, Outmanage, Outmotivate,
and Outnegotiate Your Competition" by Harvey Mackay, an excellent resource, and perennial bestseller,
Click Here

If you would like to reproduce any of Initium Enterprise Strategy Newsletters, you must include
the source of your quote and the following email address: bvellmure@initiumtech.com

Please write to newsletter@initiumtech.com and inform us of any reproductions.
Please include where and when the copy will be reproduced.


About the Author

Brian Vellmure is CEO and Founder of Initium Technology, a strategic technology consulting firm specializing in CRM, ERP, EAI, and custom Web and Portal Design. Mr. Vellmure has personally helped dozens of companies in a variety of industries properly formulate visionary strategies and strategically implement market leading technology to enable precise execution of the those strategies.

 

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