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| IIITA's e-Magazine |
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 Oct-Dec 2007 Vol 4 Issue 15 |
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Perspective |
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Building Customer Relationships in the Knowledge Economy
by Dr. Arpita Khare
Lecturer
IIIT- Allahabad
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Last few decades have witnessed a period of change unparalleled in terms of advances in technology, globalization of markets, and the realization of the governments to create political systems that would increase trade. The challenge for organizations’ today is to use technology to enhance the competence and capability of the business processes. The sheer magnitude of the changes being made in the wide variety of businesses and public enterprises has prompted the use of term such as “reengineering”; “reinvention”; “rebuilding”; “redesigning”. These terms represent an element of change that is gripping organizations and making them improve their productivity.
The most typical role of IT in the value chain is reducing the friction in transactions between supply chain partners through cost-effective information flow. Conversely, IT is more importantly viewed to have a role in supporting the collaboration and coordination of supply chains through information sharing. Third, IT can be used for decision support. In this instance the analytical power of computers is used to provide assistance to managerial decisions.
The approaches followed by companies to improve their productivity in 1960s and 1970s were focused on improving their marketing strategies and trying to create customer loyalty. Soon it was evident that superior designs and manufacturing functions by themselves did not necessarily lead to sustainable market share. And with the demand for products escalating in 1980s, manufacturing functions got much attention to be more responsive to the market. Managers realized that it was important for organizations to be flexible and adaptive to customer needs. Though the internal manufacturing capabilities increased and quality-driven production became critical requirement for survival, companies realized that materials and technology played a major role in the efficiency criteria.
Technology’s role in this transformation process is to identify the relevant sources and information systems that can decipher the relevant information and convert it into valuable asset for the organization. E-commerce, Internet, software developments are tools that are bringing about transformation in the value chain. But increasingly intellectual capital is being understood as a factor that is revolutionarizing the systems. Technology has assisted the transfer of information across the different organizational networks, thus setting performance standards for processes. Managers can use knowledge and technology to take effective decisions. Author Thomas Stewart describes: “Intelligence becomes an asset when some useful order is created out of free-floating brainpower- that is, when it is given coherent form (a mailing list, a database, an agenda for a meeting, a description of a process); when it is captured, in a way that allows it to be described, shared, and exploited; and when it can be deployed to do something that could not be done if it remained scattered around like so many coins in the gutter. Intellectual capital is packaged useful information” (Thomas, 1997). Information can become a capital asset for the organization, as it can give power to the organizations to not only be able to transform the experiences into valuable pools of resources that can enhance the strategic capability of organizations. Also it can help organizations to translate the accumulated experiences of years to take decisions in new markets, managing problems of adapting to new technologies and new products to market dynamics.
If the crux of all the marketing endeavors, lies in the identification of the customers’ needs and creating processes that simply enhance the delivery & usage experience-then logistics becomes a critical decision parameter for any company. It is this relevant customer that provides the company with revenues and competitive advantage in the marketplace. Fox Electronics designs and manufactures quartz crystals and oscillators to provide customers with customized products in 10 days a less, rather than the industry standard of 12 weeks (Lee & Whang, 2001). This has been made possible by analyzing customer needs and then developing the supply chain processes in a way that have the ability to forecast, anticipate, and plan. Demand information can be accessed from the initial contact points with the customer and moving backwards to the supply customers and moving backwards to the supply chain partners.
As customers are the final link in the supply chain, possessing information regarding their attitudes, behaviour patterns, purchase patterns would enable companies to better cater to customer’s needs. Knowledge management has addressed the following issues:
Using information would improve the efficiency in business operation.
Sharing knowledge, experiences and data would bring about not only better coordination but also reduce delays in decision making.
Knowledge has to be retained in the organizations, to help managers use it for future contingencies.
Information captured across the various processes would enable companies to be more accurate in addressing the market needs.
Companies such as high-end retailer Tiffany (www.tiffany.com) simply use their websites as an additional means of luring people into their stores by providing add-on customer service and product-related information on, for instance choosing a diamond. Levi Strauss & Co. includes a retail store locator on Levi’s and Dockers websites so customers know where to go shopping. Colgate’s customers- including heavy-hitter retailers such as Wal Mart and Rite Aid- are getting products faster, which can in turn increase satisfaction rates. Companies are also reducing out-of-stock situations, an influential factor in enhancing customer loyalty. Club Med, an all-inclusive resort company with locations worldwide has evolved to reflect the maturing of its membership. Studying the database of member characteristics, Club Med has realized that overtime it’s once swinging singles members have become married with children. In order to continue capturing future vacation visits, Club Med modified some of its locations to accommodate families with young children (Fitzsimmons & Fitzsimmons, 2002). Companies have been able to become more focused in their approach towards handling customers, as they are equipped with increased inflow of information. To share information with suppliers and customers has led to change in way business was previously conducted.
The ultimate aim of any company using information technology is to build a relationship with the customer. Knowledge economy has created the feasibility of exploiting data about customers to make the interaction more personalized. More and more companies are realizing that to retain customers, it is important to make the customer experiences with the company more relevant to his needs. This is important as it would enhance the value the customer gets from his association and interaction with company. Knowledge management is providing companies the ability to create partnerships with customers as they have been doing with their suppliers.
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