Insights on Strategy
A Monthly Newsletter published by
Strategy Development Group, Inc. May, 2002
What Greenpoint Mortgage Funding
and Virgin Entertainment Have in Common
What these two very different companies have in common is using technology in
a way that strengthened their competitive advantage in their respective markets.
In addition to these two companies, Newsweek's April 29 Special Report on
Business and Technology showcases nine other firms that have applied technology
in a similar fashion. It's interesting to note that in searching for new ways to
compete, businesses often overlook the role technology can play in strengthening
their competitive advantage and tend to leave that challenge for the
"higher tech" firms. When they do invest in technology, it's generally
relegated to beefing up infrastructure or "just keeping up" with the
competition. In this informative article, Newsweek looks at some unusual ways
"lower tech" businesses have used technology to differentiate
themselves from their competitors. Here are some excerpts.
Selling Better to Your Customer
In its pursuit of providing the highest level of customer service in the
industry, Greenpoint Mortgage Funding became one of the early adopters of
Automated Valuation Modeling technology (AVM), which reduces the cost of home
appraisals from $300 to $50 and turnaround times from weeks to hours. By using
technology to further leverage its commitment to service, Greenpoint has raised
its share of the mortgage market in two years from .8% to 1.3% (We're talking
billions here!). Given the response time, what broker wouldn't want to refer
Greenpoint on a deal!
Similarly, Virgin Entertainment continues to improve on the shopping
experience of its customers by taking CD sampling to a higher level of service.
With its new in-store Kiosks, customers can now sample over 250,000 CD's (as
compared to Amazon.com's 15,000 songs!) as well as check out reviews from
industry magazines, pictures of the artists, track listings and album credits.
All the customer does is take the CD over to the Kiosk, scan the bar code on the
package and tap a selection for listening. Virgin is putting technology where it
can help the most - in front of its customers. Who would want to talk to a
salesperson when you can have access to a Kiosk!
Making Your Product Better
In addition to strengthening the selling experience, technology is often used
to improve product quality or performance. What was important to WillaKenzie
Estate, a small winery in Yamhill, Oregon, was quality. In its quest to produce
one of the finest pinot wines available, this winery developed a 1,000 pound,
pneumatically controlled, microprocessor-driven grape stomper, revolutionizing
the way tannins are extracted during the fermentation process, which gives wine
its color and flavor. WillaKenzie has won favorable reviews from many wine
connoisseurs and has quadrupled its size over the past six years by applying
technology to a relatively low tech side of its business.
Becoming More Efficient
Another way of competing is by being the lowest cost service provider. At
JetBlue, all 550 of its reservation agents work from their homes using the
wonders of computers and telecommunications saving 20% per flight booked. This
was an important factor in allowing the startup airline to turn a profit after
only 6 months of operations. In another example, all JetBlue pilots and
technicians have laptop computers so that they can keep abreast of FAA
regulations and avoid downtime due to procedural infractions. JetBlue has
followed the lead of Southwest in creating a low cost business model but has
used technology to further differentiate itself from the leader.
Selling More to Your Customer
Target wants to sell more products to its existing customers. It has found a
unique way of doing just that by replacing conventional coupons with
chip-embedded cards. With 2.5 million already in circulation, Target is
currently the largest issuer of Smart Visa cards. Customers can now download
promotions from their computer and use them at the store. Not only will coupon
sales be more effective, but they can be tailored to customer needs opening up
new opportunities to increase sales to existing customers.
For other examples and more in-depth information, I urge you to read this
wonderful article. Each of these companies used technology to strengthen one of
the ways it competes in its industry. It used technology to directly support its
business strategy. It did not use technology as an end in itself. Technology
doesn't come cheaply or quickly and therefore must be used wisely. Before you
start down that long road, first be clear on your business strategy and then
make sure your investment in technology directly supports it, otherwise, you may
lack the commitment to see the investment through.
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