McKinsey Agrees with James

Posted by Guest Blogger and Proud Parent of a New Second Grader (as of this morning), Ian Turvill

McKinsey has just published a great article which argues that companies who address different market segments with different value propositions, service experiences, etc., will grow at the expense of companies who do not.  (See Profiting from Proliferation: Managing your business as if customer segments matter.  Registration required.)  No big surprise there, perhaps.

However, what is interesting is how McKinsey defines the challenge associated with achieving this objective.   "Effective segment management," the company's consultants report, "often requires collaboration across functions, which is difficult to facilitate and reward in product-, service-, and geographically-oriented organizations."

The McKinseyites suggest three organizationally-oriented methods of executing segmented strategies, namely:

1. Choosing an actionable segmentation
2. Building formal mechanisms within planning, measurement, and performance-management processes
3. Creating organizational accountability and empowering segment owners to make or influence key decisions

I would suggest that there is a much more direct way of implementing McKinsey's suggestion, which, of course, revolves around EDM.

EDM can play a key role in supporting segmented strategies, particularly in terms of the precision of understanding how customers should be treated, the consistency of applying those standards across multiple touchpoints, irrespective of organizational boundaries, and the agility of making changes as new information arises.

Let's imagine you run an airline.  It's not enough to have accountability and empowerment to put a segmented strategy into place that peforms reliably and predictability.  If you want your gate agents and customer service representatives to behave the same way to members of the same segment again and again - but in ways that differ markedly from your treatment of members of other segments - then an EDM-approach has to be applied.  Only EDM systems enable you to build complex decision trees and apply predictive analytics in order to micro-segment populations or groups of transactions for highly targeted treatment.

And so it is in other industries, too: telecoms providers addressing the different needs of subscribers in the call center or in their retail operations; hotels meeting the multifarious preferences of travelers checking-in at their front desks or calling down to room service; shoppers strolling through the aisles of a department store.  No amount of organizational effort is ever going to be sufficient: strong technology support is going to be essential if the segmentation effort is going to work in any meaningful way.

Of course, James Taylor said all this some time ago, so it's glad to see that McKinsey's thinkers have finally caught up with him.  Or at least, they've caught up to where he used to be!