Fulfilling Unfulfilled Dreams: The Last Frontier of MIS Fulfilling Unfulfilled Dreams: The Last Frontier of MIS

Byungtae Leebtlee@kgsm.kaist.ac.kr

Graduate School of ManagementKAIST

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AgendaAgenda

1. Introduction

2. MIS and Organization

3. EIS and Why Not?

4. Business Simulations/Games

5. Complexity Theory

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Business Solution ProductsBusiness Solution Products

ERP, SCM, CRM etc Why didn’t we come up with such solutions first? What’s left then?

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Executive Information SystemsExecutive Information Systems

Transactional System

MIS/DSS

EIS

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EIS: Unfulfilled DreamEIS: Unfulfilled Dream

IT experts have sold the concept of “Strategic Information Systems” ever since MIS started for more than 5 decades

Promised but never delivered A reason why top executives are not interested in MIS

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Why No EIS?Why No EIS?

EIS is not defined well? EIS may be a hype? Executives’ problems can not be helped by computer

systems? Ideals can not be realized due to lack of appropriate

technologies.

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Questions?Questions?

Do executives need their own information systems? Does EIS Market exist?

Can we define what is and how to make them?

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Today’s ManagementToday’s Management

Destructive Technologies and Innovation Highly Interactive and Empowered Customers (Red

Devils) Globalization and Death of Distance Winner-takes-all (or Almost if not all) More Risk and Uncertainty

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Executives ProblemsExecutives Problems

Transactional System

MIS/DSS

EIS

Un

structu

red

ness

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Why Can Not They Be Helped?Why Can Not They Be Helped?

Aggregation of Transactional Data seldom gives information and knowledge that executives search

5 key problems of Transactional Systems to Executives: 부족형 편재형 산재형 비유용성 비접급성

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Is Management Science?Is Management Science?

Statistics/Forecasting assume continuing fixed environments but today’s management faces destructive technologies

Statistics/Regression deal with “average” behavior of customers but customization and personalization are virtue of today’s strategy

Game Theory and Mathematical Modeling over-simplify the real world

Strategic Consulting produces 2x2 Matrices

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DSS, Expert Systems, AIDSS, Expert Systems, AI

Knowledge Representation Knowledge Acquisition World a God (programmer) created

Top-down Approach Pre-cooked Scenarios Equation-based approaches Modelers should know the entire chain of

causalities

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Are You Doing These Oxymoron?Are You Doing These Oxymoron?

• Management at Speed of Lights (Bill Gates)

• Management from Guts (Jack Welch)

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In the mean time…In the mean time…

CRM promotes customization/ personalization in Products/Services, Prices, Channel, ….

SCM advocates optimization over Business value chains

Capital Market put more pressure to produce immediate results

Management at Speed of Lights

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What do Top Managers do?What do Top Managers do?

Strategic Analysis Strategic Planning Strategic Implementation

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Strategic Planning FrameworksStrategic Planning Frameworks

Competitive Rivalry from

Existing Firms

TechnologyRegulatory

Environment

Changing Social Values Substitutes

Suppliers

Buyers

New EntrantsEconomic Changes

Demographic Changes

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Now You Have Discovered ….Now You Have Discovered ….

Britons are coming…. They seem stronger…

This is where consulting ends and why big firms fall. What will you do?

Re-designing products, processes, organization, channels, ……

Continuous Simulation and Chess Games in Minds

On what bases?

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New EISNew EIS

Chess Board for Business Simulations Separation real agents from virtual ones Interactions between Virtual and Real

Agents Agent Technology and Visualization

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Business Simulation and Complexity Theories Business Simulation and Complexity Theories

Seamless Interaction between Virtual (passive) and Real (proactive) Agents

Bottom-Up Approach Treat Agents Individually (by types) Paradigm Shift from Reductionism of 20’th

Century Sciences Completely different from Business Games

as you may know it

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Learning by Doing Without cost of mistakes

Real WorldEnvironment

Explore, Experiment, Learn, Analyze, Test Predict Implement, Assess

Behaviormodeling,

demographics,and calibration

Data collection,association,

trends, and parameterestimation

TimeCompression

Near exact replicaof the “real” world

SEAS architectureSupports millions ofArtificial agents

Decision Support Loop

SyntheticEnvironment

The user(s) can seamlessly switch between real and virtual worlds through an intuitive user interface.

SCMERPCRMData

Warehouse

Simulation Loop

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SEAS Middl ewar e

ServBotsData Base

Data Objects

SysBots DataBots

SEAS VirtualExecution Environment

SEAS Middl ewar e

ServBotsData Base

Data Objects

SysBots DataBots

SEAS VirtualExecution Environment

CRM and IT enables us to captureCRM and IT enables us to capture

Out channels

DNA’s extracted from data

In channels

Environmental Sensors

Total (202)

1st Brigade

(36)

2nd Brigade

(26)

3rd Brigade

(47)

5th Brigade

(53)

6th Brigade

(40)

Plan to continue education 4.13 4.34 3.69 4.32 4.16 3.97Other employment interests 4.00 4.28 3.58 4.26 3.81 4.00Can't get out if don't like the Army 3.61 3.62 3.76 3.37 3.71 3.64Commitment too long 3.60 3.49 3.96 3.57 3.58 3.54Doesn't allow enough contact with family/friends 3.51 3.57 3.81 3.42 3.44 3.44No personal life in Army 3.47 3.54 4.12 3.26 3.43 3.26Want to stay close to home 3.42 3.44 3.65 3.19 3.46 3.49Do not want to be deployed overseas 3.34 3.40 3.58 3.16 3.27 3.42Other military services more appealing 3.26 3.32 3.72 2.91 3.36 3.17Be behind my civilian peers in career 3.25 3.44 3.50 3.14 3.12 3.24Army pay very low 3.20 3.24 4.04 3.02 3.04 3.00Have financial ability to pay for college 3.15 3.49 3.08 3.24 2.88 3.16Army too dangerous 3.15 3.32 3.38 3.17 3.10 2.87Basic training/boot camp too difficult 3.14 3.09 3.58 2.89 3.11 3.21Army life too difficult 3.12 3.20 3.16 2.91 2.96 3.50Family/friends have negative attitude of Army 2.74 2.63 3.12 2.35 2.71 3.13Army has no role to play in global environment 2.73 2.48 2.96 2.57 3.00 2.61Army conflicts with religious beliefs 2.32 2.23 2.38 2.35 2.23 2.46

= Highest mean score= 2nd highest mean score= 3rd highest mean score

The combination of human decision makers (for depth) with artificially intelligent agents (for breadth) allows unmatched flexibility, realism and detail.The combination of human decision makers (for depth) with artificially intelligent agents (for breadth) allows unmatched flexibility, realism and detail.

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전통적 마케팅의 실패전통적 마케팅의 실패

4P: Product, Price, Promotion and Place Product

USP (Unique Selling Points) Copycat Economy

Price Price War

Promotion Battle for Eyeballs

Place No time for Shopping

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shopbotshopbot

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Posted Price MarketPosted Price Market

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정보 비대칭성의 상실정보 비대칭성의 상실

전 보험 비교 견적

역경매 시장

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Buyers’ Market: 소비자 권력의 증대Buyers’ Market: 소비자 권력의 증대

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안티 사이트안티 사이트

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Game of Eyeballs and Ears – 광고에 대한 면역Game of Eyeballs and Ears – 광고에 대한 면역

Other Consumer Messages (all media)

Total Internet Consumer Messages

Commercial and Internet Messages per Day per Person

(US)

20 years ago, 80 percent of a target audience in many countries could be reached with one 30-second, off-peak television spot

Reaching the same audience today often requires between 200 and 300 prime-time TV spots.

440650

2,560

3,000

1985 2000

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Where Is Money?Where Is Money?

Decline of Purchasing Prices

0

20

40

60

80

100

120

Maint. CostPur. Cost

Source: HBR,1999Source: HBR,1999

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Installed Vs. New PurchaseInstalled Vs. New Purchase

0

20

40

60

80

100

120

OldNew

Old 93.7 95.7 99.3 96.8

New 6.3 4.3 0.7 3.2

Car Train Airline Trackter

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(40) (30) (20) (10) 00

20

40

60

80

100

10 20 30 40 50

Revenue change (%)

Customer satisfaction indices

Revenue growth

0 40 80 120 160 2000

20

40

60

80

100

Customer satisfaction indices

Profit

240

Profit

고객만족 수익성고객만족 수익성

0 1 2 3 4 50

20

40

60

80

Customer satisfaction indices100

Revenue

Revenue

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75 85 95%

Prudential Property

Liberty Mutual

Aetna Casualty

Farmers Exchange

Allstate

Nationwide Mutual

State Farm

USAA Casualty

Amica

Profitability (combined ratio*)

Customer retention rate

R² = .82

미국 보험 산업 예시

Customer Retention RateCustomer Retention Rate

*Claims and expenses as a percent of premium income

0

50

100

150

200%

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0 1 2 3 4 5 6 7-1

0

1

2

3

4

5

6

7

Customer profit pattern

Year

Acquisitioncosts

Base profitNew products

Costimprovements

ReferralsPrice premium

고객당 수익성 추이 예시

Customer RetentionCustomer Retention

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0 1 2 3 4 5 6 7-$28.3

$12.4$15.8 $17.5 $18.9 $20.5 $22.3 $24.5

Annual customer profit

Year

Acquisitioncost

Base profit

Revenuegrowth:existingproducts

Revenuegrowth:newproducts

Cost savingsReferrals

Customer payback point

Customer Lifetime Profit : Amazon.comCustomer Lifetime Profit : Amazon.com

Acquisition cost

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CRMCRM

다행히 IT 산업의 발전이 은행 서비스를 더욱 발전시켰고 , 은행의 생산성 향상에 크게 … 그러나 은행의 고객층이 천차만별이라는 점을 간과해서는 안 된다 . 즉 인터넷을 사용할 수 있는 고객과 단순히 현금지급기 (ATM) 만 쓸 수 있는 고객 , 아니면 지점을 찾아야 하는 고객 등

데이비드 엘든 (HSBC 회장 , 2002.11.03 조선일보 )

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Financial impact of CRMFinancial impact of CRM

Profit Impact of 5% Increase in Rate of Customer Retention

35%

125%

25%

50% 45%35%

0%

20%

40%

60%

80%

100%

120%

140%

Businessbanking

Credit card Creditinsurance

Insurancebrokerage

Industrialdistribution

Softw are

Source: eLoyalty

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Progressive Insurance ( 미국 ) GPS/ 위성통신을 통한 보험 가입자의 운행 기록 수집 , 위험

평가 우수 운전자에게 25-50% 보험료 할인

온라인 채널 /CRM 부가가치를 소비자와 공유 많은 조직 , 프로세스의 개선 및 기술 개선 보상 청구 5 년 전에 비해 50% 단축 보상 청구의 57% 는 9 일 이내의 해결

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CAPITAL ONE CAPITAL ONE

CRM capabilities CRM offerings

Continuous testing and learning 45,000 tests per year For every product offering For every process change

1,200 CRM 담당직원

미 전체 1/7 가계에 대한 방대한 정보 수집

Innovation to match customers’ changing needs 55% of current offering did not exist 6 months ago 95% did not exist 2 years ago

34백만 고객에게 34백만 상품 제공 Credit card Auto finance Catalogs Mortgage Telecom service (long-distance,

mobile)

For in-bound calls Predict reasons for the call Route the call to the most appropriate

call operator Provide best options for complaint calls Predict cross-sell options

CRM impact

* ?

CAPITAL ONE ( 미국 )*

고객수 1998년 16.7백만에서 2001년 34백만으로 성장

불만고객 50-60% 잔류 결정

57% 신규 고객 1 년 내에 다른 상품 구매 (Up-sale, Cross-Sale)

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CRM Scope – Not every CRM is good for youCRM Scope – Not every CRM is good for you

개인화 중심의CRM

개인화 중심의CRM

전략 중심의CRM

전략 중심의CRM

아마존 , 야후의 개인화 중심의 CRM 은고객의 특성에 맞는 차별적인 제품과 서비스를 제공하는 논리를 디자인해야 한다

아마존 , 야후의 개인화 중심의 CRM 은고객의 특성에 맞는 차별적인 제품과 서비스를 제공하는 논리를 디자인해야 한다

고객 접점중심의CRM

고객 접점중심의CRM

•영업사원 중심 CRM – SFA

•서비스 중심의 CRM (CTI 또는 인터넷 중심 ) 은 역시 수십 - 수백억의 비용이 들어 고객 서비스 강화를 목적으로 한다

•영업사원 중심 CRM – SFA

•서비스 중심의 CRM (CTI 또는 인터넷 중심 ) 은 역시 수십 - 수백억의 비용이 들어 고객 서비스 강화를 목적으로 한다

데이터 베이스중심의 CRM

데이터 베이스중심의 CRM

Data warehouse구축은 수십 -수백억의 비용이 든다

Data warehouse구축은 수십 -수백억의 비용이 든다

분석 중심의 CRM

분석 중심의 CRM

Data mining장기적인 관계를 통한Cross-sellingUp-selling 지향

Data mining장기적인 관계를 통한Cross-sellingUp-selling 지향

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Best customers

Other customers

Households Annual variable contribution

Fully-costed contribution

(50%)

0%

50%

100%

150%

Not All Customers Are Kings…Not All Customers Are Kings…

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Customer PortfolioCustomer Portfolio

Customers: Return and Risk Marketing and Demarketing – on What bases? With what gut?

Low Return High

Lo

w R

isk Hig

h

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Best Mix and Match - Very Complex System Problem Best Mix and Match - Very Complex System Problem

지주회사

은행 신용카드 증권

..Service Bank

Product Bank

Sales Bank

High Net Worth

Affluent 고객

Mass Affluent

Mass 고객

Sub-prime Accounts

BranchBranch

ARS ARS

ATM ATM

InternetInternet

Mobile Mobile

TV TV

은행

보험

신용카드

증권

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서비스

영업 기회

신규 고객화 및 기존 고객

활성화

마케팅

고객 DB

Customer Creation

Customer Developme

nt

Customer Retentio

n

고객관점 기능관점

고객 정보의 지속적 축적

영업

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Demo Demo

From Analytical CRM to Product/Service/Marketing Strategies

Demo

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Beyond RepastBeyond Repast

J2EEJ2EE

Biz. Logic Layer (Engine)

Presentation Layer

Persistence Layer

Environment

RDBMSSQL 을 이용한 분석 Tool

분석 문서

시뮬레이션 환경 설정

시뮬레이션 환경 설정 : 기초 데이터

Application Layer

rule

Detector

Effector

Human Agent

Relational Database Management System

input

output

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ChallengesChallenges

Something Very New Poor Knowledge Management Causality (Business Model)

Control Explanation

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Vision of Next EIS-SAPVision of Next EIS-SAP

Industry 1 Problem Domain 1

….. Problem Domain m

Industry 2

…..

Industry n

Q&AThank YouThank You