Home Depot and User-Centric Enterprise Architecture

Operational efficiency can be the downfall of customer service.

Home Depot, with approximately $80 billion in sales is #22 on the Fortune 500. They are the world's largest home improvement specialty retailer with over 2200 retail stores, and after Wal-Mart, they are the second largest retailer in the U.S.

Yet, Home Depot has been on a slide, according to Fortune Magazine, 29 September 2008.

“Over the past several years a trip to the big orange box has so often ended in frustration that the company once famous for its helpful employees became fodder for late-night TV jokes and home to hundreds of blog rants about bad experiences and disengaged or scarce employees."

How has this affected business?

“On the University of Michigan’s American Customer Satisfaction Index, Home Depot fell eight points in seven years, to 67 at the end of 2007. It was the largest drop for any retailer in the index, while rival Lowe’s remained steady at 75…In this third year of decline, Home Depot’s same-store sales dropped 7.9% in 2008 second fiscal quarter; rival Lowe’s posted a 5.3% drop.”

What went wrong at Home Depot?

In 2000, Robert Nardelli of GE took over as CEO, acquired 30 companies and nearly doubled revenues, but he also imposed the rigorous GE style “systems- and data-culture, to help centralize purchasing and merchandising…[focusing] on growth and efficiency” and assessing store managers on 30 metrics, but “none related to customer service.”

Can you believe that Home Depot used 30 measures and NOT ONE had to do with customer service???

Unfortunately, says Ken Langone, one of the founders of Home Depot, Nardelli “didn’t appreciate the importance of a kid on the floor with an apron on.”

“The focus was on the metrics below the sales line, but not sales itself,” says a regional manager. “Stores became dirty, employees, surely or scarce. The result a company that looked better on paper, felt much unhappier in person. And in the retail business, where the customer experience is what matters most, that unhappiness eventually showed up at the cash register.”

Back to customer basics:

Now, under new CEO Frank Blake, Home Depot is returning to its customer-driven roots, and as a result they are closing the same-store sales gap with Lowes and stopping the slide in customer satisfaction. But regaining the trust of their customers will certainly be a challenge and a road to recovery.

As I read this story in Fortune about Home Depot and internalized it, I came to appreciate more than ever the duality and criticality of User-centric Enterprise Architecture (UCEA).

UCEA is not just developing the enterprise architecture with our users in mind (i.e. providing critical strategic information and governance services to the executive decision makers, line of business program and project managers, and IT professionals)—that is only one part. Perhaps the more critical element of User-centric EA is focusing the enterprise’s architecture on its customers. The way to continuously move the organization into the future is to always to focus and refocus on the organizations’ customers—on their needs, tastes, and continuous satisfaction.

The key is to align the business and technical architecture with customer needs. The organization will only succeed if its users are getting what they need and that is the architecture that must be developed and refined over time.

Home Depot and User-Centric Enterprise Architecture

Integrated Marketing Communications and Enterprise Architecture

There is a better way to showing customer love than inundating them with marketing and communications that are not coordinated, not focused, redundant, inconsistent, and not cost-effective.

This is the case of many organizations that have multiple, decentralized, lines of business (LOB) that have their own revenue and profitability targets. Typically LOBs, branches, and call centers solicit customers and their business independently, with distinct marketing campaigns, promotional offers, and customer surveys.

What’s the way to improve our customer interactions?

Integrated Marketing Communications (IMC) is “a planning process designed to assure that all brand contacts received by a customer or prospect for a product, service, or organization are relevant to that person and consistent over time.” (American Marketing Association)

In DM Review, May 2008, Lisa Loftis provides us a vision of IMC utopia, where customer contact are coordinated, targeted, is helpful to the customer, and profitable to the firm:

“Imagine being able to coordinate and prioritize your entire program of promotions and communications across all customer touchpoints. You could eliminate conflicting offers across channels. You could stop inundating you bet customers with multiple marketing campaigns, You could deliver a seamless dialog with customers where every interaction is relevant to the customer, delivered at exactly the right time and satisfies a significant customer needs. In this universe, the very act of communicating with your customer fosters a positive experience, facilitates trust and expands the relationship.”

Why is IMC important?

“Timely, relevant communications go a long way toward increasing satisfaction, and there is no question that satisfied customers add to the bottom line.”

How is IMC related to User-centric Enterprise Architecture?

User-centric EA relies on IMC to make the architecture end-users experience more satisfying and beneficial to them and thus more valuable to the organization’s decision making. As opposed to traditional EA that often is user/customer blind and develops esoteric and convoluted “artifacts”, User-centric EA seeks to provide end-users with IMC-style information products based on relevant information that is easy to understand and readily available.

What are the enterprise technical solutions that need to be architected in order to build the overall organizational IMC capability?

1. Customer Relationship Manager (CRM) systems—utilizing CRM system to manage customer contacts. This includes an organization “building a database about its customers that described relationships in sufficient detail so that management, salespeople, people providing service, and perhaps the customer directly could access information, match customer needs with product plans and offerings, remind customers of service requirements, know what other products a customer had purchased, and so forth.” (www.techtarget.com)
2. Business Intelligence capabilities—“understanding customer behavior and preference through sophisticated predictive analytics, wading through myriad potential contacts to determine the highest-priority opportunities and tuning your data warehouse to work in conjunction with specific contact optimization applications.” (DM Review)
3. Organizational Culture—adopting a customer contact optimization strategy in an organization that is decentralized is a tough sell.

In the end, developing true IMC capabilities involves moving the organization towards a more centralized model of asset management. That does not mean losing your agility and nimbleness in the marketplace in terms of strategy and decision making, but rather using your consolidated organizational assets (such as data warehouses and business intelligence, CRM systems, and the breadth of depth of your product offerings) to your advantage. You want a unified brand and voice when talking with the customer.

Integrated Marketing Communications and Enterprise Architecture