The Lippis Report

The global economic slowdown forecasted by economists and government agencies during the beginning of the year became real on March 7, 2008 when the Labor Department estimated that the nation lost 63,000 jobs in February. Since then, job loss continued to grow to nearly a half a million; Bear Stearns was sold to JP Morgan with help from the Federal Reserve; the housing mortgage crisis continued to brew while the drums of recession beat louder. This slow march of bad economic news culminated in the worst stock market performance during June since the Great Depression.

But while the housing, auto, airline, financial and consumer markets are feeling pain, business spending on IT remains strong. July 17th, just two days after this Lippis Report is published, will bring financial reporting from Cisco, Microsoft, IBM and many others. Since none have pre-announced bad news, we expect that the 4th quarter is solid for IT. During bad economic cycles during the 70s, 80s and 90s smart business and IT leaders invested in their business infrastructure to gain competitive advantage. It seems like business and IT leaders are doing the same this time around. In this Lippis Report we introduce the "œBranch 2.0" concept and show how savvy leaders are focusing on their branch office and retail stores to improve customer experience, grow revenues and lower total cost of ownership too with networks and communications.

Information Technology (IT) leaders are in a perpetual cycle of cost reduction and service creation with cost reduction being emphasized during difficult economic times. During down markets cost reduction initiatives are obviously important, but so too is service creation as corporations respond and react to new market realities. During economic down cycles there tends to be a bifurcation along the lines of business leaders who choose to invest in improved customer experience and those who focus primarily on cost cutting.

Case in point: Apple, Inc. continues to invest in its retail stores by improving the customer experience of the brand by using roaming sales representatives who can transact a purchase on the floor and email a customer's receipt versus having customers wait on lines. Their genius bars are just that: the genius being that they provide service and support to customers in the store offering up- and cross-selling opportunities. Apple does this and much more during a down market and is rewarded with over a 50% year over year unit growth in the first quarter of 2008, its best company performance.

Apple is not an isolated example. There are broad economic and market forces which have motivated business and IT leaders to re-distribute human and capital assets away from headquarter facilities toward branch offices and retail stores. Getting closer to customers and delivering a common brand experience across on-line plus brick and mortar facilities is a dominant goal. In fact, 62% of corporations have added new branch offices, accounting for an 11% year over year growth in their deployments according to a recent Nemertes Research study. Further, the majority of new hires are now targeted to branch office staffing ranks.

Business leaders realize that harnessing the intellectual power of distributed workforces play an important role in delivering customer value. Value is created by connecting a distributed workforce to the customer and the retailer's core operations, essentially placing personalized branch expertise wherever the customer happens to be. Personalized customer experience at branch offices offer new levels of top and bottom line success for retail businesses as Apple and other retailers demonstrate. Communications innovation is at the heart of this value creation.

There are five dominant trends in branch office and retail outlets including:

1) Improvement to the customer experience;

2) An increase in the number of brick and mortar facilities;

3) An increase in the number of personnel and resources focused on improved customer experience;

4) Unique value add to customer experience across on-line plus brick and mortar;

5) Communications and IT being central to branch office value creation.

Constraints Holding Back Branch Office Success

Retailing is one of the most competitive businesses in an economy. With brick and mortar and on-line competition omnipresent retail executives are challenged to find competitive differentiation beyond price. Customer loyalty is hard to gain and even harder to keep once acquired. Customers want a good to excellent experience at every brand touch point, be it on-line, over the phone, in the store and during the use of products or services before and after the sale.

Retail business executives are measured on customer experience, revenue and productivity. It's a challenge to find skilled employees and manage the high turnover rate typical for this industry. These executives strive for simple and timely business reporting to improve operations and the top line. Retail IT executives are expected to lower TCO while being integral to addressing the most pressing retail issues, those being customer brand loyalty and creation of an environment which delivers an excellent experience. Branch office constraints are focused around the following five issues:

• Staff skill levels and training
• Right here, right now customer transaction requirements
• Broad lack of loyalty, thanks to increased competition
• The inability to leverage a large number of branch offices to up- and cross-sell existing customers while gaining new ones
• The inability to address customer demand for personalized and relevant brand interaction at every touch point be it on the web, call centers, on-line and particularly in branch

Branch 2.0 Mitigates Constraints And Their Effect on Corporate Performance

The communications industry is driving new value in branch offices with Branch 2.0. Branch 2.0 leverages communications and IT to increase customer experience. IP telephony is the platform that enables a wide range of communications-based applications such as Unified Communications (UC) and Communications-Enabled Business Processes (CEBP) improvements. Business and IT leaders have a broader UC framework which extends beyond desktop and mobile phone communication launch points to a UC that is tied deep into business process, satisfying a competitive branch office business requirement.

Many business thought leaders are exploring how best to leverage their branch assets to up- and cross-sell customers while improving the branch office experience. These thought leaders are collectively thinking in terms of Branch 2.0, which from a real estate and staffing point of view is a smaller footprint but rich in IT. For example, staff expertise is a critical factor limiting the number of products and services that can flow through retail stores. To meet that end, intelligent IP video is an important attribute of Branch 2.0, assisting customers in selecting products or services that meet their needs out of hundreds of possibilities by linking a virtual expert into the sales process, and easing the localized staff expertise constraint of attempting to be an expert in hundreds of products and/or services.

The definition of Branch 2.0 can be communicated by a set of attributes and services that IT and business leaders can exploit to create value in their branch networks and address the constraints mentioned above. The following are Branch 2.0 attributes:

Multi-Site Capabilities: Branch 2.0 architecture offers capabilities to leverage resources between and among multiple sites within the network.

Multiple Modes of Communications: Branch 2.0 supports a wide range of communication options including mobility, IP video, Voice over Wi-Fi, SMS, E-mail, RFID, etc.

Open, Flexible Architecture: An open Branch 2.0 architecture is critical to scale a deployment and build upon that investment over a long period of time.

Presence: Presence or the ability to identify the availability of a single person or group of people is one of the most important attributes of Branch 2.0.

Security and Business Continuity: Branch 2.0 requires that customer data in a communication-enabled application is protected. Ensuring that during interactions between applications and live communications are available even in the event of disaster is a Branch 2.0 attribute.

Role-Based Communications: Branch 2.0 architectures offer the ability for IT leaders to mold and shape communications and application interactions to address unique user profiles.

Over the next several months we'll build upon this Lippis Report Research Note to assist business and IT leaders with ideas and best practices that improve branch office and store performance through Branch 2.0 concepts.