Thanks to training and education, and thanks to the emphasis given to the knowledge contexts in which sales occurred, Dell has succeeded in sharing networked knowledge, all of which was vital to at least one customer and might be generalizable to some or all customers. E-relations do not substitute for personal relationships, but record what was communicated, agreed, and planned, so that later understandings could be built on earlier ones.
In this way Dell overcame the problem identified as the basic knowledge management problem, described first by Snowden (2002), of converting from tacit sales knowledge known by "one" to explicit knowledge available to all. This is shown in the following table.
Where the knowledge is located
Explicit
Captured in salespeople's PC database
Distributed database across th Dell Corporation
Tacit
The individual salesperson's head
Salesperson's immediate colleagues
Retail banking has similar dilemmas to those of Merrill Lynch and Dell. Let's note the typical costs of transactions. The banking industry's average cost per transaction:
at a branch, $1.07;
on the phone, 54 cents;
at an ATM, 27 cents;
on the Internet, 01 cents.
Figure 8.8 illustrates the upward oscillation between high tech and high touch in marketing financial services and how these can be reconciled using the same philosophy that Merril Lynch and Dell were able to use.
Figure 8.8: High tech and high touch in financial services
Dilemma 4: Uniting Inner and Outer Orientation
Of crucial importance to marketing through the use of the Internet is bringing the "outside" of the company into the "inside" and letting the "inside" go "out." This perhaps exemplifies the essence of the whole marketing process.
It is a characteristic of modern business that information is increasingly stored in relationships, but where are these relationships located? Amazon's relationship with a publisher or record company is neither "inside" Amazon nor is it "inside" the supplier, but is carried via electronic impulses between the two. It is simultaneously accessible by interested parties from any point in the system. It is everywhere, yet nowhere in particular.
The real magic behind Amazon's resurgence is a bold bet by its founder and Chief Executive Officer Jeff Bezos. After all the doubts and criticism, Bezos has proved that his empire has staying power. As he states: "We're also constantly working on the website portion of the customer experience. There's still tremendous opportunity for improvement there - making it easier for customers to discover products and for products to discover customers."
And he's not limiting himself to selling Amazon's "own" goods. Bezos formed a unit to help more retailers sell to Amazon's 33 million customers, as the likes of Target and Toys 'R' Us already do. Some 19 percent of items sold on Amazon, in fact, are from other sellers. Says Bezos: "We know how to develop world-class technology to make the customer experience in e-commerce really good. It's a rapidly growing part of our business. And that goes from [large] companies that are customers all the way down to individuals using our web services to tap into the fundamental platform that is Amazon.com. They can build their own applications very effectively. It's almost closer to an ecosystem" (Bezos, 2003).
One of our champions in reconciling inner and outer direction is again Michael Dell. He observed in this respect: "One of the things that makes the Internet so exciting is that it brings the outside in. In today's market place you cannot afford to become insulated in your own activities" (Trompenaars and Hampden-Turner, 2001).
Dell's relationship with a supplier is neither "inside" Dell nor "inside" the supplier. What the Internet can do is host an entire ecosystem of suppliers, customers, partners, and subcontractors. Instead of ordering spare parts from its suppliers Dell allows them to discover for themselves the current state of inventories, by how many units and new orders from customers will draw down those inventories and make sure that Dell never runs out of components, while minimizing its carrying costs. Suppliers have the information to deliver "just in time" as their supply contracts specify. All elements in the ecosystem adjust themselves in coevolutionary patterns of mutuality.
"By virtually integrating with our suppliers in this way, we literally bring them into our business. And because our entire production is built to customer order, it requires dynamic and tight inventory control. By working virtually with our company, we challenge our suppliers to reach new heights of quality and efficiency. This improves their process and their inventory control, which creates greater value for them as well as for us and our customers," Dell explains (ibid.).
Instead of Amazon.com and Dell instructing their partners, suppliers, and subcontractors what to do, they provide and share with them the knowledge on which those instructions would have been based. The partner can then combine sources of information to make even more intelligent decisions. The ideal is to cooperate seamlessly, to use knowledge from the whole system to enable each node to behave autonomously.
Once again, both Amazon and Dell manage this cooperation with a high degree of sophistication. At Dell metrics of supplier/partner performance are agreed upon jointly every year, and these can be reviewed through Dell's secure web portal for suppliers. Through this portal each major supplier has its own equivalent of a customer's Premier Page. The portal also allows suppliers to link into Dell's own procurement orders, factory flow, etc.
At Amazon readers have an opportunity to write a review of a book and other readers can tell others how helpful the review was. "The idea of a merchant getting to know customers, introducing customers to each other, and making recommendations is, in a sense, a return to yesterday," Bezos was quoted saying in PC World in 2000. "In a sense, what technology has taken away from us is the ability for small-town merchants to make recommendations. But I think that what technology has taken away, maybe over time, technology can return."
Amazon.com's site currently uses two different methods:
Personalization, by tracking buyers' patterns and behavior to deliver recommendations for other books, and
Customization, by allowing users to rate different books to further refine recommendations. In using customization, Amazon's goal was to correct the misinterpretation of user behavior. Let's say you decided to buy a book for a friend. After that purchase, Amazon would base its recommendation list on your most recent buys and browsing habits - not necessarily now reflecting your taste and needs since it would be distorted by the book you had bought as a gift. Registered users might find it annoying to see books that didn't match their own interests in their recommendation lists, and being able to refine the list and remove items from it would make users more confident in checking Amazon's automated recommendations in the future.
Amazon also uses collaborative filtering data mining techniques to recommend products to return visitors based on the purchases of other customers who have bought the same or similar products.
Moreover, new levels of mutual understanding and greater joint intelligence are achieved where you and your partners share the same body of information and can follow each other's reasoning. Everyone has the same "inside information" and can draw the attention of either party to something the other may have missed. This dilemma is shown in Figure 8.9.