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44 Part One Organizations, Management, and the Networked Enterprise

Customer and Supplier Intimacy
When a business really knows its customers, and serves them well, the custom-
ers generally respond by returning and purchasing more. This raises revenues
and profits. Likewise with suppliers: the more a business engages its suppli-
ers, the better the suppliers can provide vital inputs. This lowers costs. How to
really know your customers, or suppliers, is a central problem for businesses
with millions of offline and online customers.
The Mandarin Oriental in Manhattan and other high-end hotels exemplify the
use of information systems and technologies to achieve customer intimacy. These
hotels use computers to keep track of guests’ preferences, such as their preferred
room temperature, check-in time, frequently dialed telephone numbers, and tele-
vision programs, and store these data in a large data repository. Individual rooms
in the hotels are networked to a central network server computer so that they can
be remotely monitored or controlled. When a customer arrives at one of these
hotels, the system automatically changes the room conditions, such as dimming
the lights, setting the room temperature, or selecting appropriate music, based
on the customer’s digital profile. The hotels also analyze their customer data to
identify their best customers and to develop individualized marketing campaigns
based on customers’ preferences.
JCPenney exemplifies the benefits of information systems-enabled supplier
intimacy. Every time a dress shirt is bought at a JCPenney store in the United
States, the record of the sale appears immediately on computers in Hong Kong at
the TAL Apparel Ltd. supplier, a contract manufacturer that produces one in eight
dress shirts sold in the United States. TAL runs the numbers through a computer
model it developed and then decides how many replacement shirts to make, and
in what styles, colors, and sizes. TAL then sends the shirts to each JCPenney store,
bypassing completely the retailer’s warehouses. In other words, JCPenney’s shirt
inventory is near zero, as is the cost of storing it.

Improved Decision Making
Many business managers operate in an information fog bank, never really
having the right information at the right time to make an informed decision.
Instead, managers rely on forecasts, best guesses, and luck. The result is over-
or underproduction of goods and services, misallocation of resources, and poor
response times. These poor outcomes raise costs and lose customers. In the
past decade, information systems and technologies have made it possible for
managers to use real-time data from the marketplace when making decisions.
For instance, Verizon Corporation, one of the largest telecommunication
companies in the United States, uses a Web-based digital dashboard to provide
managers with precise real-time information on customer complaints, network
performance for each locality served, and line outages or storm-damaged lines.
Using this information, managers can immediately allocate repair resources
to affected areas, inform consumers of repair efforts, and restore service fast.

Competitive Advantage
When firms achieve one or more of these business objectives—operational
excellence; new products, services, and business models; customer/supplier
intimacy; and improved decision making—chances are they have already
achieved a competitive advantage. Doing things better than your competitors,
charging less for superior products, and responding to customers and suppliers
in real time all add up to higher sales and higher profits that your competitors
cannot match. Apple Inc., Walmart, and UPS, described later in this chapter, are

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