A piece in the Harvard Business Review recently said US corporations lose half their customers every five years. I was never very good at compound interest calculations or progressions, but it sounds to me as if, without remedial action, those corporations will be slipping into Chapter 11 inside 15 years. However, if all US corporations are in the same boat, 50% of all customers are regularly switching their loyalties. This is the famous customer churn in action. It presupposes an informed clientele that flits between suppliers from one never-to-be-repeated offer to another. A company would have to be remarkably incompetent to fail over time to attract some of these fickle souls. So what many a company loses with the left hand, it might statistically expect to recoup with the right. A Law of the Conservation of Customers might operate, to the eventual benefit of all.
It would upset the applecart if some of the customers take their business to Net-based operations with registered office addresses in the Cayman Islands.
Then there would be a steady drain, and companies could statistically expect a net loss of business. That complicates the equation but it may not be a realistic factor at the moment.
In any case, technology exists to combat the tendency. Data warehousing is all about minimising customer churn. Clearly, if an organisation can hold on to its customers for more than five years it will gain market share. Even if it only holds on to half of them for an extra six months on top of the five years, a competitor somewhere will feel the pinch.
That's the theory, at least. Not all data warehousing projects are successful.
Suppliers in this substantial corner of the IT market generally say that you need a specific business objective to get the best out of a data warehouse - to persuade every customer to spend an extra 50p a week, say. Some prospective users, they add, still aim rather vaguely for a marginal improvement in the productivity of large numbers of their employees. They shake their heads sadly at such lack of vision.
But it's hardly surprising companies should view the technology that way. Ever since PCs started making serious inroads into companies, the most common justification for the investment was the rather vague promise of increased personal productivity. This is what people have come to expect from information technology. Because the promise is vague and refers to qualities that resist precise measurement, it takes something of an act of faith to believe it. Once that act of faith is made, however, it can prove very durable. Even when IT clearly achieves the opposite of improved productivity - it is somehow regarded as an indulgence a company can afford because its systems have raised productivity beyond a level that would be compromised by such leisure activities. In short, all work and no play ...
An office full of dull boys and girls might not be very effective.
The idea of the IT industry selling indulgences and provoking a protestant backlash is appealing but perhaps a little contrived. What's more to the point is the extent to which IT users' faith in their suppliers is rewarded.
For example, do corporations on the supply side of the IT business lose half their customers every five years? In the old days of proprietary systems, the answer should have been no. The point of proprietary systems was that people were locked in for the long term. Have industry standards and open systems changed that?
If you look at the leading suppliers in various parts of the PC business today as opposed to five years ago, I suspect that you would find most of the names were the same. The order may have changed here and there but not the composition of the top three or four. Faith, apparently, extends beyond the promise of the technology.
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