Six Sigma in Motorola

For Motorola, the originator of Six Sigma, the answer to the question "Why Six Sigma?" was simple: survival. Motorola came to Six Sigma because it was being consistently beaten in the competitive marketplace by foreign firms that were able to produce higher quality products at a lower cost. When a Japanese firm took over a Motorola factory that manufactured Quasar television sets in the United States in the 1970s, they promptly set about making drastic changes in the way the factory operated. Under Japanese management, the factory was soon producing TV sets with 1/20th the number of defects they had produced under Motorola management. They did this using the same workforce, technology, and designs, making it clear that the problem was Motorola's management. Eventually, even Motorola's own executives had to admit "our quality stinks,"[i]
Finally, in the mid 1980s, Motorola decided to take quality seriously. Motorola's CEO at the time, Bob Galvin, started the company on the quality path known as Six Sigma and became a business icon largely as a result of what he accomplished in quality at Motorola. Today, Motorola is known worldwide as a quality leader and a profit leader. After Motorola won the Malcolm Baldrige National Quality Award in 1988 the secret of their success became public knowledge and the Six Sigma revolution was on. Today it's hotter than ever.
It would be a mistake to think that Six Sigma is about quality in the traditional sense. Quality, defined traditionally as conformance to internal requirements, has little to do with Six Sigma. Six Sigma is about helping the organization make more money. To link this objective of Six Sigma with quality requires a new definition of quality. For Six Sigma purposes I define quality as the value added by a productive endeavor. Quality comes in two flavors: potential quality and actual quality. Potential quality is the known maximum possible value added per unit of input. Actual quality is the current value added per unit of input. The difference between potential and actual quality is waste. Six Sigma focuses on improving quality (i.e., reducing waste) by helping organizations produce products and services better, faster and cheaper. In more traditional terms, Six Sigma focuses on defect prevention, cycle time reduction, and cost savings. Unlike mindless cost-cutting programs which reduce value and quality, Six Sigma identifies and eliminates costs which provide no value to customers: waste costs.
For non-Six Sigma companies, these costs are often extremely high. Companies operating at three or four sigma typically spend between 25 and 40 percent of their revenues fixing problems. This is known as the cost of quality, or more accurately the cost of poor quality. Companies operating at Six Sigma typically spend less than 5 percent of their revenues fixing problems (Figure 1). The dollar cost of this gap can be huge. General Electric estimates that the gap between three or four sigma and Six Sigma was costing them between $8 billion and $12 billion per year.
Figure 1: Cost of Poor Quality versus Sigma Level
What is Six Sigma?
Six Sigma is a rigorous, focused and highly effective implementation of proven quality principles and techniques. Incorporating elements from the work of many quality pioneers, Six Sigma aims for virtually error free business performance. Sigma, s, is a letter in the Greek alphabet used by statisticians to measure the variability in any process. A company's performance is measured by the sigma level of their business processes. Traditionally companies accepted three or four sigma performance levels as the norm, despite the fact that these processes created between 6,200 and 67,000 problems per million opportunities! The Six Sigma standard of 3.4 problems per million opportunities[1][1] is a response to the increasing expectations of customers and the increased complexity of modern products and processes.
If you're looking for new techniques, don't bother. Six Sigma's magic isn't in statistical or high-tech razzle-dazzle. Six Sigma relies on tried and true methods that have been around for decades. In fact, Six Sigma discards a great deal of the complexity that characterized Total Quality Management (TQM). By one expert's count, there were over 400 TQM tools and techniques. Six Sigma takes a handful of proven methods and trains a small cadre of in-house technical leaders, known as Six Sigma Black Belts, to a high level of proficiency in the application of these techniques. To be sure, some of the methods used by Black Belts are highly advanced, including the use of up-to-date computer technology. But the tools are applied within a simple performance improvement model known as DMAIC, or Define-Measure-Analyze-Improve-Control[1][2]. DMAIC can be described as follows:
D
Define the goals of the improvement activity. At the top level the goals will be the strategic objectives of the organization, such as a higher ROI or market share. At the operations level, a goal might be to increase the throughput of a production department. At the project level goals might be to reduce the defect level and increase throughput. Apply data mining methods to identify potential improvement opportunities.
M
Measure the existing system. Establish valid and reliable metrics to help monitor progress towards the goal(s) defined at the previous step. Begin by determining the current baseline. Use exploratory and descriptive data analysis to help you understand the data.
A
Analyze the system to identify ways to eliminate the gap between the current performance of the system or process and the desired goal. Apply statistical tools to guide the analysis.
I
Improve the system. Be creative in finding new ways to do things better, cheaper, or faster. Use project management and other planning and management tools to implement the new approach. Use statistical methods to validate the improvement.
C
Control the new system. Institutionalize the improved system by modifying compensation and incentive systems, policies, procedures, MRP, budgets, operating instructions and other management systems. You may wish to utilize systems such as ISO 9000 to assure that documentation is correct.

Infrastructure
A very powerful feature of Six Sigma is the creation of an infrastructure to ensure that performance improvement activities have the necessary resources. In this author's opinion, failure to provide this infrastructure is the #1 reason why 80% of all TQM implementations failed in the past. Six Sigma makes improvement and change the full-time job of a small but critical percentage of the organization's personnel. These full time change agents are the catalyst that institutionalizes change. Figure 2 illustrates the required human resource commitment required by Six Sigma.
Figure 2: Six Sigma Infrastructure
Leadership
Six Sigma involves changing major business value streams that cut across organizational barriers. It is the means by which the organization's strategic goals are to be achieved. This effort cannot be led by anyone other than the CEO, who is responsible for the performance of the organization as a whole. Six Sigma must be implemented from the top-down.
Champions and Sponsors
Six Sigma champions are high-level individuals who understand Six Sigma and are committed to its success. In larger organizations Six Sigma will be led by a full time, high level champion, such as an Executive Vice-President. In all organizations, champions also include informal leaders who use Six Sigma in their day-to-day work and communicate the Six Sigma message at every opportunity. Sponsors are owners of processes and systems who help initiate and coordinate Six Sigma improvement activities in their areas of responsibilities.
Master Black Belt
This is the highest level of technical and organizational proficiency. Master Black Belts provide technical leadership of the Six Sigma program. Thus, they must know everything the Black Belts know, as well as understand the mathematical theory on which the statistical methods are based. Master Black Belts must be able to assist Black Belts in applying the methods correctly in unusual situations. Whenever possible, statistical training should be conducted only by Master Black Belts. Otherwise the familiar "propagation of error" phenomenon will occur, i.e., Black Belts pass on errors to green belts, who pass on greater errors to team members. If it becomes necessary for Black Belts and Green Belts to provide training, they should do only so under the guidance of Master Black Belts. For example, Black Belts may be asked to provide assistance to the Master during class discussions and exercises. Because of the nature of the Master's duties, communications and teaching skills are as important as technical competence.
Black Belt
Candidates for Black Belt status are technically oriented individuals held in high regard by their peers. They should be actively involved in the process of organizational change and development. Candidates may come from a wide range of disciplines and need not be formally trained statisticians or engineers. However, because they are expected to master a wide variety of technical tools in a relatively short period of time, Black Belt candidates will probably possess a background including college-level mathematics and the basic tool of quantitative analysis. Coursework in statistical methods may be considered a strong plus or even a prerequisite. As part of their training, Black Belts receive 160 hours of classroom instruction, plus one-on-one project coaching from Master Black Belts or consultants.
Successful candidates will be comfortable with computers. At a minimum, they should understand one or more operating systems, spreadsheets, database managers, presentation programs, and word processors. As part of their training they will be required to become proficient in the use of one or more advanced statistical analysis software packages. Six Sigma Black Belts work to extract actionable knowledge from an organization's information warehouse. To ensure access to the needed information, Six Sigma activities should be closely integrated with the information systems (IS) of the organization. Obviously, the skills and training of Six Sigma Black Belts must be enabled by an investment in software and hardware. It makes no sense to hamstring these experts by saving a few dollars on computers or software.
Green Belt
Green Belts are Six Sigma project leaders capable of forming and facilitating Six Sigma teams and managing Six Sigma projects from concept to completion. Green Belt training consists of five days of classroom training and is conducted in conjunction with Six Sigma projects. Training covers project management, quality management tools, quality control tools, problem solving, and descriptive data analysis. Six Sigma champions should attend Green Belt training. Usually, Six Sigma Black Belts help Green Belts define their projects prior to the training, attend training with their Green Belts, and assist them with their projects after the training.
Staffing Levels and Expected Returns
As stated earlier in this article, the number of full time personnel devoted to Six Sigma is not large. Mature Six Sigma programs, such as those of Motorola, General Electric, Johnson & Johnson, AlliedSignal, and others average about one-percent of their workforce as Black Belts. There is usually about one Master Black Belts for every ten Black Belts, or about 1 Master Black Belt per 1,000 employees. A Black Belt will typically complete 5 to 7 projects per year. Project teams are led by Green Belts, who, unlike Black Belts and Master Black Belts, are not employed full time in the Six Sigma program. Black Belts are highly prized employees and are often recruited for key management positions elsewhere in the company. After Six Sigma has been in place for three or more years, the number of former Black Belts tends to be about the same as the number of active Black Belts.
Estimated savings per project varies from organization to organization. Reported results average about US$150,000 to US$243,000. Note that these are not the huge mega-projects pursued by Re-engineering. Yet, by completing 5 to 7 projects per year per Black Belt, the company will add in excess of US$1 million per year per Black Belt to its bottom line. For a company with 1,000 employees the numbers would look something like this:
Master Black Belts: 1
Black Belts: 10
Projects: = 50 to 70 (5 to 7 per Black Belt)
Estimated saving: US$9 million to US$14.6 million (US$14,580 per employee)
Do the math for your organization and see what Six Sigma could do for you. Because Six Sigma savings impact only non-value added costs, they flow directly to your company's bottom line.

Implementation of Six Sigma
After over two decades of experience with quality improvement, there is now a solid body of scientific research regarding the experience of thousands of companies implementing major programs such as Six Sigma. Researchers have found that successful deployment of Six Sigma involves focusing on a small number of high-leverage items. The steps required to successfully implement Six Sigma are well-documented.
1. Successful performance improvement must begin with senior leadership. Start by providing senior leadership with training in the principles and tools they need to prepare their organization for success. Using their newly acquired knowledge, senior leaders direct the development of a management infrastructure to support Six Sigma. Simultaneously, steps are taken to "soft-wire" the organization and to cultivate an environment for innovation and creativity. This involves reducing levels of organizational hierarchy, removing procedural barriers to experimentation and change, and a variety of other changes designed to make it easier to try new things without fear of reprisal.
2. Systems are developed for establishing close communication with customers, employees, and suppliers. This includes developing rigorous methods of obtaining and evaluating customer, employee and supplier input. Base line studies are conducted to determine the starting point and to identify cultural, policy, and procedural obstacles to success.
3. Training needs are rigorously assessed. Remedial skills education is provided to assure that adequate levels of literacy and numeracy are possessed by all employees. Top-to-bottom training is conducted in systems improvement tools, techniques, and philosophies.
4. A framework for continuous process improvement is developed, along with a system of indicators for monitoring progress and success. Six Sigma metrics focus on the organization's strategic goals, drivers, and key business processes.
5. Business processes to be improved are chosen by management, and by people with intimate process knowledge at all levels of the organization. Six Sigma projects are conducted to improve business performance linked to measurable financial results. This requires knowledge of the organization's constraints.
6. Six Sigma projects are conducted by individual employees and teams led by Green Belts and assisted by Black Belts.
Although the approach is simple, it is by no means easy. But the results justify the effort expended. Research has shown that firms that successfully implement Six Sigma perform better in virtually every business category, including return on sales, return on investment, employment growth, and share price increase. When will you be ready to join the Six Sigma revolution?

Understanding Customer Relations Management

Introduction
In the mid-twentieth century, mass production techniques and mass marketing changed the competitive landscape by increasing product availability for consumers. However, the purchasing process that allowed the shopkeeper and customer to spend quality time getting to know each other was also fundamentally changed. Customers lost their uniqueness, as they became an “account number” and shopkeepers lost track of their customers’ individual needs as the market became full of product and service options. Many companies today are racing to re-establish their connections to new as well as existing customers to boost long-term customer loyalty. Some companies are competing effectively and winning this race through the implementation of relationship marketing principles using strategic and technology-based customer relationship management (CRM) applications.
CRM technology applications link front office (e.g. sales, marketing and customer service) and back office (e.g. financial, operations, logistics and human resources) functions with the company's customer “touch points” (Fickel, 1999). A company's touch points can include the Internet, e-mail, sales, direct mail, telemarketing operations, call centers, advertising, fax, pagers, stores, and kiosks. Often, these touch points are controlled by separate information systems. CRM integrates touch points around a common view of the customer (Eckerson and Watson, 2000). Figure 1 demonstrates the relationship between customer touch points with front and back office operations.
In some organizations, CRM is simply a technology solution that extends separate databases and sales force automation tools to bridge sales and marketing functions in order to improve targeting efforts. Other organizations consider CRM as a tool specifically designed for one-to-one (Peppers and Rogers, 1999) customer communications, a sole responsibility of sales/service, call centers, or marketing departments. We believe that CRM is not merely technology applications for marketing, sales and service, but rather, when fully and successfully implemented, a cross-functional, customer-driven, technology-integrated business process management strategy that maximizes relationships and encompasses the entire organization (Goldenberg, 2000). A CRM business strategy leverages marketing, operations, sales, customer service, human resources, R&D and finance, as well as information technology and the Internet to maximize profitability of customer interactions. For customers, CRM offers customization, simplicity, and convenience for completing transactions, regardless of the channel used for interaction (Gulati and Garino, 2000).
CRM initiatives have resulted in increased competitiveness for many companies as witnessed by higher revenues and lower operational costs. Managing customer relationships effectively and efficiently boosts customer satisfaction and retention rates (Reichheld, 1996a, b; Jackson, 1994; Levine, 1993). CRM applications help organizations assess customer loyalty and profitability on measures such as repeat purchases, dollars spent, and longevity. CRM applications help answer questions such as “What products or services are important to our customers? How should we communicate with our customers? What are my customer's favorite colors or what is my customer's size?” In particular, customers benefit from the belief that they are saving time and money as well as receiving better information and special treatment (Kassanoff, 2000). Furthermore, regardless of the channel or method used to contact the company, whether it is the Internet, call centers, sales representatives, or resellers, customers receive the same consistent and efficient service (Creighton, 2000). Table I provides a brief overview of some of the benefits that CRM offers by sharing customer data throughout the organization and implementing innovative technology.
With much success, software vendors such as Oracle, SAP, PeopleSoft, Clarify, SAS, and Siebel are racing to bring off-the-shelf CRM applications to organizations. Many of these are the vendors responsible for developing enterprise resource planning (ERP) systems. AMR Research estimates that the CRM market will top $16.8 billion by 2003 (Tiazkun, 1999).
While there are many compelling reasons to consider a CRM strategy, caution and careful analysis is prudent. Hackney (2000) warns that although CRM software vendors may entice organizations with promises of all-powerful applications, to date there is no 100 percent solution. Possible risks such as project failure, inadequate return on investment, unplanned project budget revisions, unhappy customers, loss of employee confidence, and diversion of key management time and resources must be well thought out (Schweigert, 2000). In one example, a large telecommunications company rolled out a major CRM application to more than 1,000 sales reps in late 1999, at a cost of $10,000 per user, only to find a year later that fewer than 100 were using the system (Patton, 2001). Recent surveys further reveal that the average investment in CRM applications is $2.2 million dollars (CIO Research Reports, 2002), and that CRM implementation failure rate is as high as 65 percent (Apicella et al., 1999).
It is becoming increasingly clear that stalled or failed CRM projects are often the result of companies lacking a thorough understanding of what CRM initiatives entail. Thus, this paper first presents the evolution of CRM to facilitate the comprehension of the implementation issues. It then sets out to explore the underlying critical components that can enable (or hinder) the successful implementation of CRM initiatives. A CRM implementation model that integrates the three key dimensions of people, process, and technology within the context of an enterprise-wide customer-driven, technology-integrated, cross-functional organization is proposed in Figure 2. The essential roles of these three dimensions are further elaborated in the subsequent sections following the evolution of CRM.
2. CRM evolution
Customer relationship management itself is not a new concept but is now practical due to recent advances in enterprise software technology. An outgrowth of sales force automation (SFA) tools, CRM is often referred to in the literature as one-to-one marketing (Peppers and Rogers, 1999). SFA software automates routine tasks such as tracking customer contacts and forecasting. The goal of SFA is to allow the sales force to concentrate more on selling and less on administrative tasks. It should be noted, however, that CRM also has its roots in relationship marketing which is aimed at improving long run profitability by shifting from transaction-based marketing, with its emphasis on winning new customers, to customer retention through effective management of customer relationships (Christopher et al., 1991). Thus, CRM is a more complex and sophisticated application that mines customer data that has been pulled from all customer touch points, creating a single and comprehensive view of a customer while uncovering profiles of key customers and predicting their purchasing patterns. Technology that tracks and analyzes customer behavior allows companies to easily identify the best customers and focus marketing efforts and reward those who are likely to buy often. Acquiring a better understanding of existing customers allows companies to interact, respond, and communicate more effectively to significantly improve retention rates.
Innovations in technology, competitive environments, and the Internet are just several factors that make one-to-one initiatives a reality. Companies can develop these relationships to customize the shopping experience, better predict online buying patterns, entice customers with special offers or services, evaluate the economic advantage of each customer, and build long-term mutually beneficial relationships. The following examples highlight some of the benefits of CRM applications.
Ritz-Carlton, an upscale chain of hotels, records guest preferences gleaned from conversation with customers during their stay and uses them to tailor the services that customers receive on their next visit at any other Ritz-Carlton in the world. Requests for items such as hypoallergenic pillows and additional towels are recorded for future use so that personalized goods and services can be added for repeat customers. Mining customer data allowed Bank One to significantly reduce turnover among its most profitable small business customers by assigning dedicated account managers (Conlon, 1999). The service industry, however, is not the only industry to harness people, process, and technology to manage resilient customer relationships. Dell Computer Corporation exemplifies CRM success by combining IT with front and back office operations. Every PC that Dell manufactures is already sold. From the Internet, Dell customers are able to configure their own system, from thousands of hardware and software combinations, with an easy-to-use ordering system that provides delivery dates as well as progress updates.
3. The technology factor
Information technology (IT) has long been recognized as an enabler to radically redesign business processes in order to achieve dramatic improvements in organizational performance (Davenport and Short, 1990; Porter, 1987). IT assists with the re-design of a business process by facilitating changes to work practices and establishing innovative methods to link a company with customers, suppliers and internal stakeholders (Hammer and Champy, 1993). CRM applications take full advantage of technology innovations with their ability to collect and analyze data on customer patterns, interpret customer behavior, develop predictive models, respond with timely and effective customized communications, and deliver product and service value to individual customers. Using technology to “optimize interactions” with customers, companies can create a 360 degree view of customers to learn from past interactions to optimize future ones (Eckerson and Watson, 2000).
Innovations in network infrastructure, client/server computing, and business intelligence applications are leading factors in CRM development. CRM solutions deliver repositories of customer data at a fraction of the cost of older network technologies. CRM systems accumulate, store, maintain, and distribute customer knowledge throughout the organization. The effective management of information has a crucial role to play in CRM. Information is critical for product tailoring, service innovation, consolidated views of customers, and calculating customer lifetime value (Peppard, 2000). Among others, data warehouses, enterprise resource planning (ERP) systems, and the Internet are central infrastructures to CRM applications.
3.1 Data warehouse technology
A data warehouse is an information technology management tool that gives business decision makers instant access to information by collecting “islands of customer data” throughout the organization by combining all database and operational systems such as human resources, sales and transaction processing systems, financials, inventory, purchasing, and marketing systems. Specifically, data warehouses extract, clean, transform, and manage large volumes of data from multiple, heterogeneous systems, creating a historical record of all customer interactions (Eckerson and Watson, 2000). The abilities to view and manipulate set data warehouses apart from other computer systems. Constantly extracting knowledge about customers reduces the need for traditional marketing research tools such as customer surveys and focus groups. Thus, it is possible to identify and report by product or service, geographic region, distribution channel, customer group, and individual customer (Story, 1998). Information is then available to all customer contact points in the organization.
Data warehousing technology makes CRM possible because it consolidates, correlates and transforms customer data into customer intelligence that can used to form a better understanding of customer behavior. Customer data includes all sales, promotions, and customer service activities (Shepard et al., 1998). In addition to transaction details, many other types of data generated from internal operations can make significant contributions. Information related to billing and account status, customer service interactions, back orders, product shipment, product returns, claims history, and internal operating costs all can improve understanding of customers and their purchasing patterns. The ability of a data warehouse to store hundreds and thousands of gigabytes of data make drill-down analysis feasible as well as immediate. A corporate awareness survey conducted jointly by Cap Gemini and International Data Corporation (1999) found that 70 percent of US firms and 64 percent of European firms plan on building a data warehouse to support their CRM projects. SAS Corporation, a significant player in the data warehouse industry, has recently teamed with Peppers and Rogers Group to provide “CRM Resource”, a weekly guide on industry-focused CRM. A brief outline of organizational benefits with a data warehouse are:
accurate and faster access to information to facilitate responses to customer questions;
data quality and filtering to eliminate bad and duplicate data;
extract, manipulate and drill-down data quickly for profitability analysis, customer profiling, and retention modeling;
advanced data consolidation and data analysis tools for higher level summary as well as detailed reports; and
calculate total present value and estimate future value of each and every customer.
3.2 Enterprise resource planning (ERP) systems
Enterprise resource planning (ERP), when successfully implemented, links all areas of a company including order management, manufacturing, human resources, financial systems and distribution with external suppliers and customers into a tightly integrated system with shared data and visibility (Chen, 2001). An overview of ERP systems is provided in Figure 3. Major enterprise systems vendors, who have been successful in the ERP market, are gearing up for the growing needs of CRM by aggressively forming alliances with, or taking over other software companies that have been operating in the CRM market. For example, J.D. Edwards entered into a deal with Seibel, a leading CRM company, in May 1999 and subsequently shut down its in-house sales force automation team. Peoplesoft acquired Vantive's CRM software in October 1999 to integrate with its own ERP systems. Through mySAP initiatives, users of SAP R/3 system can add Web-based CRM and SCM functions while leaving the core R/3 system intact (Xenakis, 2000). Oracle has taken the most drastic steps in forming a new bond between ERP and CRM. The new flagship ERP/CRM software package, called 11i, is heavily Internet oriented and allows users to seamlessly implement modules of CRM with a smaller ERP suite (Sweat, 2000).
Significant differences exist between ERP technology and CRM applications. ERP serves as a strong foundation with tightly integrated back office functions while CRM strives to link front and back office applications to maintain relationships and build customer loyalty. ERP systems promise to integrate all functional areas of the business with suppliers and customers. CRM promises to improve front office applications and customer touch points to optimize customer satisfaction and profitability. While ERP systems address fragmented information systems, CRM addresses fragmented customer data. CRM applications are Web-enabled and designed to extend the data mining capabilities of ERP throughout the supply chain to customers, distributors, and manufacturers (Scannell, 1999). Organizations can use CRM analytical capabilities to predict and answer key business questions on customer intelligence and share the results across channels. Although ERP is not required for CRM, providing customers, suppliers, and employees with Web-based access to systems through CRM will only be beneficial if the underlying infrastructure, such as data warehouses and/or ERP, exists (Solomon, 2000). Companies with an ERP system, however, need to understand where they are in the implementation process, as well as assess where other technologies, such as data warehouses, fit in before plunging into CRM applications (Saunders, 1999).
3.3 Impact of the Internet
The explosive growth of the Internet has also brought new meaning to building customer relationships. Greater customer access to the organization, such as online ordering and around the clock operations, has set the stage for a shifting paradigm in customer service. A recent report describes how successful Web sites are in building lasting relationships with “e-customers” by offering services in traditionally impossible ways (Peppers and Rogers, 2000). Using a series of richly detailed case studies, they also contended that in the broad arena of business-to-business commerce, organizations would rise or fall on the basis of their capabilities to cultivate one-to-one relationships with their customers (Peppers and Rogers, 2001). Customers expect organizations to anticipate their needs and provide consistent service at levels above their expectations. In return, customers are loyal to the organization for longer periods of time. For instance, the American Airlines Web site builds customized customer views in real time allowing two million frequent fliers to have a unique experience each time they log on (Peppers and Rogers, 1999). Prior to the Internet, there was not a cost-effective way to tell millions of customers fitting a certain profile about an immediately available special fare. With the interactive capability of the Internet, American Airlines can do exactly that without having to tell everyone about every special fare. As a part of CRM, American Airlines offers loyal customers promotional fares and special discounts to partner businesses based on individual customer preferences.
4. Business process changes
Not long ago, companies with efficient facilities and greater resources were able to satisfy customer needs with standardized products, reaping advantages through productivity gains and lower costs. Mass marketing and mass production were successful as long as customers were satisfied with standardized products. As more firms entered the market, mass marketing techniques, where the goal was to sell what manufacturing produced, started to lose effectiveness. Target marketing, or segmentation, shifted a company's focus to adjusting products and marketing efforts to fit customer requirements. Changing customer needs and preferences require firms to define smaller and smaller segments.
It has become well known that retaining customers is more profitable than building new relationships. Consequently, relationship marketing was developed on the basis that customers vary in their needs, preferences, buying behavior, and price sensitivity. Therefore, by understanding customer drivers and customer profitability, companies can better tailor their offerings to maximize the overall value of their customer portfolio. In his seminal study, Reichheld (1996a, b) has documented that a 5 percent increase in customer retention resulted in an increase in average customer lifetime value of between 35 percent and 95 percent, leading to significant improvements in company profitability.
Customer relationship marketing techniques focus on single customers and require the firm to be organized around the customer, rather than the product. Customer-centric organizations seamlessly integrate marketing and other business processes to serve customers and respond to market pressures. Firms that evolve to this stage will benefit from a marketing-manufacturing interface, resulting in the flexibility to meet changing customer needs efficiently and effectively (Prabhaker, 2001). Figure 4 demonstrates the change from weak to strong customer relationships based on changing marketing strategies of mass marketing, target marketing and customer relationship marketing.
Despite the technological perspectives discussed in the previous section, the philosophical bases of CRM are relationship marketing, customer profitability, lifetime value, retention and satisfaction created through business process management. In fact, Anton (1996) characterizes CRM as an integrated approach to managing customer relationships with re-engineering of customer value through better service recovery and competitive positioning of the offer. Couldwell (1998) further depicts CRM as a combination of business process and technology that seeks to understand a company's customer from the perspective of who they are, what they do, and what they are like. In fact, companies have been repeatedly warned that failure is eminent if they believe that CRM is only a technology solution (Goldenberg, 2000).
The statement “retaining customers is more profitable than building new relationships” is especially true in the changing Internet market. The Boston Consulting Group estimates that it costs $6.80 to market to existing customers via the Web, versus $34 to acquire a new Web customer (Hildebrand, 1999). A recent Deloitte Consulting survey of more than 900 executives across different industries also revealed that manufacturers that set goals for improving customer loyalty are 60 percent more profitable than those without such a strategy (Saunders, 1999). A CRM strategy can help create new customers, and more importantly, develop and maintain existing customers.
Customer relationship management is an enterprise-wide customer-centric business model that must be built around the customer. It is a continuous effort that requires redesigning core business processes starting from the customer perspective and involving customer feedback. The Seybold Group starts this process by asking customers what barriers they encounter from the company (Seybold, 1998; Seybold et al., 2001). In a product-focused approach, the goal is to find customers for the products using mass marketing efforts. In a customer-centric approach, the goal becomes developing products and services to fit customer needs. In Seybold's work, five steps in designing a customer-centric organization were suggested:
make it easy for customers to do business;
focus on the end customer;
redesign front office and examine information flows between the front and back office;
foster customer loyalty by becoming proactive with customers; and
build in measurable checks and balances to continuously improve.
The goals of a customer-centric model are to increase revenue, promote customer loyalty, reduce the cost of sales and service, and improve operations. Optimizing customer relationships requires a complete understanding of all customers; profitable as well as non-profitable, and then to organize business processes to treat customers individually based on their needs and their values (Renner, 2000). Within the paradigm of business process re-engineering, Al-Mashari and Zairi (1999) offer a holistic view of success and fail factors. Specifically, change management, management support, organizational structure, project management, and information technology were highlighted. Companies considering CRM implementation can also benefit from addressing these five BPR issues.
5. People changes
Implementation of enterprise technology, such as CRM and ERP, requires changes to organizational culture (Al-Mashari and Zairi, 2000). While both technology and business processes are both critical to successful CRM initiatives, it is the individual employees who are the building blocks of customer relationships. There are several underlying dimensions surrounding management and employees that successful CRM implementations require.
Top management commitment is an essential element for bringing an innovation online and ensuring delivery of promised benefits. Top management commitment, however, is much more than a CEO giving his or her blessing to the CRM project. Customer-centric management requires top management support and commitment to CRM throughout the entire CRM implementation. Without it, momentum quickly dies out. Furthermore, top management should set the stage in CRM initiatives for leadership, strategic direction and alignment of vision and business goals (Herington and Peterson, 2000). This view was reinforced in a recent META Group Report (1998) that singled out top management support and involvement as a key success factor for CRM implementations.
As in most major change efforts, objections and disagreement among various functional departments that arise in the process of business reengineering and CRM implementation can only be solved through personal intervention by top management, usually resulting in changes to corporate culture. The META Group Report (1998) concluded that investing in CRM technology without a customer oriented cultural mindset is like throwing money into a black hole. Dickie (1999) also warns against starting a CRM project if senior management does not fundamentally believe in re-engineering a customer-centric business model.
CRM projects require full-time attention of the implementation project team with representatives from sales, marketing, manufacturing, customer services, information technology, etc. Cap Gemini and IDC found that top management and marketing and sales management are generally the initiators of a corporate CRM project (1999). In addition, project teams require not only sponsorship by top management but also a project champion that can persuade top management for continuous change efforts (Al-Mashari and Zairi, 1999). In general, project teams assist companies to integrate their core business processes, combine related activities, and eliminate the ones that don't add value to customers.
A functional organization often takes “ownership” of customer data. Many departments and individuals see customer handling as a sales or marketing function, and regard the release of their data to another function as a loss of power. A customer-centric model requires sharing the data enterprise-wide; this usually requires a fundamental paradigm shift in the culture to sharing information and knowledge. Especially in organizations where tradition has established separate goals and objectives, top management must not take a passive role in change efforts. Silo-based organizational myopia must be replaced with a customer-focus so departments will collaborate rather than compete with each other. Many of these changes efforts can be aided by effective communication throughout the entire project and reaching all levels of employees.
CRM initiatives require vision and each and every employee must understand the purpose and changes that CRM will bring. Re-engineering a customer-centric business model requires cultural change and the participation of all employees within the organization. Some employees may opt to leave; others will have positions eliminated in the new business model. Successful implementation of CRM means that some jobs will be significantly changed. Management must show its commitment to an ongoing company-wide education and training program. In addition to enhancing employee skills and knowledge, education boosts motivation and commitment of employee and reduces employee resistance. Additionally, management must ensure that job evaluations, compensation programs, and reward systems are modified on a basis that facilitate and reward customer orientation. After all, how people are measured will determine their behavior.
6. Conclusion
Somewhere along the turn of the twentieth century, buyers and sellers lost their intimate relationships. Prior to the Industrial Revolution, sellers knew their customers, many times by name, and generally understood their needs. Mass production built a wall between buyers and sellers where the main concept was to find customers for standardized products. Customers are more empowered today than ever before and the Internet is accelerating the trend toward greater customer empowerment. CRM applications attempt to focus on the customer first, specifically one customer at a time, to build a long-lasting mutually beneficial relationship.
Customer relationship management is a comprehensive approach that promises to maximize relationships with all customers, including Internet or “e-customers”, distribution channel members, and suppliers. Getting to “know” each customer through data mining techniques and a customer-centric business strategy helps the organization to proactively and consistently offer (and sell) more products and services for improved customer retention and loyalty over longer periods of time. Peppers and Rogers (1999) refer to this as maximizing “lifetime customer share”, resulting in customer retention and customer profitability. On the other hand, advanced customer data analysis also allows a company to identify the customers it does not want to serve. Beside the technological advances, CRM initiatives represent a fundamental shift in emphasis from managing product portfolios to managing portfolios of customers, necessitating changes to business process and people. As companies start to re-engineer themselves around customers, individual employees must also come to terms with changing business process, organizational culture and, thus, the ways they view their customers and how they treat them.
Organizations today must focus on delivering the highest value to customers through better communication, faster delivery, and personalized products and services. Since a large percentage of customer interactions will occur on the Internet rather than with employees (Bultema, 2000), technology must adapt to the changing and unpredictable market. Organizations that implement CRM and e-business applications will have the greatest gains (Lange, 1999). The future of CRM is e-relationship management or eRM that will synchronize cross-channel relationships (Saunders, 1999). It is also envisioned as an “e-partnering ecosystem” with a complex network of partners that operate as an interconnected whole, spanning entire markets and industries (Creighton, 2000; Siebel, 2001).
CRM implementations and the changing effect of the Internet offer abundant research opportunities. The identification of some implementation issues in this study raises several important research questions. In particular, what are the roles of suppliers and supply chain partners in CRM? How does e-CRM strategies affect brick and mortar companies? What business processes, integration challenges, and organization structures are common throughout successful CRM implementations? Research in these areas will contribute to building thriving customer relationships and long-term corporate survival. Years of academically researched topics of relationship marketing and customer retention are now practical and cost-effective to implement due to emerging technology. It is time to put academic theories to practice.

Creating a Better Place to Work

In our evolving global economy, we tend to look to capital and technology for competitive advantage. Effective organizations are also critical to global success. The realization has led us to various approaches for redesigning our operations. However, in the processes of "restructuring" and "downsizing" - tactics that provide our companies with leaner structures and flatterer hierarchies - we often tend to overlook the fact that our people are the most important source of competitive advantage.
In many instances, the way we have made our operations more cost-effective has been to lay off workers-based on the simple notion that people equal costs. Unfortunately, we fail to realize that the success of cost cutting comes at the price of serious motivational problems for the remaining employees. The workforce is burdened with new responsibilities, and at the same time, must cope with the uncertainty of further job cuts. Employee loyalty disappears. In a recent survey conducted by The Society for Human Resource Management (SHRM) of companies that went through downsizing shows that employee morale declined in 86 percent of those companies. This leads to a long term vulnerability for many of the restructured corporations.
In their mission statements, many corporations affirm that "people are our most important asset." Admittedly there are numerous examples of sincere efforts to promote participatory management and people involvement, encourage teamwork, and otherwise draw on the assets latent in human energy and talent. And more and more companies share ownership with their employees in the hope of setting higher levels of productivity. However, we often do not comprehend that the task of turning employee involvement into competitive advantage requires profound changes in the role and philosophy of management, corporate values, organizational hierarchy, and labor relations. If these changes are not in place and, consequently, decisions are still handed down from the top, employee motivation suffers and productivity remains at low levels.

We need a different approach to unlock people's productivity. this may be an opportune time to revisit the principles of motivation, to see what really energizes people and lets them take ownership of their jobs. Since the 1950s and 1960s, when Abraham Maslow, Frederick Herzberg, and David McClelland developed their theories of motivation, we have made significant advances in our understanding of what energizes people in the workplace. For example, we now focus on the difference between "extrinsic" and "intrinsic" approaches and we understand how people "self," their way of being, influences their motivational orientation.

Having said so, let's try to develop a profile or a perspective for a good employer, i.e. a good place to work for; how such a place would look like? And what are the core values that attract people to work for such a company and make them want to stay on board? I can think of the following characteristics:

1. Employees are in control. workers not only have he power to run day-to-day operations, but also the opportunity to participate in designing manufacturing processes for greater efficiency. Once the labor content of a product is determined, company leaders and workers cooperatively figure out the best ways to cut product costs. Of course this evolves employees participation in the planning process related to each function in the organization.
2. A simple, clear bonus system. Any organization can compare the actual cost of labor with the estimated cost. If the actual cost is less than the estimate, the difference between the two could be paid as a bonus to the employees who contributed in fulfilling such saving. Likewise, the bonus is significantly reduced if a poor-quality product reaches the customer. This helps prevent high-volume production at the expense of quality.
3. Team problem solving. The value of the workplace can be enhanced where employees take responsibility for more than their own job. Employees in each area would operate as a cohesive group to maximize output and solve problems if they trust their management and were empowered by them to become accountable.
4. Leaders emerge as needed. Natural leaders do emerge naturally in the workplace, only of we create an environment that help employees reach their potentials. When problems arise, we can see leaders around us trying to help solve them. Those are employees who have the ability to influence others, and with the right investment in developing their skills they make great leaders.
5. Management takes on a new role. Self-autonomy is the name of the game here. mature employees should be enabled and empowered to 'manage' their own jobs. They assume responsibility and become accountable about the results. Management role becomes more focused on 'what gets done', but 'how it is done' could certainly be decided by the job holders as long as they work within the organizational context and observe its ethical conduct and abide by the quality standards in what they do.

To conclude, I found that the most important assets that contribute to both high morale and high productivity could be summarized as:

• True autonomy where employees run their shop.
• Management confidence that employees can grow and develop as needed by the organization.
• A cooperative, caring environment and a willingness to stand by each other through good times and bad.

Teamwork: A Success Prerequisite

Business is avidly embracing all kn ids of teams as the fading century relaxes its grip on its ideals of scientific management and rugged individualism. But business teams, however robust they appear are still delicate organisms, at risk of succumbing to any number of internal and external threats. And sometimes, just when a team-or a plant full of teams-seems strongest, unanticipated problems can arise that range from time stealing and energy sapping to life threatening.

Workplace teams take many forms, address many purposes, and have many different names., but they fall into two general categories. First, there are the teams variously known as cross-functional teams, product improvement teams, process imrprovement teams, and program teams. These may be short or long-lived or even permanent. What these teams have in common is that they combine people from a variety of functions who work together toward a joint goal. To simplify terminology, we can call all these types of teams project teams.

A second broad category of business teams has upended the basic structure of countless manufacturing and service organizations over the last decade. These are work unit teams that assume most of the responsibilities formerly reserved for the unit's supervisor. Such a unit may be called an autonomous work team, a self managed team. or a self-directed team. It is a small group of employees who share responsibilities for a block of work; the team plans, schedules, and assigns work and makes decisions related to production and personnel.

While these two types of teams - including ensuing committees and task forces related to them - can be called formal teams that are initiated by the organization to carry out official tasks and assignments, there are always other teams that are initiated by the social activities of the employees themselves such as recreational activities teams, and voluntary community service activities. The bond that ties employees together in this latter type is usually stronger and more relaxing.

Everywhere in business today, people are wearing many hats, assuming every-increasing responsibilities. So the the life of any permanent or long-lived team, there will be times when progress will falter because members are juggling too many balls. The manager of a project team member May call on the person to redouble efforts on a high priority task back in the work unit. In a self-directed work team, a big new order, growing backlog, or unexpected customer demand may draw workers' attention away from their concentration on learning and assuming increased supervisory responsibilities.

Burdened by conflicting priorities, team members may respond in ways that change team tasks and bypass team processes. They may skip team meetings, asserting they are "too busy"; they may attend the meetings but use the time to talk about different issues they share with other members of the team; they may fall behind on promised deliverables. The sooner the team leader intervenes, the less likelihood that a few isolated instances will grow into patterns that erode the team's viability.

When situations like these start to occur, the team leader's first task is to confirm that "other priorities' isn't a polite euphemism for burnout or loss of interest in the team's purpose and activities. those are different roblems, and while the symptoms may be similar, some of the solutions are quite different. But connecting with team members outside the formal meetings is a good starting point whatever the underlying cause of members' withdrawals.

Team members commitment makes them monitor their own ability to deliver what they have promised to deliver.

Teams sometimes confront a problem of conflicting priorities that's quite different from the one individual members wrestle with when they find themselves with too much to do. As the company refines its strategies and priorities, teams have to take stock to ensure their priorities still match those of the organization. Every team needs to be careful not to get locked into a narrow view of its purpose. Unless it keeps up to date on needs and goals of the broader organization, support for the team will wane and it will wither due to its own shortsightedness.

Hallmarks of Organizational Success

Companies that wish to compete successfully in a turbulent business environment characterized by global competition, exploding information technology, fast-paced change, and new employer-employee relationships will inevitably be forced to make significant adjustments in the way they operate. From interviews - conducted in late nineties - with more than 1,000 senior executives and academics, experts at the University of Pennsylvania's Wharton School have developed a set of twelve hallmarks that will characterize the leading corporations of the the twenty first century:

Vision directed - This means having a statement of principles that is not just some high-sounding works tacked up on the wall of the company cafeteria, but a rather clear set of values that actually influence a company's operations and give employees a strong sense of pride in their organizations.

Cross functional - Asea Brown Bovari is a giant corporation with tens of thousands of thousands employees doing business in hundreds of local companies located across the globe. ABB cannot afford to be organized along traditional functional lines (e.g., marketing, manufacturing, R&D) because business decisions involve continuous coordination among many functions. Instead, ABB has a matrix organizational structure, with its local companies grouped by products and services, and again by geographical location.

Flatter & empowered - Information technology, intense competition, and the rapid rate of change have made he old, rigid hierarchies obsolete. Decision making simply cannot move up and down the corporate silos fast enough, so organizations must be fattened and individuals at every level must be empowered to make decisions. But, as John Kotter argues in The leadership Factor, this requires more from managers than they were ever asked to do before. "Figuring out the right thing to do in an environment of uncertainty... and then getting others to accept a new way of doing things demand skills and approaches that most managers did not need in the past. It demands more than technical expertise, adminstrativeability, and traditional management. Operating in the new environment also requires leadership." So an effort at developing leaders throughout the organization must accompany efforts at empowerment and flattening the corporate hierarchy.

Global - Companies like Ford have recognized the advantages that globalization can mean, from buying materials and services in low-cost areas of the world to developing new markets that can help cushion the blow when your domestic sales take a downturn.

Networked - Instead of carrying out every function on their own, companies will often find it far more cost-effective to create partnering arrangements with other firms to perform certain functions. Outsourcing, for example, is currently occurring in almost every field of business, where organizations are recently hiring outside vendors for their legal, audit, and cafeteria operations, security, and janitorial.

Information-technology-based - Computers and communications systems will continue to alter the way companies operate internally while improving relationships with suppliers and cu stormers. At large law firms, for example, computer networks now enable corporate clients to regularly review the work the firm is currently performing on their cases as well as the number of hours being billed to each other.

Stakeholder-focused - As Dr. Jerry Wind of the Wharton School explains, "A company will not be able to operate as a closed entity cut off from society's needs and demands. Management will still give primary attention to its shareholders, ... [but] increasingly, governments, environmental organizations, ... will hold firms accountable for their actions."

Flexible/adaptive - One of the best predictors of a company's long-term performance is its ability to adapt to changes in the marketplace. This requires a culture that encourages experimentation and intelligent risk taking, that incorporates now ideas into the fabric of its operations, and that provides employees with abundant opportunities to develop new skills so that hey can keep pace with change. At Motorolla, for example, the emphasis is on lifelong learning, with employees attending more hours of training annually than at almost any other company in the US. Training programs have enabled the company to achieve an exceptional reputation for product quality and maintain positions of leadership in areas such as computer chips, cellular telephones, and paging equipment.

Customer-driven - While many companies talk about getting close to the customer, some are actually trying to achieve it. Some manufacturing companies, according to Fortune Magazine, recognized that the best way for manufacturing employees to understand customers' needs to regularly travel to their facilities and find out firsthand how they use these companies. The result : significant product improvements.

Total Quality-focused - If any single element can be called the foundation stone of the change process, it is the emphasis on quality. After World War II, W. Edwards Deming and Joseph Juran taught the Japanese the importance of quality and how to attain it. Eventually, American companies got the quality concept and began singing out its praises with the other world-wide believers. They did that, just in time to win back some of their customers from the Japanese. Some of these companies (e.g. Motorola and Federal Express) have even been recognized for their efforts by receiving the prestigious Malcolm Baldrige National Quality Award.

Time-based - Developing a new product rapidly and bringing it to the marketplace ahead of the competition can spell the difference between a company's success or failure. In his book what America Does Right, Robert Waterman describes Proctor & Gamble's plant in Lima, Ohio, which was given the job of manufacturing the company's improved Downy fabric softener. Lima succeeded in overhauling its production equipment so rapidly that new Downy was rolling off the assembly line and into supermarkets in the unbelievable time of only sixteen weeks. The key, according to Waterman, was the plant's empowered work teams that took ownership for the project and held a large stake in its success.

Innovative - Innovative and entrepreneurial are words most of us associate with small or medium-sized companies. yet some of the large corporations - the elephants - have also learned how to run with the gazelles. Through a variety of methods, companies like General electric, Motorola, Federal express, and P&G have proved that they can compete successfully. Unfortunately, too many other U.S. companies are still struggling to find a change process that will make them more competitive.

These are the twelve hallmarks of success that a congress of The American Management Association ( AMACOM) I had attended in the mid nineties in Las Vegas with more than 4,500 of executives from the five continents had discussed and agreed upon. I can see now that we were right in predicting the future traits of the twenty first century needs and demands.

Kyaizen: The Japanese Version of Quality

The Japanese word 'Kaizen' means grdual, unending improvement; doing little things better; setting - and achieving - ever-higher standards. Masaaki Imai, the author of a book with the same title in the late eighties, says that it is Kaizen that is the simple truth behind Japan's economic miracle and the real reason the Japanese have become the masters of "flexible manufacturing" technology - the ability to adapt manufacturing processes to changing customer and market requirments, and do it fast.

The US interpretation of Kaizen message is "do it better, make it better, imorve it even if it ain't broke, because if you don't, you can't compete with those who do." In other words, the key to success in sustaining quality leadership in the market is to continuously imporve your products and/or any services you are offering your customers. It is amazing that all that Imai preached in his book are still valid todate. Kaizen, as discussed by the author still plays a vital role in formulating all aspects of organizational systems and processes including HR planning, customer satisfaction, team cocepts, corporate culture, problem solving and conflict resolution, just-in-time production ... etc.

Kaizen strategy, as stated by Imai is the single most important concept in Japanese management-the key to Japanese competitive success. It means ongoing improvement involving everyone from top management to workers. The concept is deeply ingrained in the minds of all employees at all levels of employment that they often do not even realize that they are thinking Kaizen. Perhaps the most important difference between between Japanese and Western management concepts is that Kaizen is a process oriented way of thinking, while the West's is innovation and results oriented.

In today's competitive business environment, any delay in adopting the latest technology is costly. Delays in adopting imporved managment techniques are no less costly. After the Second World War, numerous warnings have been issued about the increased cost of resources, stiffer competition to win customer acceptance through quality, and the need to develop more customer-orineted products and services faster than ever before.

Successful companies have shown that it is possible to anticipate change and to meet the challenges while hey are still manageable. Japanese companies, for example, have successfully designed, manufatured, and marketed competitive products using Kaizen strategy. Many Japanese management practices uscceed simply because they are good managment practives. This success has little to do with cultural factors. It is simply a management practice. That means the ways leading to it can be replicated anywhere else in the world. It it an overriding concept behind good management. A Japanese management competitive edge could be due to their systematic collaborative approach to problem solving while the West is still applying a conflict resolution approach.

Underlying the Kaizen strategy is the recognition that management must seek to satisfy the customer and serve customer needs if it is to stay in business and make a profit. another important aspect of Kaizen has been its emphasis on process. Kaizen has generated a process-oriented way of thinking, and a management system that supports and acknowledges people's process-oriented efforts for improvement.

Knowledge And The Intellectural Capital Of The Organization

In the new economy of the millennium, knowledge has emerged as an asset to be valued, developed and managed. The quest for knowledge is not new: in the fourth century BC, Aristotle noted "All men by nature desire knowledge." Now, 25 centuries later, knowledge drives the global economy. No longer is knowledge considered only an individual's personal wisdom; knowledge is a component of the intellectual capital of organizations (Stewart 1997). In the global economy of the millennium, data and information proliferate, and the applications and uses to which they are put transform them into knowledge. To make use of data and information, transform them into knowledge, then maximize the value of knowledge is the new challenge in achieving a sustainable competitive advantage. The 'information age' of the 1990s has evolved into the 'knowledge age' of the millennium.

Knowledge is increasingly acknowledged as a corporate asset; indeed, some are it has supplanted the traditional factors of production - land, labor and capital - to become the pre-eminent corporate and competitive resource (Havens and Knapp, 1999). Knowledge, however, is an intangible asset; its very elusiveness and intangibility create myriad challenges.: how to manage it; how to valuate it; how to measure it; how to process it. If it is a corporate resource, how does the corporation manage it? Who, within the corporation, assumes responsibility for acquiring, developing and marketing it? Knowledge management (KM) has emerged as a principal component of the new economy. Likewise, the learning organization has become the site of effective KM (Argryis and Schon, 1978; Senge, 1990).

Individual Knowledge and Learning

Learning is an innately human activity. Growth in knowledge is a function of maturing and developing. For adults, experience plays a significant role in knowledge acquisition: Kolb (1984, p.38) asserts, "Learning is the process whereby knowledge is created by the transformation of experience". Kolb's theory of experiential learning informs much of the literature on adult learning in general and human development and training in particular.

Humans bring to an organization their prior education, experience, knowledge and skills, and as they interact within the organization they draw on this experience to develop their skills and knowledge further, thus adding to their human capital and to the value of the organization.

Economists have identified a steady growth in human capital per worker in the industrialized world in two areas:

1. Capital deepening - individual workers have improved their performance of particular skills.
2. Capital widening - individual workers have exhibited an increased ability to acquire a variety of skills (Lindbeck and Snower, 2000).

Human capital, however, while contributing to the value of the organization, remains the possession of the individual. Individuals can and do learn, develop and acquire knowledge both independently and with the organization. In order to learn, they require neither organizational assets nor organizational capital, yet they can, and do, learn from their experience in the organization. The organization, conversely, cannot develop, learn, or grow independently of its human capital.

Organizational Knowledge and Learning

Knowledge is recognized as a corporate asset and, like all corporate assets, it must be managed: thus, the emergence of KM. Ideally, KM captures, transfers, and leverages what everyone in the organization know. This, of course, is a daunting challenge. Who is "everyone in the organization", and how does the organization manage their knowledge , their human capital, thus transforming it into organizational intellectual capital?

Intellectual capital extends beyond mere knowledge: Stewart (1997) identifies three categories of intellectual capital:

1. Human (evidenced in staff's knowledge, skills and talents).
2. Structured (comprised of systems for codifying, storing, transmitting and sharing knowledge).
3. Relational (resulting from connections between organizations and clients, vendors and partners).

The three must interact. Indeed, managing intellectual capital has been described as capturing individuals' tacit knowledge and making it explicit in the organizational structure (Lynn, 2000). Managing and developing intellectual capital is a dynamic process that creates a tension between assimilating new and exploiting old learning (Crossen el al., 1998) . Effective KM systems do three things:

1. Filter out information that does not support an individual's immediate or long-term need or goal.
2. Present information in the form appropriate for the context and the individual needing the information.
3. Focus information into the hands of those who can act upon it and give it value (Covley-Durst, 1999).

The last item is the crux: until it is acted upon, knowledge has no real value. Until a human puts knowledge to use, it is an un-valued asset. Until a human shares tacit and explicit knowledge within the firm., it is the individual's human capital, not the organizaions's. The knowledge possessed by the employees represents a key source of sustainable competitive advantage for organizations (Elsdon and Iyer, 1999). Knowledge is an asset, but it is a slippery asset to value, manage and measure.

Developmental Alliance: A Case Study

Big organizations that are keen to sustain their growth rate and secure bigger market shares, are nowadays facing serious problems in developing their people at the same rate they grow. managers became so involved in strategic planning, Production, marketing, and sales activities to the extent they do not find time to coach their teams. The impact of this becomes more evident in all the front line jobs that have direct contact with the customers. It becomes worse still in service organizations that build their glory on how they can 'pamper' their customers.

Due to the lack of continuous training and coaching, the sales people find themselves driven by escalating bottom lines and very tight deadlines to cope with organizational expectations of them.

Consequently, sales teams become too result oriented to the extent that they may neglect some of their organizations' business codes and ethics in dealing with their customers. They may rush customer to take a buying decision of the products and/or services without spending enough time identifying their needs, and helping them get what they really need not what the salesperson want them to have. Naturally, a skills and competencies gap between current and expected performance levels exists.

Training departments became unable to close this gap fast enough, nor to cope with the in-house training demands restricted by inflexible deadlines. New methods of training had to be developed in order to satisfy the increasing on-going demand on coaching the field teams. Complementary training activities to the training departments had to be initiated, and new training modules as well. Modules that address marketing and sales people behavior, being both efficient and effective, and consume less time than the traditional classroom training.

Companies like Cisco came up with technological solutions for the problem. Being the biggest networking company in the world with 77 acquisitions since 1999, more than 51,000 employees icluding 16,000 engineers operating in 117 countries with one third of the world population, coordinated coaching for this enormous number of employees becomes almost impossible.

Strategic allaince with an advanced E-training provider becomes a feasible solution, and training provider who can tailor sales interactive coaching models that are built around integrated complementary classroom and distance activities. Experts all over the world can deliver these modules in classes nearer to Cisco operations in 15 different languages, followed by telephone coaching sessions that reinforce the skills and competencies taught in class. Cisco ally in this is Richardson, an American training organization with a customer driven culture that demonstrates the same values and business ethics of Cisco.

A new trend is being developed by these two companies which I believe is going soon to be copied by other organizations, especially that the outcome is measurable.