I have chosen Office Depot as my company for writing the CEO memo assignment. The office supplies industry is indeed facing some really interesting times. Staples by far has been the most successful of the three big firms in this space (other two being Office Depot and Office Max). All the three players also offer technology products. With cirucit city going out of business and Staples trying to enter this segment through the test marketing of its technology stores, the industry is indeed changing rapidly. As the economy continues to contract and businesses cut spending I see a big role that technology needs to play to make Office Deport successful in comparison to its competitors. Some of the key things I will look to address in my memo are:
1. Rationalizing and Re-prioritizing IT projects to reflect the new economy. Office Depot is faced with a major liquidity crunch and in this era of slowing economy I would look to rationalize the portfolio of IT projects. The focus would be definitely on projects which require lower capital investments and have quicker turnaround in terms of ROI.
2. There has been a major focus on closing down unprofitable stores by the 3 major players. I believe IT systems can be leveraged for data mining the vast amount for sales and margin information from each store to better understand the profitability of each store. This will help rationalize the portfolio of stores in a more systematic fashion rather than ad-hoc store closures to cut costs.
3. Real Estate prices have declined significantly and this would also be a good time to invest in new store locations. As organizations close unprofitable stores and when the economy gets revived (hopefully) IT systems could be leveraged to build statistical models to predict profitability of new store locations based on historical data. Building such IT capabilities would help Office Depot better invest in opening new stores and improve profitability.
3. Improving Supply Chain would also be a big focus of my recommendation. Moica Luechtefeld who was appointed the Executive VP of IT was also recently (in 2007) made in-charge of Supply Chain and has an extensive background in Business Development and Supply Chain. This can be leveraged by developing IT projects to better manage the supply chain. One example would be analyzing the sales and profitability based on products categories in stories across North Aamerica and trim the unprofitable product lines. This will greatly improve liquidity which has been the Achilles' heel of Office Depot in recent times.
4. Online sales and e-commerce partnerships would be another major focus. Office Depot which was the largest e-retailer has been overtaken by Staples in recent times in terms of sales through online purchases. Online sales have higher margins and help better manage the Supply Chain. This will help boost Office Depot's profitability and will also help improve the liquidity situation.
Please feel free to comment and give suggestions as to more avenues I should explore or how to improve the above mentioned initiatives.
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Shrikant, I think you have a great start and have covered many potential avenues where leveraging IT can help Office Depot. I particularly like your fourth idea. Perhaps there's a way to leverage data mining activities to increase sales via the ecommerce model - such as target marketing or segmentation.
ReplyDeleteAlso, have you thought about leveraging IT to increase recurring sales and improve the overall customer experience. There has been alot written lately about how the overall customer experience can greatly impact whether or not a customer becomes a "Rabid" customer (i.e. un-official brand ambassador).
Lastly, have you thought about using other Web 2.0 technologies as ways to increase revenue? A CEO blog, an online community, customer service instant messaging, customer forums, online order with in-store pickup, etc. I really think that these areas are ultra important for retailers in a down economy. Any way that a retailer can differentiate itself from its competition is going to be important and certainly IT can help pay a behind-the-scenes roll with these.
Shrikant,
ReplyDeleteLots of stuff here. I'd consider focusing on parts of it for the memo instead of trying to do it all.
I also like 4, and I like 3 as well. I think those will give you the best ROI. If they are having liquidity problems, then cutting down on working capital costs through enhanced IT-enabled inventory management is critical.
Aimee and Matt, thanks a lot for your inputs. I will definitely keep them in mind while writing my CEO memo.
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