Posted by Mark Brousseau
What do Lehman Brothers, AIG, Merrill Lynch, Washington Mutual Savings, Arthur Andersen, Starbucks, and Toyota all have in common? All went gunning for business growth but instead ended up with self-inflicted wounds. Each of these companies pursued the wrong kind of growth for the wrong reasons. If you are considering trying to grow your business to beat the economic pressures of the down economy or are caving to the popular "grow or die" influence of Wall Street, Ed Hess asks that you think before you grow.
"Most business executives accept without question the belief that growth is always good, that bigger is always better, and that the healthy vital signs for a public company include growth that is continuous, smooth, and linear," says Hess, a professor at the University of Virginia's Darden Graduate School of Business and author of the new book Smart Growth: Building an Enduring Business by Managing the Risks of Growth. "The problem with those presumptions is that there is no scientific or business basis for them."
Hess, a leading authority on business growth, knows this to be true because he's conducted extensive research of his own with both public and private companies. Based on his research, Hess has found that the hard data shows that above-average, long-term growth (five years or more) by public companies is an exception, not the rule, occurring in less than 10 percent of the companies studied.
"For the vast majority of companies, growth is often pursued in a way that brings with it as many risks of failure as chances of success," notes Hess. "Combine unquestioned strategic presumptions with bad judgment—and sometimes a fair share of greed and arrogance—and the results can be serious or fatal to the viability of a business."
What are some of the self-inflicted wounds premature growth can leave on your company? Hess outlines a few:
Growth can create new business risks. Growth is a business strategy that can require investments in people, equipment, raw materials, space, and supplies. As these cash outlays occur before new revenues kick in, many businesses find themselves exhausting their cash reserves—a risky tightrope to walk.
"Starbucks is a great example of a company that learned this lesson the hard way," says Hess. "Previously the poster child of a successful, well-respected business, a new executive team decided that continuous, quarterly store expansion was necessary to prove to Wall Street how committed the company was to growth. Aggressive plans did indeed increase the number of new stores being opened each month, but many were in unprofitable locations that eventually had to be closed. The result was bad press, a diluted customer value proposition, and, equally troublesome, the sudden need to take on massive and unprecedented short-term debt. A change in senior management and a public mea culpa showed that, in the pursuit of growth, Starbucks had instead weakened itself as a business, at least for a time."
Growth can force you into the big leagues before you are ready. Growth can match companies up against more experienced players before they truly know how to handle the competition.
Growth can strain your operations. Growth can pose huge challenges for your people, processes, controls, and management capacities, resulting in quality problems and the increased potential for damaged customer relationships and diminished brand perceptions.
"Toyota learned this lesson the hard way," says Hess. "The company maintained an unbridled pursuit of growth over the past decade or so even though it was already a market leader in quality and dependability. It wanted more—to be #1 in sales. That shift in mindset set Toyota down a path where controls were stretched beyond capacity. The results: massive recalls, hundreds of lawsuits, and a damaged brand. Even Toyota's current CEO has acknowledged that the company's problems can be traced to growing too quickly."
Hess's solution for overcoming the risks associated with growth is a concept he calls Smart Growth. Smart Growth accounts for the complexity of growth from the perspective of organization, process, change, leadership, cognition, risk management, employee engagement, and human dynamics. It recognizes that authentic growth is a process characterized by complex change, entrepreneurial action, experimental learning, and the management of risk. It is a strategy that requires companies of all sizes to follow what Hess calls the "4Ps of Growth":
Plan for growth before kicking the strategy into gear. Think about how growth will change what you need to do. What new processes, controls, and people will be needed at what cost?
Prioritize what changes or additions to the business have to be made to accommodate the growth. This is a way to make the essential investments first, so as not to deplete cash reserves before new income starts rolling in.
Processes must be put in place to ensure there are adequate financial, operational, personnel, and quality controls for a bigger business. These are like dams on a river: if the water starts flowing faster and with more volume, those dams need to be reengineered to handle it.
Pace growth so as not to overwhelm yourself, your people, and your processes. Growth can be exciting, but it is also almost always stressful. If you underestimate the need for effective change management, and for a phased approach to implementation, you increase chances for failure.
The tools and rigorous governance methods outlined in Smart Growth can help companies along all four parts of the process. For example, Hess's Growth Decision Template can help leaders analyze, illuminate, and devise a plan to manage their growth risks.
Hess also advises all public companies to conduct an annual Growth Risks Audit to review the stresses that growth is placing on the organization, its people, and its processes. Avoiding conflict of interests and striving for objectivity are critical. This annual Audit should be conducted by a senior multi-disciplinary team made up of members who are not rewarded for producing growth results but are rewarded instead for preventing growth risks from creating serious damage to the business.
"CEOs and Boards of Directors face a unique kind of challenge when it comes to planning for smart growth," says Hess. "Sometimes the right decision when it comes to growth is not to pursue it, but it takes a special kind of team to make that decision when shareholders and analysts are clamoring for higher returns each quarter. But smart growth is possible. Successful high-growth companies—such as Best Buy, SYSCO, Walgreens, and Tiffany & Company—have grown through constant improvement in their organizations' DNA, executed by a highly engaged workforce in a positive learning and performance environment.
"What's important to remember is that the goal is not necessarily growth," concludes Hess. "The goal is continuously making your organization better. When you achieve that, growth will happen naturally in due course. That's the way to achieve smart growth."
Wednesday, June 30, 2010
On-premises versus the Cloud
Posted by Mark Brousseau
There is a lot of talk these days about on-premises versus cloud computing. Keyon C. Thomas (keyon@infostreet.com), reseller channel manager at InfoStreet, says the market is shifting:
I talk to VARs/MSPs all day long. One of the things I am always shocked by is how many of them don't know how little money they make selling on-premises technology and how much more they can make selling all cloud solutions. For some of my VAR's, I see an 82% profit increase. If that is not enough to get your attention then I don’t know what will. Let me break down why and see if it makes sense to you guys as well.
So let’s first look at a typical on premises install. You go in and meet with the client to make sure that you have the things they need. From there you order from your vendor, in most cases you sell at a set price with your commission built in. Plus you have to put money into technicians setting stuff up (and even if you are the tech your time is money because that time you are spending could be better spent on finding more clients). This is about a 5- to 6- day deployment with a combination of time at the client location and pre configuration at your location. Plus with most on-premises solutions, there is no recurring revenue unless you get a break fix support contract. Even if you have a break fix contract, when something goes amiss you still have to send someone out to the location to fix it so, again, you are eating into your overall profits.
Now let’s look at a cloud install using a combination of SaaS and HaaS. Your client’s network should already be in place just like it would have been in the prior example. If you can get the networking contract then you have minimal work there to set it up. Hardware would come from you HaaS vendor with the deployment specs provided to them. This is again a simple install since all the configurations were done before you received them decreasing your time at the client location.
Deployment of the file server, Exchange, SharePoint, and Communicator like environments for the clients can be deployed by the SaaS provider with a couple of clicks so you don't have to have a technician. There are even SaaS offerings of Accounting, MS office suite, and industry specific software. For most clients you're looking at about a 1 work day deployment. In both cases you are going to have recurring monthly revenue coming in before you add your support contract. When stuff does go down, if it is hardware you ship it back to the HaaS vendor and if it is software the SaaS provider is taking care of it, so you are not devoting man hours to it. Quite simply you are collecting the same if not more money but doing CONSIDERABLY LESS WORK per client. This frees you up to get more clients. Where you may only be able to support 7 to 14 on-premises clients you could support over 100 cloud clients. It just makes sense.
So my question to you is would you like to explore how to decrease your operational expenses while you significantly increase your bottom line?
There is a lot of talk these days about on-premises versus cloud computing. Keyon C. Thomas (keyon@infostreet.com), reseller channel manager at InfoStreet, says the market is shifting:
I talk to VARs/MSPs all day long. One of the things I am always shocked by is how many of them don't know how little money they make selling on-premises technology and how much more they can make selling all cloud solutions. For some of my VAR's, I see an 82% profit increase. If that is not enough to get your attention then I don’t know what will. Let me break down why and see if it makes sense to you guys as well.
So let’s first look at a typical on premises install. You go in and meet with the client to make sure that you have the things they need. From there you order from your vendor, in most cases you sell at a set price with your commission built in. Plus you have to put money into technicians setting stuff up (and even if you are the tech your time is money because that time you are spending could be better spent on finding more clients). This is about a 5- to 6- day deployment with a combination of time at the client location and pre configuration at your location. Plus with most on-premises solutions, there is no recurring revenue unless you get a break fix support contract. Even if you have a break fix contract, when something goes amiss you still have to send someone out to the location to fix it so, again, you are eating into your overall profits.
Now let’s look at a cloud install using a combination of SaaS and HaaS. Your client’s network should already be in place just like it would have been in the prior example. If you can get the networking contract then you have minimal work there to set it up. Hardware would come from you HaaS vendor with the deployment specs provided to them. This is again a simple install since all the configurations were done before you received them decreasing your time at the client location.
Deployment of the file server, Exchange, SharePoint, and Communicator like environments for the clients can be deployed by the SaaS provider with a couple of clicks so you don't have to have a technician. There are even SaaS offerings of Accounting, MS office suite, and industry specific software. For most clients you're looking at about a 1 work day deployment. In both cases you are going to have recurring monthly revenue coming in before you add your support contract. When stuff does go down, if it is hardware you ship it back to the HaaS vendor and if it is software the SaaS provider is taking care of it, so you are not devoting man hours to it. Quite simply you are collecting the same if not more money but doing CONSIDERABLY LESS WORK per client. This frees you up to get more clients. Where you may only be able to support 7 to 14 on-premises clients you could support over 100 cloud clients. It just makes sense.
So my question to you is would you like to explore how to decrease your operational expenses while you significantly increase your bottom line?
Tuesday, June 29, 2010
Taking the Sting Out of ACH Dispute Management
Posted by Mark Brousseau
The financial services landscape is undergoing radical change, with transaction processing rapidly migrating from paper-based to electronic payments. According to the Federal Reserve's 2007 Payments Study, electronic payments now exceed two-thirds of all non-cash payments -- a big change from a decade ago when paper checks were still king. Automated Clearing House (ACH) transactions have been a key to the growth of electronic payments. The number of ACH transactions in 2008 topped 18.2 billion, representing an increase of 1.2 billion over 2007, NACHA reports.
But this ACH growth also has created new back-office challenges, particularly in the area of transaction dispute management. The limitations of traditional in-house ACH systems and the strict time constraints and complex processing requirements imposed by NACHA rules and Regulation E have led to increases in operations expenses and potentially higher charge-offs associated with ACH disputes. And changes in the interpretation of Regulation E -- spelled out by Federal Reserve Bank staff and an OCC Advisory Letter -- may further complicate matters.
The Situation
One of the nation's largest bank ACH processors has taken proactive measures to better manage its ACH disputes. The bank's ACH operations perform a wide range of functions, including daily inbound and outbound transaction management, implementation and maintenance, customer service, compliance, and exception support.
Over the past several years, the bank has achieved significant growth in its ACH transaction volume. Along with this growth in overall ACH transactions, the bank has seen its ACH disputes increase 25 percent during the same period.
To be sure, the overall growth in ACH volumes is a factor in the increasing number of disputes. But customers also are better educated about ACH, and have higher expectations. Regardless of the cause, ACH disputes are costly to manage (with different attributes for each dispute and conflicting Regulation E and NACHA timelines), and present the risk of non-compliance and charge-off losses.
The Solution
Recognizing these challenges, the bank began an evaluation of solutions to better manage its ACH dispute process. At that time, the bank used an ACH processing product that kept transactions online for a short period of time, after which the information was archived to an offline report warehouse. The offline warehouse required the bank to "restore" reports and customer statements, a time-consuming and costly process that prevented the bank from providing quick responses to customer inquiries.
The bank evaluated three options for enhancing its ACH capabilities: further extending its legacy ACH solution's capabilities, developing an in-house solution, or leveraging a hosted solution. Scarce in-house IT resources precluded the bank from extending its legacy solution's warehouse capabilities. Similarly, the bank ruled out developing a custom solution because of competing demands for its limited IT resources and the long time-to-market required to develop an in-house solution.
Ultimately, the bank selected a hosted ACH solution from eGistics based on its compelling business case and its track record in the bank's lockbox operation. Using eGistics, the bank was able to implement an ACH Dispute Management solution faster, more effectively, and more economically than it could using internal resources or its current ACH vendor.
Within a few weeks of selection eGistics delivered its ACH solution, which supports a range of ACH functions including dispute research, customer service inquiries (notably questions about transaction details and debit authorization), and compliance reporting for potential rules violations. eGistics’ ACH Dispute Management solution provides a secure, easy to use Web interface that enables users to quickly search ACH transactions using a variety of configurable search criteria.
The Benefits
Most important to the bank, the eGistics hosted framework streamlined the research, management and reporting of ACH transaction disputes. Here's how it works: The bank receives ACH transmission files from the ACH network. A copy of these files is forwarded to the eGistics ACH solution. Operators log in to the eGistics platform and are able to search for transactions in real-time. Additionally, transactions can be marked as disputed, and then managed through the resolution process. Because there is a single view of the transactions, all operators can see the status of a dispute or inquiry. Finally, each disputed transaction is given a disposition status such as: credited, denied, or returned.
Streamlined research and management of ACH disputes were part of an overall business case for the bank that included long-term storage, improved customer service, attractive total cost of ownership, minimal internal resources, minimal capital expense, and rapid deployment. And eGistics provided the bank with the peace of mind that its solution complied with industry requirements, was reliable and scalable, ensured the privacy of critical data, and maintained complete access management through transaction tracking, auditing and reporting.
The eGistics hosted solution enhances the bank's dispute management process by providing: real-time distributed data access to any authorized user (even across branches or operations centers); intuitive search capabilities; the ability to annotate comments to disputed transactions; and the ability to export data (such as for batch extracts). The eGistics solution also has provided the bank with expanded search capabilities, including the ability to search on any alpha-numeric field (e.g. date, amount, customer, etc.) or using multiple "operators" (e.g. "contains," "greater than," "less than," "equal to," etc.). eGistics' ability to search data based on configurable parameters allows the bank to spot trends and react more effectively to unauthorized ACH debits. And the filtering capabilities provided by the eGistics research tool will enable the bank to block and restrict access to certain transactions, when required. What's more, the bank can store data in the eGistics solution for an unlimited period of time.
The functionality delivered by the eGistics solution supports a range of ACH functions at the bank, including: dispute research; customer service inquiries (notably, questions about transaction details and debit authorization); fraud mitigation; and compliance (reporting for potential rules violations).
The Bottom Line
At a time when rising ACH dispute volumes are impacting the back-office operations at banks, one of the largest ACH banks in the United States has achieved significant benefits by moving to a hosted ACH dispute management solution. These benefits include better, faster customer service, more accurate and timelier dispute status and tracking, streamlined ACH operations with lower costs, and reduced losses from charge-offs.
The financial services landscape is undergoing radical change, with transaction processing rapidly migrating from paper-based to electronic payments. According to the Federal Reserve's 2007 Payments Study, electronic payments now exceed two-thirds of all non-cash payments -- a big change from a decade ago when paper checks were still king. Automated Clearing House (ACH) transactions have been a key to the growth of electronic payments. The number of ACH transactions in 2008 topped 18.2 billion, representing an increase of 1.2 billion over 2007, NACHA reports.
But this ACH growth also has created new back-office challenges, particularly in the area of transaction dispute management. The limitations of traditional in-house ACH systems and the strict time constraints and complex processing requirements imposed by NACHA rules and Regulation E have led to increases in operations expenses and potentially higher charge-offs associated with ACH disputes. And changes in the interpretation of Regulation E -- spelled out by Federal Reserve Bank staff and an OCC Advisory Letter -- may further complicate matters.
The Situation
One of the nation's largest bank ACH processors has taken proactive measures to better manage its ACH disputes. The bank's ACH operations perform a wide range of functions, including daily inbound and outbound transaction management, implementation and maintenance, customer service, compliance, and exception support.
Over the past several years, the bank has achieved significant growth in its ACH transaction volume. Along with this growth in overall ACH transactions, the bank has seen its ACH disputes increase 25 percent during the same period.
To be sure, the overall growth in ACH volumes is a factor in the increasing number of disputes. But customers also are better educated about ACH, and have higher expectations. Regardless of the cause, ACH disputes are costly to manage (with different attributes for each dispute and conflicting Regulation E and NACHA timelines), and present the risk of non-compliance and charge-off losses.
The Solution
Recognizing these challenges, the bank began an evaluation of solutions to better manage its ACH dispute process. At that time, the bank used an ACH processing product that kept transactions online for a short period of time, after which the information was archived to an offline report warehouse. The offline warehouse required the bank to "restore" reports and customer statements, a time-consuming and costly process that prevented the bank from providing quick responses to customer inquiries.
The bank evaluated three options for enhancing its ACH capabilities: further extending its legacy ACH solution's capabilities, developing an in-house solution, or leveraging a hosted solution. Scarce in-house IT resources precluded the bank from extending its legacy solution's warehouse capabilities. Similarly, the bank ruled out developing a custom solution because of competing demands for its limited IT resources and the long time-to-market required to develop an in-house solution.
Ultimately, the bank selected a hosted ACH solution from eGistics based on its compelling business case and its track record in the bank's lockbox operation. Using eGistics, the bank was able to implement an ACH Dispute Management solution faster, more effectively, and more economically than it could using internal resources or its current ACH vendor.
Within a few weeks of selection eGistics delivered its ACH solution, which supports a range of ACH functions including dispute research, customer service inquiries (notably questions about transaction details and debit authorization), and compliance reporting for potential rules violations. eGistics’ ACH Dispute Management solution provides a secure, easy to use Web interface that enables users to quickly search ACH transactions using a variety of configurable search criteria.
The Benefits
Most important to the bank, the eGistics hosted framework streamlined the research, management and reporting of ACH transaction disputes. Here's how it works: The bank receives ACH transmission files from the ACH network. A copy of these files is forwarded to the eGistics ACH solution. Operators log in to the eGistics platform and are able to search for transactions in real-time. Additionally, transactions can be marked as disputed, and then managed through the resolution process. Because there is a single view of the transactions, all operators can see the status of a dispute or inquiry. Finally, each disputed transaction is given a disposition status such as: credited, denied, or returned.
Streamlined research and management of ACH disputes were part of an overall business case for the bank that included long-term storage, improved customer service, attractive total cost of ownership, minimal internal resources, minimal capital expense, and rapid deployment. And eGistics provided the bank with the peace of mind that its solution complied with industry requirements, was reliable and scalable, ensured the privacy of critical data, and maintained complete access management through transaction tracking, auditing and reporting.
The eGistics hosted solution enhances the bank's dispute management process by providing: real-time distributed data access to any authorized user (even across branches or operations centers); intuitive search capabilities; the ability to annotate comments to disputed transactions; and the ability to export data (such as for batch extracts). The eGistics solution also has provided the bank with expanded search capabilities, including the ability to search on any alpha-numeric field (e.g. date, amount, customer, etc.) or using multiple "operators" (e.g. "contains," "greater than," "less than," "equal to," etc.). eGistics' ability to search data based on configurable parameters allows the bank to spot trends and react more effectively to unauthorized ACH debits. And the filtering capabilities provided by the eGistics research tool will enable the bank to block and restrict access to certain transactions, when required. What's more, the bank can store data in the eGistics solution for an unlimited period of time.
The functionality delivered by the eGistics solution supports a range of ACH functions at the bank, including: dispute research; customer service inquiries (notably, questions about transaction details and debit authorization); fraud mitigation; and compliance (reporting for potential rules violations).
The Bottom Line
At a time when rising ACH dispute volumes are impacting the back-office operations at banks, one of the largest ACH banks in the United States has achieved significant benefits by moving to a hosted ACH dispute management solution. These benefits include better, faster customer service, more accurate and timelier dispute status and tracking, streamlined ACH operations with lower costs, and reduced losses from charge-offs.
Subscribe to:
Posts (Atom)
