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Once, during an initiative to adopt a more lean organizational structure, Jim McRickard was shown all the steps that customer orders go through before finally being placed. The exercise was intended to point out inefficiencies, but for McRickard, CEO at construction industry supply company Dayton Superior, it highlighted the problem of price transparency. Prices changed so many times from the initial quote to final price that there was no way to determine why prices shrank or whether a reduction was actually necessary to secure new business.
"I'm sitting there and I'm supposed to be getting a lesson in operational excellence, and I just saw how often someone changes a price," McRickard said. "I knew we had to provide a scientific methodology."
From that moment on, he decided pricing needed to be based more on an analytic understanding of the company's products, competitors and customers. Implementing a data-driven strategy became his top priority.
Prices not set in stone
Jim McRickardCEO, Dayton Superior
Dayton Superior, which is based out of Miamisburg, Ohio, primarily sells concrete accessories for large-scale building projects. Before moving to a data-driven approach, sales workers were authorized to drop prices down to a predetermined floor. But McRickard found that in the process of making a sale, they would almost always reduce the price down to that level. Often it was not apparent why the price reduction was needed to make the sale.
"It's nearly impossible for anyone to know the right price for every product," McRickard said. "Our thought was to put some science behind it."
He had his company implement price optimization software from Zilliant, Inc. called MarginMax. Sales teams use it to assess their own costs on each project and determine how competitive each local market is on price. Using this information, the sales force can determine whether to adjust prices up if sales costs are high or down if a project takes place in a market that has a lot of competitors. McRickard also uses the tool to monitor whether the sales team sticks to the recommendations and how well reps perform against their quotas.
C-suite boosts data-driven strategy
McRickard said the fact that sales teams know the CEO monitors their use of the optimization tool has made adoption more uniform. Knowing that the highest levels of management sponsor the project has made a big difference.
It's a common notion that management needs to support the transition to new data-driven strategies, but it's rare to see a CEO lead the charge. Mostly, you hear people from the technology side talking about how they need to convince the CEO or COO to support a new analytics initiative. But that is changing, and McRickard isn't alone. CEOs and other top-level managers are increasingly in the driver's seat pushing their organizations to become more analytically focused.
"Most executive teams recognize that they have to be data-driven in order to stay competitive," said Michael Bridges, managing director of Accenture Digital. "It's one of the more welcome shifts. There's nothing like having your bosses stand up and say, 'This is what we have to do.'"
He said part of this change stems from a general awareness among the C-suite that data and analytics are important to ongoing strategy. It's also driven by easy-to-use tools that executives can wrap their heads around.
In the early days of business intelligence and data warehousing, it took someone with at least a master's degree in technology to truly understand how data was stored, analyzed and reported. But Bridges said tools today are much less technologically heavy. They may even be cloud-based, requiring very little installation and configuration expertise. This arrangement enables executives who have no technology backgrounds to have more intelligent conversations about analytics tools.
For McRickard, the change just makes sense. He came to Dayton Superior two years ago and has focused much of his tenure on modernizing the way the company manufactures its products and operates on the business side. Pushing for a data-driven strategy was simply an obvious extension of modernization.
"This has been on my radar screen for a while," he said. "This is something I thought the industry was ripe for."
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