Case Study: Panasonic Searches the Master Data for a Single Version of TruthBy Duff Mcdonald | Posted 05-22-2006
Case Study: Panasonic Searches the Master Data for a Single Version of Truth
First to Market
Charles Seymour, president of Yale University from 1937 to 1951, famously made a remark that rings true for more than just hallowed institutions. "We seek the truth," he said, "and will endure the consequences." Given that Seymour died in 1963, it's unlikely he was speaking on behalf of today's CIO. But he might as well have been.
No one understands that better than Bob Schwartz, vice president of Panasonic North America Information Technology. The consumer electronics giant is in the midst of trying to achieve the holy grail of data management: the coveted "single version of the truth." The company has launched an ambitious campaign, starting in Europe, to reconcile product information across its many divisions in an effort to speed time-to-market. "Literally thousands of people handle this product data multiple times over," says Schwartz. "In legacy environments, over fax machines, e-mails, phone calls and snail mail. There's tremendous inefficiency, and a real possibility for accuracy issues."
Much has been gained as corporate networks have subsumed increasingly complex business functions; companies have the ability to create, store, share and analyze data about products, customers and suppliers in ways never dreamed of just a few decades ago. But something has been lost as well: a consistent and accurate single view of those products, and customers, that's available to those who need it when they need itthe so-called single version of the truth. Somewhere along the way, many an IT department has lost the handle on clean data. And now they are enduring the consequences.
Today, many multinational companies are waking up to find that they have numerous, duplicative and incomplete records stored in multiple repositories across the enterprisein remote and isolated information islands. All of which tends to slow these companies down, and cost them money. And for a corporation as big, and as spread out, as Panasonic, this is not a trivial issue. Consider the rollout of a single product across just Panasonic Europe Ltd.'s operations. With 15 different sales subsidiaries, 14 manufacturing facilities, five research and development centers, and seven administrative outposts, the task of getting the right materialsphotos, product specifications, manuals, pricing, even point-of-sale marketing informationfrom the right source into the right hands (and in the right language) entails a complexity akin to handling air-traffic control at LaGuardia. Worse, the process has been more ad hoc than systematized.
What's more, the time required to modify and massage product materials for regional or national purposes has made it almost impossible to contemplate a truly simultaneous global product launch, which leaves Panasonic more vulnerable to competition in those regions that weren't at the front of the line. "That lag time, particularly for strategic products like plasma TVs, has allowed competitors to come into markets before us, or concurrently," says Schwartz. "And there's no reason why we should be in the lead in one place, and not first to market in another."
: A Corporate Mandate">
A Corporate Mandate
Life at Panasonic is pretty good these days. Already one of the world's leading electronics manufacturers, the company is the current market-share leader in plasma TVs, one of the hottest new product segments. A recent management succession went smoothly, with Fumio Otsubo named to take over as president, in June, from Kunio Nakamura, who has been elevated to the post of chairman. And the Japanese behemoth's tag line"Panasonic: Ideas for Life"has actually hit the mark, giving the company a good grip on a slice of that always-elusive consumer mindshare.
But success, of course, can breed complexity, and Panasonic has that in spades. Matsushita Electric Industrial Co. Ltd., Panasonic's Kadoma, Japan-based parent company, is actually a collection of more than 600 firms that make over 15,000 products for sale in dozens of countries; directly or indirectly, Matsushita employs more than 330,000 people spread across the globe. The administrative costs of keeping a machine like that running can be a significant drain on profits, and the bigger the company gets, the more waste that can seep into the model. Enter the five-year plan. Otsubo takes over a global electronics giant with operating profit margins of just 5 percent, and the board of directors has given him a goal of doubling that number by 2010. It's not going to be easy.
At a time when consumers have come to expect ongoing price declines in the kinds of products Panasonic makesplasma TVs, DVD players, mobile phonesOtsubo isn't going to find that extra margin by raising prices. The price of plasma TVs, for example, has been falling by an average of 20 percent a year. Instead, the folks at Panasonic will have to focus on the other parts of the margin equationreducing costs and driving sales. And one group they'll look to for help in that effort is the IT department.
So far the results of Panasonic Europe's search for a single version of product information truth are promising. Bob Schwartz and the North American subsidiary are closely following Europe's lead, and if all goes well, Japan will come on board in the next few years, resulting in true global data synchronization. But it's early yet, and with ever more sources of data on the horizonincluding RFIDthe truth sometimes seems a world away.
: A Unified Europe">
A Unified Europe
In Europe, preliminary efforts have shown tangible results. The goal: to replace what was largely a "pull" modelin which marketing and sales had to request both structured and unstructured data (from product specifications to photos) from numerous sourceswith more of a "push" approach, in which that information is centralized and delivered automatically to everyone who needs it, simultaneously. The bulk of the necessary dataall the way from rollout to phaseout of a particular productis delivered to retail partners, e-commerce systems (e.g., direct-to-consumer Internet sales), and in fragments to Panasonic employees, when and where they need them. "The business benefit is that Panasonic can manage rollouts in a consistent way," says Paraic Sweeney, vice president of product information management solutions at IBM Corp. "And in ensuring the information describing the product is consistent, you don't have a confused consumerbecause a confused consumer will go elsewhere."
Panasonic's European operations signed on to use IBM's master-data-management software, from the company's WebSphere family of products. "We wanted not only to consolidate the information but also to systematize and more effectively manage our business processes," says Paul Bolton, senior manager for e-commerce and customer relationship management solutions in Europe. "In other words, we needed more control over all of our internal information."
After just 18 monthsthe first four or five of which were taken up by internal discussions and planningPanasonic's European operations can point to meaningful savings as a result of the switch. Time-to-market has been significantly improved, and the amount of time required for creating and maintaining product information has been reduced by 50 percent. The company estimates that the process is five times more efficient than previously, and Panasonic Europe expects to save a million euros a year as a result. The group also projects a 3.5 percent increase in sales, thanks to that faster time-to-market.
While he endorses the overall project, Forrester Inc. analyst Paul Jackson is a little dubious on that last point. "I like the way they're taking charge of their IT and stock control, and also the way they're stopping fairly random country-level, e-commerce offerings and instead presenting a united offering across Europe," Jackson says. "But while I'm sure it will lead to savings both in terms of manpower and marketing messaging, I'm never convinced these kinds of backroom improvements can lead to sustainable sales increases, or a move up the market-share rankings." While acknowledging Dell Inc.'s ability to use IT supply-chain systems so effectively that they have become a unique selling proposition for that company, Jackson thinks that a combination of price, innovation, and partnerships are far more important for sustainable market share increases than cost-cutting initiatives alone.
However the benefits are measured, the vendor community is pushing products hard into big companies such as Panasonic. Among the players addressing what Gartner Inc. calls "product information management" are SAP AG, Oracle Corp. and IBM. And Gartner estimates the market will be worth some $500 million annually by 2009.
: U.S. Looks to Emulate Europe's Success">
U.S. Looks to Emulate Europe's Success
Schwartz hopes to replicate in the U.S. the same time-to-market efficiencies achieved in Europe, and he expects the trend to catch on in the Middle East, Russia and, finally, Japan. "The old days of being able to enjoy first-to-market leads of six to 12 months are long gone," says Schwartz. "In the U.S. alone, we have 48 competitors in plasma TVs. In Europe, we've managed to go from five or six months to bring a product to market down to a month or two. That's key to our growth strategy."
And while the benefits of reducing redundant activity, and thus increasing Panasonic's efficiency in getting new products out to consumers, are now obvious (thanks to Europe), the challenges in doing so in the U.S. are equally clearand substantial. For starters, there's the gargantuan task of reorganizing the internal workflow, and the consolidation of product information itself. Gene Kelsey, vice president of brand strategy for Panasonic's consumer electronics business in the U.S., is watching the European initiative with great interest, but admits he's not exactly looking forward to replicating it in the U.S. "The difficulty is that moving the process toward making information more accessible from a single source can be as hard as it was to reach out to the multiple touch points to begin with," he says.
For example, when Panasonic needed to prepare a consolidated view of product information for Wal-Mart Stores Inc., it went about the task in a fairly systematic way. First, the company identified what information was required to be senta set of data that was largely defined by industry standards. Next, Panasonic went back into its legacy systems to determine the sources of those various fragments of information. Then, in partnership with IBM, the company built an interface mechanism that would collect that data for a product-information-management repository.
Of course, new ways of doing business meant that some informationmarketing benefits, for examplecouldn't be found in legacy systems. So Panasonic then built new interfaces to include the appropriate review and approval cycles. Once that PIM repository had the required consistent and accurate information, another application-integration layer was built to push that information downstream. All told, this single PIM project took 14 weeks.
: A Culture Clash">
A Culture Clash
Schwartz himself is realistic about what lies ahead, particularly the necessary cultural change that such a task will require of the 88-year-old company, with its far-flung employees and facilities. In that, he has a formidable foe: inertia. "We have multiple facilities that have input into new products," he says, "most of which have their own information infrastructure. Building the case as to why they should give that up for a more global approach is clearly a major challenge."
Bolton admits to as much in Europe. "We had to sell the concept," he says. "It took time to convince people that a standard approach wouldn't reduce their flexibility." A historical tendency toward divisional autonomy in the U.S. will complicate matters even more, but Schwartz says the exigencies of today's cutthroat competitive environment will trump tradition. The relentless decline in prices and margins have necessitated a rethinking of what is truly core for the company's myriad operationsand thus best left specific and verticaland what is better leveraged across the enterprise as a whole. "The value of sharing information and enabling simultaneous launches is starting to awaken people's thinking about what it can do for us from a strategic standpoint," Schwartz says. "But in a culture that's still predominantly bottom-up, achieving that consensus can be difficult."
Bolton has been living through that exact challenge. In Europe, he says, they had difficulty convincing their manufacturing partnerssome 70 to 80 percent of which are based in Japan and Chinato tie into the system. "They were critical for the success of the project," says Bolton. "They have all the initial information we need. And many of them were perfectly happy with their manual processes." Bolton chose to split the product information project into two parts, rolling it out internally first, and then taking those results to Panasonic's manufacturing partners in the hopes of bringing them on board before too much time and money had been invested. "It was a calculated risk," he says. "But once we could demonstrate the results, the buy-in was easy."
The most important constituency Bolton and Schwartz will need to convince, if they are to achieve global adoption, is the head office. "Is Japan on board yet?" asks Schwartz. "No. But the U.S. and European operations account for the majority of sales outside Japan. If we get a groundswell of use and support, we can get Japan to adopt it as well. At the moment, they're still evaluating whether or not it's the solution they will use. We'd like to think they will."
If the project does win over Japan and get adopted globally, one of the thorniest tasks will be the establishment of a set of rules that make up the company's internal information governancein other words, who has permission to do what to which data and when. "The old-school way of thinking is, 'Information is power, so I will keep that information,'" Schwartz says. "How do we break those barriers down? Some of it is going to have to be tough love."
: RFID Looms">
Nothing about the transition to a more centralized product information system is particularly troublesome for Bob Schwartz. What does keep him up at night? A four-letter word: RFID. Schwartz believes the sheer volume of data that will be produced by radio-frequency-identification tags will compel innovation on a scale comparable to the emergence of the Internet itself. "RFID is going to drive the next big wave of innovation in IT," he says. "How to store it, how to utilize it, and how to extract value from it."
At the moment, Panasonic, like many others, has been dabbling in RFID at the behest of Wal-Mart. "In that regard, for us it's still a costslap-and-ship," he says. The company has begun considering the potential for RFID in warranty, out-of-warranty, service and repair, as well as further optimization of the supply chain itself. But that's somewhere down the road. "I don't think anybody truly understands the amount of information this is going to generate," Schwartz says. "And how we're going to be able to filter it and focus on what's truly relevant."
Thanks to advances in communication and storage technology, the enterprise is awash in data. And the truthabout both products and customersis in there somewhere. It falls on the CIO to endure the consequences of finding it.
Schwartz and Bolton don't get too philosophical about it all. The way they see it, their job is to determine what difficulties the business side of Panasonic is experiencingparticularly its ability to find and use relevant information in a timely matterand help solve them. "We're measured on one thing," says Schwartz. "And it's not the technology that we use. It's the value we deliver back to the business."