15.939 Strategic Options & IT

Assignment #1

Group 5

Ignacio Pulido

Why is it interesting?

L.L. Bean is an interesting company because of they way they have managed a deep organizational transformation to enhance their already "world class" customer service capability in light of more demanding customer needs. IT plays a key role of their product offering and service delivery system, fitting nicely with their overall objectives and goals.

Company Background

L.L. Bean is a private, family owned, company founded in Maine in 1912 by Leon Leonwood Bean, producer of high quality outdoor apparel, footwear, and equipment.

The company started with a single product: the leather top, waterproof boots. Since the beginning, the founder set a very strong culture and tradition for customer service, quality and innovation, by being the first to implement a 100% unlimited guarantee. The legend says that out of Bean's first 100 pairs of boots, customers returned 90 due to defects in the stitching. Bean refunded 100% of those and started over with an improved boot.

Bean's golden rule was to "sell good merchandise at a reasonable profit, treat your customers like human beings, and they will always come back for more". His model, still used today, was to build customer loyalty by providing exceptional service. Hence, he focused on the sales, marketing, and customer service steps on the value chain, taken for granted that the company manufactured a high quality product.

Today, L.L. Bean has a sales volume of approximately $975 million. It manufactures 'in Maine' more than 16,000 products, which are sold primarily through catalogs (87%) and a retail store in Freeport. This two channels are available to customers 24 hours a day, 365 days a year. The employee roster amounts to 3,000 plus 2,500 part time during pre-Christmas season. They receive and process around 150,000 orders per day, 80% placed by phone and the rest by mail. L.L. Bean is still recognized as a leader in the industry by its "world class" customer service, and a strong reputation for quality.

Since the founder's death in 1967, his grandson Leon A. Gorman took over the company growing it into one of the world's leading international mail-order concerns and a benchmark for customer service.

Adapting to change

L.L. Bean's target customer profile are men and women, college-educated, age between 35 and 55, interested in the outdoors. These customers have changed their needs over time, evolving toward more sophisticated products and services. This complexity was then transferred to L.L. Bean who had to transform itself to accommodate these new customer needs. The way L.L. Bean managed this transformation affecting all organizational levels is what makes it interesting. They understood that they needed to change their strategy, processes, structure and technology in an orderly fashion, while maintaining their core values and principles. An interesting point is that rather than accommodating current technology into their organization, they worked the other way around, defining what technology they should use to achieve their new objectives and support their new processes.

L.L. Bean enhanced its value proposition to build a more close relationship with its customers by providing them with a one-stop shop for all their outdoor needs. In addition, Bean attempted to anchor affinity or communities of shared interest, both through content and conductivity, hoping that many of them would step forward and buy their products.

Bean took several actions to achieve this goal. They changed their whole customer service ideological platform to, rather than relying on its guarantee, ensure that things happen right the first time, thus lowering their cost of poor quality. Although L.L. Bean employees had the mindset for delivering quality service, they didn't have the power to execute it. Nor could they prevent problems before they occurred because they didn't have the knowledge of processes elsewhere in the company that affect the situation. Therefore, Bean embarked in a total quality initiative focusing on employee development rather than process improvement. The idea was to maximize customer satisfaction by totally involving people in improving the way work is done. This way they tried to improve their employee involvement.

This quality initiative also triggered changes on employee roles and organizational structure. Lastly, new technology had to be used to provide the customer with more and better information and services. An important point was the focus on information offerings complementing Bean's products.

IT initiatives

Bean's use of information technology is directed toward enhancing the customer interface and providing the customer with more related information and services. For Bean, quality happens in the interaction with customers. Today, Bean is implementing two major IT programs in telephony and electronic commerce/service via the internet.

Bean has always been an early adopter of interesting technologies. L.L. Bean has partnered with IBM to offer an electronic catalog that will enable customers to select items and place credit-card orders via the internet. L.L. Bean was the first company to sign on IBM's new Net.Commerce software and use it to set up a "virtual storefront" on the internet. This service is embedded in their impressive web page.

Another important aspect regarding the internet technology is the use they have given to the their web page. Bean has transformed their web page to attract customer groups, providing them with information about their specific hobbies, informing them about recent developments, helping them make the most out of their time outdoors, including a special Park Search feature that can identify specific tailored destinations for a vacation or weekend getaway. In addition to this information, customers can select clothing and gear for their specific purpose, sign up for special training sessions with the Outdoor Discovery School, or interact with sporting goods experts to help them choose the right equipment.

On the other front, Bean is enhancing its telephone customer interface making it more intelligent by being able to 'guess' the customer's needs and supply the right operator with all the necessary information. Bean is testing a new telephony system, integrated to the customer database, that will identify a caller and route his/her information directly to the specific group based on previous transactions, and other personal information. This phone service adds to the 24 hour, 365 days toll free number, and to the telecommunications device for the hearing impaired (TDD).

Summarizing, L.L. Bean is an interesting case of a transforming organization that is using IT technology in a clever way to support their overall strategy and processes. The result is to enhance their value proposition to customers by widening the product offering and building a closer and lasting relationship.