Benchmarking bytes: dollars and cents yardsticks can't give you an accurate measure of technology's impact at your club.

For every technological implementation there are a host of complicated schemes designed to evaluate the success of installed application software. Some approaches focus on: "What is the club's return on investment?" Others beg the question: "Do the benefits outweigh the costs?" or "Is the application sufficiently buffered from our membership?"

Club managers considering adoption of such approaches may be confused by the complexities and regret using a mathematically formulated review. The inherent weakness of some analytical models is that a candidate application may satisfy many of the criteria despite the fact it missed its intended target in the first place. For example, consider the club that installs voice messaging to direct incoming phone calls to the club. When evaluating its impact against expense there is very likely to be a favorable outcome. Unfortunately, members may dislike the impersonal nature of the application and stop phoning the club. Rather than conducting an intricate quantitative audit, management should consider a more simplistic qualitative analysis.

Perhaps more sensible than a compounded evaluation is a straightforward set of test criteria that can be applied either pre- or post-implementation. Common sense standards designed to measure the appropriateness of club technology can be narrowed to three areas: a) competitive advantage; b) productivity improvement; and c) profitability enhancement. In other words, management needs to orient itself to responding to these simple questions: Has the implementation of this application provided the club a competitive advantage? Did the application improve staff productivity? Does the application enhance the club's profitability?

While it may not be obvious at the outset, this simplistic analysis can generate a sufficient basis for evaluating application success. In addition, this three-dimensional approach avoids the pitfalls and frustrations so often accompanying more complicated analysis.

Competitive Advantage

Can technology produce a competitive advantage for the club? Often the answer is yes. Consider a club website that enables members to make their own dining room reservations; or a club point-of-sale system with frequent diner software that tracks and automatically rewards member frequency; or the creation of a cybercafe within the club. Each of these applications produces an outcome unparalleled by non-automated or semi-automated operations while generating a unique competitive advantage. The goal of competitive advantage is to cultivate member loyalty while increasing purchase frequency. Club technology can help change the impact of competitive advantage so that the short list of items that once were perceived as the only differentiators in the club industry (price and quality) can now be supplemented with innovative by-products of the digital era (brand imaging, personalized services, and product customization).

Competitive advantage is typically established through one of four dimensions. The most obvious is product differentiation. Product differentiation is the art of applying technology to produce a product that is unique in the marketplace. For example, a club can distinguish itself by sponsoring a website that allows members to review their account online. Similarly, the club may pipeline an electronic version of its newsletter (eNewsletter) to select members. In either case, an advantage can be gained through distinctive capabilities or custom product features. Product differentiation helps create value while enabling the club to effectively satisfy or exceed member expectations.

A second means for establishing competitive advantage through technology is to generate unparalleled service (e.g. MRM--member relationship management). MRM is built on the proposition that knowledge of a member is valuable to loyalty and revenue enrichment programming. MRM requires capturing interactions and analyzing past member behavior to predict or direct future behavior. For example, using data mining to learn member preferences or to determine which wine is frequently ordered with a specific entree.

Once this information is known it can be applied to special member services or to bundle menu items to increase member satisfaction. Just as unique product features can serve as a point of differentiation, member services can also create effective image and branding. The development of personalized member services and products remains an important ingredient to MRM throughout the club industry.

Consider what might happen when the club places a hot beverage machine outside the pro shop for early morning players who arrive prior to the clubhouse opening. A high-tech beverage machine is capable of producing a wide variety of drinks (e.g. brewed coffee, espresso, cafe latte, hot chocolate, etc.) that hopefully results in enhanced member satisfaction. Alternatively, consider the impact of a member-only online auction, a member-only business directory, or a customized news service, all hosted at the club's website.

A third form of competitive advantage arises when technology enables a product to be produced at a lower cost. When costs are reduced, product margins will be higher thereby allowing some flexibility in pricing. A cost advantage is established when a substitutable product cannot be produced for the same low cost elsewhere and therefore the club gains an advantage. Lower costs traditionally have created a natural means to gain competitive advantage. Cost reductions are addressed in the areas of productivity and profitability.

A fourth technique for establishing competitive advantage through technology is market segmentation. By employing technology to target specific member demographics or interest groups, a club is better able to expand its reach while exceeding member expectations. Many clubs are embarking on member-centric programs aimed at providing a competitive advantage through product branding. Having members aware there are specialty goods and services available at the club that are not available elsewhere helps position the club with a powerful competitive advantage.

It is important to note that once a market leader establishes a competitive advantage the rest of the market tends to move quickly to catch up. It is for this reason that it may be difficult to create a sustainable competitive advantage in the club marketplace. Technology, however, can provide the club with exceptional opportunities for continuous development of competitive advantages.

Productivity Improvement

The second measure that can be used to evaluate the effectiveness of club technology is productivity improvement. There are two aspects of productivity evaluation: data processing and workflow processing. From a data processing perspective there are three categories of measures. The first is minimization of the time it takes to transform data from input (raw facts) to output (information). When the time of the traditional data processing cycle is minimized, the club is operating in a more efficient manner and technology should be credited for having made a positive difference. For example, the processing time required for aggregating one month's data under the club's former POS system as compared to processing the identical sample through its new POS system will reflect the efficiencies of the newer application. If there is a gain, then improved productivity has been demonstrated and the application should be judged somewhat successful.

Second, the optimization of data handling procedures must also be evaluated to determine improvement. The goal being to reduce the number of times the same piece of data must be handled. For example, taking a member's dinner order tableside using a handheld device will lead to singular data capture for subsequent processing. This is illustrative of a significant gain that arises from data capture, thereby omitting the need for additional data entry, data handling, or data rehandling procedures. Recognizing that each time data is processed there is a chance of transposition or omission errors, a more effective application minimizes data handling procedures.

A third related category for data processing is streamlining output. Modifying system-generated reports so that the most relevant statistical and analytical information is highlighted helps render an application more productive. Management report content needs to be in an efficient format to enable more effective decision-making.

From a workflow perspective, normal measurable outputs for productivity are the number of transactions processed per hour, the degree of process integration, amount of resource scheduling, and the impact on inventory control. These remain important evaluative tools when determining an application's impact on productivity.

If the adoption of an application allows staff to be more efficient, then this is a positive benchmark. One perspective is to analyze the workplace pre- and post-implementation to determine direct and indirect measurable and auditable outcomes. For example, management should take care to investigate gains in expanded member services, rapid access techniques, and data mining tools as a result of productivity improvement.

Profitability Enhancement

Evaluating the impact technology has on the club's bottom line profitability may be the most difficult of the three informal criteria to determine. The impact of technology on club revenues and expenses may not always be obvious. Nonetheless, this dimension is critical for clubs mindful of return on investment (ROI). The main question being: Will the club benefit financially by adding a candidate application? Will there be net profit? Will revenues exceed expenses? Stated simply, this criterion is designed to measure whether the benefits of an application outweigh its costs. When this is the case, then the application is a profit enhancement.

A Benchmarking Example

It is important to note that the three areas of technology evaluation (competitive advantage, productivity, and profitability) are not mutually exclusive. Implementation of a point of sale (POS) system, for example, impacts all three areas. First, a competitive advantage can be gained from several perspectives. As mentioned earlier, frequent diner software can be used for reward tracking as well as producing gift certificates. Menu item modifiers can be used to store personalized preparation instructions thereby enabling members to build-to-order (BTO) their own entrees or unique PLU identifiers.

These examples illustrate how technology helps differentiate a club from its competitors.

From a productivity perspective, a POS system with remote kitchen displays helps minimize kitchen traffic, facilitates efficient order entry, provides production staff with more legible instructions, monitors tip pooling, and enables members to receive more attentive dining room service. Together these factors can lead to enhanced revenues and a positive measurement of installed technology.

Technology can provide a club with a competitive advantage through product differentiation, unique service, cost reduction, and informed market segmentation. In addition, productivity may be improved through gains in both data processing and workflow processing procedures. Intelligent club applications should also be evaluated relative to enhanced profitability. These three simple evaluation criteria provide an effective, quick, and easy scheme for the evaluation of technology in the club industry.

CM