What Mitch didn't realize was that some of the reports he was shouting for took more than 180 hours of senior staff time to prepare on the firm's rudimentary computer system, a solitary 386 that ran R-base database-management software.
Understanding that fact marked the beginning of Mitch's conversion. And once he'd made up his mind to computerize, he knew exactly what he wanted the system to do. It had to track standard things, of course, such as the details of each sale and commission. But more important, it had to keep tabs on an indicator particular to the cellular-phone industry: Mitch wanted the system to rank Celluphone's dealers according to deactivation rate, or "churn," in the seventh month of service.
Here's why: The 11-year-old company is an agent of AirTouch Cellular, the primary provider of cellular-phone service in the Los Angeles area. It does most of its business through small cellular-phone dealers. The dealers sell portable phones and sign their customers on for the AirTouch Cellular service, which is activated by Celluphone. Celluphone then makes money by collecting a percentage of each customer's monthly phone bill.
Each time Celluphone activates a new phone number, it gets a commission from AirTouch. Celluphone passes that money -- plus some promotional funds -- on to the dealer who initiated the sale. If the dealer's customer cancels the service before he or she has been on board for seven months, the dealer must return the commission to Celluphone; after that, the commission stays in the dealer's pocket. So seventh-month cancellations are big money-losers for Celluphone: it's too soon to generate much in usage profits but too late to recover the dealer commission. "We wanted to stay away from the guys who had a 6% seventh-month deactivation rate and stick with the guys with a 1% rate," says Mitch.
So Mitch and Mike looked for an EIS that could on a moment's notice rank dealers by seventh-month deactivation rate. Mike called in Ken Moss, of Moss Micro, a consulting firm in San Juan Capistrano, Calif., that has extensive experience in the cellular-phone business. Because Mitch's needs were so particular, Moss chose to custom-develop Celluphone's entire system rather than rely on a vendor such as IRI or Pilot, whose software is expressly designed for EIS use. He built the system from Microsoft products, including an SQL Server for the database and Excel for the interface. At Mitch's request, Moss even programmed the spreadsheet to respond to a single rather than the customary double click of the mouse. ("That's stupid," Mitch had grumbled. "Why do I have to click twice?") The final price tag was $60,000 for hardware, software, and consulting services -- a cost comparable to that of specialized EIS products.
Within seven months the system had paid for itself in reduced hours spent compiling data. Profits rose, too, because the company stopped doing business with some of the dealers it once assumed were bringing in good customers. "We were losing money, and we didn't know it," says Mike.
As Mitch gets deeper into his EIS, he keeps discovering new things he wants it to do. Recently, he asked Moss to program the system to show deactivation rates per dealer for the past three years, not just for the current year. But the computer convert is still a businessman at heart. "My father is happy he has his own computer," says Mike. "But he still asks me, 'Why are we spending so much money to buy computers for everyone else?' "
* * *
Given the cost and complexity of building an EIS, it's no surprise that many small companies aren't willing to bring one on board. But if you know what's key to running your business, you may be able to produce some EIS-like reports using the systems you already have.
CEO Mary Baechler employs a make-shift EIS to gauge the progress of her company, $7-million Racing Strollers, a manufacturer of baby strollers for joggers, in Yakima, Wash. Every day she looks at a printed report that details cash coming in and cash going out. Her eye focuses first on the top right-hand corner of the page, where a single figure tells her at a glance how things are going. The number shows the estimated net profit for the month based on actual performance to date. "Some months it curls my hair," she says.
To create the reports, her staff takes information from purchasing, order-entry, sales, and inventory databases, and rekeys it into an Excel spreadsheet. Lots of companies, large and small, do the same thing. For many it's a practical, if frustrated, response to the reality of personal computing. Most of the components that run businesses were never designed to work together. Their owners purchased them piecemeal, with no attention to a larger plan. Without a customized program that can "port" data from one application to another in a usable format, they must resort to rekeying the numbers.
That's how Racing Strollers ended up with its jury-rigged system. The 50-employee company uses both Macs and IBM-compatible PCs; a host of software programs, including Great Plains Accounting software; and a database from Aldus called TouchBase. "Over the years I've bought virtually everything my local reseller recommended," says Baechler.
This year she plans to spend between $50,000 and $100,000 on a more formal EIS, which will allow the company's systems to work together. Her employees are likely to welcome the upgrade. Unlike some small companies, where even the suggestion of an electronic network brings on culture shock, Baechler's company has always shared information. She has an open-book policy, which means that her employees are privy to the financial status of the company. A new system, in which all the applications are linked and all employees have access to computers, will only enhance the business-savvy environment. Already, says Baechler, "nearly every one of my production workers knows what a debt/equity ratio is."
