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American Express: Becoming the Worlds Premiere Service Provider

Chris Campbell Jonny Silberman Jenny Tu Arthur Chen

Presentation Agenda
Market Positioning

Overview

Competitive Advantages & Core Competencies Objectives & Strategies

Global HR

Customizing & Implementing Relationship Care Programs Annual Employee Maintenance Training

IT Support

Enhance Social Media Presence Entering Cloud

Implications
Overview Globalizing HR

Finance

Implementation
Enhancing IT Implications
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AMEX is a Luxury Credit Card

Overview

Globalizing HR

Enhancing IT

Implications

AMEX is a Luxury Credit Card


Business Model: Credit Card; large transactions, fewer customers, better customer service.

Business Model: Credit/Debit Card, small but many transactions, connected to banks (not vertically integrated)

Overview

Globalizing HR

Enhancing IT

Implications

Identifying Key Issues

Key Issues

Current Constraints Large, Powerful Competitors New Substitutes Entering the Market (via New Technologies)

Aims for Future


Remain the premiere card for High Net Worth Individuals Maintain Branding of Delivering Superior Customer Service

How can Relationship Care be applied globally?

How does AMEX leverage new Core Competency technologies to further connect with its clients?

Overview

Globalizing HR

Enhancing IT

Implications

Leveraging on Unique Resources

Competitive Advantage

Current Constraints Large, Powerful Competitors New Substitutes Entering the Market (via New Technologies)

Aims for Future


Remain the premiere card for High Net Worth Individuals Maintain Branding of Delivering Superior Customer Service

AMEX is viewed as a high quality credit card service provider for the affluent

Core Competency Continual strategic investment in HR & IT infrastructure to maintain market position

Overview

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Implications

Strategy Alignment with Vision


American Express wants to become the worlds most respected service brand Leveraging on technology to improve global customer service
Business Development

Operations

Human Resources

Information Technology

Marketing

Finance

Overview

Globalizing HR

Enhancing IT

Implications

Strategy Alignment with Vision


American Express wants to become the worlds most respected service brand Leveraging on technology to improve global customer service
Business Development

Operations

Human Resources

Information Technology

Marketing

Finance

Globalizing HR

Enhancing IT

Customizing Relationship Care


Maintaining Employee Training NPV $17.3 B

Social Media Integration


Cloud Computing

These strategies will allow AMEX to continually connect to customers on a deeper level globally, and position itself favorably in the future
Overview Globalizing HR Enhancing IT Implications
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Strategy Overview

Globalizing HR

Customizing Relationship Care Maintain employee training

Social Media Integration Cloud Computing

Enhancing IT

Globalizing HR

Customizing Relationship Care Maintain employee training

Social Media Integration Cloud Computing

Enhancing IT

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Relationship Care Made a Positive Impact


Benefit Description Allow employees to make personalized decisions to connect better with customers provide a better service more efficiently

Improved Training & Hiring

Employee Empowerment

Employee Development

Leverage New Technology

Employee Decision Power Over Policies

Provides performance based promotion and incentives programs Recognition is given to high achieving employees Defying industry norms, employee turnover has decreased by half as a result of valuing our employees American Express is able to have a much lower industry norm
Implications
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Lower Attrition

Overview

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Relationship Care Needs to be International


Push Out of US
2005 - 2010 Credit Card Payment CAGR
23% 24%

Pull into International Markets


2011 - 2015 HNWI CAGR
13%

7%

7%

7%
6%

6%

8%

9%

North America

Western Europe

Asia Pacific

Latin America Middle East & Africa

North America

Western Europe

Asia Pacific

Latin America Middle East & Africa

Source: Euromonitor

Source: Merrill Lynch Wealth Management

Slowing growth (6%) vs emerging markets (23-24%)


Credit Card Transaction Volumes are stabilizing in North America which is currently 87% of AMEX Revenues

The highest area of projected growth in High Net Worth Individuals is in the Asia Pacific Since this is American Expresss target market, AMEX needs to establish its customer service there
Enhancing IT Implications
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Overview

Globalizing HR

Implementing Relationship Care Globally


Why Relationship Care has created positive financial impacts as well as better customer loyalty and retention Seek to replicate success in growing international market places

How

Apply Relationship Care model to international countries customize employee training programs to fit distinct culture and products

Survey (6 employee value metrics) to evaluate culturespecific employee preferences

Analyze survey results for initial program. Structure specific project to tailor country preferences

Implement initial project. Constantly survey employee happiness and RTF ratio
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Overview

Globalizing HR

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Implications

Applying in the Context of India


Employee Metric
1. Payment for Performance 2. Flexibility in Schedule

% Satisfied
75%

Resulting HR Strategy Structure


Maintain current operations Bring in MSA Technology to allow Scheduling Flexibility

42%

3. Office Policies
4. Career Development 5. Recognition

35%

Allow more independence in conducting personal responsibilities


Create potential paths to ascension within company Implement location specific rewards programs for high achieving employees Conduct internal research to identify points of contention and then adjust them
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35%

53%

6. Environment
Source: Asian Academy of Management Journal

43%

Overview

Globalizing HR

Maintaining Up-To-Date Training


Why Employees need constant up-to-date training to keep up with changing products, cultural sensitivities, and consumer preferences. Mangers evaluate CCP performance in annual reviews Managers may suggest additional training depending on CCPs needs CCPs are required to take one new class and review a class annually

How

Potential Classes Required Annually: 1. Manager Review 2. One New Class 3. One Review Class True Customer Concerns Objectives: 1. Current Conversation Points 2. Never Offend

New Technologies
Current Topics Religious Neutrality

Overview

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Globalizing HR

Customizing Relationship Care Maintain employee training

Social Media Integration Cloud Computing

Enhancing IT

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Spotlight Shone on IT Spending Quality


% of IT Spending, 2010 8% 7% 6% 6.80% Indust Ave: 5.3%
Invest at the right time but should have invested more Should have invested sooner

McKinsey Global Survey 2009 Web 2.0 Spending

42 24 18 10 7

5%
4% 3% 2% 1% 0%
Financial Services Insurance Healthcare Primary Production Retail

Won't do anything differently

Total Ave: 3.0%


Invested at the right time but overestimated Should have waited

Other

AMEX needs to reduce its IT spending and allocate more efficiently


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Overview

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Implications

Social Media Focus

Objective

Ensure AMEX customer experiences are as robust online as they are offline, everywhere in the world

33% of customers contact a company through their website

Why

20% of customers contact a company through email Younger customers are online more, especially the Millennial Generation

How

Integrating Call Centers with Social media Recommend a Friend Program via Facebook

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American Express Calls the Client


Call Us 24/7 at 1-800-528-4800 Current Wait-Time to Speak with an American Express Representative: 12 Minutes 40 Seconds Estimated Wait Time at Call Center Call Us Directly

Well Call You Back at a convenient time! No Talking to an Automated Machine No Waiting

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Recommend-a-Friend on Social Media


Justification for Recommend-a-Friend
Relationship Care Program is measured using the company wide metric of Recommend-a-Friend

85% of Costumer Care Professionals performance is based on the Recommend-a-Friend Metric

However, there is no actual implementation of a Recommend-a-Friend Program through Social Media

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Recommend-a-Friend on Social Media

Directly transfers customer service objectives into increased revenue

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Strong Drivers Present for Cloud Computing

Pay-per-use billing dramatically reduces upfront costs Lower upfront IT costs Easier to scale-out Enterprises can seamlessly scale their services to meet seasonal client demand

Cloud computing can provide an almost immediate access to hardware resources Faster time to market Creation of new value drivers Cloud computing can lower IT barriers to innovation and increase interoperability between disjoint technologies

Source: McKinsey

Overview

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Cost Suppression Derived from Cloud Computing


Full Time Employees (FTEs) by role group Application Support Architecture Business Analysis
65 63 164 115 45 45 52 52 131 107 257 257

Approx 10-15% of headcount can be reduced by migrating capacity over to cloud servers Labor reduction stems from facilities and IT Administrator
Total FTEs 1704
505
673

Client Services
DB Admin Desk Top Support Facilities

20 8
87 87

Help Desk
IT Administrator Management Quality Assurance Real Estate Telecommunication
Total starting FTE Source: McKinsey 1 1

-15% 1448

53 53

40 40

116 116

Total FTEs after migration

Total Starting FTEs


Enhancing IT

Total FTEs after migration


Implications
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Overview

Globalizing HR

Executing in 3 Simple Steps


AMEXs private cloud

1) Select right partner Select based on screening criteria Partners: Google, Zoho, & Windows Azure
Overview

2) Staggered migration Plan migration phases and contingencies Launch pilot program with off-site support
Globalizing HR Enhancing IT

3) Synchronize globally Link up with global offices Ensure technical support 24/7
Implications
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Positive Impacts of Cloud Computing


Benefits Description Architectual specifics are abstracted from the buyer Accessible Globally They run in multi-tenancy mode with multiple users accessing in infrastructure simultaneously Underlying hardware can be anywhere geographically Required to incur upfront capital costs and perform hands-on management (private pool), However, annual maintenance costs are lower due to aggregated location and reduced equipment Scaled up/down dynamically, and immediately, which differentiates from traditional hosting service providers. Paves way for easier integration with future acquisition targets Achieve greater utilization rate as data servers are pooled

Cost Savings

Achieve Efficiency & Scalability

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Contributing to the Bottom Line


Adjusted Operating Profit (US$M) 24,000 22,000 456 3,194 1,687 Initial Capital Outlay WACC 4-yr NPV IRR Payback Period Cloud Computing Capital Budgeting Value (US$800 M) 14% US$407 M 40% 2 years

20,000 18,000 16,000


14,000 12,000 10,000

18,208

2009
Status Quo

2011F
RC Global

2013F
Recommend

2015F
Cloud Computing

Strategy yields positive NPV & 7.0% CAGR to adjusted operating profits
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Overview

Globalizing HR

Enhancing IT

Implications

Implementing Growth
Globalization of HR Take Employee Survey

Analyze Survey Results


Planning Relationship Cost Globally First Year of Relationship Care Reevaluate Annually Technological Developments

Facebook Enhancements Developments


Launch Facebook Enhancements Adoption of Cloud Computing

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Ultimately, AMEX will


How can Relationship Care be applied globally? How does AMEX leverage new technologies to further connect with the customer?

Apply Basic Relationship Care Model but Modified for Cultural and Social Sensitivities

Social Media as the Primary Customer Touchpoint

Maintain Luxury Market Position


Remain Relevant and Accessible to New Generation of Customers
Overview Globalizing HR Enhancing IT Implications
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American Express: Becoming the Worlds Premiere Service Provider

Chris Campbell Jonny Silberman Jenny Tu Arthur Chen

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Slide Navigator
Overview 1) Cover Slide 2) Presentation Agenda 3) AMEX Market Position 4) AMEX Marketing Position 2/2 5) Identifying Key Issues 6) Leveraging on Unique Resources 7) Strategy Alignment with Vision 8) Strategy Alignment with Vision 2/2 Enhancing IT 17) Social Media Focus 18) Spotlight Shone on IT Spending Quality 19)American Express Calls the Client 20) Recommend-a-Friend on Social Media 21) Recommend-a-Friend on Social Media 2/2 22) Strong Drivers Present for Cloud Computing 23) Cost Suppression Derived from Cloud Computing 24) Executing in 3 Simple Steps 25) Positive Impacts of Cloud Computing 26) Contributing to the Bottom Line 27) Implementing Growth 28) Conclusion slide Backup Slides 31) Background 32) Industry Snapshot of AMEX 33) Risk Mitigation for Cloud Computing 34) Cloud Computing More Expensive than Data Centers 35) Screening Criteria for Private Cloud Partners 36) Financials for RC Global and Recommend a Friend 37) Financials for Cloud Computing and Summary 38) Sensitivity Analysis: RC Global and Recommend a Friend 39) Sensitivity Analysis: Cloud Computing 40) US Payment Trends 41) Methods of Contacting Customer Service 42) Emarketer: Support for Social Media Integration 43) Investing in Web 2.0 and Social Media 44) Investing in Web 2.0 and Social Media 2/2

Globalizing HR 11) Relationship Care Made a Positive Impact 12) Relationship Care Needs to be International 13) Implementing Relationship Care Globally 13) Applying in the Context of India 14) Maintain Up-to-Date Training

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Background
2005: Jim Bush identifies erosion of customer service
2008: American Express records revenues of $28.4 billions (3% increase from 2007) 2009: Revenues fall due to tough economic times

Happy Employees

Happy Customers

Increased Revenues

Overview

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Industry Snapshot of AMEX

Overview

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Risk Mitigation for cloud computing


Hurdles Description Our Value Proposition

Financial

Current cloud computing offerings are not cost-effective compared to large enterprise data centres

Procure multiple quotations to obtain competitive rates from vendors Perform cost-benefit analysis, ignoring sunk costs and factoring in cost declination Adopt private encrypted cloud servers for AMEX proprietary usage

Technical

Security and reliability concerns will have to be mitigated and applications rearchitected Business perceptions of increased IT flexibility and effectiveness will have to be properly managed The IT supply and demand organizations will have to adapt to function in a cloudcentric world

Operations

Run pilot programs and ensure employees have hands-on experience

Organizational

Migration to cloud server to span over 6 months for IT department to increase familiarity exposure

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Cloud computing more expensive than data centre

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Screening criteria for private cloud partners

1. Since when is the company offering cloud services? 2. Is the company making profits? If does, since when is the company profitable? 3. Is there a 24/7 technical support available? Are there any hidden costs associated with the provided support? What exactly includes the technical support? What is the number of support techs on the support team? 4. Is the provided Cloud service reliable and secure? What compliance and controls the service implies? 5. What technologies are used by the companys service support? 6. Are you required to sign up a long-term contract for the service? Does the sign-up process involve any setup costs? 7. Are there any discounts for large volume usage? If, so, which are those volume levels? 8. Is it required a minimum monthly spend? 9. Does the service have a free trial period? 10. Is mobile access enabled with the service?

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Financials for RC Global and Recommend

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Financials for Cloud Computing and Financials

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Sensitivity Analysis: RC Global and Recommend


Adjusted Operating Profit Margin (Strat RC Global) 32.60% 33.60% 34.60% 35.60% 36.60%

31.60% 4.60%
5.60%
Increase in % of Cardholder Acq (Strat Recommend Friend)

37.60% 8647.7
9312.6 9977.4 10642 11307 11972 12637

21838
22567 23296 24025 24754 25482 26211

19640
20358 21076 21794 22513 23231 23949

17442
18149 18856 19564 20271 20979 21686

15243
15940 16637 17334 18030 18727 19424

13045
13731 14417 15103 15789 16475 17162

10846
11522 12197 12873 13548 14224 14899

6.60% 7.60% 8.60% 9.60% 10.60%

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Sensitivity Analysis: Cloud Computing


Initial Capital Outlay for Cloud Computing 407 11% 12% 13% WACC 14% 15% -500 763 731 700 670 642 -600 673 641 611 582 555 -700 583 552 523 495 468 -800 493 463 434 407 381 -900 403 373 346 319 294 -1000 313 284 257 231 207 -1100 222 195 169 144 120

16%
17%

615
589

528
503

442
418

356
332

270
247

183
161

97
76

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US Payment Trends

Overview

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Methods of Contacting Customer Service

Overview

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Emarketer: Support for Social Media Integration

Overview

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Investing in Web 2.0 and Social Media 1/2

Overview

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Investing in Web 2.0 and Social Media 2/2

Overview

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