W H I T E PA P E R

BEYOND THE GOLDEN RECORD SERVING MANY MASTERS THROUGH HIERARCHY MANAGEMENT

Table of Contents Real-world Implications for Multiple Hierarchies.... 2 Requirements for Managing Multiple Hierarchies.... 4 How to Start Effectively Managing Multiple Hierarchies............................................... 4

© 2010 Initiate Systems, Inc. All rights reserved.

W H I T E PA P E R | Beyond the Golden Record

Business structures are complex. Companies are continually merging, acquiring or spinning off other companies, necessitating changes in how their relationships with other organizations are reflected. Each change adjusts their organizational structure, affecting how organizations like yours interact with them. Increasingly, businesses are turning to master data management (MDM) solutions to better understand and manage business relationships with customers, suppliers, vendors and partners. For these businesses, an MDM solution with a strong grasp on organizational hierarchy management is a must. Moreover, businesses need an organizational hierarchy management solution with the flexibility to manage and display multiple, alternate views of the same set of customers. When several departments each want to see their own unique view of the same set of customers, they need an organizational hierarchy management solution that allows for flexible accommodation of these alternate views. Simply put, different users want to see data grouped in different ways that meet their needs. Sales will want to view hierarchies differently than Finance or Marketing, as each has different priorities and business drivers. Even within a department, multiple alternate hierarchy views can help achieve a multitude of goals and benefits, such as understanding the impact of pricing or sales territory analysis. Industries as varied as High Tech, Manufacturing, Financial Services and more can benefit from a solution that supports flexible alternate hierarchy management. By enabling multiple hierarchical views, a business can benefit greatly from a better understanding of the relationships among and between its customers. This can reduce operating costs, enable cross- and up-selling, better align sales territories, improve customer satisfaction, and enable better decision making and customer analysis.

Real-world Implications for Multiple Hierarchies Let’s first discuss the need to understand multiple hierarchical views by looking at the example of a retailer. A retailer tracks numerous aspects of its customers, suppliers and stores. Within any of these groups, there are several different types of hierarchies. Among customers, the retailer may want to track online and in-store sales, as well as establish relationships between customers to enable visibility into household relationships. The retailer may also want to understand supplier or vendor data – including their hierarchies – across all the supplier’s divisions and branches, as well as across the retailer’s divisions and branches, enabling a total view of expenditures with each supplier. This data must be consistent across the retailer’s enterprise, as well as be viewed from multiple angles, as a supply chain manager will need a different hierarchical view than an accountant who tracks billing. Finally, the retailer establishes hierarchies among its own stores to enable tracking and reporting on its varying divisions, including geographies or franchise owners. Within each of these cases, a single customer, supplier or store will appear in multiple hierarchies. It’s essential that the organizational hierarchy management solution enables the accuracy to report with

2 © 2010 Initiate Systems, Inc. All rights reserved.

W H I T E PA P E R | Beyond the Golden Record

confidence and the scalability required to incorporate new data as stores, customers or suppliers evolve and grow.

“ HOW CAN YOU MODEL DIFFERENT HIERARCHIES WHILE ALSO RESOLVING THEIR INTEGRITY? THIS CHALLENGE INCREASES WHEN YOU CONSIDER THAT CUSTOMERS CAN BELONG TO SEVERAL DIFFERENT HIERARCHIES AT ONCE, AND THESE HIERARCHIES ARE NOT STATIC – THEY CONTINUE TO EVOLVE OVER TIME. ”

Three of the best understood hierarchy-driven business functions are legal, sales and marketing. Since the business requirements vary from function to function, the orientation of their hierarchies varies. For example, legal will be most interested in the orientation of corporate governance to assess accountability, such as the difference between corporate and franchise stores. Legal insists on the highest level of confidence and accuracy. Sales will be focused on optimizing customer-oriented resources to maximize coverage and improve customer service. Hence, sales would likely focus on the customer’s procurement behavior rather than legal accountability. As a result, sales may split a large account geographically to provide better coverage and help drive sales. Although marketing will also be focused on procurement activities, the emphasis is on touching customers or prospects rather than high levels of accuracy. Marketing would rather risk touching a customer or prospect multiple times due to duplicate data rather than miss a potential touchpoint due to overly strict data stewardship. Alternatively, legal accountability and sales revenue views must be more cognizant of accuracy. Another example in the retail world involves the vast network of suppliers and their subsidiaries. Retailers can benefit from seeing a roll-up of their various suppliers and subsidiaries; for example, understanding international exposure in their supplier base could help illuminate how currency fluctuations – such as a falling dollar – may impact pricing contracts. By rolling up supplier information, the retailer may also see their total purchases and leverage this information for additional volume discounts. On the other side, suppliers who understand how their various subsidiaries interact with retail customers could improve efficiencies and streamline distribution and billing. The challenge is enabling these different representations from the same data. How can you model these different hierarchies while also resolving their integrity? This challenge increases when you consider that customers can belong to several different hierarchies at once, and these hierarchies are not static – they continue to evolve over time. For example, franchise stores could be mapped into brand and owner hierarchies at the same time. Membership in both is essential and has serious repercussions on revenue management, taxes, sales compensation, inventory and a host of other issues. Similar scenarios of multiple hierarchies exist in a number of domains, including law enforcement, constituency services and healthcare provider networks. Time-based hierarchies can be very valuable to business. This requires more than knowing what a hierarchy looks like at a given moment, but allows users to view and navigate a hierarchy as it appeared at a given time. What does the lineage look like prior to a merger or acquisition? Or, going forward, what would a hierarchy look like after a proposed merger? Many organizations want to model prospective or what-if hierarchies in addition to history. For example, if two major suppliers were considering a merger, they could benefit from examining their potential overlap in retail customers to determine the effects. Similarly, sales and marketing teams often need to model account mappings to optimize their activities and make strategic pricing and sales territory decisions.

3 © 2010 Initiate Systems, Inc. All rights reserved.

W H I T E PA P E R | Beyond the Golden Record

Requirements for Managing Multiple Hierarchies Typically, pricing hierarchies, customer classes or sales territories may differ from the legal representation of a customer’s hierarchy. Some customers may be eligible for service or support through a clause in their contract, while others are entitled to the same service or support through repeat purchasing behavior. Managing multiple hierarchies requires that rules for managing these hierarchies account for both ways a customer grouping would be populated.

“ EACH LINE OF BUSINESS OR DIVISION MAY HAVE A UNIQUE VIEW OF THEIR CUSTOMERS’ ORGANIZATION. EACH DIVISION WANTS TO GET A COMPLETE, ACCURATE VIEW OF WHAT THEY CONSIDER TO BE THE “RIGHT” CUSTOMER GROUPING (HIERARCHY). HOWEVER, THE ORGANIZATION AS A WHOLE MAY ALSO WANT TO UNDERSTAND THE INTERSECTION OF THESE HIERARCHIES.”

Another requirement driving the need to maintain multiple representations of customers’ hierarchies is the fact that each line of business or division may have a unique view of their customers’ organization, one that varies from other lines of business within the same company. For example, consider the divisions within a bank. A typical bank has multiple product lines – loans of all flavors, lockbox services, retirement investments and deposit accounts, to name a few – that are related yet independent of each other. Each product category may be managed separately within different divisions. For example, divisions that manage commercial banking and loans may be legally prevented from viewing investment accounts and loans managed by other divisions of the same bank. Each division wants to get a complete, accurate view of what they consider to be the “right” customer grouping (hierarchy) so they can provide the right price or discount and the appropriate level of service essential for customer retention, cost control, cross- or up-selling, and other benefits. However, the organization as a whole may also want to understand the intersection of these hierarchies. What are the similarities and differences in how each line of business views its customers? With this information, they may be able to make better decisions about how to treat the customer in its entirety, how to structure sales and support teams, achieve better marketing efficiencies and reap numerous other benefits.

How to Start Effectively Managing Multiple Hierarchies So how can your organization start managing multiple hierarchies? First, start basic, with a baseline legal hierarchy coming from a trusted source or provider. By starting with a single, clean dataset, you lay a solid foundation for your future data stewardship. Starting with the legal hierarchy also enables you to leverage both your internal customer information and hierarchies and third party reference datasets available in the market. You will want to get the basic legal hierarchy right before you address alternate hierarchical views, as this will give you a solid base from which to work. Meanwhile, establish the strategies and guidelines that will provide focus to your data stewardship efforts early. With basic data stewardship in place, the move towards greater complexity will be easier. Next, load the attributes that correspond to your contracts, sales, marketing or other hierarchies. Identify the places where your hierarchies have disconnects or require attention. This may stem from missing organizations or organizations with attributes that conflict with your trusted baseline hierarchy. With the right data stewardship tools and reports, resolving these disconnects could be relatively simple.

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W H I T E PA P E R | Beyond the Golden Record

Make the necessary changes to your data to align these hierarchies and ensure the right information is displayed to the right people. Ensure that proper security attribution is available for all your data. Determine which data is more accurate and should be the “survivor” when confronted with conflicting attributes. Also, make sure your data stewardship rules dictate whether or not changes should be propagated throughout the system. Should third party data be considered more reliable than your own? What are the thresholds for matching and linking? Who has the final say? These are just a few of the questions essential to successful data stewardship across multiple hierarchies. You may want to maintain these separate hierarchies and view the intersection between them to understand potential overlaps and disparities, allowing you to make sales assignments, compensation, pricing, service and other decisions. Going forward, establish maintenance strategies to ensure that the data in your hierarchies is reliable and trust-worthy. Changes to the baseline hierarchy should trigger checks against the data elsewhere in your hierarchies. If, for example, an automatic re-parenting denoting a change of legal ownership occurs in the base hierarchy and your data engine determines that the new owner has a different pricing hierarchy attribute, the system should have rules to either automatically resolve this conflict or assign a task to a data steward. Perhaps you’ll want a data steward to review the legal hierarchy changes and determine the most appropriate changes to sales territories, pricing and other hierarchies. Finally, companies managing multiple hierarchies may want the ability to copy an existing hierarchy – perhaps from a third party – and perform data modeling or what-if scenarios. They may also want to simply copy an existing hierarchy, incorporate it with their own hierarchies, and maintain it. Fundamentally, companies managing multiple hierarchical views will need to establish the means to maintain integrity of the hierarchies across views. Starting with a solid legal baseline hierarchy lays the foundation to enable these capabilities, empowering your business to unlock the advantages of true organizational hierarchy management. For more information on how software from Initiate Systems can help with your master data management efforts, visit www.Initiate.com.

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© 2010 Initiate Systems, Inc. “Initiate” and the Initiate logo are registered trademarks in the United States and certain foreign jurisdictions. Initiate, Initiate Master Data Service and the Initiate logo are registered trademarks in the United States and certain foreign jurisdictions. Initiate Inspector is a trademark of Initiate Systems. BGR 0508