Assignment:
Introduction
If you go to the Hardrock Café Web site today (May 1, 2014), you will be impressed. You will find a very slick and visually exciting home page that rotates you through stunning scenes of Hardrock hotels, casinos, dining locations and concert venues around the world. There is a "Rewards" tab that allows you to expand your personal information profile, track travel and vacation plans, and monitor your earned points from any number of Hardrock customer community involvement schemes. You can shop for a wide range of Hardrock branded products for men and for women as well as pricier rock and roll paraphernalia and collectors' items. You will learn that Hardrock has nearly 200 locations across 51 different countries and that the firm's history traverses the glory days of the rock and roll genre from 1971 to the present. All in all Hardrock Café purports to be a great success story. But things at Hardrock Café were not always so wonderful and there was a time in the 1990's when the enterprise faced the possibility of going under as a business.
As other theme-based restaurant chains like Plant Hollywood came on the scene and as organizations like resort and hotel chains sought to attract the 20 to 30+ year-old demographic, Hardrock began to lose its distinctiveness as a brand and a venue. Compounding these strategic issues, internal operations at Hardrock began to unravel, complicating the management and control of the business. It turns out that greatly improved data management practices were to a considerable extent the solution to both sets of problems.
Problems at Hardrock
Running a global restaurant and entertainment business is challenging at many different levels. Day-to-day operations need to be coordinated to ensure that product is available in keeping with customer wants and that quality remains high and cost are kept under control. In such a business environment, management tends to focus on measurement and the comparison of actual performance and costs against company standards and benchmarks. From a competitive standpoint, the firm must continue to innovate - bringing new product and service offerings to the table (no pun intended!) as well as reengineering core business processes for greater effectiveness and efficiency. By 1998 as Ron Ward - formerly of Disney - joined Hardrock as their new Chief Information Office (CIO), it was clear that the very information management (IM) practices and systems (IT), that were there to enable enterprise-wide transacting, managing and innovating, were in fact in the way.
To begin with, sales stagnated after 1996, and in 1999, declined from the previous year's $396 million to $388 million. Profitability also declined by almost 15 percent from the previous year. A highly profitable company might not aggressively look to change its ways but one in decline must look for root causes. During this period of decline, The Rank Group, a London-based entertainment conglomerate whose businesses included casinos, video and DVD manufacturing, and a stake in Universal Studios, aggressively bought back the brand from the franchisees who constituted the majority of Hardrock venue owners. By 1998, when Ward came on board, the Rank Group had begun a process that would unify Hardrock Café venues - including all 50 in the United States - under a single corporate structure. The next task was to integrate Hardrock business operations in terms of IM and IT. It seems that over the years, the different owners of company franchises had implemented their own restaurant management systems, employing different data management practices and coding structures with regard to sales data. As a consequence, the sale of pizza at one venue and a burger at another might very well be coded the same way.
If the enterprise point-of sales system was a mess, the firm's financial management system was a disaster. Each location e-mailed their summary financial results to the CFO's office each month. The corporate financial management team would capture this information on Excel spreadsheets and then re-enter them into a single accounting system - but still running only individual location financials. This process was prone to errors, prolonged monthly, quarterly and annual financial closings, and made it very difficult to analyze trends or to forecast business performance. As Ben Worthen reported for CIO Magazine:
[In one notorious case,].... a sack containing $100,000 sat untouched for five days in the New York City Hard Rock Café on West 57th Street. The employees didn't realize it was there, and corporate sure didn't register a problem. The financial system wasn't updated frequently enough to catch the missing loot-not that it mattered, because no one trusted the system [numbers] anyway.
Without better control of financial information, it is hard to see how any organization, let alone one of Hardrock's complexity, could operation successfully.
As a further example of the malaise infesting Hardrock, consider the situation at the opening of the new Cleveland restaurant. (It should be noted that Cleveland is also the home of the Rock and Roll Hall of Fame and Museum - see www.rockhall.com). First, it is important to know that the margins on food sales in any restaurant are very slim. Hardrock makes its money on ticket, beverage, and paraphernalia sales. In particular, Hardrock pushes branded products like its t-shirts. But when the Cleveland venue opened, it had no t-shirts to sell. Hardrock with all its in-restaurant retail locations lacked a mechanizing system to manage store inventories. As a result, it was not uncommon for Hardrock Café's to run short on the very items that generated the best profits.
Lastly, as already mentioned, Hardrock was losing ground in the late 1990's to other so-called "theme restaurants." But the organization did not know why, nor did it have any sense of what customers were looking for from Hardrock - currently and going forward. This sort of business intelligence is pure gold to a company in sorting out its competitive strategies and yet it was absent as a weapon in Hardrock's competitive ansenal. Where was the Hardrock team to turn for this sort of information?
Information Management and Technology Solutions
To address the transactional and management and control sides of their problems, the leadership team invested in integrated point-of-sales, merchandizing, and accounting systems. All of these application specific software products shared a standardized, back-end, database management systems. The advantages to the organization of this investment became immediately obvious:
all business units now followed the same core processes and business rules built into these enabling software applications
the metadata pertaining to individual information system data elements, such as product name and description, were now standardized
the data was stored centrally but available to all authorized users on a real-time basis
data centralization and standardization meant that the data was more reliable and timely with easy access
management - both locally and at headquarters - could now roll-up data and analyze that data to assess performance, measure results, and more readily identify problems, opportunities and successes
In the case of merchandizing and even accounting, the availability of a single, enterprise-wide information management system facilitated more responsive and effective operations within individual Hardrock venues and across the organization. But the challenge of how to link this transactional data to customer demographics remained. Here the solution was both obvious and complex. Hardrock needed detailed information on each of its millions of customers and it needed to tie this information to individual customer store purchases. The solution came with the Internet. The Hardrock team created increasing sophisticated, customer enticing Web sites where its customers were encouraged through coupons, ticket giveaways, and other incentives to register as part of the Hardrock online community. For example, each restaurant or store receipt offered coupons on future Hardrock purchases if the customer linked his/her receipt transaction number to his/her Web account. The same thing was done with free in-restaurant photographs that were retrievable online via the Hardrock Web site. The organization also ran surveys, travel planning services, and other online events - with prizes - to build a culture and community experience around the use of its Web site. The net result of all these activities is that customers began to linked extensive personal information with their Hardrock transaction histories.
All of the qualitative information offered by individual customers went into yet another information system acquired by Hardrock - its Customer Relationship Management (CRM) System. This system included tools for tracking the various ways individual customers interact with Hardrock and its Web site. It also stored demographic data on the customer as well as music, performing artist, and travel/vacation preferences. More recent versions of this sort of product also allow for the integration of social media data from such sources as Twitter and Facebook. The CRM system is now used by Hardrock to inform Web site personalization, to plan of musical tours by the artists that the firm sponsors, and even in the acquisition of new venues and the creation of new product and service offerings.
You should not underestimate the millions of dollars and considerable effort invested by Hardrock in the development of new information management practices and the acquisition of new IT systems. But these investments in IM and IT paid off for Hardrock big time in helping them to clean-up their day-to-day operations, manage and control corporate performance, and learn enough about the needs and interests of their customers to plan for the future. Hardrock is very much "still around."
[1] This case study draws information from the Hardrock Café Web site, www.hardrock.com, and from Ben Worthen, "Rock and a Hard Place," CIO Magazine (May 1, 2001).
1. List representative companies with whom Hardrock Café competes? How would you position Hardrock in terms of their business focus (i.e. operational excellence, customer intimacy, or product leadership? Why?
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Hardrock's business focus:
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Why did you make this choice:
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2. What problems did Hardrock in its information management of three core business functions, namely: restaurant operations, merchandising, and financial management? How did this problem impact Hardrock's ability to transact, manage and innovate?
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Business Functions:
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Information Management Issue
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Impacts
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restaurant operations
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merchandising
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financial management
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