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15 Pages·2001·0.16 MB·English

CENTER FOR Massachusetts
INFORMATION Institute of
SYSTEMS Technology
RESEARCH

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of Management Massachusetts
CASE STUDY

Brady Corporation:
Delivering Customer Value Through Multiple Channels

Jeanne Ross and Natalia Levina

August 2001

CISR WP No. 315

(cid:211)
2001 Massachusetts Institute of Technology. All rights reserved.

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Peter Weill, Director [email protected]
David Fitzgerald, Ass’t. to the Dir. [email protected]

Jeanne Ross, Principal Res. Scientist [email protected]

Jack Rockart, Sr. Lecturer [email protected]
Chuck Gibson, Sr. Lecturer [email protected]
Chris Foglia, Admin. Officer [email protected]
CISR Working Paper No. 315
Title: Brady Corporation: Delivering Customer Value Through Multiple Channels

Author: Jeanne Ross and Natalia Levina
Date: August 2001
Abstract: Brady Corporation is a $500 million manufacturer of identification products
(signs, labels, bar-coding equipment, etc.) based in Milwaukee, Wisconsin, USA. The firm relies
heavily on distributors but has a significant direct-to-consumer business, so it has worked to
build an e-business environment that supports both channels. The case describes Brady’s e-
business initiatives and its approach to developing an IT infrastructure that supports those
initiatives.

Key words: e-business strategy, IT infrastructure, IT governance

Pages 12
Massachusetts Institute of Technology
Sloan School of Management

Center for Information Systems Research

BRADY CORPORATION

Delivering Customer Value Through Multiple Channels

In late 2000, more than five years after the launch of employees in 20 countries and sold to 70 countries
Brady’s first web page, Dave Hawke, Vice President throughout the world. In 2000, about 45% of its
of Brady Corporation’s Graphics Group, noted that $541million in revenues were from sales outside the
eBusiness had not changed the firm’s fundamental U.S.. (Exhibit 1 shows Brady’s 2000 financial
business model, but it was providing many highlights.)
opportunities for improving efficiency and customer
service: Brady conducted business through three groups:
Identification Solutions & Specialty Tapes (ISST),
The business model hasn’t changed, per se, Graphics, and Direct Marketing. (Exhibit 2 lists
but eBusiness gives us new tools. As a primary products for each group.) The Direct
result, eBusiness has probably increased Marketing Group sold through catalogs. Seton, a firm
the speed of everything. We can do more Brady had acquired in the early eighties, was the
for people in a shorter period of time than largest component of the Direct Marketing Group. Its
we did in the past. product line consisted primarily of Seton branded and
—Dave Hawke complementary products, but included some Brady
Vice President, Graphics Group branded products. ISST and Graphics sold direct to
some large accounts outside the U.S. However, more
In 2000 Brady had transacted approximately 8% of its than three-quarters of ISST and Graphics sales in the
sales online. In order to take advantage of the U.S. and one-half of the sales in other parts of the
significant benefits of eBusiness, management’s goal world were through distribution partners.
was to generate 50% of business online in 2003.
Brady manufactured approximately two-thirds of the
Company Background nearly 50,000 stock and custom products it sold.
Founded in 1914, Brady was a world leader in the Brady-branded products included signs to promote
manufacture of high performance signs and safe work environments, labels to identify wires,
identification solutions. Based in Milwaukee, asset tags to manage inventory, and bar-coding
Wisconsin, USA, the company had over 3,100 equipment, printers, and software to help industrial

This case was prepared by Dr. Jeanne Ross and researcher Natalia Levina of the Center for Information Systems Research at the MIT Sloan
School of Management. This case is for the purpose of management education, rather than illustrating or endorsing any particular
management practice. The case is part of a research project on e-business migration conducted jointly by Melbourne Business School and the
MIT Sloan School. Support for the project from PricewaterhouseCoopers LLP is gratefully acknowledged. This case may be reproduced free
of charge for educational purposes provided the copyright statement appears on the copy.

(cid:211) MIT and Melbourne Business School. All rights reserved to the authors (March 2001).
customers track work-in-process and improve products. The products of all three divisions
productivity. Its signs and identification products represented a very small proportion of most
were often installed in harsh environments, such as customers’ total materials and supplies expenses.
petrochemical plants, where materials sometimes had Thus, Brady had worked toward making purchase of
to withstand extreme temperatures, chemical its products as convenient as possible:
exposure, vulcanization processes, and other harsh
environments. Other materials had to meet the When I’m shopping, I like to swipe my card
particular requirements of clean rooms, jet engines, or and get out, but there are people who like to
electronic components. write checks. Our customers are the same
way. Some just like the value provided by a
Since going public in 1984, Brady had reported distributor. That’s how they do business. It’s
uninterrupted annual sales increases, profitability, and what’s comfortable for them. We like those
dividend growth. Management attributed the firm’s people. Some prefer to sit in their pajamas
strong financial results to its focus on labeling and at 2:30 in the morning and look through a
identification products. Brady invested 4% of sales in Seton catalog and then get onto the Internet
research and development of new products and and order some product. We’re glad to serve
adhesive and coating technologies. Brady’s vertical them that way. In the end it’s really the
integration included in-house production of bulk rolls customer who decides. We’ll serve them
of material using Brady’s own adhesives and coatings through any channel they like.
that were ultimately converted into identification —David Winter, Vice President and CIO
products such as wire markers, pipe markers, or bar-
code labels. In contrast, Brady’s competitors, most of eBusiness at Brady
whom were small firms, relied on the R&D and Management believed that the Internet posed a host
coating efforts of other companies such as 3M, of threats and opportunities to Brady:
Avery, and Fasson.
We don’t want to lose business to new
In addition to ensuring a pipeline of innovative competitors or old ones who can use the web
products, management had focused on providing to radically change the value proposition to
value-added services to customers. For example, a our customers.
well-educated sales force consulted with customers —David Winter
about safety regulations concerning signs, labels and
other safety products and worked with customers to In 1996, CEO Katherine Hudson, formerly chief
improve workplace safety beyond legal requirements. information officer at Kodak, directed the IT unit to
The Seton direct sales arm prided itself on high explore Internet opportunities. She later made
quality customer service, promising same-day eBusiness the responsibility of senior group
shipping on orders of stock items and some custom- managers. By 2000, Brady’s eBusiness strategy was
made signs and labels. represented in a graphic called the BHIVE, Brady’s
Holistic Integrated Virtual Enterprise (see Exhibit 3).
The company was growing both internally and by This graphic depicted the five areas that Brady was
acquisition. The firm’s acquisition strategy was to targeting in its eBusiness initiatives (customer value
buy smaller firms that either provided entrée to a new creation, order-to-cash, market probes, employee
geographic location or introduced complementary knowledge and collaboration, and eSupply chain), as
products. Due to both the nature of its business and well as the infrastructure requirements that Brady had
its growth strategy Brady’s intangible assets included identified as core to its eBusiness capability. The
multiple brands, and relationships with approximately strategy highlighted Brady’s desire to support the
3,500 distributors around the world and hundreds of firm’s multiple sales channels.
thousands of end-customers.

Graphics and Seton customers typically classified
Brady products under MRO (Maintenance/Repair
Operations) or safety commodity purchases, whereas
ISST products were more often built into customer

Jeanne Ross & Natalia Levina Page 2 CISR Working Paper
eBusiness Strategy:
Reinforcing the Role of Distributors Distributors varied in their technical sophistication.
Some of Brady’s distribution partners were initially Some distributors welcomed new web capabilities
nervous that Brady’s eBusiness initiatives might and rapidly capitalized on them. For example,
diminish or even eliminate their role in the supply Grainger, Brady’s largest distributor, had moved to
chain. Brady management, however, felt that the web very aggressively and was viewed as the
distributors played a critical role: benchmark for web-enabled distribution. Grainger
and others provided feedback on what they liked,
From a logistics point of view it would be what they didn’t like, what they wanted changed, and
very difficult for us to eliminate distributors. what additional capabilities they wanted developed:
It would mean we would no longer be able
to put things on pallets and ship them out For those distributors who are Internet-
the door. Instead we would have to take very enabled and making a transition from
small orders and ship them to infinitely calling Brady’s customer service centers, to
more end-users. Distributors also have sales accessing information online at Bradyserve,
forces that are thousands of people strong both of us see cost being driven out of our
looking for opportunities for Brady. They business models and an increase in
are our primary source of leads. Finally, customer responsiveness. That’s the benefit.
there’s power in the distributor’s line card. —Brad Martell
We are on distributors’ line cards with other
industry leaders such as 3M, Allen Bradley, In most cases, distributors managed both order taking
General Electric, and Loctite. Just by being and order fulfillment. But because many orders were
associated with them, we are presented key for custom products, the distributor’s order taking
opportunities for our lines. role was sometimes difficult for the distributor:
—Brad Martell, Director, eBusiness, ISST
Most distributors are great at standard
To alleviate its distribution partners’ fears, Brady’s products, but if you tell them you want a
first corporate-wide eBusiness initiative, nicknamed complex, one-of-a-kind label or sign, they
Distributor.com1 focused on distributor support. really struggle.
Released in June 1998 as www.bradyserve.com, the —David Winter, Vice President and CIO
initiative provided a password protected extranet,
accessible only to registered distributors. Bradyserve Brady was seeking a way to make these orders
was targeted at improving distributor relationships by simpler for customers and distributors to handle. One
allowing 24-hour access to product pricing and eBusiness initiative at Brady was Web-to-
availability, order status and open invoice listings.2 In WorkbenchTM which allowed the online customer to
1999, the site added an online order entry capability. customize a sign/label and transfer it digitally to
Bradyserve had no browseable catalog. ECatalogs manufacturing. This innovation could eventually lead
with SKU information were available on Brady to customers placing orders directly with Brady or
branded websites but these did not facilitate direct directly from a distributor’s website running the
ordering.3 Instead they directed shoppers to a Brady Web-to WorkbenchTM application.
distributor locator, where they could select the
distributor with whom they wanted to do business. Brady’s distributors varied in their IT sophistication.
For example, some did not provide Internet access to
their order entry and customer service staffs. Others
1 Distributor.com and other initiative names (supplier.com, were slow to upgrade their technologies. With every
customer.com, virtual.com) were used for internal purposes
technology upgrade Brady had to assess whether a
only. They were not URLs.
critical mass of distributors was positioned to take
2 A demo of the Bradyserve extranet was posted at
advantage of new capabilities. Distributors’
www.bradyserve.com/BradyServe/demo/demomain.html.
3 Seton had a separate web page (www.seton.com) that reluctance to adopt newer technologies delayed the
benefits to Brady of its eBusiness initiatives. By the
accepted direct orders, but Brady sites like
www.bradyid.com and www.bradysignmark.com whose end of 2000, approximately 10% of Brady’s
products were usually sold through distributors included a distributors were accessing Bradyserve to obtain
distributor locator rather than a direct order capability.

Jeanne Ross & Natalia Levina Page 3 CISR Working Paper
information or to do order entry. Management Customers drag their feet if they don’t think
estimated that 35% of distributors would be online a there’s anything in it for them. But when
year later: they can see the benefits—when they can
check the status of their order anytime or
For us as a company we have to be reorder something they’ve purchased
cognizant of the fact that not every before, I think they’ll like it and move faster.
distributor that has been successful for us in —Gene Wright,
the past is going to transition to the new eBusiness Director, Direct Marketing Group
world at the same pace. I think the context of
the conversation with distributors today is Some customers were concerned that web initiatives
that as a business partner we are investing would cut them off from favorite customer service
in this technology. We see a value in your representatives:
having the local presence to sell
complementary products, to be there for a This is not what we’re doing. We’re trying
customer in a local market. But if a to make it so that if you just want to reorder
customer wants to order online, are you something that you’ve purchased before, you
going to have the capability to connect with just buy it. But if you have a question, then
us online? you can talk to a person. We’d rather not
—Steve Hasbrook, have you talk with someone to change your
Brady Corporate Director, eBusiness address, but our customer service people
are there to help if you need them.
—Gene Wright
e-Business Strategy:
Enhancing Direct Sales Recognizing that many customers would be reluctant
On the Direct Marketing side, Brady’s eBusiness to abandon old habits, the Direct Marketing Group
initiatives were similarly greeted with a mixture of offered a 10% discount off print catalog prices for
enthusiasm and indifference. In 1994 Seton had online orders. In addition, key customers qualified for
introduced a simple website describing its catalogs additional discounts based on their buying patterns.
and providing an 800 number. Seton had consistently Users would see their discounts prior to confirming
added functionality, gradually bringing its catalog their orders. In addition to price incentives, Brady
online and offering an early online order capability was enlisting customer service people and
that functioned by sending an email message to salespeople to introduce customers to the web:
customer service. By late 2000, Seton U.S. had
brought its entire catalog online and ordering was an We think it is critical that salespeople or
integrated, albeit batch, process. To place an order on customer service people can take their
www.seton.com, customers could enter the product relationships and leverage them to help sell
number of simple stock items like orange traffic the benefits of the web. We don’t want to
cones or they could custom order products by, for build it and assume they will come. We
example, specifying the size, color, and text of a sign. aren’t relying on that. We think there’s a lot
The Seton website had access to two years of major we can do to increase use, from small
customers’ historical information to facilitate monetary incentives, to additional
reordering of both stock and custom products. information, to finding ways to make their
lives easier.
The potential savings to Brady from customer self- —Gene Wright
service was significant. For example, management
calculated that processing orders over the phone cost At the end of 2000, the Direct Marketing Group was
about $16 per transaction, whereas web orders cost generating approximately 2% of revenues online,
only $5 to process. Management believed that although it varied from 7% in Germany to less than
customers, too, would benefit from online 2% in the U.S. Gene Wright, eBusiness Director for
transactions: the Direct Marketing Group, noted that a recent
upgrade had doubled traffic on the U.S. site within
two weeks. He suspected that frustrations with the

Jeanne Ross & Natalia Levina Page 4 CISR Working Paper
incomplete catalog and some pricing mistakes had Brady envisioned that the web would also lead to new
stalled adoption. With a fully functional catalog, a and better services. For example, Dave Hawke, Vice
variety of online features, and intensified efforts to President of the Graphics Group, noted that
enlist users, he felt the goal of 50% of sales online in salespeople had considerable expertise, for example,
five years was achievable. on workplace safety, that was not available to most of
the business’ customers. The web offered an
Even as Brady worked to fortify existing channels opportunity to extend their reach:
with eBusiness capabilities, the firm was monitoring
the development of electronic exchanges. Steve We can’t afford to send direct salespeople to
Hasbrook, Corporate eBusiness Director, noted that all customers, so we want to make their
in addition to preserving existing channels, Brady expertise available online. We can do this on
could potentially add new ones: our website, and, by allowing distributors to
put our content on their websites, thereby
We have our traditional channels in the commissioning them to share our expertise
brick and mortar world and we’ll also have with end customers, or by allowing
some online distributors. We will need to customers to take the content and put it on
figure out who we want to deal with, who we their intranets.
need to deal with, and how we want to deal —Dave Hawke
with them, because it’s a whole different Vice President, Graphics Group
dynamic.
Brady had already started to provide technical
information on its products through its website
eBusiness Strategy: (www.bradysignmark.com), so workplace safety was
Expanding Products and Services a natural next step. Management did not intend to
In addition to supporting its distributors and direct charge for the company’s expertise—which
customers, management believed that eBusiness management felt could increase potential liability—
offered opportunities to generate efficiencies in its but including expertise as part of the package could
purchasing processes, streamline product enhance Brady products.
development and promote sharing of information
among employees. Internally, Brady sought to use the corporate intranet
to create a collaborative, knowledge-sharing
A key initiative was supplier.com, which was environment. Additionally, web-based systems
expected to deliver significant cost savings by supported project management, communication, and
consolidating vendors, thus allowing Brady to metrics. Eventually, however, management believed
negotiate better pricing. Supplier.com would rely on the web offered the potential for collaboration
SAP’s business-to-business procurement module to between product developers at Brady and end
automate both the procurement and payable customers:
processes. Savings were anticipated in both the costs
of transactions and the cost of goods sold. We are hoping to have collaborative
communities to give feedback and thus
To support product development, Brady created an shorten new product development cycles.
initiative dubbed virtual.com, intended to probe the It’s a marketer’s dream, because it
market for new product and service ideas and then eliminates barriers between us and our
encourage eBusiness experiments to test new customer. We will have more of a circular
concepts. These experiments were funded from the rather than linear relationship. It will give
firm’s capital budget, separate from other eBusiness us lots of additional opportunities to know
and IT initiatives, to generate a steady stream of our customers better.
product and service innovations. As an example, one —Brad Martell, eBusiness Director, ISST
early experiment packaged Brady-developed
eBusiness software for external sale (available at
www.ideam.com).

Jeanne Ross & Natalia Levina Page 5 CISR Working Paper
Building an Infrastructure we’ve actually been linking manually for the
to Support eBusiness part of the business that is not on ERP.
Brady determined early in its eBusiness efforts that —Dave Hawke, Vice President,
both its technology and process infrastructures were Graphics Group
ill-suited to the capabilities and system connectivity
Brady wanted to provide to its customers. David Winter, who came from the business side to
Historically, Brady had operated semi-autonomous become the firm’s first CIO in 1995, emphasized the
business units that, in some cases, competed rather importance of a standardized platform to support the
than cooperated with one another. That legacy had a firm’s integration efforts.
lasting impact on how business units tended to
approach business processes and information sharing. We started this endeavor saying that we
wanted everyone to use the common toolset
When the firm undertook development of and common infrastructure. I don’t want to
distributor.com (implemented as have to manage 20 different websites in 20
www.bradyserve.com), two major business units had different countries, on 20 different
to work together to define requirements. These units technology platforms. So we took the
had different distributor policies even though they approach that we’re going to design our
shared some distributors. Thus, although it took applications from the customer in and we’re
developers only a couple weeks to create a prototype going to build our applications from the
for distributor.com, it took several months to work technology platform out. In the long run if
out a design: you want to integrate to a back-end system,
you want to do it once; you don’t want to do
At one point we said, “What shall we call it 20 times.
this field here? A part number?” Well one —David Winter, Vice President and CIO
unit called it a catalog number and the other
called it an NAED number for electrical The platform choices introduced multiple new
distributors. We talked about it for a couple technologies to Brady’s IT unit. Winter contracted
days before eventually deciding to call it a with IBM to create the web environment.5 Brady
part number. developers learned from IBM developers, so that they
—Steve Hasbrook, could eventually build updates and new applications
Brady Corporate eBusiness Director in-house:

Brady management was convinced that eBusiness We brought in a partner for the U.S. Seton
demanded that the firm act in a more integrated site to learn how to use the technology and
fashion. Brady ran about two-thirds of its business on make it happen. We sent our developers to
a modified ERP, but the other third was on a variety school and they looked over the shoulder of
of platforms. CEO Hudson believed that this our development partner. We’re reusing as
configuration limited the firm’s ability to move much of the code as we can, but we’re doing
quickly to adopt eBusiness initiatives. Accordingly, the customization that’s required for each
Brady started to implement SAP across the company. country and different businesses on our own.
Now, for our second Seton site (in Canada),
We could get a lot of benefit by we’ve taken off the training wheels and
standardizing on one e-business platform we’re doing it all ourselves.
linked to a standard back-end platform. We Gene Wright, eBusiness Director,
decided to migrate to Net.commerce4 and Direct Marketing Group
Lotus Notes across businesses. Initially, we
linked our existing ERP with the web front-
end, but we did not link the other third. We

had a “linked” look for the customer, but 5 IBM’s initial engagement with Brady involved
converting Bradyserve, which had been developed in-
4 NetCommerce was IBM’s older version of the house on RPG, into Net.Commerce and connecting it to
WebSphere E-commerce platform. Brady subsequently Brady’s back-end system. A year later, IBM started work
upgraded to WebSphere. on the Seton (U.S.) website.

Jeanne Ross & Natalia Levina Page 6 CISR Working Paper
The corporate eBusiness team developed Where we have redundancy across groups,
specifications for development projects on both we’ll reinvent ourselves and organize
Net.Commerce (now Websphere) and Lotus around customer needs.
Notes/Domino. They worked with application —Steve Hasbrook,
developers in the IT unit who created templates for
developing web content. This allowed business units Governing eBusiness
to create content locally. Once content was created, In late 2000, eBusiness had evolved from an IT
the content manager could forward it for needed responsibility to a business unit responsibility. Steve
approval and then it would be loaded onto the web. Hasbrook, Corporate Director of eBusiness reported
Steve Hasbrook, corporate eBusiness director, noted to Dave Hawke, Vice President of the Graphics
that this created an environment that could respond Group, who also filled the role of executive
quickly to local needs while maintaining corporate eBusiness sponsor. eBusiness directors from each of
standards: the three major business groups (Gene Wright from
the Direct Market Group, Brad Martel from ISST,
When I first became eBusiness manager, and George Sloan from Graphics) joined Hasbrook
everything came to me as a request. Then I on the Executive eBusiness Team (known as the
would go to our Internet Service Provider EeTeam). The EeTeam identified project
who would create the HTML and then things opportunities and presented them to the IT Steering
could go on the web. That’s how we handled Team, which consisted of the heads of the three
eBusiness. Today, if a business unit has a business groups, key business unit leaders, the CFO,
new product or extension or wants to and CIO Winter.
promote a product on the web, they do so
from their desktop using the tools we’ve The company retained a team of Notes/Domino
developed to create and manage content. developers and Net.Commerce/Websphere
—Steve Hasbrook developers in IT to be able to create more and more
Corporate eBusiness Director capabilities in-house. Hasbrook managed the Project
Management resources and was given a central
The eBusiness toolset had made creating and posting budget to support their efforts and any necessary
web content, while not simple, a manageable task for outsourced development, but the priorities were
those businesses on the standard platform. Integrating established by the IT Steering Team. Hasbrook
web capabilities to back-end systems, however, was observed that this arrangement was particularly
an ongoing challenge. Bradyserve, for example, had effective:
provided powerful support for distributors because it
was integrated with back-end systems. As those Once we took eBusiness out of IT and said
systems were being replaced with SAP,6 the linkages this is a business initiative, funded by the
needed updating. businesses, we’ve been able to go really fast.
It’s been exciting.
The ERP initiative, combined with eBusiness, would
facilitate global business processes. Management From Winter’s perspective the value of having
viewed the evolution toward customer-oriented eBusiness report to the business was that the IT
business processes as both an opportunity and a Steering Team then viewed the demand for IT
challenge: resources across initiatives and across the
organization:
This is about process. We’re looking at
where we make things. We may not need to The way we govern IT is with a triumvirate:
make a product in three different e-biz, eClipse (ERP initiative), IT
manufacturing facilities. We don’t need to infrastructure. We have projects that affect
have financial services at every location. one another. What we’re doing is realizing
we’ll be more effective if we combine our

6 Brady completed three small U.S. implementations of efforts and turn down a project if we can’t
SAP in October 2000, and three larger U.S. get it done because we’ve over-allocated
implementations in December 2000. Non-U.S. sites would resources. The heads of these three
be implemented by 2003.

Jeanne Ross & Natalia Levina Page 7 CISR Working Paper