A Pledge for CRM Success

By Arthur O'Connor

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This is an open letter to all you corporate executives who are grappling with the hoary task of designing and implementing CRM in your organization.

Despite all of what you've heard and read about in surveys, research reports, and whatnot about the high failure rate of CRM implementations and the low rate of customer satisfaction with the most popular CRM packages, I have the solution: the three-point pledge.

Before you take this three-point pledge, however, you've got to qualify:

If the answers are a resounding "Yes" to all three questions, then stand up, place your hand over your heart, and repeat the following:

Promise #1: Don't adopt new technology without a clear understanding of how it can generate economic benefit, given its potential risks and rewards and your organization's design, strengths and weaknesses.

"I promise not to adopt new technology without a clear, viable strategy to use the resulting functionality to either improve revenue and profits, and/or reduce costs to a degree which substantially exceeds the total amount of investment required to make the technology work in my organization. By viable, I mean that this strategy will be grounded in a deep and real knowledge of customer needs, interests and behaviors; the core competencies of my staff; the competitive strength of my offerings; the cohesiveness of my corporate culture and organization, and architecture of my technical infrastructure."

Does this seem silly to you? Well, it represents a major mind shift to most of your corporate counterparts. Many organizations seem to buy software packages as the magic bullet to their problems, believing that, once installed, the software will mysteriously make their people, their business processes, and their collective organization so much smarter and better.

Think I'm kidding? Just consider all those organizations that bought CRM packages and painfully and meticulously reconciled, cleansed and integrated customer data, and recreated all of it in a brand new data model - just so these businesses could achieve an integration of customers across different customer-facing processes and channels.

And what did many of these same companies do to recoup their costs of such a massive investment? Did they create self-service Web sites so customers could view and manage their accounts, in order to lower servicing and handling costs? Did they provide value-added analysis at the request of customers to offer them superior value and better deals in generate added revenue?

No, many did not. They simply spent a lot of time and money, only to achieve a better internal view of customers. While an integrated view of customers gives companies the potential to offer better service and/or deliver superior value, an integrated view doesn't really generate any economic benefit by itself.

Promise #2: Use a portfolio management matrix with quantitative performance criteria to prioritize, coordinate, consolidate and streamline CRM initiatives across different business groups within your organization. Respect the fact that different businesses have different needs, and understand what technical and business processes can be shared and/or standardized and which ones should not.

"I promise to embrace a portfolio management approach to my CRM initiatives from my various business units and/or operating groups. I will integrate and consolidate these efforts to avoid overlapping, duplicative and contradictory technology development efforts. Moreover, I promise to evaluate these initiatives on the basis on solid, short-term as well as longer-term performance metrics, and will assign the highest priority to those initiatives that offer the great economic benefits, relative to cost and ease of implementation"

At most large, multidivisional corporations, the problem is not that there is no CRM strategy. The problem is that there are dozens of CRM strategies and initiatives, many of which are duplicate their efforts and and overlap each other.

Some run contradictory to the organization's IT strategy and architecture. For example, while the IT division of an organization is committed to open standards and Internet-based technology to ease integration and global deployment as well as lower maintenance costs, business groups will go ahead and buy a CRM package which is based on a proprietary data model and business objects.

The good news is that many organizations recognize this problem. The bad news is how they often "solve it." One way is the low-tech "workshop" approach, while egos, tribal instincts and corporate pecking orders prevail at establishing priorities - what initiatives get funded and how they are rolled out.

A more high-tech method involves a corporate-wide effort to gather all the business requirements and cram them into a single, enterprise-wide solution framework. This forces different operating groups to adhere to the business process design and workflows of the software application. The bad news is that, in many cases, different operating groups have very different ways of conducting business (some for good reasons, some for not so good reasons).

A common result is the famous "user adoption" problem; people simply don't use the system, or use only a small sub-set of features (for example, using a full-featured CRM system as a ridiculously expensive contact-management system). Another bad result is that different business users customize the package so much that the company winds up with the worst of both worlds: an expensive, upfront investment for a fully-supported commercial package with all the higher long-term maintenance, integration, upgrade and support costs of a custom application.

What's the better way? Use a performance matrix to measure expected return, relative to investment required. Those initiatives in the quadrant representing the highest return for the lower investment and risk win.

For expected return, use solid, quantitative performance goals -and no, I don't just mean return on investment (ROI), which is often a lousy short-term performance metric - to serve as the criteria for expected economic benefit, relative to the estimated cost and/or ease of integration and implementation.

In this scheme, commitment and accountability to making specific, measurable performance improvements in business processes (lower servicing costs, reduced inbound customer call waiting, higher hit rates and/or conversion ratios, higher average revenue per target account, etc.) establishes the criteria to which projects are judged, and not corporate rank, ego or who shouts the loudest at the senior staff meeting.

For investment required, use realistic, well-founded estimates on not just software licensing fees but also the expected costs of integrating and implementing the package, including change management, training and communications expenses.

Promise #3: Take responsibility for the culture of your organization, for doing the necessary preparatory work, for making the developing creative solutions and making touch decisions in designing and deploying your CRM system. Senior management must ensure that it has the right people, in the right roles, with the right skill sets and right incentives, in order to be successful.

"I promise to place the burden of formulating a CRM strategy and creating a customer-centric culture upon myself and our senior management team. We, as a team, take full responsibility for the behaviors of our employees, based on the formal incentive structure and examples we set. We recognize that leadership cannot be delegated to an outside consulting firm. It will be up to us to design our approach, make the technical, business and political trade-offs, and work together to fully leverage our assets and resources to deliver superior value to our customers."

This is the toughest pledge to take. If you -the senior executive involved- are not the chief sponsor and architect of the solution, then the project is probably doomed to fail. Consultants (such as myself) can provide great advice, competitive perspective, knowledge of best practices and comparative analysis of solutions, but we can't successfully implement the solution without your input, buy-in, involvement and ownership.

You need to recognize that this is your CRM system, for your organization, that you need to design and run it as part of your business tactics and strategies. It's not some new thing dreamed up by the people at the corporate office, or, worst yet, the IT department to make things run smoothly and efficiently. You need to understand that, with CRM, automation is a result, not a cause.

Sadly, many organizations have undertaken CRM without doing their homework. The embark on a CRM implementation without first having a clear idea of:

The last point is particularly telling. Many organizations adhere to the definition of corporate insanity: using the same people, operating in the same roles, with the same skills, behaviors, loyalties and incentives - and expecting completely different results!

Arthur O'Connor is a leading expert on customer relationship management (CRM) and customer-facing IT systems and strategies. He's currently the national columnist for eCRMGuide.com and this year serves as the chairperson of the Institute for International Research's CRM Conference. He has over 20 years leadership and management experience in the area of customer management, strategy and new business development, including 15 years as a senior corporate officer of two NYSE-listed inter national corporations, and over five years experience as an independent management consultant and Big 5 firm practice manager selling and managing large-scale IT engagements.