How to make sure you have got your CRM strategy right

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I've had some feedback from a senior manager in Siebel that he's getting fed-up with the number of negative statements made about the delivery of benefits from CRM, not only by the CRM-Forum, but throughout the marketplace.

I have some sympathy with that view, and we've published a fair bit in the recent past which could be perceived as negative:

Although these pieces do highlight some of the issues that face CRM implementation teams, I think they all attempt to provide positive input into how you can resolve those issues. It seems to me the core of the matter is the Gartner statement that CRM is a high-risk, high-reward endeavor. That doesn't mean we should not engage in CRM, but rather that we should take appropriate steps to undertake CRM projects in such a way as to manage the risk and the exposure.

Nevertheless, I take the Siebel manager's point, and we will make efforts to ensure that what we publish is focusing on the positive.

Coincidentally(?) two of the papers we publish this week are positive, and highly relevant to the issues we have been discussing over the past few weeks.

Firstly we publish, in their storefront, a paper from Jim Powell of CSC, covering how e-Commerce is changing the business models and roles of Financial Services institutions. This paper is of interest not only to Financial Services institutions but to all CRM professionals, in that it outlines how financial services companies are going about strategically positioning themselves in the light of e-commerce developments. This is a process of:

  • identifying your organisation's core strengths
  • identifying the evolving business models you could adopt (Jim outlines 4: The Cyber storefront, Aggregators, Product Producers, and Functional Outsourcer; and I would like to add at least perhaps another 2: on-line service/sales specialists, and community players, and there may be many more)
  • identifying the challenges which will develop from the evolving environment (Jim outlines 3: price transparency, channel conflict, and defining value propositions)

A paper well worth reading by anyone interested in CRM strategy. You can find it at:
Changing Business Models and Roles: How e-Commerce Is Changing Financial Services Institutions

The second positive paper we're publishing this week which I want to mention is a keynote paper I gave in Madrid this week on "what is CRM?". This uses some material already available on the site, but also 4 or 5 new slides outlining some of the tentative findings from the CRM survey we ran in May. I must stress that these findings are very tentative. The CRM-Institute of the University of Strathclyde are still undertaking the detailed analysis of the results, but I have done some very simple analyses myself which outline the CRM project objectives, the success in meeting those objectives, the particular CRM elements which have contributed to those successes, and the major causes of difficulty. These analyses are based on more than 700 respondents from 50 countries around the world. On the whole, the results are encouraging, given that CRM is in a relatively early stage of implementation. Significant achievements appear to being made in the building of CRM know-how in the areas of customer knowledge and co-ordinating communications across channels, with early delivery of benefit in the areas of improved customer service and customer retention. Interestingly there seems to be a negative impact on credit-control and billing which we need to explore further to understand. You can get a more detailed view by visiting the presentation at:
What is CRM, and what does it consist of?

It was a great pleasure to re-visit Madrid, and it set me thinking of the very early CRM project I undertook for a Spanish bank, Banco Central Hispano (BCH), alongside IBM as systems integrator. At that early stage in the development of CRM, it was even harder to establish what the company's CRM strategy should be, with technical knowledge about CRM and its techniques locked in my head, and the knowledge of BCH's business in the heads of BCH's Sales and Marketing professionals...and the minor issue that we were each most comfortable in different languages. We ran a series of workshops where I laid out the different ways CRM could be used in different aspects of Marketing, Sales, and Service, and BCH's representatives identified which of those techniques had relevance to BCH's environment and business situation. We then took those areas which showed promise and tried to prioritise them both in terms of the potential benefit and the costs and timescales to deliver. The process was not perfect, but both BCH and IBM seemed happy with the output of the process, and BCH were particularly happy with the benefits achieved from the first phase of the project. If you're interested you can read a detailed case study on that project at:
Banco Central Hispano: Implementing CRM in Retail Financial Services
You can see how long ago the project took place - it was the first case study we ever published on the CRM-Forum!

Looking back at that project now, with the benefit of hindsight, I think we made one mistake. We did not review whether BCH should change its business model in any way to take advantage of the new possibilities opened up by CRM. I am fairly sure that BCH were not interested in such a radical change, and I am fairly certain that I would not have had the credibility to persuade them to make a radical change, but the end-result was that we applied CRM to BCH's existing business, making incremental improvements to that business.

With today's perspective, it seems clear that the application of CRM technology (particularly in the areas of customer knowledge and new channels) does open up the opportunity of implementing a new business model offering new value propositions to the customer, on different cost bases for the organisations, which, if it is to be successful, will be a win-win situation for both the customers and the organisation.

The Gartner view is that you can apply CRM in one of three ways:

  • to offer incremental improvements to the existing business
  • to implement a new business strategy
  • to implement a new business model

Of course the potential benefits get larger the more significant the change you make; but so do the risks and the organisational changes that you have to undertake to deliver those benefits, and Gartner go on to make the point that you should manage these three types of projects completely differently.

I agree with Gartner's findings, but am particularly interested in the process that an organisation should go through in order to make this decision. In large organisations, the development of proposals for new projects frequently has significant involvement of the IT department, and their almost exclusive involvement in projects which are automating or making incremental improvements to the existing business tends to lead to project justification based on those incremental improvements, and normally based on cost savings. Such an approach to a CRM project seems almost exactly wrong on both measures. We need to be exploring changes in both business strategy and business model; and even more importantly, as is emphasised by our survey results, the benefits of CRM do not primarily lie in cost savings, but in increased business.

The starting point has to be a process which covers at least the ground outlined by Jim Powell in his paper, and some other areas as well. We also need to bring together the various expertises within the business, in a process not dissimilar to the workshops I ran at BCH to set their CRM objectives. That process must try and gain a common understanding about our position, the opportunities, the challenges ahead, the risks, and an assessment of the benefits. To do that we need to have a shared understanding of data which includes:

Our current business:
- its strengths and weaknesses
- how it chooses to differentiate itself in the marketplace both in how it competes (on price, product innovation, or service) and the market segments it serves
- how it makes money

Our marketplace:
- The challenges which CRM technology gives rise to for our marketplace
- The strengths and weaknesses of our competitors and their likely response to the evolving marketplace
- An understanding of how our customer base is evolving

Alternative business models we could adopt:
- The ways we could organise ourselves to take advantage of our strengths, the market opportunities, and the new technology to deliver new or enhanced value propositions to the marketplace

This seems like the obvious first step to be taken in adopting any CRM strategy. Unfortunately, it is likely that many organisations have initiated CRM programs without undertaking this first-step analysis. Where it has not been done, there might be significant value in evaluating this situation, even in quite late stages of development.

Where do we go from here? For me we need to move forward in a number of directions. Firstly I think we need to work this outline into a strategic framework and a process that can help organisations do that first-cut analysis of their CRM strategy. I'd be most interested to hear of organisations already having - and willing to share - such strategic frameworks. I would be also interested in trying to develop these initial thoughts into a methodology which can assist companies in this area, and again if there are people willing to collaborate on this, I'd love to hear from them.

Secondly, what we have outlined in this editorial is only one step on the way to the successful implementation of CRM. I hope that further editorials will be able to take further parts of the process and develop an outline which may help organisations with their CRM implementation projects.

As always, we're interested in your thoughts about these issues so please add them as comments to this editorial, or email me directly at [email protected]

I've made reference to a number of documents in the CRM-Forum library throughout this editorial, and we repeat them after my sign-off as a 'bibliography'.

Regards,

Richard Forsyth
The CRM-Forum

Customer Relationship Management: The Gartner Perspective, by Ed Thompson (Gartner Group)
CRM Program Management - the Art of Change, by Jennifer Kirkby (Gartner Group)
6 major impediments to change and how to overcome them, by Richard Forsyth (CRM-Forum Ltd)
CRM pitfalls to avoid, by Richard Forsyth (CRM-Forum Ltd)
Changing Business Models and Roles: How e-Commerce Is Changing Financial Services Institutions, by Jim Powell (CSC)
What is CRM, and what does it consist of?, by Richard Forsyth (CRM-Forum Ltd)
Banco Central Hispano: Implementing CRM in Retail Financial Services, by Richard Forsyth

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avatar
22nd Jun 2001 10:55

I enjoyed the above article and as usual find this site important to
my job. In this column you mention that a Siebel manager is getting fed-up
with negative statements about CRM and that you take his point.
As we are in the middle of a major e-Business initiative (our 1st),
I request that your readers receive exposure to both the good and the bad
about CRM. I would rather read about someone else's mistake instead of
learning myself. Me or my company cannot afford to participate in an
expensive and time consuming project that is unsuccessful. We see e-Business
as a once in a lifetime opportunity to do something really different and
have significant impact in our business. We would also like to take the
shortest path to a successful completion.
I suspect that many others are also in the same position as me. I
can also appreciate why a software supplier makes this statement. Keep up
the good work and educate all of us..

Thanks (0)
avatar
22nd Jun 2001 09:13

Richard, your current editorial is right on target. We do need to explore
both the positives and negatives of CRM implementation. The problem,
though, is that in every field of endeavor, negatives make news and people
are more likely to pay attention to negatives. They feel "Thank God it's
not happening to me".

Now, back to CRM implementations. One thing that has to be added to any
business model is to map the customer touchpoint processes. But, not the
way the company wants them to be. Organizations have to go out and map them
from the customer's perspective to find out how the customers want to do
business and build the relationships. Then, we can develop software that
supports those efforts.

Thanks (0)
avatar
22nd Jun 2001 09:13

Richard, your current editorial is right on target. We do need to explore
both the positives and negatives of CRM implementation. The problem,
though, is that in every field of endeavor, negatives make news and people
are more likely to pay attention to negatives. They feel "Thank God it's
not happening to me".

Now, back to CRM implementations. One thing that has to be added to any
business model is to map the customer touchpoint processes. But, not the
way the company wants them to be. Organizations have to go out and map them
from the customer's perspective to find out how the customers want to do
business and build the relationships. Then, we can develop software that
supports those efforts.

Thanks (0)
avatar
22nd Jun 2001 10:55

I enjoyed the above article and as usual find this site important to
my job. In this column you mention that a Siebel manager is getting fed-up
with negative statements about CRM and that you take his point.
As we are in the middle of a major e-Business initiative (our 1st),
I request that your readers receive exposure to both the good and the bad
about CRM. I would rather read about someone else's mistake instead of
learning myself. Me or my company cannot afford to participate in an
expensive and time consuming project that is unsuccessful. We see e-Business
as a once in a lifetime opportunity to do something really different and
have significant impact in our business. We would also like to take the
shortest path to a successful completion.
I suspect that many others are also in the same position as me. I
can also appreciate why a software supplier makes this statement. Keep up
the good work and educate all of us..

Thanks (0)