Talking Heads

At our virtual roundtable, analysts discuss (via e-mail) CRM's promise and reality.

Participants:

Stewart Armstrong, senior consultant with Ovum's IT analysis groupTony Lucas, principal and leader of Deloitte Consulting's CRM practiceTrevor Richards, managing director, Interact Management Consultants. (Richards is a former partner of KPMG and describes his company as a vendor-independent CRM consultancy).

CW: What business factors are (or will be) driving the take-up of CRM (customer relationship management) solutions in Australia?

Armstrong: CRM has traditionally been taken up as a way to differentiate from competitors and will be increasingly driven by the expansion of e-business. This is because in the online world customers are more demanding, more knowledgeable and switching suppliers is so much easier, so they become less loyal. The bottom line in the new economy is, if you don't manage your customer relationships you probably will not have any.

Lucas: Broadly speaking, there are four forces driving an increased focus on customers - accelerating customer power, rapidly changing business environment, advancing technologies and new channels.

Accelerating customer power has largely developed through intolerance of poor service, increases in access to knowledge and the formation of consumer communities. The rapid reduction of cycle times, combined with new competition and the loosening of the regulatory environment have fuelled a rapidly evolving business environment.

The emergence of the Internet, faster, more stable networks and increasing communication bandwidths have advanced technology rapidly. A multichannel approach has also become the norm with customers now wanting to use the telephone, Internet and kiosks to source information and transact. Australians are quick to adopt new technologies.

Richards: The key business factors driving the current CRM craze are campaigns by vendors who are very active in the marketplace along with the big five systems integrators. This, in our view, is unfortunate because it gives rise to a very technology-focused view of CRM, which, we believe, is a flawed implementation.

These projects really need to be supported by a business-driven strategy. CRM is all about developing relationships with customers and building on those relationships to grow and develop your business and customers. It's a basic business process elevated to a new status by technologists who claim they can greatly improve the process by applying technology to it. The jury is out on that as a process.

CW: Bill Laberis, a US-based consultant, warns: "Millions of dollars worth of CRM products are going for naught because so many companies fail to grasp a fundamental truth: CRM is not about technology; it's a state of mind." Do you agree with this warning and can you give examples of how technology led CRM projects 'are going for naught'?

Richards: The state of mind Laberis refers to is the relationship between the customer and an organisation and its staff.

It's not the technology that's important, but the cultural shift that's the big thing behind CRM, which is what we refer to as customer information competency. We do agree with what he says. There are a large number of CRM projects or CRM projects that haven't sailed or liberated the benefits they have been intended to achieve.

CRM often doesn't deal with the organisation's cultural issues; it just implements a suite of software. You have to change people's behaviour at the front end of the process to get them to do different things in order to change the nature of the customer relationship. That's a cultural change process.

Another issue often not addressed by technology-driven CRM projects is that there are multiple customer repositories that, even at the end of the day, don't give a single view of the customer.

From our discussions with CEOs running large, multimillion-customer databases, there's a great deal of scepticism about actually achieving the suggested benefits of CRM.

Armstrong: Yes. It is true that successful CRM requires a mind shift. Essentially it means moving from 'how can I sell to this potential customer' to 'how can I help this potential customer buy from me'. The key to success is to look at and support the customer's buying process rather than your selling process.

CRM applications do not exist in isolation. You can have a wonderful CRM application, which allows you to capture and analyse lots of information about your customers, but if your other business processes cannot deliver, then it will all be for nothing as a number of .com startups have found to their cost.

Lucas: Technology is key to a successful CRM program, but so too are the 'softer' components which can be neglected by executives. These include the impact of a CRM program on an organisation's dynamics, and its people, as well as CRM program leadership. At Deloitte Consulting we refer to this as the CRM 'mind set'.

The CRM 'mind set' exists in a dynamic environment where a number of forces impact and influence the culture of an organisation. These forces, or change levers, form a broader picture.

The CRM 'mind set' is an outcome of the alignment between the business strategy and the organisational enablers implemented to support customer relationships. For example, an organisation must understand how CRM values and concepts will be taught; the type of employees needed to make the most rapid progress towards realising the CRM vision and how employees develop an actionable understanding of specific customer relationships.

Leadership is another fundamental component of the mind set. For example, leaders must set overall CRM direction and build a solid customer vision that is understood by all, as well as shape and model new ways of behaving and working.

Deloitte Consulting and CSO Forum (a US based research firm) recently concluded a study of more than 255 organisations focusing on successful CRM projects. Of the toughest challenges, technology is way down the list.

CW: What steps would you advise IT to take in order to achieve a successful CRM implementation?

Lucas: Focus on the business first, not the technology. At Deloitte Consulting we deal with many organisations that see CRM as a technology solution. Implementing the technology in isolation will not necessarily lead to business success.

Deloitte Consulting and the CSO Forum research agency have identified a wide variation in the results generated by CRM initiatives. Why is there so much disparity? To begin answering that question, we focused on the 21 per cent of marketing, sales, and service organisations whose CRM projects, our research shows, met or exceeded expectations. We searched for common trends and discovered seven critical success factors:

1. An internal CRM project champion

2. Commitment to process

3. "Smart" use of technology

4. Assembling the right team

5. Not forgetting the people!

6. Realise less is more

7. Build from a solid foundation

Armstrong: CRM software is an enabler, not an end in itself. The business must have a clearly defined CRM strategy that the software will support. The IT organisation must ensure that all the stakeholders in a CRM implementation are involved. The situation to be avoided at all costs is where the business decides it should have a CRM system (with or without an explicit CRM strategy) and asks the IT department to get one, puts the tick in the box and then sits back and waits.

Richards: IT should get out of the way and let the business drive the project. Successful IT divisions enable the business to deliver improved customer management.

After all, it's a business issue that is not technology-based at all. Although technology is an enabling component, the core of the process is building on the strengths of the bond you have with your customers.

This is the same business need that has been there forever.

CW: What 'payoff' should companies reasonably expect to get out of using CRM?

Armstrong: The payoffs are in the areas of increased customer attraction and retention and greater knowledge about which of your customers are the profitable ones.

It can be forgotten that CRM is about identifying the customers you don't want as well as the ones you do. Greater knowledge of your customers also allows for better targeting and better returns on marketing campaigns.

Depending on the nature of the business, substantial payoffs can also be expected via increased productivity in sales, service and call centres.

Lucas: There are some significant business benefits being realised, but they will vary depending on the scope and the change to the business. A recent Deloitte Consulting survey revealed that manufacturers can be up to 70 per cent more profitable by connecting with all trading partners through the Internet (see page 6s).

Over the past five years, many companies have invested heavily in getting their customer relationship management, enterprise resource planning and supply chain houses in order. This investment is yielding unprecedented enterprise-wide access to information about customers' requirements, profitability and cost to serve while simultaneously increasing the capability of the supply chain.

However, the investment in customer relationship management, enterprise resource planning and supply chain optimisation has focused on maximising the solution, either for the customer experience or the supply chain, with little regard to each other.

Digital Loyalty Networks are the next frontier of competitive excellence focused on maximising the lifetime value of customer relationships.

Clearly the ability to identify, capture and use knowledge of the customer and their real requirements at e-speed, and profitably reconfigure the supply chain in real time, represents an enormous shift from the relatively undifferentiated offerings available today. This requires unprecedented discipline with each customer contact.

Richards: They should end up with better relationships with their customer, which translates into better bottom line returns. Part of that process is obtaining a unified customer view, so the organisation can recognise true customer value and reward it accordingly.

CW: If CRM has been deployed but not delivered the expected payoff, what usually prove to be the barriers?

Richards: The main barrier is when it is very technically focused rather than focused around delivering the end benefits of better, more profitable relationships with customers. The technology changes, but the processes, the people and the culture do not, so the customer ends up having the same experience as they have always had.

Armstrong: The major barriers include not having a clearly defined CRM strategy, and not involving all the stakeholders in the new systems. This can bring resistance in the workplace.

Lucas: A lack of attention to the wider transformation issues such as change management and the 'mind set' components mentioned above.

CW: What types of Australian organisations are investing in CRM now and what types of solutions do they expect to build?

Lucas: The leaders in the Australian market are the main retail banks and the leading telecommunications providers. They have been addressing the business issues for some years and are now making substantial commitments to technology. The second-tier financial institutions and communications providers will follow.

We are also seeing many manufacturing and distribution businesses starting to question how they transform themselves into a customer-facing organisation. Some of this is being driven by the uncertainty in the market as to how they sell to their key customers that are signing up to both vertical and horizontal exchanges. At the same time they want to strengthen the relationship with the dealer and channel network.

The solutions they are all looking to build are multichannel, such as direct sales via salesman or branch or agent, call centre and Web-based.

Richards: These include organisations in the banking, finance and insurance industries, a lot of retailers with large databases. By large I mean any organisation with a database that contains more than 500,000 customers records.

Generally, these tend to be stored in a legacy system, a product system or an administration-based billing system, which is not being used for relationship-building or marketing purposes. They want to migrate from this to a system where they can use that information effectively to build better relationships with their customers.

Armstrong: Generally, telecommunications, finance and insurance businesses have been among the early adopters. In these organisations improving call centre services and support for remote service personnel tend to be the most significant elements of the solution.

CW: What other key points would you make to companies now considering CRM investment?

Armstrong: Get the business vision right. Ensure consistency of interaction across all customer-facing activities, whether this is direct contact, telephone, call centre, e-mail or the Internet. Before buying software, follow up reference sites to talk with people already using it. Implement features incrementally. Go for quick wins and then build on success.

Lucas: Businesses around the world are reaping significant return on investment by transforming themselves into customer-facing organisations. The investment is significant and the payback for many is less than 12 months. Focus on the business benefits, get commitment from the business and develop a program that allows you to measure the success.

Richards: The key point is to have a balanced investment in changing the culture, and using technology as an aid to that. Define closely the business development needs of your organisation and then stay close to that.

Define your CRM objectives in order to support those business development needs.

The needs should be derived from the people and cultural aspects rather than the technology.

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