CRM, Success, and Best Practices: A Wake Up Call Part One: Searching and Establishing the Business Parameters of CRM

  • Written By: Glen S. Petersen
  • Published: October 21 2004

In Search of a Charter

Customer relationship management (CRM) represents a powerful and sophisticated set of software applications that are designed to leverage the efforts of customer-facing functions such as sales, marketing, and customer service. The CRM industry continues to flounder due to high costs and perceived high failure rates. Despite thousands of pages of analyst reports and hundreds of books written on the subject, the industry and the end user community appear to miss the point that the technology has outpaced the development of a management strategy to use it. Experience has shown and statistical research verifies that success comes when senior management is directing the effort with the right level of leadership. If the industry wants to reduce the "road kill" of failed projects and help user organizations get on track, it needs to adopt a new set of best practices that will lead to economic success and prosperity for the industry. This article is part of a two part series that will define the framework and rationale for such a set of best practices.

This is part one of a two-part note.

Part one will discuss how to approach CRM as a business strategy.

Part two will describe a points-based assessment approach as well as an interactive assessment to achieve this goal.

In Search of a Definition

Despite the fact that CRM has been part of the business vocabulary for seven or eight years now, the exact definition has eluded the industry since its inception. Some definitions have emphasized that CRM involves technology while other definitions balance this orientation with references to business strategy or culture.

From a technology standpoint, few professionals would argue that CRM embraces an integrated set of applications (referred to as a suite of products if sourced from one vendor) that address the functional needs of sales, marketing, customer service, help desk, and field service. Applications are linked to a database that contains all the interactions with prospects and customers. The database is integrated with an analytics tool that can be used for report generation and the identification of patterns in customer behavior that are not discernable through human observation and analysis.

In Search of Success

This brings us to the tricky part of the definition. What is the purpose of deploying these tools? For the most part, the objectives have revolved around vague notions of being customer centric, being closer to the customer, or making the customer more satisfied. So user organizations have essentially been told that they need to purchase very expensive technology for the purpose of being customer centric (a concept whose definition remains illusive). Is it no wonder that the industry has a problem with achieving much less defining success?

From the outset of the industry, analysts have challenged the CRM vendor community to justify the large investments required to deploy this technology. The vendor response has been to identify case studies that demonstrated success. Although some analysts have attacked vendor credibility in terms of user satisfaction with their respective system, an equally fundamental issue can be raised regarding what constitutes success. According to various vendor web sites, success can be construed as any of the following:

  • The application works according to specification.

  • The application was deployed on-time and on-budget.

  • The application was deployed in a short time period.

  • The end user reduces operational costs.

  • The end user claims success.

  • The end user organization claims a return on investment (ROI).

Before becoming overly critical of vendors, we must remember that a vendor can only describe what the user organization shares. Within the user's organization, perception of success can vary by an individual's level and role in the CRM initiative.

  • The IT perspective could focus on application functionality and reliability.

  • Project management emphasis could be on budget and schedule.

  • User's focus on the friendliness of the interface and the ability to meet personal goals.

  • Functional management is oriented to meet goals and stay within budget.

  • Senior management tends to focus on profit and budget levels and may or may not view CRM as a business strategy.

If we have an initiative whose objective is murky and we have vendors and user organizations with varying definitions of success, it should be easy to understand how one could claim varying levels of victory or disaster within the same initiative.

So why discuss these vulnerabilities? As with any technology-based industry, hype tends to overshadow reason and clarity. We need to look beyond the headlines to assess the validity of the message. Success can be claimed in numerous ways, but if the objective of the organization is to increase shareholder wealth, then an investment in a CRM system must be linked to expectations of leveraging financial performance. This implies that the CRM initiative generates an acceptable ROI that can be objectively assessed by the organization. Though many organizations are motivated to pursue CRM with such an economic objective, few take the time to assess what they will do differently that will create this desired change in performance. In these situations, the company embraces CRM with the hope of becoming customer centric and the results are all too predictable—another case of CRM failure. Hope is not a strategy and history has demonstrated that fact on a consistent basis. On the other extreme, a well documented ROI analysis provides an organizational roadmap that identifies cause and effect relationships that force the organization to think through the operational aspects of CRM and set meaningful goals that lead to performance improvement. Success needs to be assessed on the basis of ROI and one can legitimately challenge the inclusion of initiatives that failed to base their decision on something less than this perspective. Can software ever overcome the limitations of a deployment that is based on wishful thinking?

In Search of Best Practices

Within the CRM industry, the term best practices can be defined in a number of ways depending on context. Each context has evolved over time. When the industry was in its infancy, the question of best practice revolved around the notion of the "ten do's" (or "don'ts") associated with deploying the technology. These lists typically addressed action items such as gaining end user participation, proper budgeting for training, phased implementation, etc. Most of these admonitions are still applicable but do they guarantee success in the context of financial objectives? If success revolved around this sense of best practice then is it reasonable that the industry would experience the current level of failure?

As the industry matured, some vendors created comprehensive vertical applications that eliminated the need for extended design and configuration lead-times, and associated costs. However, the downside of this capability is that user organizations must essentially adopt the embedded processes to avail themselves of the benefits of rapid deployment and manageable software maintenance costs. To make this situation more palatable, the processes are referred to as best practices. Again, in the vendor's defense, the embedded processes do often represent an improvement in approach and design. Nevertheless, there is an obvious trade-off of acceptance versus deployment cost.

The last set of best practices address CRM more holistically by addressing the strategy and change management aspect of the initiative. These best practices embrace the principles of the prior two sets while addressing the need for senior management involvement and an understanding of CRM results in a cause-and-effect perspective. Before describing the nature of these best practices, the next section will summarize the discussion regarding the creation of an actionable definition for CRM.

CRM and Success

Rather than trying to craft still another definition for CRM, the following statements will describe its attributes:

  1. CRM, from a user interface perspective, offers a series of software applications that address the needs of customer facing functions.

  2. From a management standpoint, CRM provides a database and analytical applications that facilitate the creation of a 360 degree view of each customer plus the ability to identify patterns of behavior that suggest trends and relationships that guide development of products, services, programs, and policies that leverage financial performance.

  3. CRM introduces change into the organization through the introduction of a customer perspective that embraces the metrics of customer profitability and lifetime value.

  4. Success is ultimately defined as ROI. There is likely to be intangible benefits involved but if CRM is truly an operational strategy, then ROI should not be problematic to measure.

One could dwell on comparing and contrasting this definition format versus literally hundreds of others that have been offered over the years. However, the purpose here is to provide a definition that will help to position statistically-based research that clearly defines the success and the best practices that are highly correlated with achieving success.

The most recent study of this nature was conducted by IBM Business Consulting Services. A summary of this study was published in Customer Relationship Management magazine (July 2004). The study identified five key drivers of CRM success:

  • CRM strategy and value proposition development
  • Budget process management
  • Change management
  • Governance
  • Process change

The IBM team's claim is that focusing on these five factors can boost the success rate from 15 to 80 percent.

The researchers at have conducted a similar study and published a report titled The Blueprint For CRM Success. This study identified correlations between user organization approach and financial results. The key drivers (in order of impact) included

  • Pursuit of a customer centric strategy
  • Line level training and support
  • Managing organizational change
  • The statistical measurement of goals

The study also emphasized four items that did not predict success:

  • Brand of software
  • Technology related steps
  • Intensive process reengineering
  • Culture change

Lest the reader interpret these results as implying that discipline in vendor selection and quality of implementation are unimportant, what the researchers are suggesting is that these factors are necessary but not sufficient to achieve success. The reference to culture change is that the organization needs to start moving toward the customer focus before it starts implementing CRM. In other words, the direction precedes the deployment of technology; in this context, the technology is viewed as an enabler and not the focus.

The earliest research of this nature was conducted in Europe by QCi, a consulting and research organization that is now a division of Ogilvy One Worldwide. QCi's approach was to use a panel of independent experts to assess the business performance of each organization it studied and compare this impact with a broad set of practices that QCi thought were essential to achieving success (financial performance). This analysis was used to create an assessment tool that has a .8 correlation with business performance. Of the various components of QCi's model, the four priorities consist of

  • The right leadership with clear customer management objectives

  • Performance measures that link customer behavior with financial objectives

  • Sensible (balanced) customer management practices

  • Infrastructure and processes that support these priorities

Given that the objective of CRM is to improve long-term profitability, these statistically-based studies provide a consistent message to user organizations that wish to be counted on the success side of the CRM ledger:

  1. Having a clear strategy and goals are top priorities. This is the domain of senior management.

  2. Allocation of appropriate resources for support and training of users is key. If CRM is approached as an essential strategy with clear performance goals, then committing to proper levels of user support is a lesser issue.

  3. Change management is an essential component of CRM. However, the change in focus should precede the deployment. CRM must be positioned as a means to an end and not an end unto itself.

  4. Defining success is essential to the governance of the initiative and maintaining focus on the right issues.

These results should not really come as a surprise. Are we really so nave to think that the deployment of a highly sophisticated and costly set of applications is going to suddenly lead to an energized and super competitive organization? Unfortunately, CRM has been positioned and sold as a technology and senior management many times views the initiative as simply a deployment of a group of applications. Project managers are given the instructions to implement and another company gets logged on the wrong side of the ledger. The problem is that senior management does not recognize its role relative to success and project management people feel ill-equipped to seek the level of leadership and engagement that are required for success.

Defining a New Set of Best Practices

One answer to this dilemma is to use best practices in an assessment context to interact with senior management and thereby discover the need for their leadership and involvement. This article is the first installment of a two-part series that will describe how to assess the position of the organization regardless of its position relative to the deployment of CRM. The next article will introduce the reader to the framework for the model and will define its sections. It will include the assessment and discuss scoring. This set of articles will arm the reader with the tools required to get senior management properly engaged in the initiative and thereby significantly raise the potential for success.

This is part one of a two-part note.

Part one will discuss how to approach CRM as a business strategy.

Part two will describe a points-based assessment approach as well as an interactive assessment to achieve this goal.

About the Author

Glen S. Petersen is an internationally recognized speaker, writer, practitioner, and thought leader in the CRM and e-business industries. As a visionary and early adopter of sales force automation (SFA), in 1986, Petersen led one of the first successful national implementations of SFA in the United States. He has held senior level management positions with system integration and end user organizations. As a consultant, he developed a number of proprietary facilitation techniques to help organizations to better understand technology, and how to rally around a single threaded, phased implementation approach. Prior to founding GSP & Associates, Petersen was senior vice president at ONE, Inc. and Ameridata. He has authored six books including CRM Best Practices: Self Assessment and Making CRM an Operational Reality.

Petersen has a Bachelor's and Master's degree in Engineering, and an MBA from the University of Chicago.

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