CRM: The Truth, The Whole Truth And Nothing But The Truth(For A Change)

Crm: The Truth, The Whole Truth
And Nothing But The Truth
(For A Change)
Featured Author - Dick Lee - February 15, 2003

Introduction

Finding out the true facts about what makes CRM tick and how fast it circles the ROI clock—if it indeed reaches ROI—has long frustrated potential CRM implementers looking for answers. And getting good answers really matters, because their only alternative to being forewarned may be leaping into enterprise-wide, mega-bucks, change management-laden CRM implementations—and testing the depth of the water with both feet.

For the first time, there are statistically-based, substantive answers to many questions about CRM.

Actually, answers have been very easy to come by. Too easy. The problem has been getting the same answers from any two sources. That's ranged from difficult to impossible, depending on the question. At least it has been until now. But after the recent release of the findings from a comprehensive study of 448 completed CRM implementations, confusion no longer reigns. Or more realistically, now that accurate data is available confusion should no longer reign.

This new study, The Blueprint for CRM Success¹, evaluates real-life implementation approaches relative to real-life ROI performance, and does so across a sufficiently high number of implementations to leave but minimal margin of statistical error. Moreover, the research sponsors, Caribou Lake Customer-1 and CRMGuru.com partnered with an "outcome-neutral" statistical research firm, Mangen Research Associates, to assure that the data collection methods and statistical analysis would conform to rigorous professional standards.

In fact, the impetus for this research project arose from a desire by some CRM professionals to cut through the ubiquitous claims and counterclaims surrounding CRM, many germinating from "studies" conducted by parties picking up the telephone and dialing twenty CIOs or Marketing VPs with known opinions and biases.

1 - The Blueprint for CRM Success; Dick Lee (author of this article), David Mangen, Ph.D, Bob Thompson; HYM Press 2003.

Inaccuracies abound in information about CRM from supply-side sources

Not surprisingly, these claims come mostly from organizations or individuals with something to sell—whether market information, CRM application software, consulting services, conferences, books, magazines, webzine subscriptions or anything else pulled along by CRM. And played back together, they sound so cacophonous that they conjure up audible images of CRM running full speed across the business stage pulling a long string of tin cans behind it.

For example, how can one software vendor enjoy a 99% implementation success rate and own dominant market share both, while only 30% of all implementations are successful? Pick any two, but not all three. Or how about two industry analyst firms releasing "expert" opinions on CRM success rates within one week of each other—one saying 80% of implementations succeed, the other saying 70% fail? Gee, wonder what that's about? And how about when "house" research says a vendor enjoys customer satisfaction ratings over 90 but independent research sings a different tune, reporting satisfaction ratings 30 points lower? Clearly something is up (and it's probably not customer satisfaction).

Unfortunately, most misstatements like the ones above are what we might term "motivated misstatements," as opposed to simple misunderstandings or mistakes from unknowingly basing opinions on statistically insignificant data. The very fact that so many claims about CRM from so many sources don't square with each other—after years of empirical if not statistical evidence gathering—indicates that many CRM claims-makers are hearing what they want to hear—and no body of data, no matter how substantial, will deter some from saying what they're motivated to say in order to sell their wares. Especially when these data say things some absolutely don't want to hear—and don't want their potential customers to hear. "Blueprint's" individual data points, while adding up to good news for CRM implementers, contain more downside than upside for those CRM vendors accustomed to creating a false picture of CRM tailored to suit their own purposes. That's even true of the study's positive findings on ROI.

From the "Blueprint" study—good news about ROI

"Blueprint" data undercuts the 70% failure rate story, along with the 60% version and even the 50% version. Despite applying a relatively rigorous standard of success, these data indicate that 45% of implementations are or will be clear ROI producers (within two years, based on typical outlays); 35% are clearly failing and may never return their investment; and 20% are in a gray area where they'll likely show positive returns over time, but not as quickly as most implementers would like to see them. On balance, the majority of the 20% "gray area" implementations will wind up successfully paying off their capital investments in a time frame generally acceptable to financial management, especially in better economic times.

Obviously, these are "good news" numbers from an implementer perspective. So what's not to like about them from a vendor perspective? For openers, analysts still proclaiming 70% or 60% failure rates now have well-earned egg on their faces—in some cases enough to beg questions about whether they just might have "research" clients that want technology spending steered towards non-CRM investments—in ERP or SCM or data warehouses, etc. But that's not the only potential disappointment in better-than-commonly-expected CRM success rates.

Even better news about CRM failures

An important corollary to the success rates are the reasons for CRM failure. For their part, CRM implementers-to-be wanting reassurance that success is something within their span of control can take great comfort in knowing that CRM failure follows a distinct pattern.

Implementations that fail have a high propensity to:

• Ignore development of customer-centric strategies.
  
  
• Avoid the "people" side of CRM.
  
  
• Avoid organizational change.
  
  
• Ignore statistical tracking and measurement of outcomes.

These are traps and snares that implementers can choose to avoid. Or, to flip that around, implementers that fail, fail through their own fault—whether that fault be ignoring the realities that require CRM implementers to tackle some tough stuff in order to succeed or, no better, not bothering to learn the realities before starting to implement. In either case, self-inflicted injuries.

Taking care to avoid these missteps would not appear to be a very controversial message—at first blush. But if you've been around CRM for a while, you'll recognize that these four failings are all symptomatic of a flawed view of CRM that's often aggressively sold to implementers by software vendors—the view that CRM begins with software and that implementers can safely sidestep activities involving strategic planning and people and org charts by keeping CRM "tactical" and limited in scope (limited to software or a dollop of process with their technology). Nice try, but "Blueprint" data show CRM's ROI heavily skewed toward strategic implementations substantial enough to take on tough issues such as developing new strategies, dealing with organizational and human change, and creating measurable accountabilities. Another reminder that we get what we pay for—and as it turns out in the case of CRM implementers trying the tactical route, often much less than we pay for.

The recipe for CRM success is easy to follow

As you might expect, the recipe for CRM success is the flip side of the four-step recipe for failure. Successful CRM implementations typically:

• Develop customer-centric strategies (a five-dollar expression for figuring out how to add value to customers).
  
  
• Make organizational changes when required (redesigning workflow and information flow in order to implement new strategies usually requires stretching some functional boundaries and contracting others).
  
  
• Provide line-level training and support to those experiencing changed workflow and information flow (not just technology training, but providing a context and rationale for justifying change, often change in career-long work patterns).
  
  
• Set measurable goals (other than labor cost savings).

Simple. But much easier said than done. While knowing that these four factors alone exert a powerful influence on success rates is very reassuring to CRM implementers prepared to roll up their sleeves and take CRM seriously. However, this finding stands squarely in the way of several sizable CRM constituencies:

• Implementers wanting rapid deployment, quick ROI, "slam bam and we're done CRM." Unfortunately, it's the "messy" implementations that muck around with business strategies, people and organizational change that generate the returns.
  
  
• Software sellers wanting to sell their applications before customers discover what functionality they really need. Very un-CRM-like, but most software vendors treat CRM system sales as a one-time event.
  
  
• CRM consultants specializing in reengineering individual-level work processes and "selecting" (often selling) CRM software. Unfortunately, clients need much more support in the strategic areas—building strategies that add value to customers; redesigning department level workflow to carry out new strategies; re-architecting the technology infrastructure to accommodate new information needs; and dealing with the organizational and people consequences of the first three.

Overall, the "Blueprint" findings reflect a split between CRM implementer versus CRM vendor interests

Other principal findings continue this pattern of pleasing implementers more than vendors. To cite several examples:

• "Blueprint" data indicate that 25% of CRM implementers are bypassing commercial CRM software systems. Although we have no benchmark data for comparison, that percentage is almost certainly growing, shrinking CRM software sales potential.
  
  
• The decreasing reliance on CRM technology makes software sales an inaccurate barometer of industry growth. While using alternative tools such as information portals, data warehouses, and internally developed software offers new options and opportunities for some implementers, it takes away the only industry-growth measuring stick conveniently within analysts' reach.
  
  
• The data show no correlation between brand of CRM software and success rates. Successful implementers know their requirements before selecting and buy what's right for them—and advertising claims aside, no CRM software system is right for more than a slice of the user base.
  
  
• No other technology-related activity ranked as a driver of CRM success. While the majority of CRM implementations depend for success on effective and appropriate technology support, technology isn't the hard part. The business issues—strategy, organizational design, training, and measurement—are what make or break CRM implementations. Unfortunately, the vast majority of the CRM industry is focused on process and technology and not in alignment with implementer needs.
  
  
• CRM produces ROI primarily from two sources: reducing customer attrition and increasing customer penetration. New customer acquisition and front-office labor-savings are secondary contributors only. Unfortunately, database marketing consultants migrating in droves over to CRM focus almost exclusively on customer acquisition, and more than a few CRM software players cost-justify their wares with projected ROI from future staff-cuts.

Knowing CRM's past should improve its future

So—will having hard data contribute much to curing what ails CRM (which is still ailing, despite the positive findings)? On the implementer side, potentially (and hopefully) it will—especially if it increases the percentage of implementers approaching CRM as business strategy, not a technology purchase. On the vendor side? Hard to gauge. Some CRM software sellers and consultants are already listening carefully to customers and adapting to marketplace realities. But there's a hard-core group that's doing neither. And while it's a good bet that natural market forces will wash this group away, until they're gone, implementers need to keep their guards up—and know the true facts about CRM before they start (or buy).

About the Author Author

Dick Lee heads the Customer-1 practice of Minneapolis-based Caribou Lake, which helps clients develop information systems and design workflow in alignment with business strategies. Mr. Lee has authored and co-authored several books on CRM, including The Blueprint for CRM Success, and he speaks globally on CRM and on achieving customer-centricity through business/technology alignment.