Do You Know What Are the "Unintended Consequences" of Your CRM Project?

Do You Know What Are the 'Unintended Consequences' of Your CRM Project?
Jim Mercante - November 25, 2004
Originally published - March 22, 2003

Introduction

All too often companies look at CRM as a project-oriented endeavor, focusing on time and budget measures as the primary metrics of success. This is especially true in organizations that are still driven by a "ROI mentality." What many business leaders fail to take into account is the "unintended consequences" of their actions with regard to CRM. One common function of CRM is to stratify customers by current or potential profitability. Using that information, companies treat the more profitable customers better and, in some instances, actually try to discourage the least-profitable customers from continuing to patronize their service. The former may be tolerable; the latter will produce some serious unexpected consequences. However, some of the MBA marketing gurus who have never had eye contact with a consumer may not understand an important word: community. How about a bank CEO who does not have the vision to understand some of the hidden links between bank customers, which gives them additional value. For instance, a low-balance elderly widow may be the mother of a high-balance tycoon. Offend her, and he moves his business elsewhere.

Customer Knowledge

CRM, in its most straightforward definition, mandates that a company harmonize between a product or brand view of its business and the all-important customer view. Many companies, hard as it is to believe, do not have a clear idea of who are their most profitable customers. In the January 15, 2003 issue of CIO Magazine, Mohanbir Sawhney wrote an interesting article titled "New Value, Same Customers." In this article he states that " few large companies know how much business they do with a customer today, let alone how much they expect to do in the future." And further, in remarks about Procter & Gamble (P&G), he states that "Procter and Gamble found that many households spend almost 50 percent of their consumer packaged goods dollars on P&G products. However, P&G doesn't know which customers are buying what because the company is organized around brands, not customers." These attitudes are especially true in companies whose executives are from the sales discipline. These executives typically possess a "revenue at all costs" mentality, with little tolerance for the detail inspection of costs and revenue that a thriving business requires. Jack Stack, in his well-regarded book titled The Great Game of Business, presents compelling examples from his own management experiences and observations of where a company's inability to understand the true drivers of cost and revenue has disenfranchised customers and employees, and led to steadily declining revenues.

CRM and Organizational Alignment

When a very successful enterprise must expand beyond a sole proprietorship, informal, intuitive knowledge about the customers also fragments among many personalities. Much of that knowledge is subsequently lost or "unshared." The proprietor may hire a technician and a front-office clerk who deals with the customers. The enterprise divides its roles (and its knowledge) into a number of people, none of which will have the complete "big picture." True, "specialization" may bring about more "efficiency"; however, the knowledge is fragmented.

Enterprise employees need to talk to each other and share their knowledge about customers, products, and services. This may begin with unstructured, informal dialogue; however, as enterprises grow larger, more structured, formal mechanisms are required. Forms are designed and used to capture observations about customers and their actions. The forms are eventually replaced by computer systems and computer files.

This informal knowledge about each customer and each transaction is difficult to capture electronically. Knowledge that can be structured and "tabularized" is lost, in part, by capture processes that can be tedious, confusing, and lacking in motivation. Much significant knowledge is unstructured, and the only way to capture it is to write it down in text (or perhaps a sketch, if appropriate). This is something that takes time, and most people are disinclined to expend the effort required.

And yet, if you are a customer, this is your expectation of a customer-oriented company. But these activities, which are embodied in "true" CRM are difficult to quantify in terms of the "ROI litmus test." And, unfortunately, the activities get pushed aside when companies are envisioning a CRM initiative. So, as we said above, many of the so-called CRM projects are reduced to single organization, cost-measured, IT projects.

Unintended Consequences

When CRM projects are reduced to single organization, cost-measured IT projects, the organization, rather than becoming more customer focused, turns inward. It focuses instead on its own individual business-unit measures, regardless of the conflicts this creates with customers.

Now this would be bad enough, but the hidden effect is that employees lose all confidence that management has leadership timber, and, typically, the best employees leave first. This leads to a downward spiral of commodity-based business competition, and layoffs, and cost cutting. It's not hard to envision where this will lead.

Suggestions

So, what's the answer? What should the approach be? Here are some suggestions.

First, develop a clear understanding of the customer interaction processes with in your company, such as order-to-cash, and be clear on how the various organizational units within your company are expected to interact and interoperate to the benefit of both the customer and the company.

Second, make sure incentives are clearly aligned to produce the employee behaviors you desire.

Third, communicate these plans and incentives to your employees, every day. And lead by example—make sure that everyone, top to bottom, embraces these initiatives.

Then, and only then, are you in a position to develop technology plans and strategies around a customer relationship management program.

About the Author

Over the past fifteen years, Jim Mercante has been personally involved in more than forty SFA/CRM projects in various delivery and senior management posts for a leading technology software and services firm. Currently, he is head of his own consulting firm, working with business leaders on aligning business plans and customer relationship management initiatives.

He can be reached at jmercante.@aol.com.