CIOs and CEOs who are engaged in implementing a Customer Relationship Management initiative know how difficult a process it is. Relatively new and rapidly evolving, CRM solutions are still the source of great concern for managers in many of the Fortune 1000 companies. Because of the high stakes involved in these complex projects, managers are struggling to find meaningful measures of effectiveness and progress with which to assess and direct their efforts. To maximize the return on investment (ROI), managers must periodically revisit and refine their CRM strategy and objectives to keep the project on track and avoid conflicts later.
Why CRM needs regular attention. There are several reasons why companies currently engaged in a CRM implementation need to revisit and refine their strategy and approach to get the maximum impact from their investment. Scott Nelson, a CRM analyst from Gartner Research, suggests that companies “think strategically but act tactically. Invest in and get some CRM projects going, because in some cases you wont completely know what you need until [then].” Complexity. One thing about CRM that everyone agrees on is that the integration effort is incredibly complex. First of all, CRM integration often includes the entire enterprise, thus requiring careful management to align the organization. This is especially vital since many firms do not have one group who owns’ the customer exclusively. Second, CRM implementations are not just about technology – they also have significant impact on people and processes and are thus more likely to run into conflicts on a variety of levels. Finally, CRM tries to integrate the customer experience for all channels (voice, web, in-store, etc) and requires exceptional technical and data integration skills. It is therefore unlikely that everything that should have been taken into account and planned for was conceived the first time around. Revisiting the strategy with the lessons learned improves the projects chance for successfully addressing these complex issues.
High Stakes. As complex as it is, what often keeps managers up at night is how high the stakes are for implementing a successful project. In dollar terms, CRM is a very big-ticket item. The technology alone can cost in the tens of millions of dollars for medium to large companies – a lot of money in these cash strapped times. And yet according to a recent survey done by Jupiter Media Matrix, 74% of the businesses polled expect to increase spending on CRM software and hardware, many boosting the expenditure by 25% to 50% over last years levels. Indeed, that CEOs and CFOs believe that CRM is mission critical enough to continue to invest says something about their high expectations for payback.
Another reason the stakes are so high is at the very heart of CRM – the customer. While it is relatively easy to cover up internal snafus, customer-facing mistakes can break a company. A major slip up in terms of service or customer privacy could cripple a company’s brand and ruin future profits. So just as companies are rushing to capture the first mover advantage in setting up a CRM system, they are cautious about making fatal mistakes. With such high stakes, it makes sense to revisit the project to make sure it is on track.
Moving target. If the complexity and cost aren’t intimidating enough, the fact that CRM is still so new with so few successful business models means that much of it is still trail-blazing, Lewis and Clark style. The rapid pace of innovation in CRM technology compounds this ambiguity, as today’s standard is likely to be left behind by tomorrows invention. Finally, the business environment that existed when many CRM strategies were crafted has changed dramatically. In particular, the amount of capital businesses are able to invest and the expected payback period have both shrunk considerably.
Revisiting the strategy/ implementation: the CRM Diagnostic. Given the difficulties facing CRM implementation, many companies are learning as they go, revising and enhancing their strategies as more information become available. While on the job revisions are important, a formal process that diagnoses the CRM strategy, metrics employed, organizational buy-in and adherence to the project plan ensures a more complete view. If not already planned, minor CRM diagnostics should be conducted every three to four months, with a major review each year.
The CRM Diagnostic answers the questions: 1. Are we pursuing the right strategy? The insights gained from new customer information may have a direct effect on the type of CRM strategy to be pursued. For example, halfway through their CRM implementation a regional retail bank realized that its customers were not as interested in online banking as expected. Investments in additional servers and networking hardware were put on hold as the bank realigned itself to focus on in-branch, phone, and direct mail contact.
2. Do we have the right metrics & business case to support the strategy? Without the correct metrics it can be next to impossible to assess the progress of a CRM system. Since CRM is such new territory dealing with soft areas like customer satisfaction, finding the right metrics that relate to the strategy specifics is quite difficult. To deal with this challenge, Hilton Hotels implemented a balanced scorecard approach in 1997. Hilton tracks the progress of its CRM initiative in five categories: Operational Effectiveness, Revenue Maximization, Customer Loyalty, Brand Standards, and Learning and Growth. Their approach provides several benefits. First, it allows management to track the performance of their properties and the CRM initiative in very real and quantifiable terms. Second, it provides frequent information about performance so that managers can react quickly. Third, it puts softer but no less important areas like Customer Loyalty and employee learning on the same footing as areas like financials. Underlying the metrics, a robust business case with both near and medium term revenue goals and cost improvement expectations is essential to provide tangible performance targets to focus and sustain the CRM program throughout its lifecycle.
3. Is the organization supporting the initiative? No matter how good a company’s CRM strategy and technology are, the initiative will never achieve its goals without strong employee support. Making sure that customer information is shared and utilized throughout the organization is a major requirement. People need to be informed about and trained in the new processes and technology of CRM. Above all, people need to see a value in CRM and feel a part of the effort. Clearly, from inception to completion, any CRM initiative must be also considered a significant cultural/behavioral change management undertaking and be treated as such by sponsors and participants
4. Are we on track with the project plan? Project plans are helpful in keeping initiatives progressing according to the best expectations at the time. A project can get behind because of unforeseen roadblocks, additional elements that need to be included, or an under-performing project team. In all cases, it is necessary to assess the reasons why a project is not in pace and to deal with them as soon as possible.
CRM implementation is a game of inches. Given the complexities and high stakes of most projects, the CRM diagnostic is a great way to maximize the investment and avoid future pitfalls. If necessary, seek outside help to make sure that the project is living up to expectations. Above all, do not lose sight of the goal – strong and profitable relationships with happy customers.
Derek F. Martin is a strategy consultant with Pacesetter Management Consulting, Derek has more than 5 years experience working with Fortune 100 companies. Derek specializes in helping companies achieve sustainable results by developing solutions that include people, process, and technology elements. Derek can be reached at: dmartin@pacesettergroup.com http://www.pacesettergroup.com/
