The ABCs of CRM Success

The focus of many CIOs is now turned to gaining competitive advantage through customer-facing strategies. They realize that companies must create customer loyalty and build business value by improving sales tools and understanding consumer habits. But it's also well-known that many companies faltered in their CRM initiatives, and satisfaction levels are still abysmal. The drive to gain a comprehensive view of the customer has outpaced some companies' ability to deploy scaled, successful CRM projects. It would seem that the end of CRM is at hand.

In fact, many organizations are highly entrenched in their CRM efforts and continue to spend a great deal of time and money to leverage its greatest benefits. According to Forrester, businesses were expected to spend more than $3 billion worldwide on new CRM software licenses in 2005. And total spending on CRM—including maintenance, integration, and related hardware and software—will exceed $12 billion. Unrelenting pressure on businesses to differentiate the customer experience they offer from that of competitors spurs demand for further investments.

But to many CIOs, CRM is still falling short. Among the 94 business and IT executives Forrester recently surveyed, only 10% strongly agreed that the business results they expected to achieve had been met or exceeded. And just 14% strongly agreed that their CRM applications had improved end-user productivity (see chart, left).

What do the top performers do to meet CRM objectives? We recently interviewed 22 global IT executives to understand their methods for achieving business-performance improvements from a CRM initiative. The organizations—which represent manufacturing, financial services, communications, and utilities—cited four types of benefits: increased revenue, lower costs, higher ROI, and improved competitive strength.

From this, we identified 10 best practices that led to outstanding results in five areas: governance, process management, data management, user adoption, and technology. It's important to note that eight out of 10 of the best practices are not technology-specific, but rather are based on strategy and execution. Here are our recommended best practices.

1. Build strong executive sponsorship. Not surprisingly, the executives emphasized the importance of strong and visible commitment by top management for customer-facing initiatives to succeed. There's no single, best way to secure top-level sponsorship, but if it's absent, the risk of failure increases significantly. For example, a water utility company faced a significant challenge in the wake of a poor performance review by industry regulators. In response, top management formed a multidivisional task force to find ways to become the best in its industry. The executives decided the organization needed to become more customer-centric, and it revamped customer-facing processes and adopted new technologies to support delivery of better customer service. In this case, CRM was led by top executives who viewed it as a core strategy to improve competitive position and increase the organization's standing with regulators.

2. Require business executives to lead CRM with support from IT. CIOs have an important role to play in helping business leaders understand how to take advantage of mature CRM technologies such as packaged application software, and emerging approaches like CRM software-as-service. In most organizations, the business units are accountable for delivering profit and loss, and CRM initiatives must therefore be led by business executives who own and manage the customer-facing processes that impact organizational success metrics.

3. Develop the right governance structure. Successful CRM projects require a constant balancing of objectives, priorities, resources, and schedules. A clear governance structure establishes accountabilities, allocates resources, and makes decisions. A financial services company, for instance, created a CRM steering committee comprising both senior IT and business unit heads with direct accountability to the board of directors. Under this structure, decision-making processes are well-defined, and mechanisms exist to deploy company resources where needed.

4. Define objectives and processes first, and then apply technology. CRM technologies are a means, not an end. It's essential to define objectives—and the business process changes necessary to meet them—before considering a technology purchase. For example, is the goal to increase revenue per sales rep? Increase average order size? Decrease customer acquisition costs? Decrease service response times?

A global auto manufacturer worked for three years to reengineer its dealer management processes to improve service delivery to buyers. The goal was to increase customer service satisfaction at the dealer level to protect against buyer defections to rival brands. The manufacturer worked closely with dealers to improve presales, sales, and post-sales. Only after the ideal processes had been defined and agreed upon by the dealers did the company look for technology solutions to support the requirements of the new designs.

5. Follow a realistic pace for rollout. Successful CRM requires new business processes and supporting technologies. This is never easy, and leading companies have found that a deployment strategy based on continuous improvement works best. The 22 companies studied took three to six months to develop a CRM business case and define their requirements; three to four months to implement pilot programs to test prototypes; and six months to roll out functionality to the initial set of targeted users. This was typically followed by a continuous-release schedule, whereby new capabilities were introduced to the organization every 90 to 120 days.

6. Define data requirements and data-quality management approaches early. Customer data integration and management were a sore spot with most of the executives surveyed. They realized they had not spent sufficient time on this issue early enough in their CRM initiative to avoid problems later. Progressive companies are moving away from efforts that focus on technology and after-the-fact data cleansing; they're starting to manage and use customer data more proactively.

7. Strive for high user involvement. New CRM processes and technologies that have a clear benefit for users but are not properly introduced into the organization won't be adopted. Enterprises must put mechanisms in place to support users in learning new skills and ensure that users have opportunities to influence application functionality and enhancements.

In one innovative example, a global bank allowed 84 users to participate directly in choosing the specific technology vendor to support the bank's CRM effort. Users from around the world viewed and critiqued prototype solutions developed by the CRM team. Finally, the strongest prototype was tested in pilot programs in four countries. The process built a strong user constituency.

8. Place a high priority on usability. End-user benefits must remain the center of CRM process and application enhancements. Applications aren't user-friendly to front-line employees when 20 to 30 steps are required to complete a process. Attention must be paid to the user interface and workflows to ensure that they're well-aligned with the working practices of day-to-day users.

9. Simplify the platform. The companies interviewed want to reduce the complexity and cost of their enterprise-applications portfolios. This need is driving a reduction in the number of CRM point solutions and consolidation of investment into fewer, multifunctional CRM suite platforms. An illustration of this strategy is an international office machines company that needed to consolidate 26 unintegrated legacy systems because customers were dissatisfied with poor sales-and-service coordination and duplication. Every time a front-line sales or service person left the company, customer information was lost. It was becoming too costly to maintain the disparate technologies and too hard to sustain the breadth of skills needed to support all these unique tools. The company decided to standardize on one multifunctional suite solution to support the company globally.

10. Actively manage the vendor relationship. Consolidating CRM solutions requires enterprises to rethink their relationships with technology and professional services providers. The relationships must move from focusing only on cost, project schedule, and system performance to include a shared vision for achieving business outcomes.

CRM is a long-term strategy to deliver differentiated customer experiences that will set your organization apart from the competition. Use an approach of continuous improvement for every quarter of every year. A CIO who focuses on strategy and execution stands the best chance for long-term success.

William Band is a consulting analyst at Forrester Research.

Is your CRM strategy working? Tell us at [email protected].

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