An emphasis on a cross-functional approach to marketing
Chapter 7: Organizing for CRM Implementation
Having outlined the status of CRM as a maturing management dis- cipline and a growth market and examined each of the five key CRM processes of the strategic framework in detail, this final chap- ter considers the all-important task of organizing for CRM imple- mentation. Numerous reports of CRM disappointments have caused many to question the value and implications of investing in customer relationship management activities and technologies.
While some CRM failures are inevitable, most of them can be pre- vented by paying more attention to the organizational issues involved in: assessing the organization’s readiness for CRM; fully addressing the project management and change management requirements; understanding the role of employee engagement and planning; and carefully executing and evaluating the CRM pro- gramme. Experience has shown that successful CRM implementa- tion is preceded by the development of a clear, relevant and well-communicated CRM strategy. Short-term wins have more chance of securing enterprise-wide commitment than do drawn out CRM projects with over-ambitious goals. Moreover, a CRM strategy designed to deliver incremental returns provides the flexibility and scope for progressive improvement. The adoption of best practice, underscored by strong leadership, is key to a positive outcome. No amount of IT can compensate for the requirement of human invest- ment. This is evident in the aim of CRM: to create a seamless per- sonalized customer experience that is consistently and continually enhanced. For attracting existing and potential customers, anything less is inappropriate.
Checklist for CRM leaders
CRM leaders should ask the following questions in considering the role of CRM in their organization:
1. How important are the following relationship issues for my organization?
(a) the retention of profitable customers
(b) developing a cross-functional approach to marketing (c) managing multiple markets in a more integrated manner 2. How important are the following trends in my organization?
(a) the shift in focus from transactional to relationship marketing (b) the realization that customers are a business asset rather than a
commercial audience
(c) the transition from functions to processes
(d) the use of information proactively rather than reactively
(e) the greater utilization of technology in managing and maximizing the value of information
(f) the need to balance delivery and extraction of customer value (g) the utilization of one-to-one marketing approaches
3. How is CRM considered in my organization?
(a) do we view CRM from a strategic perspective where it is concerned with how the organization can create increased shareholder value through developing superior customer relationships?
(b) is CRM viewed in a consistent and uniform manner throughout the organization?
(c) are we clear on the distinction between operational CRM, analytical CRM and collaborative CRM?
4. Are we familiar with the CRM marketplace:
(a) in terms of the key segments for CRM applications?
(b) in terms of the CRM service providers and consultants?
5. Do we understand the rationale behind addressing CRM from the per- spective of the following five processes?
(a) the strategy development process (b) the value creation process
(c) the multi-channel integration process (d) the information management process (e) the performance assessment process.
Chapter 2
The strategy development process
Business strategy
• Business vision
• Industry and competitive characteristics
Customer strategy
• Customer choice and customer characteristics
• Segment granularity
Information management process
Back-office applications Front-office
applications Analysis
tools IT
systems
Data repository
Integrated channel management
Sales force
Outlets
Telephony
Electronic commerce Direct marketing
Mobile commerce
VirtualPhysical
Shareholder results
• Employee value
• Customer value
• Shareholder value
• Cost reduction
Performance monitoring
• Standards
• Satisfaction measurement
• Results and KPIs Value
customer receives
• Value proposition
• Value assessment
Value organization receives
• Acquisition economics
• Retention economics Customer segment lifetime value analysis Strategy development
process:
Multi-channel integration process:
Performance assessment process:
Value creation process:
The strategy development process is deservedly the first process to be considered in the CRM Strategic Framework. It not only shapes the nature of the other four key CRM processes but, more impor- tantly, it defines the overall objectives and parameters for the organi- zation’s CRM activities. As highlighted in the figure above, the The strategic framework for CRM
strategy development process involves determining the business strategy and the customer strategy and ensuring that they are integrated.
There are numerous definitions of strategy, but the one by man- agement consultants Richard Norman and Rafael Ramirez best cap- tures the concept of strategy in the context of CRM. It is one that highlights the criticality of customer relationships.
Strategy is the art of creating value. It provides the intellectual frame- works, conceptual models and governing ideas that allow a company’s managers to identify opportunities for bringing value to customers and for delivering that value at a profit. In this respect, strategy is the way a company defines its business and links together the only two resources that really matter in today’s economy: knowledge and rela- tionships or an organization’s competencies and customers.1
While most companies recognize the importance of having clearly defined business and customer strategies, relatively few actively develop a formal CRM strategy with a focus on building appropriate customer relationships. Yet, central to the concept of strategy is the delivery of value to the customer. This implies knowing who the customer is, what he or she wants and whether and how the organi- zation can satisfy this known demand on a sustainable basis.
With much current attention being directed at CRM, some man- agers advocate the quick introduction of a particular technology solu- tion to solve their strategic challenges. However, many organizations’
experiences with IT are mixed. Some are hostages of out-of-date legacy systems, some of a legacy culture where IT is inappropriately viewed as an ever-escalating cost rather than as a source of competi- tive advantage. The result is either inappropriate investment in new technology (which may fail to break free of the legacy ‘bonds’) or an organization focused solely on the technology challenge instead of on the underlying critical business issues. Alternatively, the organization may adopt one particular technology too rapidly; focus insufficiently on building customer relationships; or resist the use of new technologies for improved CRM. Rather than concentrate immediately on a technology solution, managers should first consider CRM in the context of their organization’s overall strategy development. In other words, what are the goals of the organization given the opportunities and constraints within which it operates?
The strategy development process focuses on addressing the fol- lowing key issues:
● Where are we and what do we want to achieve in our business?
● Who are the customers that we want and how should we segment them?
In this chapter, we address these issues under the following headings:
● Business strategy
The role of business strategy
Business vision
Industry and competitor characteristics
Analysing the industry and competitive environment
Determining business strategy
● Customer strategy
The role of customer strategy
Customer choice and customer characteristics
Segment granularity
● CRM strategy development
CRM strategies
Transition paths for CRM.
Business strategy
The first part of the CRM strategy development process is to review the organization’s business strategy. A detailed understanding of the business strategy is essential if an appropriate customer strategy is to be implemented. We should emphasize from the outset that CRM is not about developing a business strategy. Rather it is about fully understanding the business strategy in order to determine how the appropriate customer strategy should be developed and how it should evolve over time. CRM should not seek responsibility for business strategy development. However, it should intervene and ensure top management’s attention is directed at business strategy where a thorough review of it clearly shows that it is wrongly directed or it is not taking account of changing competitive landscape. This is because it is crucial for the CRM activities to be aligned with and supportive of an appropriate business strategy.
We do not attempt a fully comprehensive coverage of all aspects of business strategy here. Rather we examine the key issues that need to be considered and some frameworks that can be used to make an assessment of the organization’s business strategy in order that the CRM strategy is appropriately focused.
The role of business strategy
Business strategy is a top management responsibility that involves identifying the future direction of the enterprise as well as managing the creative interaction of the functional disciplines of operations, marketing, finance and human resource management. It is both a process and a way of thinking which leads to the development of a set of strategies that assist the business in achieving its corporate objectives.
Virtually all companies have a business strategy; however, this may be implicit or explicit. While some companies are successful with only an implicit strategy guiding the chief executive and the management team, it is our experience that companies developing an explicit strategy through a planned approach have a greater chance of long-term success. Almost all large companies who have introduced CRM will have developed an explicit strategy. However, our newspapers and business journals are a constant reminder that such strategies are often not well-formulated or well-implemented, or both and do not automatically result in success.
Corporate success can be the result of an implicit strategy being evolved based on creative entrepreneurial insights on the part of a company; or it may be the result of opportunistic effectiveness. That is, effective intuitive responses to short-term opportunities in the marketplace. A further factor that can influence corporate success is luck, which often plays an important role in success. However, these factors cannot be relied upon to produce long-term results. While they may result in initial success for a company, a further factor, developing a formal business strategy, provides an opportunity to influence sustained success over the longer term. Companies wish- ing to adopt such an approach need clearly to define their business vision and formulate a business strategy that takes full account of the competitive characteristics within the areas in which they have chosen to operate.
Business vision
The process of business strategy formulation should commence with a review or articulation of a company’s vision. The business vision should explicitly reflect the basic beliefs, values and aspirations of the organization. It should be noted, however, that many companies’
statements of their vision display a great deal of similarity and read like public relations promotions rather than reflect the commitment to values that they are intended to be. A business vision should be an enduring statement of purpose that distinguishes the organization from its competitors and it should act as an important device for coordinating activity in an organization. A company’s business vision should reflect the shared value systems which are held within the organization. It can provide a framework to enable the diverse staff of an organization to work together in a coordinated manner towards the achievement of the overall objectives and philosophy of the enterprise. Unfortunately, many companies’ vision statements do not conform to these requirements.
Vision statements need not be long and platitudinous. Tom Watson, the founder of IBM, articulated his company’s philosophy in the phrase ‘IBM means service’. The business vision described by Watson was simple: not just to be a good service company, but to be the best service company. Tom Watson argued the vision of the organization had a great deal more to do with its performance on this dimension than did technological or economic resources, orga- nizational structure, innovation or timing. Over most of the com- pany’s history it has maintained this strong customer service focus.
The most recent and authoritative work on business vision and identifying and communicating values is that undertaken by Hugh Davidson, a consultant and visiting professor at the Cranfield School of Management. His research was prompted by the fact that most of the written material on vision and values discusses how important they are and provides guidance on how to design statements, but there is little published about how to make vision and values work in practice. He undertook a two-year research study on how to make vision and values really work in organizations. His research involved interviewing top management (chairmen and chief executives) in 125 well-run companies and non-profit organizations in the USA and UK – companies which included BP, FedEx, DuPont, Tesco, Nestlé, Johnson
& Johnson and IBM, as well as many non-profit organizations.2
Organizations use a variety of terms to describe their business vision. These include mission statements or ‘missions’, business def- inition, statement of business philosophy, belief statement, credo, vision statement, statement of purpose and so on. Davidson found the term ‘mission’, which has been widely used over the last 25 years, has become less popular in recent years as managers feel the use of the term has been abused. He concluded that it did not matter which words were used to describe the business vision; what was important were three fundamental questions. The questions and terms he uses to describe them are:
● What are we here for? – Purpose
● What is our long-term destination? – Vision
● What beliefs and behaviours will guide us on the journey? – Values.
A good example of a company putting this into practice is Goldman Sachs. They are a market leader in their sector and one the best com- panies in the investment-banking industry. The box below shows how they define their purpose, vision and values.