Ready or not, welcome to the Customer Age. Customers have more choices than ever before, thanks to a global economy that pumps out high-quality goods and services, with a helping hand from the Internet to ensure competitive prices (unless you’re dealing with Microsoft software or the California energy market, but that’s another story).
That’s why, over the past decade or so, we’ve seen a shift to CRM—a business strategy to get, grow and retain the right customers. Increasingly, it’s not what you sell but how you treat your customers that will determine your long-term success. Even in these uncertain economic times, analyst firm Aberdeen Group says that CRM-related software, services and hardware spending will grow from about $13.5 billion in 2001 to $15.3 billion in 2002 and continue at a compound annual growth rate of 20 percent through 2005.
Dog-eat-dog or better relationships?
That’s a whole lot of moola supposedly chasing better relationships. Are they getting any better? I’m not so sure.
Consulting my friendly dictionary, I find that “relationship” means “being mutually interested or involved in social or commercial matters.” Let’s say you’re a manufacturer and want a better “relationship” with your component suppliers. You might spend money on supply-chain management (SCM) software to cut cost and delivery times. But your suppliers see you as their customer, so they’ll probably invest in a CRM system to increase revenue and profits from you.
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Therein lies the problem. Too often buyer and seller are trying to get the upper hand and increase their profits at the other’s expense. This is a dog-eat-dog, win-lose transaction, not a relationship. Would you ever attempt to “manage” the relationship with your spouse? Not unless you like walking with a limp, you wouldn’t.
Done right, CRM should be about both receiving and delivering value. But mostly, this over-hyped buzzword been about controlling the other party and extracting as much value as possible. It’s no wonder that true CRM success stories are few and far between.
It’s the value, Stupid
According to an Insight Technology Group study in 2001, more than 52 percent of firms bought CRM applications without first planning how they were going to generate a return on that investment. Not surprisingly, 76 percent of those same companies reported minimal or no improvements. Other studies have found failure rates of 50 percent to 80 percent, depending on how “failure” is defined.
Some projects fail because of mismatched expectations: people in IT, marketing, sales and customer service all thought they were getting something different. And, as we found in our CRM software satisfaction study some CRM software reps over-promise and under-deliver on what their technology can do. (No, really. It does happen!)
Then again, maybe it’s the CEO’s fault for not supporting the project strongly enough. Or not investing in a change management program. Or not defining ROI metrics ahead of time.
Meanwhile, while we’re playing the blame game internally, we’ve forgotten the most important party of all. You remember, the one that pays the bills: the customer. I think the reason CRM fails is pretty simple: lack of customer benefits. If we learned anything from the debate about customer loyalty earlier this year, it’s that real loyalty is built by the total value the customer receives—the product, service, price and communication. You have to earn loyalty by delivering more value than your competitors. Then you’ve got a relationship worth managing.
So maybe, despite your purchase of a nifty neato CRM system, the reason your customers don’t deliver value to you is because you don’t deliver value to them.
Philosophically, collaboration is a different story because it’s about “we,” not just “me.” To collaborate, after all, means to work together, with both sides investing in the relationship and benefits flowing both ways. A collaborative (win-win) mindset, supported by the right processes and systems, is what’s required to make CRM work.
Partner or Perish
The conventional wisdom a couple years ago was that the Internet would enable companies to directly sell to and service all of their customers. Yet indirect channels remain of vital importance in reaching target markets; adding consulting and services; and providing total solutions. Think about it: The last time you bought a car, you could’ve done so online. Did you? In fact, globally about 40 percent of business is done through intermediaries (channel partners) of various sorts, including distributors, retail stores, resellers, agents and brokers, just to name a few. Some analysts predict that the percentage of indirect commerce will actually increase to as much as 60 percent over the next decade or two.
The real payoff of the Internet is its enabling of business collaboration—sort of “information partnerships” between manufacturers, partners and customers. Michael Dell, in his book Direct From Dell (HarperCollins, 2000), said:
The Internet as a sales channel represents only a fraction of the Internet’s value to business. The real potential lies in its ability to transform relationships within the traditional supplier-vendor-customer chain.”
Agreeing with Dell’s viewpoint, GE’s former Chairman Jack Welch said in Jack: Straight From the Gut (Warner Books, 2001) that creating a “boundaryless” company was a core part of GE’s value system. In his view, a boundaryless company would “remove all barriers among the functions: engineering, marketing, manufacturing and the rest” and would “knock down external walls, making suppliers and customers part of a single process.”
Cisco Systems’ efforts to create a “virtual enterprise” are well chronicled. “Barriers to information in Cisco are incredibly low,” says Ran Kelsi, London-based head of Strategic Initiatives EMEA for Cisco Systems. He adds:
We’ve been successful in opening up the guts of our organization as much as we can to our customers. They can deal not only with the front office, but gain access to knowledge and information they need at a particular point in time. This eliminates bottlenecks and we expose the internal value chain to external customers.
Improving collaboration with partners isn’t optional, anymore. Economic pressures are driving this trend, according to Karen Smith, Aberdeen’s CRM research director:
A slow economy increases the premium placed on additional revenue-building channels. As a result, a growing priority among enterprises is building superior partnerships that can help differentiate and sell their product lines through value-added services; a wider selection of related products; and relevant, local expertise.”
In short, you can’t afford to do it all yourself. So don’t.
Shift from automation to collaborative e-business
In the past decade, businesses have invested in a proliferation of enterprise software applications: sales force automation (SFA) applications for the direct sales force; customer service and support (CSS) applications for the customer service department; and partner relationship management (PRM) applications for indirect channels. By and large, these systems automate business processes with the goal of extracting more value from customers and partners. To make matters worse, according to an InformationWeek study, only 17 percent of businesses integrate their call centers, web and email systems with each other, making it impossible to create a complete picture of the customer.
For a sustainable competitive advantage, companies must move beyond the easily duplicated automation projects. In the future, advanced “collaborative e-business” systems will connect the enterprise with its customers and partners, enabling the seamless exchange of information that was Welch’s vision at GE. These solutions will ensure that the enterprise, partners and customers can all work together in a profitable relationship network.
As the diagram shows, traditional CRM is shifting outside the enterprise. Emerging web services standards will play a starring role in the next wave of collaborative CRM solutions, enabling true “plug and play” process integration while handling both structured and unstructured information.
Here’s a sample of what you’ll find in the collaboration toolbox, with a few vendors noted.
- Collaborative Commerce. Early on, vendors experimenting with e-commerce discovered their channel partners wielded considerable market power and were none too pleased to be cut out of the flow of business. Distributed e-commerce systems allow customers to visit a vendor’s web site, do some research then fill a shopping cart. The vendor’s site helps the customer pick the appropriate partner, based on geography, price or other factors and the shopping cart is electronically transferred to the selected partner’s site. Vendors: Click Commerce, Comergent.
- Integrated Marketing Portals. Portals have limitations in B2B processes, but they’re a great way to reach consumers. Effective portal tools use XML to aggregate content streams from multiple parties, then syndicate this information in a consumer-facing portal. If the content changes at the source, it’s changed in the portal automatically, without requiring a slow and costly traditional web publishing process. Vendors: Broadvision, HAHT Commerce, Vignette.
- Lead and Opportunity Management. These tools help deploy sophisticated systems to send leads to the most qualified partners, based on certification, geography or other business rules. These leads can then be accessed via a secure extranet by the targeted partner. But watch out for “death at the browser interface.” Next-generation systems will allow vendors and partners to exchange leads and lead status information through process integration, rather than forcing visits to yet another portal. Vendors: ChannelWave, Colabranet, Scribe.
- Service Incident Management. Post-sales service and support is a costly fact of life in any business. Collaborative service systems help glue together customer service processes across multiple organizations. A customer service request can be tracked across departments or companies using a single web page, much as you’d track a shipment via the FedEx web site. Vendors: eBest!, ePeople, TightLink.
- Team Collaboration. People still do the real work in complex selling and service scenarios. Even with robust relationship management systems, people still need to interact using such applications as email, desktop documents and project plans. Collaboration tools allow companies to manage this unstructured information via shared workspaces that can be used by customers, partners and employees. Using such systems can help an enterprise rapidly form teams and enable people to work faster and smarter. Vendors: Groove, Intraspect, Flypaper.
Hub, spoke or toast
We’re living in a networked world—business ecosystems of partners and customers. Companies must be a vital hub or spoke or else risk the same fate as failed dot-coms that couldn’t deliver value at a competitive cost. A McKinsey study discovered that “network orchestrators” like Cisco, Schwab, Palm and Qualcomm outperformed their peers, not only in the boom times of 1995 to 2000 but also during the recent downturn. IBM, Microsoft and many software developers owe their success as much to their partner networks as to their products.
Companies succeeding in collaboration are asking customers what kind of access they want and giving it to them. However, a culture of trust is crucial. “People have to be willing and unafraid to share,” says sales and marketing guru Barry Trailer of CSO Insights. “The tools are much less important than a culture that encourages sharing information and creates an open environment wherein people do not feel they need to hold trump cards as bargaining chips.”
Despite the missteps of the past few years, more and more companies are adopting CRM in their organizations. The message is seeping through that CRM isn’t just about technology and automation. Rather, CRM is about giving customers more choices for interaction and viewing your organization through your customers’ eyes. It’s about creating mutual wins.
To increase your odds of success:
- Drive everything from a customer perspective. Start from the very top of the business. Check your ego at the door; act like you work for your customers and partners, not vice versa. If you’re not delivering value, don’t start the project.
- Dare to share vital business information with partners and customers. Work through inevitable security issues and occasional missteps. While you’re learning, however, be smart about the risks you do take.
- Think, plan and then do. Focus on business problems and processes that are truly critical to the success of customer and partner relationships. Assess the impact of process gaps between your enterprise and your trading partners.
- Motivate and monitor adoption. You’ll need to work hard to encourage customers and other stakeholders to use new systems supporting relationship networks. Keep at it—you’ll never be completely done.
- Remember, it’s still about people. At the core of successful relationships, networked or otherwise, are real people of flesh, blood and emotions whose main question is: “What’s in it for me?” Better have an answer ready.
In the collaborative future of CRM, customers will reap rewards by receiving the products, services and interaction experiences that they want, at an affordable cost. Partners—true value-added intermediaries—will earn the loyalty of both customers and suppliers. And the enterprise will gain the sustainable competitive edge it needs to win in the Customer Age.