Most companies invested in CRM software for the first time between 1996 and 2006. That decade saw the CRM boom and bust. Siebel went public in 1996, signed huge multi-million dollar software license deals, peaked at a 45% market share in 2002 and was acquired by Oracle in 2005. The big ERP vendors all entered the market with varying success, Nortel acquired Clarify for $2.1bn in 1999, (before selling for just $200m 2 years later) and Salesforce.com was founded in 1999, winning over 20,000 customers by 2006.
The CRM applications that most companies implemented during that decade of 1996-2006 were predominantly Sales Force Automation solutions and Customer Service /Contact Centre software. Solutions designed to support Industrial Age distribution models of large field sales forces and customer service agents. Many projects failed (analyst estimates range greatly from approximately one to two thirds of projects) and many companies experienced long, painful implementations that rarely achieved the anticipated benefits. As many of the CRM projects were so slow and painful to implement, many companies have retained the solutions that they implemented for far longer than intended and the relics of these systems still power a large part of the customer experience today.
Looking back at the wave of digital change we have seen over the last decade or so, I would pick out 2006 as a tipping point. In 2006 worldwide Internet penetration stood at 15.7% (see http://www.internetworldstats.com/stats.htm). Since 2006 it has more than doubled to over 30%. During the last 6 years we have seen enormous changes in technology and communications. We have seen the mass roll-out of broadband and mobile broadband, an explosion of connected, smart hardware devices like the iPhone (2007), the iPad (2010) and the seemingly unstoppable rise of social networks like Facebook (founded in 2004 but hitting 500m users in 2010 and 1bn in 2012), Twitter (founded in 2006) and GooglePlus (founded in 2011).
There is a stark reality here. Most companies invested in CRM for an analogue age, designed to support a predominantly field sales force and contact centre-led distribution model. They invested before worldwide Internet penetration reached critical mass, before any of the digital disruption we see today became main stream and before digital became baked into the distribution model. Hence we now see IT departments in a spin, trying to keep up with increasingly frantic demands from the business and trying to bolt on new applications, services and channels to legacy systems that were simply never designed to be used in the way they are today.
CRM for a digital age has to look different. It cannot be the technology-centric, monolithic disaster that plagued some (but certainly not all) of the previous generation of projects. CRM for a digital age is not any particular software or technology and it will vary greatly from business to business but it is likely to display some of the following characteristics:
- Designed for Customers and front line customer-facing staff, not just for management
- Focussed on speed to value and positive internal momentum
- Designed with a core foundation (e.g. data, processes) but able to embrace change at the front-end of customer interaction (i.e. devices, apps, social networks etc)
- Delivered in an iterative fashion with constant business involvement
- Open and integratable in nature (often made up of a collection of services rather than a single package)
- Cross-functional in nature, busting through internal silos
- Paid for based on value delivered to the business
The challenge most companies face is one of transition. Shifting not only from legacy CRM technologies, but also from legacy mindsets, procurement models, IT delivery models and of course distribution models. Without question, all of those challenges are difficult, but is it really realistic to continue with a CRM solution designed for an analogue age?
Hello Laurence
Thank you for writing this insightful post. I was part of Siebel in those heady days focussing on the telecoms industry. Even in those days it occurred to me that the hype way exceeded the capabilities of the systems. And I do remember the struggle to get the CRM system implemented.
What caught my eye was a multimillion pound CRM implementation where only one person was using the CRM system. Why? Because, for just about everybody else the CRM system created work and hassle instead of making their lives easier. To this day, I find CRM systems as sinks for data – usually data that is not particularly useful. And certainly, having a CRM system is no guarantee that the organisation will actually be able to mine the data, do something useful with it, nor that it will deliver the kind of experiences that customers like.
Yes, there is BIG challenge to get organisations ready for the digital age. Time and again I have found that clients struggle to implement the digital strategies I create for them. Why? Because the back end – the IT systems and databases – are not up to the job. And the time-effort-cost needed to put in the right IT platform is considered prohibitive. So always the temptation is to tinker with what is there – to add a little here, take some away there, put some sticky tape etc.
Which means that new entrants without legacy IT infrastructures, tied down by sunk costs that have not yet been fully depreciated, and legacy mindsets will have the advantage. I find the particularly pertinent given the demise of HMV and Blockbuster this week.
All the best
Maz
Hi Maz – many thanks for your comments. You make some really great points!
I completely agree – many CRM systems were designed on the basis of “value to management” rather than value to user or value to customer. As a result many (particularly SFA solutions) have become an admin burden for users that deliver little value to them.
Your point on digital readiness is also spot on. Perhaps a challenge with siloed / tactical digital programs are that they are fairly easy to justify (70% of customers are on FB so shouldn’t we build an app?…) and fairly low cost to build, but the net effect of lots of different initiatives across an organisation is digital spaghetti and a confusing, inconsistent experience for the customer.
Many of the success stories around digital programs are indeed start-ups (Zappos, GiffGaff, Threadless etc). These are all great stories but the challenge of replicating in a large, traditional organisation with decades of legacy IT, mindsets, processes, silos etc is far greater.
Thanks for dropping by and appreciate your thoughts.
Laurence