CRM: A History of Failure?
Are customer relationship management (CRM) projects prone to failure? ZDNet reviewed analyst firms’ reports to chart general CRM failure rates for 2001-2009:
- 2001 Gartner Group: 50%
- 2002 Butler Group: 70%
- 2002 Selling Power, CSO Forum: 69.3%
- 2005 AMR Research: 18%
- 2006 AMR Research: 31%
- 2007 AMR Research: 29%
- 2007 Economist Intelligence Unit: 56%
- 2009 Forrester Research: 47%
Failure is defined broadly, covering projects that didn’t meet expectations (at best) or failed outright (at worst). Because these statistics come from different research firms using dissimilar research methodologies, you can’t accurately compare year-on-year trends. But to pick just about any given year, my immediate reaction is: There’s no need for CRM failure rates to be this high.
Will project success rates improve? In fact, I predict that sales force automation (SFA) project failure rates are going to increase even more. (The majority of CRM implementations today are for SFA.) Why is that? Simple: Companies are shooting without aiming, just like it was 1999 all over again. The only difference is that instead of implementing on-premises CRM software, they’re using SaaS.
SFA Success Starts With a Plan
What can companies do to ensure that their SFA—or broader CRM (encompassing not just sales, but also service and marketing)—projects meet expectations?
For answers, let’s flash back to 1999, when Lee Iacocca, then CEO of Chrysler, was still a well-known business figure. In those days, he talked a lot about planning as a way of saving money.
Here’s the great thing about planning: you don’t need to spend much money to get a great return. For example, say you spend less than 1% of your expected return on a one-week—or, if you like, two-week—exercise to identify the objectives of your SFA system, as well as what your two-year plan will be to achieve those goals.
As a result of having that plan, you’re probably five times as likely to achieve your objectives, versus just implementing this or that software. And really, what did the planning cost? If your returns are over 100 times that initial planning exercise investment, wasn’t the planning more than justified? In fact, why would you neglect such a foundational step, given the potential returns?
Is SaaS Short-Circuiting Our Brains?
If you follow the Freakonomics camp, you know that psychologically speaking, we humans approach financial matters not from a rational perspective—though we think we’re being objective—but rather with our emotions. And perhaps that’s the answer: SaaS offers the opportunity to have something up and running in days or weeks. It’s the latest and greatest. You want it now. Why bother pausing for even a week or two, to plan?
Just as we’re not naturally adept at rationally analyzing financial patterns, when it comes to CRM projects, we also need to check our innate tendencies at the door. Meaning, sit down and figure out what you really want to do, and how you’re going to do it. Unless you want to fail?
Planning Is Cheap
Based on our experience, and—organizationally speaking—having lived through the dot-com bust as well as the boom that preceded it, we’ve continued to emphasize this theme: Want to succeed? Then don’t just implement software. First, plan.
The good news is that over the past 12 years, we at Innoveer have codified what people should be doing in terms of their CRM planning, and have developed best practices to very quickly help people determine what their plan should be. So whereas a decade ago, planning may have been relatively expensive, today, it’s much easier and less expensive, because we already know the best practices for sales effectiveness, marketing, or customer service.
As a result, creating a plan doesn’t require starting from scratch. Rather, to create an SFA plan, one excellent starting point is to benchmark your company’s sales capabilities—in such areas as relationship management, territory management and pipeline management—against other companies to see understand where your organization excels or needs work.
We’ve found that companies often continue to invest in what they’re already good at. In fact, we recommend investing in what you’re not doing well, because that weakest part of your SFA—or wider CRM—program is what holds you back. Of course, you won’t learn that from just having SaaS CRM software. To find out, you need to build a plan.
Learn More
Innoveer offers a brief workshop to help organizations identify the cost, time and business benefits associated with achieving new and more advanced—meaning, more effective—SFA capabilities. During the workshop, Innoveer examines the five core elements of an organization’s field sales program, identifies the optimal enhancements, and produces specific, technology-agnostic recommendations for building plans and budgets, with detailed estimates of the required project time and costs to improve specific elements of your sales program.
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Adam, thanks for a great post and rounding up these statistics.
I find it interesting that there’s been so much talk of CRM “failure” the past decade, although mostly in the first half.
I suppose it’s good for headlines and nothing sell analyst reports or consulting like fear, but after researching the matter carefully in 2003, I feel the failure rate story was overblown.
Partnering with Dick Lee and David Mangen, we conducted an in-depth study to look at success rates both from the point of view of perception and ROI. Both told roughly the same story — about 2/3 of CRM projects (not just SFA) could be objectively classified as successful.
Or, if you prefer, 1/3 were “failures,” at least as of the time the survey was taken. I think it’s fair to say that most large CRM projects take time to deliver results, so success rates would tend to be lower in the early goings.
I also interviewed Gartner’s Ed Thompson (no relation) in 2004, and he offered a more nuanced version of the failure rate story.
The Reports of CRM Failure Are Highly Exaggerated: An Interview With Gartner’s Ed Thompson
One thing that Ed did mention is that CRM failure rates tend to be higher for larger organizations — precisely the kind of clients that major analyst firms have as clients. This means the sample they’re using is skewed to more failure-prone projects.
Ed also said that success rates for field sales projects tended to lower:
I’ve never been one to hype CRM as a quick fix or sure thing. But frankly I feel the reports of 50/60/70% failure rates were a result of sloppy research or hype to sell services. The media lapped it up and so the perception was born that CRM=failure. It’s simply not true.
All that said, it’s still not easy, and many of the points you made about strategy and planning are spot on. Thanks again for your post.
Adam: Thanks for exposing these important ideas. I’m with you. Definitions of the word failure and research methodologies notwithstanding, there’s always room to improve outcomes and results for CRM projects.
As Bob suggests, part of the perception challenge is whether a person looks at the CRM-results glass as half-full or half-empty. Like many projects that involve information technology, Time-to-Value is long and full of risk. Three years or more is not unusual. There are long learning curves, process redesigns, and probably most challenging for CRM–the requirement of unhooking legacy social connections and re-connecting them for new collaborative “workflows.” If it happens at all, it’s seldom quickly, and rarely easy. Little wonder that the perception of failure is so high after the CRM software Account Executive painted such a compelling and persuasive picture of value chain partners playing together nicely in the sandbox.
For any “failed” project, one question that should be asked: “How were expectations managed before and during implementation?” But other questions need to be asked of the client. “How integral is SFA/CRM to your business strategy?” “How committed is your company to a successful outcome (for the CRM project), and how would you know if you’re successful?”
Most of us reading this blog have sat in a meeting in which a high-level executive weighed in on a past initiative saying “I never thought it would work in the first place.”
Adam – what you describe is very similar how we started our CRM practice 15-years ago. And we’ve been very successful. However, a year ago we threw in the towel in terms of calling ourselves a CRM consultancy and slid over to the Outside-In/Outside-In Process umbrella where everything is about customers and SCOs (successful customer outcomes). We just didn’t want to be continually ridding ourselves of the “technology taint” In retrospect, we should have followed Bob when he morphed CRMGuru into CustomerThink.
One small nit, however. To be truly effective, planning has to start with customers and work in. You can look at internal competencies in customer-facing roles in parallel. But IMO the minute you take your eyes off customers bad things happen.
A side note, we’re right now in the process of adsopting the CAMMI (Company Alignment Maturity Model Instrument) for assessing internal skills. It’s a significant improvement over gauging capabilities from interviews ands outcomes data. You might be interested in it (http://cammilogic.com/).
Thanks for hitting the planning piece so hard. It’s long overdue! For seemingly forever I was a voice in the wilderness on CRMGuru touting the importance of planning . And I sure didn’t do a great job persuading people. Hope you’re more successful.
As Bob covered in his 2004 interview everyone jumped on the Gartner 55% CRM implementations fail to meet expectations, and truncated that to 55% of CRM implementations fail, full stop.
Over time people realised that 55% of projects didn’t actually fail outright, and as the decade progressed I think people got better at implementing CRM in general.
However, as Bob noted sales force automation (SFA) is a different beast, and I suspect organisations are still struggling with this, but whether that constitutes failure depends on how you define it.
If you position the question as to how many SFA implementations are generating a significant return on investment, I would estimate based on my own observation, quite a low percentage, well under 50%.
Whether the sites that I might suggest are generating a low ROI, would see what they were doing as a failure is another matter. That would depend both on what their expectations were in the first place, and their openness to admiting, or awareness of failure.
I’ve seen a number of sites where the executive team were very positive about the benefits of the system, where further investigation revealed pretty much no one was using it.
The point that Adam made about failure rates for SFA being due to the increasing use of SAAS is an interesting one, and one that I’m sure will be hotly debated. Personally I would tend to agree that SAAS implementations tend to be less planned and consequently less likely to generate high returns.
The key here though is expectation. As per my recent post (http://tinyurl.com/yjxh7j2), it’s down to what you were trying to achieve in the first place. What I might see as a low ROI system, may be another’s view of a successful outcome.
Thanks for the great feedback, guys.
The fact that these analysts have been talking about such high failure rates for years doesn’t mesh well with our practical experience of seeing high CRM and SFA success rates for 12 years with over 400 customers.
That being said, I remain very concerned about most SaaS CRM software vendors’ approach to the market. They are telling prospects and clients that SFA in particular is easy, and that all you really need to do is install the software, load up some data and get going. How this cannot result in lower user adoption which will cause more “failure” is beyond me. They seem to think that SaaS somehow solves these issues.
To counter this we are pushing planning services quite hard to SaaS CRM customers even if it is only a few days to think through the implications of their projects.
These are all good comments but we shouldn’t get caught up in how high a success rate is high enough. We need to focus on how to make any software implementation (in this case CRM/SFA) a success.
In this I agree with Adam’s last comment that software vendors convince companies that CRM/SFA implementation is easy. It’s not. Sure it looks easy in the demo with nicely built data sets and great data quality. But life is not a demo.
Too often the issue is that organisations have a customer management, sales management, etc, problem that is hard to solve. They think (and are convinced by vendors) that buying software will solve the problem even before they have really defined the problem well enough to solve it. We haven’t even discussed the solution yet.
A better approach, and one that we use, is to define the problem, solve it using the systems that you have including Excel, Outlook, etc. It wont be a pretty solution but just so long as it works. When you have a good process, that works effectively and everyone likes — only then you automate it with software. That is what I mean by “Try before you buy”.
Technology is not the solution to your SFA problem it only speeds up the process — for better or worse. I sometimes remind my clients that many of their best sales staff sent most of their careers using 6×10 index cards to track the sales process.
If you automate a bad process you get the same results, just faster.
Most recently, I made this 2010 prediction for sales leaders on my blog:
In 2010, sales leaders will finally realize that investing in Sales 2.0 is essential to increase sales productivity and improve sales effectiveness.
Why? It’ll become glaringly apparent that sellers who leverage Sales 2.0 tools significantly outperform their colleagues. On the downside, sales leaders will mistakenly assume this success is due to technology and overlook the substantial skill differential among their reps. This failure to invest in training will result in much lower ROI than initially projected.
I stand by my projection. SaaS is easy for companies to implement. It has the potential to bring tremendous value. However, it will not be the panacea that sales leaders are hoping for – due to their failure to understand/embrace what it takes for a successful implementation.
The lack of planning that many of you described is pervasive in sales organizations.
I see it on the street level with individual sellers who refuse to plan for their sales meetings, assuming that their ability to “wing it” or their charm will get them the order.
They do this despite a preponderence of evidence that shows the value of a pre-call planning, a well-defined sales process, strong business acumen and much more.
Their focus is on activity. Doing. Being busy. Making calls. Thinking is not even on their radar screen.
Then they get promoted into sales management and ultimately sales leadership positions. They tell their reps, “Get out in the field. Make the calls. It’s all a numbers game.”
Even “thoughtful” leaders, when under pressure to deliver the numbers, resort to activity directives versus focusing on improving the skill level of their sellers and the quality of their customer interactions.
When I look at this success group of self-motivated, intelligent people, I always see what’s possible – if only they utilized all their talents. And what’s possible is a whole lot more than they’re getting today!
Thanks for posing the question, Adam – you’ve stimulated an excellent debate! Given how analysts make their money, it’s appropriate to take their projections with a pinch of salt – but whatever the true figure, there’s no doubt that too many CRM/SFA implementations fail to achieve their potential.
It’s clear that software (whether hosted or behind the firewall) is no substitute for management. It can facilitate good sales management and good process, but it can’t compensate for bad sales management or a lack of process. The SaaS vendors may well be guilty of implying that because the software seems easy to implement, it is going to be simple to achieve the desired results.
In fact, thoughtless, out-of-the box installs usually do more harm than good. The CRM vendors don’t help. A classic example (one of many) is the automatic association of some arbitrary, untested percentage “probability” to a given sales stage, as if this represented good practice – a habit that is misleading at best and downright prejudicial to forecast accuracy in most circumstances.
I’d suggest that the primary purpose of an investment in CRM/SFA solutions ought to be to improve the organisation’s ability to achieve desired outcomes, rather than recording sales activity. Therefore before any system can help, there needs to be a clear consensus about the nature of those outcomes and how they might best be achieved.
Like Dick, I believe that the outcomes need to be customer focused – and the system needs to determine where the prospect is on their buying journey and how their progress might be facilitated. Although harder to collect, evidence of buyer activity, commitment and behavior invariably proves to be a much better predictor of sales success than just tracking sales activity.
Taking this customer-centric approach also helps to cut down on a lot of the unnecessary data collection and form filling that seems to bedevil so many CRM/SFA systems, and is a massive disincentive to user adoption. Better to focus on the information necessary to fully understand the prospect, where they are in their decision making process, and what might be done to facilitate their next step. There should be a “deal strategy” dimension to very prospect.
The other recommendation I’d make is to leverage the system to highlight what has or hasn’t changed. Effective sales management is less about knowing the current status of a deal than it is understanding the velocity of projects and identifying good or bad change (or the lack of it) while there is still time to make a difference.
It seems to me that poorly implemented, CRM/SFA systems have the terrible potential to drive thoughtless behavior, but well implemented, they present a real chance to drive thoughtful behavior. The choice (and the outcome) is likely to reflect the true underlying character of the sales organisation concerned.
Adam,
I completely agree that the return on planning is huge. So, you can look at failure a number of ways:
1. Do businesses that fail to plan (yet believe they succeeded) really fail because of lost opportunity (from not planning)?
2. Do business that focus on optimizing internal (inside-out) processes (not customer outcomes) fail even when they believe they’ve succeeded because of all the potential value they’ve left on the table?
How much value do operational efficiencies really deliver? Well, we have formulas for that. Many CRM consultants are very good at narrowing the focus down to these operational areas and selling a deal. But, is that where we should be?
I believe failure to plan is failure to capitalize. And I believe that failure to focus on the customer is failure as well. Maybe this is just my failure as a consultant, for instance. But, it makes me ask myself “what’s really the failure rate of CRM?”
Mike Boysen
Effective CRM
Only three and a half years later, I’m happy to report that my predictions were way off:
http://www.cloudsherpas.com/partner-salesforce/crm-failures-happened-2/
Adam