A Cheat Sheet for CRM Success

“People are going into CRM and failing left and right,” says Mark Sklenar, VP and CIO at Underwriters Laboratories, the product safety and testing organization. “There’s a high degree of complexity here that’s not fully appreciated.”

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Point No. 1
Recognize that CRM is about changing processes, not installing software

Chief information officers agree that a root cause of CRM failure is looking at the projects as software deployments when, in order to take full advantage of the systems’ capabilities, a substantial reorganization must be performed on virtually every operation touching customers. This massive change requires the support and commitment of people throughout the organization— often up to the level of the CEO—if it’s going to be successful.

While a lack of sales-team participation was the root cause of BMC Software’s first customer management failure, CIO Jay Gardner says a poor appreciation of the need for business-process change doomed its second try. BMC fully thought out and planned its processes before a third attempt. Executive support was secured, business processes were tagged for change, technical challenges were identified, and, Gardner says, users’ input was solicited on procedural changes.

While BMC overhauled many of its systems, the changes it made to its order-entry system are a good example of how the company was able to manage process change. Under the old system, a salesperson would fill out a paper order or contract and turn it over to a sales assistant for data entry. Because of administrative time pressures, the process was inherently inefficient.

Users were brought in to help design a new process. Now, using its new system, BMC sales representatives are armed with computerized order-processing tools, electronic order forms, and network connections to submit orders. The result has been a reduction in order backlogs from nearly six days to less than two-and-a-half days—with positive implications for billing and payment.

Another way CIOs can ease the reengineering pain is to conform to the procedures and methodologies inherent in the various vendors’ CRM packages. However, Michael Maoz, a Gartner Inc. analyst and leading CRM expert, says there is a downside to following a vendor-defined CRM process.

“Change is based on understanding customers—their latent and explicit expectations—and designing new processes and employee behaviors to meet these needs,” Maoz says. “By accepting a CRM vendor’s canned business processes, the business is skating on thin ice over a deep pond. You look good until you fall through.”

Point No. 2
Avoid over-customizing

Most businesses already underestimate the total cost of CRM by as much as 40% to 75%, with large businesses plunking down anywhere from $30 million to $90 million on technology, labor, consulting and training over the course of a three-year project (Gartner). And it tends to be the custom work that drives costs through the roof: Whereas a typical sales application—say, one from Oracle—might cost $4,000 per seat, customization can drive the actual cost four to seven times that high.

Of course, this isn’t to say that no customization should ever be done. The trick is not to get caught on a customization treadmill.

“Obviously, with any application, nobody in their right mind really thinks they’re going to take it out of the box and and it’s going to work,” says Greg Augustine, VP of information systems at TidalWire, which implemented a CRM system in October 2000 and has made two significant upgrades since.

Equinix had a good rule of thumb when it came to managing what CIO Don Fulghum considers “scope creep”: It limited customization by requiring executive-level approval on any major enhancements. Changes had to clearly demonstrate a significant business benefit before being approved. [An article on avoiding the pitfalls of such creep appears in Workbook.]

Point No. 3
Plan a phased rollout—monolithic CRM applications fail

One way to assure CRM failure is to set out to deploy an initial CRM system across an entire organization.

Dow Chemical initially tried to roll out a Siebel package to its global sales force in 1996. In addition to not having business processes in place, says customer interface manager Martin Gembrowski, “our initial challenge was just trying to deploy technology to remote people. It was extremely complex.” The project failed.

The second push toward CRM at Dow started at a grassroots level. In the late 1990s, CRM systems began to spring up in some of Dow’s business units. An inside sales group was using CRM to handle telephone account sales; another group was deploying CRM to do tech support in a call center. All were using the same Siebel system that was part of the company’s earlier, aborted effort. The IT organization picked up on the renewed interest and started to deploy the Siebel package in other pilot projects.

The technology had proven itself. “And that’s when a lot of people within the organization started pointing to their individual Siebel implementations,” Gembrowski says.

Where its overarching first attempt had failed, small Dow projects led to a major embrace of CRM. Today Dow’s system spans 30 countries and is used by more than 2,000 employees.

Point No. 4
Establish measurable goals for your CRM initiative

Whether it’s tracking efficiencies, costs or sales, metrics should be established for each CRM project. With the proper measures, CIOs can calculate return on investment and demonstrate a system’s value to users. “The key driver of most CRM failures is a lack of measurement strategy,” says analyst Erin Kinikin of Giga, which has found that more than 80% of companies don’t have a well-defined measurement strategy for CRM. “If you can’t define or measure benefits, it’s pretty likely that you won’t achieve them,” she says.

“There are business metrics you can use,” notes Mike Overly, who is managing a CRM system at Hewlett-Packard that will soon be used by 8,800 sales representatives.

“It’s not brain surgery,” Overly says. “If you’re a marketing person, there are metrics for both the quality and quantity of leads. And if you’re in sales, you can track your win-loss versus the competition.”

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